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Is a Big Global Risk Reversal At Hand?
The February non-farm payroll showed a further loss of 36,000 jobs, versus an expected loss of 75,000, and the unemployment rate remained unchanged at 9.7%. December was revised up by 41,000 and January was revised down by 6,000, so netting everything out there was essentially no change. Those hired now exactly equal those fired, about 3 million a month. There were continued big losses in construction, and decent gains in temps.
This month I decided to put to use former Labor Secretary Robert Reich’s course on labor statistics which I took at UC Berkeley, and dig through the supporting data at the Bureau of Labor Statistics website (click here for the link at http://www.bls.gov/ ). Something amazing is happening. There is a barbell effect in the labor markets which few seem to see, which is rendering the aggregate payroll figures meaningless.
There is a barbell effect taking place, where the 40% who have been jobless for more than six months, who worked in the bubble industries of real estate, housing, and construction, are never going to see their jobs come back. The 60% who are short term unemployed, who recently lost jobs in finance, accounting, and health care, are getting rehired very quickly. In fact, 20% of the jobless are getting rehired in only six weeks.
There is another effect at work. While the employment rate is for those with no high school diploma is 16%, the kind of worker who lost their manufacturing jobs to China, the jobless rate for those with college degrees is only 4.5%. This is proof that the dying sectors of the US economy that is delivering the highest unemployment rates, and that America is clawing its way up the value chain in the global race for economic supremacy. The bottom line is that payroll figures are much better than they appear at first glance. Alert: the markets don’t know this.
The financial markets had been expecting dire payroll numbers, thanks to the huge snow storms that hit the East. I am going to go way out on a limb here and bet that the snow will be gone by June. In fact, without the snow, the February number could have been as high as a positive 100,000, and that we may actually see this in the March figures to be released in a month.
I think the report is spectacularly good news, because it suggests that the rise in jobless claims and unemployment is now at its apex, and is about to reverse and return to earth. Mind you, we aren’t going back to 5% unemployment anytime soon, but any number showing job gains will have a hugely positive psychological effect.
It will be an improvement that the markets don’t expect, don’t believe in, and therefore will catch them seriously off guard. This means that the global risk reversal trade that started on January 11 may be over, and that big hedge funds are about to start adding on positions across the entire range of financial instruments.
That great bell weather of global risk taking, the Euro/Yen cross is telling us as much, having popped from ¥120 to ¥123.5 on the payroll news. You also see this in the Ausie/Yen cross, and outright yen markets. Those who managed to catch my recommendation to short the yen at ¥88.40 on Thursday bagged an instant profit of ¥2.
This numbers are good news for stocks and emerging markets, although I don’t expect to see huge gains. Focus on big cap technology. It will juice commodities, oil, and precious metals. These numbers also put another nail in the coffin of the 30 year Treasury bond, which I have been despising all year.
For more iconoclastic and out of consensus analysis, you can always visit me at www.madhedgefundtrader.com , where the conventional wisdom is mercilessly flailed and tortured daily, or listen to me on Hedge Fund Radio at http://www.madhedgefundtrader.biz/ .
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Cooking with paper, anyone got some good recipes? Ah, the "financial economy," what does it produce? THIEVES. Right up until the victims decide to start building guillotines. By this time next year a good steak is gonna cost you $50 and $5 for a tomato.
The madhedgefundtrader has certainly named himself correctly.
Hey Noah, lets hire some carpenters and build those head choppers. Deliver one to wallstreet, one to the white house.
Lets not leave out the supreme court, they deserve theirs too.
I live in the west, we tend to go for ropes and trees.
the market has been going straight up for a year now. you don't think this "good" news might be factored in?
i guess the moral of the story is that the government can fix any and all problems by printing money and pretending that home/asset prices haven't fallen.
The market has been arbitraged by those TARP funds received from Joe Taxpayer. (That is, those funds the banksters haven't first FDI'd offshore, along with all those jobs from which they laid off American workers.) And the other monies they have used for further speculation.
well the government has plowed 8%f the gross national product into the economy ,,
so what ever reaction will be short lived . and who in the real world will be buying .. like 20% unemployed// why is it that all these bogus numbers are used ,, something you learned ,, using flawed information to arrive at conclusions
how about using the numbers .. in shadow statistics to get the real skinny..
and leo you do not have a clue hello in my humble opinion .
why not just break all the windows in the united states and replace... then a ramp up in jobs,
hiring .. towns and states are let go .. san francisco 50% or work force... tax reciepts down all over,
this keynesian economic crap is all over the place
somebody get a clue on the austrian model ..
we need to make stuff to get the economy humming .. savings .. not debt , not govenment handouts . we consume and do not save ,
do any of you boys in the number crunching business ... ever created a job.
I call bullshit on the short JPY call.
He didn't do it yesterday.
http://www.zerohedge.com/article/heat-seeker-more-just-air-air-missile
And there isn't a single post on his own website for yesterday.
He damn sure didn't do it last thursday on his own website or here
http://www.madhedgefundtrader.com/February_25__2010.html
http://www.zerohedge.com/article/watch-out-home-listing-agent-hanging-shower-head
Let's get rid of Ben Bernanke and the governors and just put Mega Maid in charge of monetary policy. Although unlike Mega Maid, Bernanke can suck and blow at the same time.
http://www.youtube.com/watch?v=ZXOAc5yt218
F*** the Schwartz! Buy gold!
Hey bud I think you just flayed some conventional wisdon there.
The problem is that the issues that cause the "great" recession were never rectified. So we can have an employment recovery and even another positive GDP print, but what happens when all of the NPAs come home to roost. We still have off-balance sheet hell except for what was handed off to the taxpayer and they are rioting in Euroland because they don't want the spending cuts required to swallow the bill for the handoff.
Remember, when this all started we had strong employment and GDP was humming along. Don't be distracted by the ancillary background noise to the point that you can't hear the song that is playing.
There is a fairly large town in (ironically) Greece called Santorini. It is directly at the base of an active volcano. It has had several fairly recent eruptions and scientists say that there is a very good chance that there will be a major eruption within the next 20 years.
There are many active steam vents and it could blow any day. What is amazing is that the people who live there don't really seem to care. They are assuming that the scientists will warn them in time and they will be able to get off the island before the big boom.
Our global leveraged fiat experiment seems to resemble this volcano in many ways. Several economic "scientists" are saying there is a very good chance it could blow any day but the vast majority of people aren't concerned in the least.
An outsider looking at the people of Santorini wonders why in the world those people cannot see the obvious. A visitor from another planet would look at our fiat fiasco and wonder the same thing.
I am looking at your planet!!
What will you leave your children?
How much else must die so you might have your comfort ?
Why do you all toss away so much?
Oil can make so many products, Why would you burn it up?
And what makes each of you think you are so important?
To those of you who claim religion..have you treated each man as your brother, as Jesus?
Personally i have seen repeated evidence of a creative intelligence all during my life. It appears to be in the very air we breathe and in the thoughts and actions of us all.
Too bad it doesnt get to Wallstreet.
Nice comment, Humble Servant.
The questions seems to be:
The sheeple are not thinking about the aftermath! The sheeple are thinking about instant gratification 24/7. And the banksters know it. They are the goat that leads the sheeple to slaughter!
Reggie,
While I agree with you, the fact remains that banksters control this economy, and they want asset reflation and to inflate their way out of debt. Don't kid yourself, this recovery can be a lot stronger than what most anticipate. They will swallow Greece and any other problem that heads their way. There is simply too much money out there. A bond trader told me today that he has huge clients looking to snap up corporate bonds now, even after spreads have come in considerably. Risk trades are back on.
They're snapping it up becasu they have to in order to keep their asset allocation in place.
no to mention the unprecendented demand from the ETF world, how else do they support the demand from retail?
this is a crowded trade and will one day be a pin hole to get out of.
Dont be suprised when there's no bid for this stuff.
exactly when i dont know, but it will come and it will be ugly
Your point is true as long as the Fed and other central banks around the world keep underwriting the risk.
Lets see what happens when we start to see is if this pigeon can fly on its own. Which in my opinion it can't. Think derivatives!
Asset reflation? Inflation? "recovery"? Isn't that how we got into this mess in the first place. Asset reflation and inflation do not make a "Recovery"! It makes for an asset bubble and subsequent (and nearly guaranteed) crash.
Reggie is exactly right, and Leo is living in fantasy finance land.
The banksters are simply squeezing every last drop of blood they can - like the tiger feasting on the gored gazelle - there will be no recovery.
In fact, I will be greatly surprised if we aren't witnessing the demise of predatory capitalism (around the end of 2012, it appears).
Nope, that privatization and securitization of EVERYTHING has produced all those debt-financed billionaires (colossal thieves), but left everyone else suffering from their debt they have laid on our backs.
Both you and Reggie are absolutely correct.
At what point would you consider the risk trade as being too one sided? Retail has pretty much abandoned equities for bonds, which seems to indicate that the smart money is preparing to fleece the dumb money, especially if there are any rate hikes on the horizon. Meanwhile the only activity in equities seems to be more of big money quants ghosting shares back and forth, unless there have been recent retail inflows that I haven't read yet.
what of mutual fund cash? it appears at historic lows.
I have't seen anything to the contrary. Last read, mutual funds were way low on cash. But, I have to leave room for misdirection and subterfuge, and my own ignorance, which alone or in combination would allow me to miss the latest "record cash on the sidelines" statement that bleats out every so often.
Of course there will be a recovery... it will be small and it will be short lived... a short time after the appearance of a recovery the final collapse with occur. Nothing new here.
Hello!?!?!? I have been telling all of you since January to brace yourselves for more upward growth revisions. Moreover, the US recovery is more than just fluff. Wait till April rolls around, some very bearish investors are going to get caught with their pants down. The bond market will shake and start pricing in Fed rate hikes as soon as August. It's going to be bumpy, but stay long risk assets, and watch speculative activity bubbling up in alternative energy.
Bottom line: Household survey showed gains of 308,000 and for a second month in a row full-time jobs gained according to this survey, which is better at showing trends in employment (take 3-month m.a.). US payrolls will come roaring back in April.
leo you are a complete moron..ask yourself how did we got here? money printing and government stimulus..this is not reality and is not by any means a recovery. shit the real estate market continues to deteriorate even with the ridiculous tax credit...sure we might have bumps up in employment the next couple months because of tax payer blood money but it doesnt mean a god damn thing....we are living in a unsustainable economic pipedream. and rate increases with the real estate debacle - are you serious? theres no demand right now, shadow foreclosures, ARM resets coming over the next 2 years, and the tax credit is up on 043010, and you see rate increases...wow leo you take the cake
Thank you - you get it. I run a manufacturing business that serves high tech industry. My business has doubled since July so I know that there are some real aspects to this "recovery." However, it is completely running on money printing both public and secret) and stimulus. I know this, most of my vendors realize this, and my customers know this. That is why real private sector employment has not grown - it's all been in government or government supported areas.
Leo, last week you were afraid of deflation and you were not sure to be bearish or bullish. What made you change your mind, again?
Here you go:
"With the release of February data on March 5, 2010, BLS has corrected April-July 2009 establishment survey estimates for all employees and women employees for the federal government series. The changes result from corrections to initial counts for Census temporary and intermittent workers for Census 2010."
The net result of the revisions is that jobs were added to the beginning and the end of what will be defined as 'the recession.'
This serves to now make the slump look steeper and more severe, and the recovery to be a little sharper, with plenty of jobs leftover to create a 'flat impression' in 2010 at worst.
In short, jobs were removed from almost every month in the revision during the slump, and shoved into the beginning and into the end.
That looks like a nice picture of a recovery, doesn't it? See, the February 2009 stimulus program and the strategy of massive bank bailouts have worked.
Leo,
You two should get a room.
Wow! In some traders' worlds they still refuse to believe ANYTHING ever correlates?
From Monday to Thursday, nobody believes the federal stats, but notices the explosion in poverty, homelessness, food stamp allocation, food bank output, etc., but come Friday, suddenly those stats are believable?
Hmmmmmm.....
Wow! In some traders' worlds they still refuse to believe ANYTHING ever correlates?
From Monday to Thursday, nobody believes the federal stats, but notices the explosion in poverty, homelessness, food stamp allocation, food bank output, etc., but come Friday, suddenly those stats are believable?
Hmmmmmm.....
SHHHHHH, more people on food stamps is a GOOD THING according to CNBACNBS news. It means more people can buy food and thus support American farmers (of course many fruits/veggies come from Mexico, meat from Argentina, lamb from New Zealand, Florida's tomato yeald is at less than 1/5th normal due to that global freezing, i mean warming, i mean Climate Change.... but shhhhh don't tell anyone that).
Green shoots!
funny how people get bullish at the top
You folks are aware that there is a bogus upward birth/death adjustment in these statistics, right?
Not to mention census hiring has already shown up, 15k this report, more in future reports.
It's all a dancing marathon - people will take as much as they think they can handle.
Way to go America!