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Another Freaky Friday?
Submitted by Leo Kolivakis, publisher of Pension Pulse.
It
was another freaky Friday. First, let's discuss the US jobs report.
There was a decline of 20,000 payrolls in January and the unemployment
rate fell to 9.7%. Despite being off in my forecast (I was expecting
big payroll gains close to 150K), I am still convinced that big job
gains are in store for Q1 & Q2 2010.
There are two encouraging things worth noting from the January jobs report.
First, temporary employment added 52,000 jobs in January and it wasn't
all Census hiring. Since reaching a low point in September 2009,
temporary help services have added almost a quarter of a million jobs.
Why
is this important? Because employment lags the broader economic
recovery, and companies usually hire temp workers initially before
offering them full-time jobs. As shown in the chart below, the pickup
in temp workers has historically been a good harbinger of future
employment gains.
Next,
Stéfane Marion, Chief Economist & Strategist at the National Bank
of Canada noted the following encouraging news from the US jobs report:
...the
wage bill is now expanding at a 4% clip in the last three months, the
best showing since early 2008. We also note that the household survey
from which the unemployment rate is derived showed the addition of
784,000 jobs in January (after adjusting for revisions to population).
The employment figures derived from this survey, however, are much more
volatile than those obtained from the payroll survey. As such, it is
preferable to use a 3-month moving average to extract the underlying
trend. As shown, household jobs still show a gain of 110,000 after
smoothing. In the past, the household survey has led the payroll
survey coming out of recessions.
All
this means that no matter how the BLS muddies the waters, job growth is around the corner. It has been a severe
recession which is why it's taking a frustratingly long time to see
some meaningful employment gains, but the recovery in the US labor
market is already upon us.
Now, the stock market is another
beast altogether. The explosion of algorithmic trading makes it very
difficult to understand the daily movements in stocks. Just look at
today's price action on the Dow:
What
happened at the end of the day? Traders will tell you "it's just short
covering" while conspiracy theorists will tell you it's the "Plunge Protection Team" (PPT) or Goldman Sachs.
Maybe it was just the
big hedgies manipulating shares lower in the early morning so they can
scoop them up at attractive levels. Who knows? All I know is that there
is still plenty of liquidity out there to drive shares much higher.
That's why I keep buying these dips, especially the big dips on solar
shares.
Look, is the market rigged? You bet it is. If you study
stock markets on a daily basis, you'll see very weird things that defy
logic. But at the end of the day, it all boils down to fear &
greed. Forget Greece, PIIGS and all the noise coming out of Europe.
This is just noise that the big hedgies use to feed off retail and less
sophisticated institutional investors.
So, while it was another
freaky Friday on Wall Street, I'd say the US jobs report was
encouraging as was the price action in the stock market. Things are
slowly getting better, but the pace of job growth is painfully slow.
However, as the recovery gains steam, job growth will follow. It's only
a matter of time now.
»
- advertisements -
a 60,000 household survey-in a country with 600 million people.
And to boot, the BLS always revises their intitial number later with this survey number-and the revision is always+more unemployment.
for a primer on how phoney the BLS stats are:
http://globaleconomicanalysis.blogspot.com/2010/02/jobs-contract-yet-aga...
The employment numbers are based on temporary workers-not real jobs. A lot of these jobs are seasonal XMAS jobs.
Plus the government uses a corny birth/death model for business and extrapolates what the employment numbers are-they don't have real numbers and their math is flat out stupid and it's a phoney,political number. u-6 is the real number. 18% unemployment. BLS is a bunch of math dropouts
Anyone else staring out the window in the Northeast at like 2 feet of snow and it's still coming? Retail will take a hit this month just from the sheer inability to get to the mall this weekend!
Say Al
Thanks for inventing that "Earth is Warming" thing. I really enjoyed meeting the President, uh, Prime Minister, uh, the Leader of the country of Copenhagen while I was promoting that Crap and Raid thing.
All the best.
Barry
p.s. can I borrow yer snow shovel ?
That's why I left the northeast! The weather there is positively ghastly...
I live in Colorado now, where we might get 5 feet of snow once in a winter, but the sky will be blue and it'll be 60 the next day.
In the northeast, it was just gray, drizzle, and lake effect snow. Bah at the northeast.
After living at 8500 ft in the Rockies for 2 years, all I know is we had the heat on in on July 4th. Taxes and gov't hoops to jump were out of control. Lost 50k when I sold to get out of that god forsaken state. Don't get me started about blizzards at -28degrees. Freekin bears in my garage after trash. Mountain lions eating small dogs. F Colorado. Just my opinion.
where, south park?
ROTFLMFAO!
2nd BEST COMMENT OF 2010 ON ZH !!!
Wow, you lived up at 8500 ft in the Rocky Mountains and had to deal with bears, mountain lions, heavy snow in the winter, and chilly evenings in the summer? Bet that came as a shock.
Leo, I look at reports too but I also look at reality on the ground. Some may call it anecdotal and perhaps it is, but it is also reality:
1. Everywhere I go outside of NY and Washington, people have lost their home equity, many have lost a chunk of their 401K and are about to lose an even bigger chunk and they simply are not spending.
2. Without consumer spending (and there is none) there is no recovery.
The bounce we're seeing is a result of two things. One is a massive government influx of cash that is a high stakes gamble that somehow it will reprime the consumer pump. It won't for observation 1 above and it comes with a heavy price tag in that it will lead to higher rates which will lead to more retrenchment. Second, we are bound to bounce a little since last year we fell off of a cliff. It's called reversion to the mean and it's about the only principle I believe is rock solid when it comes to economics. We aren't even back to the mean yet so we may bounce a little more. No argument there, but then again, I'm not ignoring the macro trend and it isn't pretty.
The problem with pinheads who never leave the beltway and see what's really going on in Milwaukee, Kansas City, Houston and a million other places in between is one of availability bias. I've read you for a long time and I always chuckle, never more so than this morning. You're in for a surprise, Leo. The only question is whether or not you're too arrogant to see it coming.
+ 20
+ 10
Leo's theme song...
LET'S HAVE ANOTHER CUP OF COFFEE
Album : Songs Of The Depression
(Irving Berlin)
Fred Waring & His Pennsylvanians - 1932
Just around the corner,
There's a rainbow in the sky,
So let's have another cup of coffee,
And let's have another piece of pie.
Trouble's like a bubble,
And the clouds will soon roll by,
So let's have another cup of coffee,
And let's have another piece of pie.
Let a smile be your umbrella,
For it's just an April shower,
Even John D. Rockefeller
Is looking for the silver lining!
Mr. Herbert Hoover
Says that now's the time to buy,
So let's have another cup of coffee,
And let's have another piece of pie!
(Repeat)
:)
Keep chasing them skirts trader boy:
Chase? Nah. Catch and release? You betcha. ;-)
so they better start hiring Americans because those profits from elsewhere will dsiappear fast without a sustained US recovery.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
No employer big or small is going to hire as long as the "flim flam man" is pushing communist healthcare and Crap and Tax.
Leo: is there any methodology behind your outlandish predictions that you can speak to ?
i see the tags "algorithmic trading" and "price action" and am wondering what employment numbers and personal opinion have to do with either of them.
have to tip my cap to your intestinal fortitude for (1) not only lapping up some of the most speculative issues with each (and every) "dip" (must have some pool of capital to keep dipping into) but also for (2) telling us (rather adamantly) how certain you are about their outcome ('sometime', down the road). Where do we hear that kind of anal-ytic rigour all the time ... oh yeah, gold bugs.
i realize that your arbitrarily constructed price tgt for solar spec is CSCO-ish and that you "know" equity mkts will reach new highs, soon enough ... again: just wondering if you'd be so kind as to share the actual methodologies that help you arrive at such 'logic.'
at the end of the day, I am but a humble student of Mr. Mkt (we all are), who prides himself on technical risk management and playing intellectual devil's advocate to the POV of my own theses ... so: I would love to learn how you arrive at such prophetic conclusions bookended by statements of certitude.
Chopshop,
Saw your latest rant against "solar transmitted disease," and I understand your skepticism. Let me be perfectly clear with you and everyone else on the ZH board. When I was diagnosed with MS 12 years ago, I started thinking about how short life is. It affected my behavior in good and bad ways. But one thing it helped me with is to stay focused, listen to my body and do what I think is right for me, not what others think is right for me.
I am a risk taker. Always was one, always will be one. If I have conviction, I will go for it. This has gotten me in trouble in the past (lost a mint on fucking Nortel), but losing money is when I learned the most.
For the overwhelming majority of people, they should not be taking the risks I take. They will die of stress. They should be investing in low-cost index shares and read books like William Bernstein's The Intelligent Asset Allocator.
But I take risks in stocks. I pay attention to what the top funds are buying and selling, and if I have conviction on a stock or sector, I accumulate and sit on those shares. Don't forget, I use to allocate to the top hedge funds in the world. I know their strenghs and their weaknesses. In particular, as much conviction as they have, they will never allocate more than a certain percentage to any stock or sector. Ever. This makes perfect sense because they are fiduciary managers that need to diversify their holdings. Moreover, no pension fund would allocate to any hedge fund that bets the farm on a stock or sector (although some have).
Now, the other players I use to allocate to are top CTAs and global macro guys. The global macro guys were fundamental analysts who liked "shorting" the CTAs, going in ahead of a big trend. The CTAs (commodity trading advisors) used all sorts of fancy technical analysis and "stochastic price models" to confirm trends and then they would all jump in. This is why you see trends lasting for a lot longer than you think or price action overshooting on the downside and upside.
2008 and early 2009 was where we saw the ravaging effects of deleveraging. Hedge funds had to meet redemptions, so they sold indiscriminately. The market got way oversold. So that's why I laugh when some "technical guru" tells me "we are up 66% so the market needs to pull back". Huh? Are you kidding me? There is so much liquidity out there that this market can go much higher in a blink of an eye.
I know, financial reforms are on their way (holding my breath!), the PIIGS will get slaughtered (yeah right!), Israel will attack Iran (maybe but I doubt it), or Al Caca will attack the US (hope this never happens again). You can conjure up all sorts of evil, sinister plots in your head.
But at the end of the day, this isn't grandma's market. If you don't understand liquidity flows and sources of leverage (from pensions, insurance companies, sovereign wealth funds, hedge funds and PE funds), all the technicals in the world will not help you. Most traders are hopelessly myopic in these markets, and they put their stops too tight, which is why they get whipsawed by the quants and their equally dumb algorithmic models (based on spurious correlations that inevitably break down).
My take on these markets might be dead wrong, but I am convinced that the Fed and other central bankers will do everything in their power to avoid deflation, spurring on asset bubbles once again.You got to pick your spots carefully to make money here.
I take concentrated risks with my own money and will live with the consequences. That's my prerogative. It doesn't mean I will be right, or that anyone should blindly follow me, but at least you can't accuse me of hiding behind some smoke and mirrors report.
Enjoy your weekend.
leo - you may be interested in this new treatment for ms:
St. Joseph's Hospital is one of just two places in Canada testing Italian vascular surgeon Dr. Paolo Zamboni's controversial theory that MS is a vascular disease -- a radical departure from long-held beliefs that it's an autoimmune condition. The University of British Columbia is the other place.
the new theory is that ms is a vascular disease, and thus easily treated.
more here:
http://www.thespec.com/News/Local/article/717814
back to the topic at hand, what about the issue that employers are going to first give more hours to existing workers, who aren't working full shifts, before hiring any new employees?
Leo
If you bought Nortel (what do you want the Internet to be ? Anything you want it to be) you have my sympathy. Note that the banks got out of Nortel around $80-90 as they ran the pump-and-dump frenzy to $121. Then they stood back and watched as everyone else got fried.
Any optimism about the employment/unemployment numbers will be short term at best. Unless this economy insources its manufacturing jobs, there will be nothing for the service industry to service.
"World trade" cannot be purchasing inferior imported crap from China, while they hoard everyone else's currency. Somethings got to give, and it is happening now.
It is not only China who should be worried about jobless people rioting, this country is not far away. Unemployment is closer to 20%, once you back out the jiggy-jigging.
And eventually, even the most-excellent teleprompter reader, will fail to connect. The peasants are revolting so let them eat optimism....
Leo....you wrote...
I pay attention to what the top funds are buying and selling, and if I have conviction on a stock or sector, I accumulate and sit on those shares. Don't forget, I use to allocate to the top hedge funds in the world. I know their strenghs and their weaknesses. In particular, as much conviction as they have, they will never allocate more than a certain percentage to any stock or sector.
If you look at the institutional holdings of stocks that had massive runs..Nortel, Enron, etc etc.... you will find that at the top the instituions held LESS shares than they did at the bottom. The MF's/hedgies who missed out on the ride up are the buyers on the slippery slope down. William Oneill has made this observation in his book How To Make Money Selling Stocks Short..pg 17
leo, IMHO,the energy money, will go to the cheapest form, in a troubled economy. solar is great, it's clean, dependable, and simple. it's also much more expensive, than forms of energy, that can be readily integrated into existing systems. the time for solar to blossom, is when the economy is flush with funds, looking for something better.that won't be the environment, for a long time. people worried about paying their utility bills, aren't thinking about installing a solar system. for solar to take off, there will have to be widespread adoption. you can't make money in solars, unless the companies are making money. there is no money for solar, right now. be fearful, in this market, not greedy. take some chips off the table, protect yourself, live to trade another day.I like solar, but grid power, is so cheap, that solar, is not a good investment, unless you live off the grid. it takes over 20 years, for the average system, to pay for itself. SOLAR, IS GOING TO GET HAMMERED, WITH EVERYTHING ELSE. sell into any rally, keep your powder dry, and buy back in later, at a lower price. being off on the timing, is the same as being wrong. GOOD LUCK
Leo: thanks for taking the time to reply.
While we agree to disagree on our outlooks / MO's, I retain nothing but respect for your willingness to stand with conviction.
As per TA: there are about 14 million 'chartists' and 1400 'technicians' ... virtually no one 'doing' TA has any clue wtf they're looking at, let alone how to escape the stochastics default club, let alone how to actually predict mkts with robust accuracy.
Don't ever take my word for 'it' ... you're own due diligence, et cet. While i don't expect anyone to take mine w/o a healthy does of sea salt (though all-too-cognizant of the fact that many will), and certainly don't anticipate winning any popularity contest (outside of Jimmy Chanos' & Michael Steinhardt' neck-o-the-Matrix) ... fade my / our TA at your own peril. Douchey ? yup. Accurate ? yup.
At the end of the day, this isn't Grandma's mkt ... and if you don't understand causality (how / why social mood is entirely endogenous) then 'you' haven't a prayer at investing, let alone trading.
fwiw, I've been a very, very active member of the NMSS for over twenty years (which ought not mean much if anything to you ... and will hopefully be glossed over by others - since i've got a public rep to maintain) ... and while we each have our own personal issues, which continually remind us of our mortality, hope is never an investment philosophy.
rant over ~ thanks for 'sharing' a part of your day with, Leo / fellow ZH junkies.
don't ever let someone tell you ya can't stir up a hornet's nest, Leo !!
and don't mind any of the hater-aid bullshit being slung your way here either, while we agree to disagree I always appreciate the effort & energies that you share with us all here each day. Thanks for, Leo & have a great weekend !
+1,000,000
Leo, you got some serious stones to stand up and keep taking these bullets. My hat's off to you.
Leo,
You certainly miss two important aspects in your analysis:
1)the indebtness of the US consumer. Many people writing articles on economics don't understand that you cannot fix a probem resulted from rampant indebtness by encouraging consumers to take even more debt and artificially pumping up housing prices!!! you don't mention anything of the "too much debt" issue, you either are not aware of it or you intentionally leave it aside so to make your analysis more credible :)
2) price discovery. Companies will not hire on a sustained basis unless this mechanism works. Right now it doesn't. Why? One example: the Fed is the MBS market, price is no longer a function of demand and supply. Information is distorted. The real estate sector will not start recovering when the signals it receives from prices on one hand and the level of inebtness of consumer on he other hand are confusing and have lost significance.
Aside from that, I am sure you know everyhing on hedge funds and pension funds and your an expert in the "flows of liquidity" and what not and there's too much liquidity around only that the American consmer has none of that :))) And DOW will go to 20,000.
Buy the dips folks if want to lose your shirts!
Zexe,
Ok, then I recommend you just buy high quality companies that pay decent dividends. :)
Don't want to blame you but it looks like a lot of intelligent posters don't really buy your thesis. I would think about it !
You know, I don't always agree with everything you say, but you're right about a lot of things too.
I think that you're a decent and honest guy and that you deserve to be respected for that.
Even if we don't agree with some of your specific calls (I don't agree with the solar calls at all, it's still too early to pick winners in that sector, IMO) your opinions are honest and well thought out.
I appreciate your decency, and don't ever let people be mean to you because they don't disagree. There's just not room in the world for such mean spirited comments from people.
MB, you are as good as Obama's speach.
One can read between lines that you are, as Leo, a mainstream guy. Basically nothing against that but then I think ZH is the wrong forum for you. On ZH, one is also allowed to tell the truth a lot of people don't like to listen. So CNBC is probably the better channel for you.
This is only partially correct. Since truth can only be deciphered through hindsight, the disapproval from the peanut gallery comes instead from any opinion that breaches ZH peanut gallery group-think.
Sad. :-(
Or the Yahoo! boards.
Spot on!
Leo, I commend you on your honesty and encourage you to keep posting. Yin needs yang for balance. I have no clue where you think the updraft in employment is coming from, but as I am in the residential housing and CRE business, it is raining every day where I work, and I'll grant that I see nothing but red ink coming right now.
wow honest person in the real estate business, thanks. as the buddha says rains fall equally on all beings. peace
+1, but honesty in this context is a slippery fish. We tend to see things as we are, not as they are.
Leo,
The problem with you is that you probably advise pension funds and you can't write the world is exploding. So all your comments are always mainstream, stocks will go up bla bla. How can you for example seriously say "Forget about Greece, PIGS and all the noise coming from Europe" ? This is indeed extremely relevant even if the Euro technocrats will play this down day by day as it was done with Dubai. The PIGS are likely in a much worse situation as the EU wants the public to believe. And about the US ? I'm sure you see like ZH the reality, that is the debt is so astronomic that it will never be paid back. Even with all the trillions they pumped in, they can't create jobs, what a shame ! Of course they will continue to pump in trillions and trillions but is that fair for the future generations who will have to deal with that ? You will say it's easy to criticize and not bring a solution. OK, here is mine: make a default on US and European debt. I know it would be more than painful but it would let the system again work from itself.
Not true, my bearish views back in 2005 & 2006 cost me my job at a major pension fund (among other dubious factors).
Well, that explains your bullish views!
What I dont understand is why those views have changed. Things have got a hell of a lot worse since then, people and states are ridiculously bankrupt, we are at or shortly to slide down hubberts peak so business as usual seems unlikely heading forward, and even this jobs report isnt as good as you make out, this from another ZH article:
A number that avoids some of the constant fudging by the BLS, the Non-Seasonally Adjusted number, hit a new recent record: instead of 9.7%, this number was 10.6%, a 0.9% increase from December!
The same can be seen in the U-6 data. NSA U-6 is now at a record 18%.
Read this comment posted on Seeking Alpha:
The Labor Market Is Improving, No Matter How the BLS Muddies the WatersA lot of the confusion comes from the fact that the BLS uses two different surveys and still can't figure out which one is more representative of what is really going on in the economy.
Leo,
Jesse from the Cafe Americain claims that no jobs are added.
He looks at the labour force participation rate and does not see an upturn. "That number continued its downtrend from 64.9% in November to 64.7% in January, with a slight uptick from December's low of 64.6%." http://jessescrossroadscafe.blogspot.com/
Lower unemployment should translate into higher participation rate, but for now it does not. Something does not add up here.
The water is indeed muddy, in that data and others, but even if he is correct, and there is improvement, SOME improvement is no doubt going to happen off such a low point. The world wont just stop, these things take decades (or even centuries) to play out, but I think we are entering a long term structural change and decline of modern industrial civilisation, which of course will have some small improvement along the way. Solar is a small part of things which will help us post hubberts peak, but it is no solution to this long term decline.
The fact that you were fired for having overly bearish views, when these views were in fact correct, speaks volumes for the nature of the business you are in. Bad news is just not welcome, as correct as it may be.
Leo;
There is nothing encouraging about 8 million jobs gone. So, stop running around like a wino with a five dollar bill screaming "I'm rich."
Right. Wishful thinking, biased researching, neglecting to discuss a lot of negative data, e.g., people drawing from retirment accounts to pay expenses, current underfunding of social security, pensions underfunded, the pension insurer agency needing to be bailed out, states needing to be bailed out and a dozen more. Not to mention phony methods of calculating growth and everything else. This is the ¨titanic enconomy,¨sailing among icebergs while taking on water all the time.
What is freaky is the total lack of wisdom as being totally demonstrated by the world's political individuals....
Do note that they are circumstantially inept....
If one questions this statement then one should quickly peruse their biographies....which will be proof positive that garbage in garbage out holds true not only with computer models but likewise in humans....
This is like sending a few hundred people to start a company that builds autos....but yet has never been to school for it....nor have ever built them....
The world's political system is comprised of those who have been successful at advertising 30 second TV and radio spots....and promising chips to cronies....
.......................
What is going to be interesting is the fact that there will be no AAA sovereigns when this sharade is over....there will only be the best of the worst....
The keypoint being that one has to grow in independence and live where it is best for themselves and their families....
The US is on track to tax over 60% of the incomes of small business ....through both progressive and VAT...and other employees related tax impositions....
This will prove to be the final nail in the coffin of US entrepreneurship....with regards to what could have been....
The best hope is that another set of politicos will come in and try to unwind the damages to entrepreneurship....
Until then talented people will tend to disperse where they can be the most productive and efficient....Those countries that see the light will gain the most....
There are already NO AAA sovreigns left. It's just the ratings agencies are too politically and financially conflicted to do their job.
Greece's default worries are a joke when compared to the prospect of the USA making good on its debt. Hell, they still actually make something. Think I'll go have a salad loaded with kalamatas and feta cheese just to prove the point. Chased by a big swig of Metaxa.
Jeepers Leo! You are starting to sound like the Califia Beach Smokinator guy. Not ecerything is green....
I wonder if he made note that a record 38.2 million
people are on food stamps. Those guys are awash in
disposable income and their future looks so bright
that can barely contain their enthusiasm. It's Xmas
everyday for these souls. How do I get on that bus
that's heading towards DC? While I'm there I'll
get a job in the gov't. I hear their hiring people
to shovel snow when the record snowfall storm breaks..
"job growth is around the corner."
I guess if they say it enough people will believe it. Shoveling Unicorn manure is one opening I heard about. Scale-exfoliation for mermaids. "Escorts" for K Street lobbyists.
Any jobs added - outside of this Administration - will be low wage gigs which will put greater pressure on wage deflation. Not jobs in the "$100,000 Box." Credit contraction is exactly the environment where rose-colored glasses are needed to see the silver linings.