Archive - Jan 10, 2014

President Obama has just nominated Lael Brainard as a Fed Governor, Jerome Powell to his second term and most notably, Stanley Fischer (ex Head of the Bank of Israel) as Vice-Chairman of the Fed. "These three distinguished individuals have the proven experience, judgment and deep knowledge of the financial system to serve at the Federal Reserve during this important time for our economy,” Obama said in statement. Bear in mind that Fischer is skeptical of forward-guidance (as we note below) which is soon to become the Fed's main weapon to jawbone markets.

Stanley Fischer's term as governor runs through 2020 (vice chair through 2018), Brainard's term through 2026 and Powell's through 2028!

Tenure anyone? We are sure they will still do a great job...

The firm that advises its former employee Bill Dudley on how to run the New York Fed, speaks. Goldman's bottom line: bad jobs report, the weather was at fault (and apparently all those economists who had expectations of a 200K print were unaware it was cold out there until today) but the Fed will still taper by another $10 billion in January.

The gross manipulation of the unemployment rate due to the plunging labor force participation rate and the soaring, record number of people that are not in the labor force is by now, we hope, clear to all. Yes, millions may be dropping out of the labor force because they can't find a job which somehow means the US economy is getting better, but sadly the US civilian, non-institutional population keeps rising, and hit a record 246.7 million in December. Which is why every month we show what the real unemployment rate would look like when normalized for the fudged participation rate by taking a 30 year average. Today, we find that the difference between the reported (6.7%) unemployment rate, and the implied using realistic assumptions for the US labor force, which remained at 11.5% where it has been ever since the start of the Second Great Depression, just hit a record high 4.8%. As did the spin, lies and obfuscation by the administration that "all is well."

The Fed spent over $1 trillion in 2013 (to push the stock market to all time highs) and all we got was... less jobs created than in 2012?

While we have been told again and again that there are no asset bubbles - although th emost recent FOMC statement referenced concerns over small-cap mulitples and covenant-lite loan issuance - it seems the Fed's Jeff Lacker just let slip some ugly truthfulness...Answering questions after a speech proclaiming growth ahead and rising inflation, he said:

• *LACKER RELUCTANT FOR FED TO 'PRICK' ASSET-PRICE BUBBLES

Well there it is. There are asset bubbles? But Lacker - who has been anti-QE to some extent - knows that if the Fed moves to actually do anything about it (other than jawbone), it's all over. Perhaps as more realize the transition from a Bernanke Put to a Yellen Collar has occurred, there will be no need to jawbone any longer.

As was reported to mass jubilation on Wednesday, the ADP private payrolls number soared to the highest monthly change since November 2012, a 238,000 increase driven by what the report said was a 48,000 increase in construction jobs.  ADP's Mark Zandi went on the record to say that “The job market ended 2013 on a high note. Job gains are broad-based across industries, most notably in construction and manufacturing. It appears that businesses are growing more confident and increasing their hiring." It appears not. According to today's BLS report in December, on a seasonally adjusted basis, the construction industry lost 16K jobs. And where it gets really funny is when one looks at construction on a non-seasonally adjusted basis, construction jobs plummeted by a whopping 216,000! However you cut it someone is obviously lying. If we cared we would ask who. However, since both data series are completely fabricated, who even cares?

When this indicator of global trade rises, everything is rosy and reams of asset-gatherers and talking-heads wil quote it as indicative of how great the world is. When it drops - silence. There's always an excuse - over- or under-capacity, too many ships, too few ships, etc. However, the last 2 weeks have seen a 35% collapse in the cost to ship bulk. There is a relative seasonal pattern over the holiday period - with shipping costs rising into the holiday and falling after but... this is the biggest drop from a Christmas Eve since at least 1984, 30 years! Seems like the inventory stacking of Q4 had absolutely no follow-through whatsoever...

The $16 Trillion clone...

Markets, it would seem, are choosing to ignore Mark Zandi's sage advice this morning - when faced with yet another example of his ineptly over-optimistic extrapolation "ignore this number - it's going to go away." Stocks had slowly melted up overnight with S&P futures almost back to unchanged on the year and that gain was instantly vaporized on the NFP print - but shortly after bagen to recover losses. Treasury yields have collapsed with 10Y at 2.88%. Gold and silver - which were twitchy going into the number  - have surged higher with gold at $1240. The USD is being sold with JPY and EUR strength. It seems the recognition that bad news is bad news in the new "Yellen collar" world is growing on investors. Of course this can change any second...

Curious why despite the huge miss in payrolls the unemployment rate tumbled from 7.0% to 6.7%? The reason is because in December the civilian labor force did what it usually does in the New Normal: it dropped from 155.3 million to 154.9 million, which means the labor participation rate just dropped to a fresh 35 year low, hitting levels not seen since 1978, at 62.8% down from 63.0%. And the piece de resistance: Americans not in the labor force exploded higher by 535,000 to a new all time high 91.8 million.

Simplistic, subjective and unbalanced anti-gold opinions tend to get media coverage. However, it is important to always focus on the empirical evidence as seen in the academic research, price performance over the long term and the historical record. 

So much for the recovery. Moments ago December nonfarms were revealed at just 74,000 a huge miss to expectations of 197,000 - the biggest miss Since December 2009. The drop from last month's revised 226K was the largest since December 2010. Other notables: the change in private payrolls was a tiny 87K vs expectations of 200K. Mfg payrolls added just 9K vs 15K expected and down from 31K. Average hourly earnings for all employees rose 0.1% vs. Expected 0.2%. The good news: the unemployment rate plunged to 6.7% from 7.0%... For all the wrong reasons - the number of people not in the labor force rose to a record 91,808,000. As a reason for the plunge the BLS says there was a major weather effect seen on the forced part-time series, and notes the decline in healthcare which is rare and part of the sector slowing. Thank you Obamacare. And now bring on the Untaper.

Overnight China reported disappointing export data, missing expectations of +5%. The gvoernment explained this on the basis that they were losing their competitive edge since the Yuan has strengthened to 20 year highs but perhaps most telling is that fact that, as the FT reports, China became the world's biggest trader in goods for the first time last year - overtaking the US for all of 2013. We suspect the powers that be are starting to get nervous as this comes soon after China's surge to become the world's largest oil importer marking a notable shift in the world's most powerful nations - as trade with the rest of Asia and increasing flows with the Middle East represent a shift in power away from the US.

• Citigroup 165K
• Barclays 175K
• UBS 185K
• HSBC 191K
• Goldman Sachs 200K
• JP Morgan 215K
• Bank of America 220K
• Deutsche Bank 250K