Archive - Feb 7, 2014

The poor jobs number today saw gold surge from a low of $1,256.55/oz to a high of $1,272/oz prior to being beaten lower back below $1,258/oz. This is the second incident of peculiar trading on the COMEX this week which is fueling manipulation suspicions.

Raise your hands if you are surprised that, as has emerged, virtually every major bank was manipulating currencies (and everything else) whether as part of the "Bandits' Club", the "Cartel" or some other - until recently- secret message room. That's what we thought. Now raise your hand if you thought the manipulation could be so pervasive, so glaring and so in your face, that even the oldest central bank - the Bank of England - and who knows how many other monetary authorities, were openly encouraging traders from these private banks to do more of the illegal activity they had been engaging in - namely manipulating currencies - with their explicit blessing knowing very well such behavior is undisputedly illegal. We hope at least one or two hands went up, because which it is one thing to be cynical about what is going on behind the scenes, it is something else to see the edifice of global corruption and criminality, whose only purpose was to preserve the status quo, unwinding before your very eyes substantiated by actual facts.

It was all going so well. It appeared the "market" had decided that this was not weather-related (as we showed) but real weakness and that real weakness can mean only one thing - a fickle Fed re-primes the pump by un-tapering the taper. However, as we noted last night, it is Jon Hilsenrath of the Wall Street Journal that creates the "common knowledge" upon which we should act. The bounce in stocks was evidently hope of the un-taper for as Hilsy noted in a Q&A that the "Fed is likely to stick to its course on rates and bond-buying in the wake of the mixed jobs report," stocks, USDJPY, and Emerging Market FX started to fade.

When you have one after another "polar vortex" out there, and feet of snow covering the country and supposedly crushing economic activity, what do you do? Why you hire construction workers of course. As the following breakdown of the best and worst jobs of December shows, the one job category to benefit the most from January's horrifying weather which was the reason for all those weak January numbers (if one listens to the propaganda pundits and other TV anchors) was construction workers, which saw 48K jobs created. Which in some parallel universe surely makes sense. Just not this one.

Let the flames begin...

December and January saw dismal job gains based on the NFP data... but as we now know, thanks to Zandi and Liesman, that we should ignore it because it's all about the weather. So, confused, we looked at the number of employed people who are "not working due to weather" (thank you for the convenient series BLS) to gauge the significance of the impact... it appears, from the chart below, that more people were out of work due to weather in 2008, 2009, 2010, 2011, and 2012...?

BOTTOM LINE: The January employment report contained a confusing set of data, as payroll job growth significantly disappointed, but the unemployment rate declined by one-tenth, reflecting large gains in household employment. Overall we see the report as slightly weaker than expected. Nonfarm payroll employment rose a disappointing 113k in January (vs. consensus +180k). By industry, retail trade declined 13k (vs. +63k in December), while health and education services?normally a consistent support for headline job growth?declined for the second consecutive month (-6k). Construction employment, which declined 22k in December amid adverse weather, added 48k, suggesting little negative weather impact in the January report. Government employment fell 29k, the worst performance since October 2012, split between federal (-12k) and state and local (-17k). Payroll job growth in November and December was revised by a cumulative 34k, consistent with the general tendency for positive back-revisions in the January report. Over the past three months, payroll employment rose an average rate of 154k per month.

With the HFT brigade selling then buying, and trying to goalseek an explanation of why this happened after the fact, one key aspect of today's release that was ignored is that the BLS just revised its Establishment Survey data, in the process changing all historical job numbers. To wit: "Establishment survey data have been revised as a result of the annual benchmarking process and the updating of seasonal adjustment factors. Also, household survey data for January 2014 reflect updated population estimates." As a result of this revision, while the monthly changes were not that dramatic, what happened is that the "stock" level of jobs as reflected in the Establishment Survey rose by half a million as of December 31, from 136,877 to 137,386. And so all key historic data - from GDP in early 2013 to jobs - has now been revised to reflect a more rosy economy, and instill consumers with even more confidence in hopes they will spend, spend, spend.

In the 30 seconds before this morning's jobs report was released to the general public, Gold prices dropped and USDJPY jumped from its relative stasis going in. Obviously it is not clear if anyone knew anything but following the knee-jerk reactions, these were rightly positioned moves for where the market is now.

Ugly jobs report in which not even the spin brigade could find anything to cheer, after even the BLS said the atrocious December print was not due to the weather when it did not revise the December number? No worries: here is what the market is using as a goalseeked justification to send the futures off its post report plunge lows to a level higher than where it was before the report. See if you can spot it...

UPDATE: Stocks have bounced on USDJPY's jump back to 102 (as we warned) but Treasuries are not playing along

Bonds are surging and gold is well bid as the jobs report had little to offer the hopeful. The anti-goldilocks number slammed bonds with the 10Y Yield to unchanged on the week (down around 8bps on the kneejerk), gold is testing $1270 as JPY strength provides ammunition for derisking in the equity markets. S&P futures spiked 11 points higher on the release as algos went wild, then fell over 20 points from that high and are bouncing back modestly now. Of course, we are still 45 minutes from the US open so expect USDJPY to be levered back to 102 and lift stocks to make retail believe everything is fine...

So much for the hope of either a surge in January jobs, or a massive upward revision in the December print. Moments ago the January jobs number came out and at 113K, it was a huge miss to the expected 180K, but more importantly, the December number which was expected to be revised much higher was virtually unchanged at 75K, compared to 74K originally. The unemployment rate, which has become largely irrelevant, dipped to 6.6% from 6.7%, just so Obama can get the brownie points for fixing the economy. However, judging by the market reaction this is hardly what the traders think.

• HSBC 171K
• Barclays 175K
• Citigroup 180K
• Bank of America 185K
• Deutsche Bank 200K
• UBS 200K
• Goldman Sachs 200K
• JP Morgan 205K

Following rate-rigging scandals, FX manipulation debacles, insider-trading idiocy, and over-aggressive lending practices, bankers are taking a different approach in regaining some public trust. As Jamie Dimon gives himself a "well-deserved" pay rise, Dutch bankers are turning to God... As Bloomberg reports, all 90,000 Dutch bank employees will take an oath 'to do no harm' as it were, punishable by the Banking Association. While Goldman may be doing God's work; the Dutch are vowing to Him to enhance confidence in their industry.