Archive - Apr 3, 2015

Today, every possible function of a bank, from savings to loans to money transfers, can now be done faster, cheaper, and more efficiently by new technology, courtesy of the Digital Revolution.  In 10 years’ time, the technology and adoption will have progressed to the point that today’s banks will be entirely obsolete. Thomas Jefferson once wrote that “. . . power should be taken from the banks and restored to the people, to whom it properly belongs.” It took two centuries. But now it’s actually starting to happen.

Taking the gold-backed dollar into the next millenium and imbuing it with all of the attributes of the Bitcoin blockchain.

So much for yet another "above consensus" recovery, and what's worse it is, well, about to get even worse, because while the Fed keeps baning some illusory drum that slack in the economy is almost non-existent, the reality is that in March the number of people who dropped out of the labor force rose by yet another 277K, up 2.1 million in the past year, and has reached a record 93.175 million. Indicatively, this means that the labor force participation rate dropped once more, from 62.8% to 62.7%, a level seen back in February 1978, even as the BLS reported that the entire labor force actually declined for the second consecutive month, down almost 100K in March to 156,906.

In a move presaged by objections from politicians and some smaller EU financial institutions, the German lender L-Bank is suing the ECB in a bid to avoid falling under the central bank’s direct supervision. WSJ calls this "the most radical step by a European bank against ECB supervision [and] highlights the headwinds the ECB is facing from some politicians and smaller lenders in Germany, Europe’s biggest economy."

The American economic and financial landscape is vastly different than it was following World War II. The wealth gap between the rich and the poor has shifted sharply to the upper 10% of the population. For that group, the economic picture is considerably brighter than for those in the bottom 80%. For Byron, whose personal net worth is in the billions, this is truly a "Picasso economy," for the majority of everyone else it is more like a "starving artist sale."

If wage growth for over 80% of America's workers is sliding even as wage growth for all American is flat, that must mean that the wage growth for the tiny 17% of America that is its bosses and supervisors must be soaring. And sure enough, it is. In fact, as the chart below shows, wage growth of "supervisory" workers has never been higher!

Yesterday we warned that "the whisper expectation is for a NFP print that will be well below consensus, somewhere in the mid-100,000s if not worse now that the bartender hiring spree is over." As already noted, we were spot on with the abysmal jobs print, the worst since 2013. We were also correct about the end of the "bartender hiring spree" because as the following chart shows, the number of "Food Services and Drinking Places" workers, aka waiters and bartenders just saw its worst monthly increase since June of 2012.

Our current faith in central banks' ability to "make the economy all better, all the time" is horrendously misplaced.

America continues to be a country where there are only jobs for old men, those 55 and older, who saw a 329,000 increase in jobs in the past month. Every other age group saw job losses!

Without the aid of a VIX safety-wire, this morning's bad news has been unceremoniously sold in US equity futures markets this morning. Having just closed, with The Dow down 200 post-Payrolls, the S&P joins the Dow in the red for 2015...

Was it just the - as predicted - algos running wild in short-term run stops or did USDJPY (and EURUSD) swing violently in the seconds before the payrolls print because, yet again, someone got to see the number early?

Iceberg ahead!

Uh-oh... the payrolls "bad news" does not appear for now to be bad enough to prompt a "good news" buying mania as perhaps - just perhaps - the market is coming around to the total farce of smoke and mirrors of lower rates and QE doing anything for the real economy is being exposed... Dow futures are down 90 points, TSY yields down 7-8bps and USD weakness spreads as carry trades are unwound en masse.

We warned yesterday that the "whisper expectation is for a NFP print that will be well below consensus, somewhere in the mid-100,000s if not worse now that the bartender hiring spree is over", and we were right: moments ago the BLS reported that in March a paltry 126K jobs were added, nearly 50% below the 245K expected, and the lowest monthly increase since March 2013.The unemployment rate was unchangned at 5.5%. The January and February data was also revised significantly lower, and subtracted a grand total of 69K jobs.