Archive - Nov 8, 2013

With the Chinese property bubble set to burst, the bust may lead to even greater demand for physical bullion from the gold loving Chinese.

The answer is ... 1, and he hasn't paid yet...

Having quietly limped back to retrace the jobs report losses, US equities were beginning to fade back in hurry when we tweeted the market's desparation for a POMO stick-save... sure enough, 2 minutes later, as POMO started, S&P 500 futures took off in an uninterrrupted 13 point surge higher (with bonds, FX, and gold all continuing their 'taper-on' post-payrolls trends ignoring the idiocy in stocks)...

iTesla, or Tespad Model S(parky)?

Whether it is the conference board, Gallup, Bloomberg, or pretty much any other measure of the economic confidence or consumer comfort in the US, the numbers have been falling (or plunging) despite the incessant rise of US equities. The reason this is of particular note, as we have discussed previously, is that this pattern of exuberant highs in stocks with fading confidence-inspiration has ominous overtones for future performance... (especially for those hoping for moar multiple expansion). The UMich data this morning merely confirms the trend with the lowest print since Dec 2011 (3 misses in a row). This is the biggest miss since Feb 2006!

Dismissing for one moment the fact that TWTR for all intent and purpose is now trading red for ($43 handle) for most if not all 'retail' investors unallocated at the IPO, Aswath Damodaran, valuation guru from NYU has taken his spreadsheet of doom to the analysts' forecasts for the dot-com-mania poster boy. As the following chart shows, the 140-character platform will have to generate $32 billion in 2023 to be worth $45 per share - that is a 50-fold increase in revenues over the next decade to justify it's IPO-busting current price. "Twitter is a good company, with the potential to be a great one," he said, but as Bloomber reports, he adds, "but not a good investment," as based on his calculations, TWTR is worth $18 (31% less than its IPO price). It seems the market is getting that...

Following the quantity breakdown of jobs in the month which saw the third biggest jump in people not in the labor force in history and a loss of over 600,000 full-time workers (don't ask how this is possible - not even the BLS knows), next we look at the quality of October jobs. Or lack thereof. Because the top job-gaining sectors were also the worst of all: Leisure and Hospitality; Retail; and Temp Help, namely minimum wage hotel workers and retailers, amounted to roughly half of all job gains.

The wholesale changes at the Fed's Board of Governors in the period ahead are generally under-appreciated by market observers.  

Milliseconds after the release of the jobs report this morning, the 'supposedly' most liquid bond market in the world - US Treasury futures - were halted for 5 seconds. As Nanex notes, this has happened before... What is also evident, as seen below, is Gold's premature plunge (who knew what when?) So while yesterday was the turn of the OTC equity market, today we see fixed income markets 'break'...

So much for the surge in 691,000 full-time jobs in September. One short month later, indicating just what a farce the BLS's sampling process is, while the algo frenzy-inducing establishment survey showed a gain of 204,000 workers, the household survey had some other ideas. True, the headline household survey number rose by an almost identical 213,000 workers, however it is when trying to foot that number into the actual components, when one gets a headache. Because according to the same survey, a whopping 623,000 full-time workers (supposedly government) lost their jobs in October, nearly offsetting the entire 691,000 gain the month before which it turns out was purely for Obamacare (now hopelessly damaged) optics.

The labor force participation rate plunged from 63.2% to 62.8% - the lowest since 1978! More importantly, the number of people not in the labor force exploded by nearly 1 million, or 932,000 to be exact, in just the month of October, to a record 91.5 million Americans! This was the third highest monthly surge in history. This was the third highest monthly increase in people falling out of the labor force in US history.

If ever there was a more sad indication of just what the Fed's liquidity hosepipe of exuberance has done to global capital markets, it is this morning's reaction to a better-than-expected payrolls report. Good news, right? Oh no - not for risk... indicative that a 'taper' may be closer than some hoped, bond yields are blowing higher, stocks are dumping, Gold and Silver are tumbling, and the USD is surging. Still think a 'taper' is priced in? Still think markets reflect anything but the flow of fed money printing? Think again...

So much for all the fire and brimstone associated with the government shutdown.

• October nonfarm payrolls soar +204,000, nearly double the 120,000 expected.
• Unemployment rate at 7.3%, up from 7.2%.

And just like that, the "Taper talk" is back...

• JP Morgan 75K
• Goldman Sachs 100K
• UBS 100K
• Bank of America 110K
• HSBC 120K
• Barclays 125K
• Citigroup 130K
• Deutsche Bank 130K

Each month the BLS tells us, buried in an oft-ignored table, what percentage of businesses surveyed returned a response in time for the first payroll print. Despite payrolls remaining an intensively revised number (part of the reason we usually advocate fading an overreaction in the market), this data collection rate has climbed steadily over the years. The attached chart shows the first-print data collection rate for October going back to 1981. Collections have risen from about 40% to above 70% over this period.