This page has been archived and commenting is disabled.

A Look At Tomorrow's Double Whammy Of Worsening NFP And Wholesale Prior Year Downward Labor Revisions

Tyler Durden's picture





 

Tomorrow will likely be a jobs-predicated bloodbath. First, we will get the NFP data, which expectations have pegged at -5K (and for some reason Private payrolls still matter, even though the census impact is now negligible) but as Goldman is likely spot on with their estimate of -50K, and validated by recent ADP data, the finally number will be big miss to consensus. More importantly, as we highlighted in today's Frontrunning, tomorrow the Labor Department will announce a million-ballpark wholesale downward revision to 2009 employment numbers (due to birth-death and other perpetual upwardly biased adjustments), confirming that the jobs situation is far more dire than anything Joe Biden could have ever imagined. As the ever-optimistic Neil Dutta from BofA stated: "That adjustment is probably overstating the
employment gains because we are in a very subdued recovery and the
likelihood is that the birth-death factor is making the data look better
than it otherwise would be
."
Tax records will probably show more businesses closed than initially estimated by the Labor Department, analysts said. This will certainly sour the mood, and the only saving grace will be how much of an impact the market will believe a near-certain QE2 will have on stocks (and has not been priced in yet). In the meantime, here is Goldman's latest view on why the labor picture in America is getting worse and worse.

A Slow Economy Means a Slow Labor Market (Tilton)

The September employment report will be released Friday at 8:30am.  We expect a below-consensus gain of 25,000 private sector payroll jobs and an increase in the unemployment rate to 9.7%.  A variety of labor market indicators, including this morning’s weak ADP Employment Report, look consistent with this forecast.   More simply, employment growth tends to follow GDP growth with a strong correlation and a slight lag – so weak growth data in recent months also points to job growth that is as soft or softer than that seen over the summer. We expect the Labor Department to announce a preliminary estimate of a small upward “benchmark revision” to payroll growth since March 2009.

This morning we changed our foreign exchange forecasts to reflect more broad dollar weakness stemming from the weak US growth outlook and (expected) renewal of asset purchases by the Federal Reserve.  A weaker dollar is one important channel through which asset purchases (or “quantitative easing”) could stimulate the economy, and one reason why we expect a modest reacceleration in growth over the course of 2011.  See GS Global Viewpoint 10/20, “New FX Forecasts: More Broad USD Weakness Ahead” for more details.

Last Friday we issued our preliminary forecasts for the September employment report: a drop of 50,000 payroll jobs, composed of an increase of 25,000 private sector and a decrease of 75,000 government jobs, a rise in the unemployment rate to 9.7%, and an increase in average hourly earnings by 0.1%.  Incremental information over the past three days has not changed our views.  Most leading indicators look quite weak:

1. Job advertising has stagnated.  Surveys of job advertising by the Conference Board and Monster.com show a substantial pickup in late 2009 followed by continued improvement in the first half of 2010.  But over the past two to three months they have stagnated, with the Monster survey actually showing a substantial seasonally-adjusted drop in August (this is the latest data point available for Monster, although it’s good enough for our purposes--our studies suggest job advertising leads payroll growth slightly, as one might expect).   

2. Business surveys are mixed.  The Institute for Supply Management’s manufacturing sector employment index declined from 60.4 in August to 56.5 in September, suggesting a slower rate of employment growth.  In contrast, its nonmanufacturing counterpart posted an improvement from 48.2 to 50.2 (this index has ranged between 48 and 51 since February).

3. Jobless claims are down, but largely for technical reasons.  New jobless claims averaged nearly 500,000 in the first two weeks of August but have improved somewhat since then; they averaged 461,000 in the final two weeks of the survey period.  This is probably the best piece of recent labor market news, but looking back over the year’s data, the early August figures look like an aberration; the more recent numbers are almost spot on the first-half average.  The total number of benefit recipients has also come down by nearly half a million since the August payroll survey was taken.  However, the main reason for this seems to be the increasing number of Americans who have exhausted all available benefit programs; if we add back these “exhaustees” to the number of current recipients, there has been little if any underlying improvement.

4. Consumer perceptions have become even more pessimistic.  Households’ perceptions of job availability continue to deteriorate.  In the latest Conference Board consumer confidence survey, only 3.8% of respondents characterized job availability as “plentiful”—a figure that has declined four out of the past five months—while 46.1% thought they were “hard to get.”  The differential of -42.3% is exceptionally weak by historical standards.

5.  The ADP Employment Report disappointed.  Market participants got an unpleasant surprise this morning when ADP estimated a decline of 39,000 private sector payroll jobs in September, well below consensus expectations of a 20,000 gain.  Based on current BLS and ADP estimates, the ADP report has underestimated private sector payrolls by about 50,000 per month over the last three months, and about 70,000 per month over the last six months.  If we assume this general bias persists and make an adjustment in this range, this morning’s report would be broadly consistent with our estimate of +25,000 for private sector payrolls.

A large majority of the evidence therefore points to slow employment growth in September.  More simply, real GDP growth was weak in Q2 (1.6% annualized) and does not seem to have reaccelerated since then.  Since employment growth typically follows GDP growth with a slight lag, it would be odd for payrolls to show substantial improvement in the near term.

As for the public sector, by far the most important factor this month relates to temporary Census employment – nearly all the remaining temporary workers finished their contracts by the payroll survey week (the week of September 12-18).  This represents a decline of about 78,000 Census workers from the prior month, and essentially explains the difference between our private-sector and total employment estimates.  Other factors include ongoing budget pressures forcing cutbacks at the state and local level, which have been offset to some extent in recent months by a small amount of federal non-Census hiring, and the possibility that temporary poll workers for primary elections in certain states (including New York) may have been counted in payrolls this year even though they were not in the past.   We have assumed these factors play little role on net in the public sector payroll change, so our forecast for total payrolls is -50,000.

We expect the unemployment rate to edge up to 9.7% in September.  Although the household and payroll surveys of employment can and often do move in different directions in a given month, our expectation of a decline in total payrolls in September suggests a decline in employment in the household survey (the survey used to calculate the unemployment rate) is also more likely than not.  Unless those job losers depart the labor force entirely—certainly a possibility, but seemingly less likely with the labor force participation rate already at a quarter-century low—this implies some rise in the number of unemployed.  And with unemployment at 9.64% in August, it would take only a small increase in the number of unemployed for the rate to round up to 9.7%.

The September payroll report normally features the Labor Department’s preliminary estimate of its annual “benchmark” revision to payrolls.  The benchmark is the process by which initial survey estimates of employment are “trued up” to near-complete counts of employment from state unemployment insurance records.  The complete counts are available only with a lag of about nine months—each January’s payroll report provides the updated benchmark level of employment for the prior March—hence the rationale for the more up-to-date payroll survey measure.  With three of four quarters of comprehensive data now available (April through December 2009), the Labor Department is in a position to provide a preliminary estimate for the size of this revision.  We can get a sense of how large it might be by comparing the growth of payrolls in the comprehensive count (available in the Quarterly Census of Employment and Wages or QCEW) from March-December 2009 with the growth in payrolls from the survey results over that period.  The payroll survey shows a loss of 727,000 jobs on a non-seasonally adjusted basis while the QCEW shows a loss of 588,000. That is, the QCEW implies that the payroll survey underestimated job growth by 139,000 over these nine months; if we extrapolate this to twelve months the underestimate would be 185,000.  Therefore, we expect the preliminary estimate to be an upward revision to payrolls of approximately this magnitude.  This would be a much smaller adjustment than last year (a downward revision of more than 900,000) and a relatively small one in historical terms. 

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 10/07/2010 - 17:27 | Link to Comment john_connor
john_connor's picture

Better than expected or same NFP report: Fed has no cover for QE 2

Worse than expected or same NFP report: It is confirmed that QE 1 is destroying real economy by increasing commodity input costs and increasing US debt burden

Either way: CARNAGE

 

Thu, 10/07/2010 - 17:34 | Link to Comment SloSquez
SloSquez's picture

Yes, and why wouldn't it.  People don't understand the psychology of "Oh Shit".

Thu, 10/07/2010 - 17:58 | Link to Comment chopper read
chopper read's picture

Obamanomics: oh, the humanity.

http://www.youtube.com/watch?v=F54rqDh2mWA

 


Thu, 10/07/2010 - 19:13 | Link to Comment BobWatNorCal
BobWatNorCal's picture

And on the topic of Biden-nomics, I give Joe a LOT more credit for imagination than the author has.
"..the jobs situation is far more dire than anything Joe Biden could have ever imagined."

Thu, 10/07/2010 - 21:13 | Link to Comment rocker
rocker's picture

Are we Americans really that stupid to argue who's program works and who's does not. I guess so. One side claims to favor the rich or wannabes. The other side claims to favor those who know they will never be rich and even when they do the right things gets screwed. Isn't the real question, who's screwing both sides. Hint, take a look at who gave us cheap money way back in 2001. Then look at who really got the cheap money and what they did with it. It seems that ZH has answered some of this. Who's front running the FED? Who's gaming the system and who's being hurt by it. I just know this, savers are being screwed and don't even get why. If inflation caused much grief for some. Then who gained from it. Aren't those the real crooks and swindlers.

Thu, 10/07/2010 - 23:53 | Link to Comment chopper read
chopper read's picture

simply put, YES.

 

regarding the elderly and poor, Benny and the Inkjets may as well say, "let them eat cake."

 

the 'stimulus' and healthcare bill are just the railroad spikes in the coffin. that's why i say, "NOBAMA!".

Thu, 10/07/2010 - 18:00 | Link to Comment Vampyroteuthis ...
Vampyroteuthis infernalis's picture

You cannot print your way out of a depression!!

Thu, 10/07/2010 - 18:33 | Link to Comment Minion
Minion's picture

Good point - the root cause to all this seems to be a massive misallocation of capital, to the point where the population has no means of producing what they consume.  Everything looks fine (aside from always being in the red, from a balance of payments standpoint) until the creditors stop lending.  They say hyperinflation starts with a failed bond sale.......

Thu, 10/07/2010 - 18:16 | Link to Comment midtowng
midtowng's picture

The market is still positive for the jobs revisions.

http://www.marketwatch.com/story/second-look-at-stimulus-success-2010-10...

Joseph LaVorgna, chief U.S. economist of Deutsche Bank, said the gains in real gross domestic product over the past year, along with the job growth reported in the BLS’s separate household survey, suggest the revisions will move payrolls higher.

Thu, 10/07/2010 - 18:23 | Link to Comment SheepDog-One
SheepDog-One's picture

'Real gross domestic product'? What a farce, remove the money print-fest and the USA has 0 GDP.

Thu, 10/07/2010 - 18:20 | Link to Comment HarryWanger
HarryWanger's picture

I disagree. QE2 is pretty much already in the books. Tomorrow's number will have nothing to do with whether or not we get QE2. You don't think these guys know this number already.

So BTE on the number and you could see a huge move up. Economy, theoretically, improving albeit very slowly and QE2. 

WTE and we might see an early dip followed by a rise as the spin on QE2 gets ramped up huge. The only way I see a down day on this news is for a major miss - which is doubtful. It won't be great or even good but it won't be a major miss. Just like we see in the article above.

Thu, 10/07/2010 - 18:24 | Link to Comment SheepDog-One
SheepDog-One's picture

There wont be any Q/E2, all hype for hypes sake while the FED holds a pair of 2's. Q/E is priced in, and cant be delivered.

Thu, 10/07/2010 - 18:35 | Link to Comment InconvenientCou...
InconvenientCounterParty's picture

It seems there is a perverse psycological relationship with more monetization. When people are hanging their hopes on currency debasement as a fix for the real economy, we have truly decoupled from the real axis. As a previous post pointed out, the Fed is truly boxed in like never before. It could go a number of different ways, but for my money, the downside risk far outweighs the upside risk.

Thu, 10/07/2010 - 18:39 | Link to Comment HarryWanger
HarryWanger's picture

But isn't the Fed's goal to bring yields down so far that it forces money into other assets, i.e. equities? Isn't that the great wealth effect we always hear about? Boxed in, sort of. They just have to be careful that while forcing down yields that money does indeed cause the wealth effect they hope for. Otherwise, bad news.

Thu, 10/07/2010 - 21:48 | Link to Comment john_connor
john_connor's picture

Wealth Effect?  You are mistaken.  The majority of Americans buy stuff when 1) they have a source of income and confidence in that source moving forward and 2) they have access to easy credit.

Since both of these conditions have been obliterated, especially on a relative basis, they will not buy stuff.

The so called wealth effect, if anything, is marginal froth at the end of positive credit cycle and the biggest bubble in history.  That bubble has burst; it doesn't exist anymore.  Wake up Mcfly.

Thu, 10/07/2010 - 21:53 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

Kind of you to change idiot to mistaken, John.  Seldom does a post elicit that sort of attention to pedestrian words on this forum.

Thu, 10/07/2010 - 22:00 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

Harry is not an idiot.  (S)He has a hidden agenda, but (s)he is not an idiot.

But isn't the Fed's goal to bring yields down so far that it forces money into other assets, i.e. equities?

Nevertheless, Sarah's husband is on the right track.   Americans are not savers (understatement of the day).  There is no real money that can be forced into other assets, i.e. equities.  Much of the real money is either sitting in KSA or here in the banks' and insurance companies' investment accounts, and it sure as hell isn't going back into equities anytime soon.

If a dumbass like me understands this, then the PhDs at the Fed sure do.  Therefore, Harry, the Fed's goal must be something else other than what you state.

Fri, 10/08/2010 - 00:20 | Link to Comment Quantum Nucleonics
Quantum Nucleonics's picture

That hasn't happened.  Credit availability isn't stimulating aggregate demand.  Banks are sitting on the capital the Fed is creating, happy to earn the spread between zero and treasuries.  Low rates distort the economy, plus huge government deficits mis-allocate capital.

The best course would be to normalize rates, stabilize the US dollar, dramatically cut government spending, privatize the mortgage markets, and let the chips fall where they may.  That would produce an ugly recession, with very high unemployment, and take out most of the large banks.  But, then, finally, the markets could clear, asset prices could normalize, and you'd see a sharp, sustainable recovery.

Thu, 10/07/2010 - 18:43 | Link to Comment InconvenientCou...
InconvenientCounterParty's picture

BTW, the only scenario where i get killed is equities to the moon and gold/silver dropping like a stone, dollar strong. It's been a long time since I've seen that pattern.

Thu, 10/07/2010 - 20:53 | Link to Comment john_connor
john_connor's picture

Stocks are massively overbought, so we are going down either way.  QE 5 is baked into stocks right now.  Everyone (except Ben) knows, however, that QE is destroying the real economy and that more QE is a death knell.  The past 5 weeks has just been fun and games for the computers.

We will be down 5-10% from today's close within a week.  

Thu, 10/07/2010 - 21:53 | Link to Comment TheManagement
TheManagement's picture

Terminology such  as "death knells" and "going down" does not help address the challenges of the current investing climate. Please use more positive, forward-thinking terminology.

Signed,

TheManagement

Fri, 10/08/2010 - 00:27 | Link to Comment Quantum Nucleonics
Quantum Nucleonics's picture

I think Bernanke knows it isn't working, it's just that the (flawed) economic theory to which he subscibes offers no solutions to the current situation.  The drowning man will flail about on the surface for a bit before slipping below waves.

Thu, 10/07/2010 - 18:22 | Link to Comment SheepDog-One
SheepDog-One's picture

You'd think either way theyre screwed, but then again we live in Bizarro world where 2 sets of terrible data may equal 'GOOD NEWS'!

Thu, 10/07/2010 - 18:52 | Link to Comment bugs_
bugs_'s picture

Carnage!  And thats a best case!

Thu, 10/07/2010 - 17:31 | Link to Comment sysin3
sysin3's picture

algobot code (as reverse-engineered by ZeroHedge some time ago) :

if news == bad then buy at market, else buy at market;

rally, bitchez !

(for the love of the Flying Spaghetti Monster, I wish that I were kidding)

Thu, 10/07/2010 - 18:36 | Link to Comment Minion
Minion's picture

The AlgoBots are just automated shill bidders - real traders will take profits eventually.  How very interesting that insiders are selling 2400 times more often than they're buying......

Thu, 10/07/2010 - 17:31 | Link to Comment cossack55
cossack55's picture

I wish I had time to read this post, but I'm late for my first job interview in 4 months.  Wish me luck and I hope flipping burgers won't iritate my arthritus.

Thu, 10/07/2010 - 17:44 | Link to Comment gwar5
gwar5's picture

Good luck, hold the mayo

Thu, 10/07/2010 - 18:06 | Link to Comment plocequ1
plocequ1's picture

I'll take a side order of fries to go with the huge Shit sandwich that we are all going to have to take a bite.

Thu, 10/07/2010 - 18:17 | Link to Comment TraderTimm
TraderTimm's picture

Looks like we'll have to supersize that for an extra trillion.

Thu, 10/07/2010 - 23:53 | Link to Comment chopper read
chopper read's picture

call it a "Crappy Meal".

Thu, 10/07/2010 - 17:35 | Link to Comment cnbcsucks
cnbcsucks's picture

Sounds like S&P up 3% tomorrow.  The worse the news, the higher the market.  It's about as perverse as it gets.

 

Thu, 10/07/2010 - 22:27 | Link to Comment homersimpson
homersimpson's picture

Why did someone junk you? It's not like the market is going up on spectacular news.. After seeing the past month, I don't recall the last time the Fed or TBTF banks allowed the market to dip below 50 points on the DJI..

Thu, 10/07/2010 - 17:35 | Link to Comment treemagnet
treemagnet's picture

QE2 not priced in yet?  Best Sept in 70 years on bullshit news and no QE baked in?!

Thu, 10/07/2010 - 18:22 | Link to Comment HarryWanger
HarryWanger's picture

Not baked in until the bozos programming the machines declare its baked in. Hell, that could be at 1200 for all we know.

Thu, 10/07/2010 - 18:40 | Link to Comment Minion
Minion's picture

There is a sucker in every game.  Do you really think the public at large, now overcome with the urge to chase price, is not opposite the banksters who are ringing the cash register on their sorry ass?  :D 

Thu, 10/07/2010 - 17:39 | Link to Comment Max Hunter
Max Hunter's picture

participants got an unpleasant surprise this morning when ADP estimated a decline of 39,000 private sector payroll jobs in September,

The 39k looks like a 39.99 price tag.. Coincidence?.. I think not..  The worse part about the 99.99 gig is... it must work, or they wouldn't do it..

Thu, 10/07/2010 - 17:45 | Link to Comment Lao Tzu
Lao Tzu's picture

I'm glad you're willing to go down on paper with specific predictions. I'll be checking the markets at the end of the day tomorrow.

Thu, 10/07/2010 - 17:50 | Link to Comment RobotTrader
RobotTrader's picture

Whatever the NFP is....

We know that the PigMen were already frontrunning it all day.

Massive selling volume in GLD, and huge accumulation in DZZ.

Thu, 10/07/2010 - 18:02 | Link to Comment Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Let the mass asset sell-off commence!

Thu, 10/07/2010 - 18:41 | Link to Comment Minion
Minion's picture

Behold, the one day chartist, telling everything after it happens.  Behold. 

Thu, 10/07/2010 - 18:50 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

ah, for the right to puke up charts

Thu, 10/07/2010 - 18:00 | Link to Comment plocequ1
plocequ1's picture

IMF is seeking more bailout money to the tune of 7 Trillion dollars, All for the Banks. I just added to my Gold position.

Thu, 10/07/2010 - 18:08 | Link to Comment Racer
Racer's picture

So tomorrow the Bureau of LiarS  says it yet again has to revise the already revised numbers to a dreadful number and the market is now supposed to believe the figures, sorry guesses that will again be revised again and again?

A market for morons and that is how the lying cheating banksters are treating anyone who believes or trades in this FRAUD

Thu, 10/07/2010 - 18:11 | Link to Comment monopoly
monopoly's picture

Way too many weak holders following price action up thinking it is easy to scalp a few cents near the top. Once they are all gone we can move forward. Might take a little time but nothing new here. Lets see, oh yeah, this is the 73rd top in gold since I bought a little a few years ago.

Just part of the flow. Just repeat bernanke, geithner, obama and tell me you want to sell.

Thu, 10/07/2010 - 18:28 | Link to Comment SheepDog-One
SheepDog-One's picture

As long as the central banksters, Geithner, Bernanke, and Obama are running this Titanic, Im buying more gold and happy about it!

Thu, 10/07/2010 - 18:22 | Link to Comment gwar5
gwar5's picture

 

Lee Quaintance says Fed is using old methods for a new paradigm. Everything is too leveraged to respond the way it used to and QE II means they're just buying more leveraged assets (bonds), making it worse. There's too much credit, not enough liquidity and it's the pushing on a string thing.

The suggestion from some quarters, therefore, is for the Fed to buy unleveraged gold assets from the treasury books, instead of UST bonds, which would reliquify the currency and give it gold backing. The Treasury still has gold on the books for only $42 / oz  and has 261 million ounces (8200 tonnes) vaulted.

http://www.gata.org/files/QBAMCO_Who_is_John_Galt.pdf

The fair value of 1 ounce of gold should be about $8250. per ounce, based on old Bretton woods math used in the past (Which is very nice) for market price discovery. If the Fed became a buyer of gold, and returned to a gold standard in the process, major problems and bigger bubbles might be avoided and gives them a way out.

(note: King world says there are "massive" calls for physical gold delivery if gold price hits $1307-1325, sets floor for price. He didn't say HOW massive were the calls for physical)

 

Obviously this is bullish for gold. If the Fed looks to be considering a return to gold, you now have a ballpark price target. Jim Rickards and others have also discussed this scenario so it's an option with legitimate thinkers and backers and I see it being floated more frequently

 

Thu, 10/07/2010 - 18:25 | Link to Comment HarryWanger
HarryWanger's picture

As I mentioned earlier, the data is far from good but it's also far from bad. What does that get us? A market stuck between 1040 and 1175. That range will probably tighten up a bit, if it hasn't already but no truly "awful" data lately. By awful I mean ISM contraction, Claims rising substantially, earnings falling off a clip. 

None of that is happening. Not good but also not bad. Just a sluggish, slow moving growth with a tiny slope upward.

Thu, 10/07/2010 - 18:28 | Link to Comment SheepDog-One
SheepDog-One's picture

'Data far from bad' LOL well I suppose, as long as youre not comparing it to historical data or anything.

Thu, 10/07/2010 - 20:55 | Link to Comment berated
berated's picture

Harry, given your view above, I'm curious as to your thoughts re the Consumer Metrics Growth Index? The link is to a Doug Short post on SA. The third graph in the post really catches one's eye....

http://seekingalpha.com/article/228318-consumer-metrics-growth-index-cur...

Thu, 10/07/2010 - 22:29 | Link to Comment TheSettler
TheSettler's picture

Harry you need to learn to enunciate yours words a little better so whomever is taking the dictation can spell out your true meanings (clip)? (cliff)?

Thu, 10/07/2010 - 18:26 | Link to Comment BorisTheBlade
BorisTheBlade's picture

A weaker dollar is one important channel through which asset purchases (or “quantitative easing”) could stimulate the economy, and one reason why we expect a modest reacceleration in growth over the course of 2011.

No one even talks anymore about export acceleration once the dollar weakens for a simple reason: RMB, the second biggest exporter in the world has its currency more or less pegged to the dollar and reluctant to revaluate, while the central banks of the rest of the world are busy with nothing, but destroying their currencies as fast as the US does, just to keep the fairytale going.

Thu, 10/07/2010 - 18:32 | Link to Comment Racer
Racer's picture

Tally sticks, paper money and coins made out of base metal pretending to be more than they are worth are scams and cons perpetuated by the various governments to fool people and make laws so they obey this idiocy.

Gold is made in stars not by people, I would rather trust an element made that way than in a piece of toilet paper continually rolling off the printing presses by broke governments

Thu, 10/07/2010 - 18:35 | Link to Comment Racer
Racer's picture

Madoff with your money, that is what the banksters are doing

Thu, 10/07/2010 - 18:34 | Link to Comment SheepDog-One
SheepDog-One's picture

Bottom line- Obama approval clinging by fingernails to 40%, all time record low heading into an election in a few weeks, congress approval at 10%, look for Fear and Panic button to be hit by mid Oct. 

All this day to day talk of market conditions in an utterly broken market overall misses the entire point. Its all nothing but an illusion, and the illusion makers are in deep trouble.

Thu, 10/07/2010 - 18:45 | Link to Comment RobotTrader
RobotTrader's picture

If it turns out that we are out of the woods on the NFP....

I expect a massive selloff in gold and bonds and a huge ramp in financials and retailers.

I'm ready for anything, just looking for the market to tell me what it wants to do.

The fact that the retailers refused to sell off in front of this thing was awfully suspicious.

Thu, 10/07/2010 - 18:58 | Link to Comment HarryWanger
HarryWanger's picture

By "out of the woods" I assume you mean somewhere around consensus or BTE. WTE by a huge margin would be an issue but I don't expect that.

I have a big position in precious metals for quite some time. It would take a lot to force me out of that. A selloff in gold? Maybe, but we'd need some huge payroll numbers for that to happen.

But I agree on retailers - a close to consensus or blowout and they'll fly. So your odds are about 75% chance, based upon possible NFP scenarios, of retailers running high tomorrow.

Thu, 10/07/2010 - 19:00 | Link to Comment Boba Fiat
Boba Fiat's picture

Out of the woods?  Yeah, I'm sure that's what we're gonna learn tomorrow.  "All clear.  Psyche.  No depression."

Thu, 10/07/2010 - 20:27 | Link to Comment trip nixon
trip nixon's picture

Robo may be correct or incorrect about how tomorrow's numbers will affect various markets, only time will tell, but his analysis is severely flawed. I agree that gold looks poised for a sell off, and I have bought aggressive LEAPS on that bet, but Robo assumes that a strong NFP would tank gold. For that to be correct, you would have to explain why gold is rising in the first place, and that explanation would need to sync with the idea of strong jobs numbers causing a sell off in gold.

So why is gold rising? If it's strictly, "I'm so afraid of everything that I want gold", then yes, perhaps strong economic and job growth would fuel a sell off in gold because it's a fear trade. If the reason for gold's rally is expectations of hyperinflation, then Robo is definitely wrong. Strong growth in jobs should be inflationary which will cause gold to rise. The real question is why gold is rallying to begin with, and the lack of an apparent answer, besides currency debasement, raises questions about the legitimiacy of gold's latest rally and could explain why there was a high volume reversal today.

I also strongly disagree with the notion that gold and bonds will fall and equities will rise. This is, of all scenarios, the least likely. First, why are hedge managers plowing into stocks, when bonds have clearly outperformed stocks all year? Will this outperformance suddenly end? Not yet, bonds continue to rally quite nicely. They have made a tragic error, and it will end badly into year end. The more likely scenario is exactly what happened today -- bonds will keep rallying, stocks will sell off, and gold will sell off.

Thu, 10/07/2010 - 20:41 | Link to Comment TraderTimm
TraderTimm's picture

Aren't precious metals, bonds, etc.. all fair game if we sell off hard? It just turns into a panic for assets at that point to meet margin calls or simply cashing out in fear. I remember reading a post here that detailed a scenario of that nature.

Thu, 10/07/2010 - 22:00 | Link to Comment espirit
espirit's picture

Cashing out for BennieBux? I think Joe Trader is looking for something more tangible where losses could be minimized so physical PM's, commodities, ag-land, and the like are where I'm headed.

Thu, 10/07/2010 - 18:49 | Link to Comment Goldtoothchimp09
Goldtoothchimp09's picture

The market tops tomorrow!!!

I think tomorrow will mark the end of Minor 2. So many factors line up. We had time symmetry A=C yesterday. We have price symmetry (with a throw over for C tomorrow i predict). We have astro (October 8) see this - http://mysquigglylines.blogspot.com/
While news doesn't make the market -- this foreclosure mess will become a big issue for psychology. Art Cashin made that point - and he is wise beyond belief. It all points to tomorrow. I hope the Dow is up 150 pts. plus in the afternoon!! Perfect short entry -- i feel it in my bones!

Thu, 10/07/2010 - 19:01 | Link to Comment HarryWanger
HarryWanger's picture

Respectfully disagree on the foreclosure mess. Nobody even understands it let alone being any sort of "big issue for psychology". I think it will be completely handled out of the spotlight and under the radar. 

Thu, 10/07/2010 - 23:18 | Link to Comment Fearless Rick
Fearless Rick's picture

Harry, beg to differ, but, as somebody with skin in the game and intense coverage of the entire real estate fiasco since 2007, I can undeniably state that I understand it, and being neither an economist, nor engaged in real estate except on a small basis and from a reporter's perspective, if I understand it, there are surely many more who understand it better than I do.

I figure the bankers who made this mess understand it, so your statement gets pushed right off the page by sheer weight of numbers.

As far as how it's going to shake out, nobody really knows, but I'll propose these two scenarios:

1. If the banks and bank executives are forced to realize their losses, the economy is sunk for 3-5 years.

2. If the banks and bank execs are NOT forced to realized their losses, the economy is sunk for 10+ years and the nation may not survive it. Plus, the dollar will sink like an anchor.

I think it would be very difficult to deal with $4-6 trillion of underwater residential and commercial real estate "under the radar." Too many actual people involved.

Fri, 10/08/2010 - 00:35 | Link to Comment Quantum Nucleonics
Quantum Nucleonics's picture

I don't understand why people thing that this foreclosure issue will force realization of losses.  Banks have been using mark-to-fantasy to value all these illiquid, non-performing loans since March 2009.  There's no reason they can't continue to carry these loans at par, or whatever, till what is essentially a paperwork snafu gets sorted out.  As a side benefit, they can hope the delay will help work through the excess housing inventory, and prices stabilize

Fri, 10/08/2010 - 06:09 | Link to Comment StychoKiller
StychoKiller's picture

Your so-called paperwork snafu is just the scab over the gangrene, my friend.  These greedy idjuts were writing mortgages so fast in order to roll them into MBS, then CDOs, then CDO^2, etc.;  what makes you think that these greedy idjuts were standing in lines in county courthouses around the nation while the bureaucrats got around to recording all the various assignments, buyers, tranches, little green men, etc. that were buying mortgages by the ton?

The fraud in the foreclosure process(es) is just to hide the previous fraud(s) perpetrated on the holders of the various securitized mortgage paper(s).  Get with the program -- if you can't keep up, take notes.

Thu, 10/07/2010 - 20:29 | Link to Comment 99er
99er's picture

Chart: SPX

Topped.

http://99ercharts.blogspot.com/2010/10/spx_07.html

[See Forums for futures.]

Thu, 10/07/2010 - 21:26 | Link to Comment Withdrawn Sanction
Withdrawn Sanction's picture

"...on the foreclosure mess. Nobody even understands it let alone being any sort of "big issue for psychology"

Well, I'd imagine 1 in 5 underwater homeowners know and understand the foreclosure crisis in very real and visceral (if not theoretical) sense.

Whether the NFP number really matters in any meaningful sense for trading, I'l leave to others to decide.  But what matters to the headline unemployment no. (the last one before the election) is how many people were defined out of the labor force (as discourared, or otherwise Orwellian "non-persons").

Last month, BLS defined more than 300K people out of the LF at the same time they added 115K "new hires" through their birth/death model.  While exclusion of the B/D hires would not raise the unemployment rate, the fact that they almost exactly offset the release of 114K Census workers would.  These 2 tricks alone shaved about 0.3% off the reported unemployment rate, which should have been 9.9% but was reported as 9.6% instead.

People know.  They get it....and they're tired of "getting it."

Thu, 10/07/2010 - 22:16 | Link to Comment long_and_short
long_and_short's picture

@HH, you know its funny you brought up the Phd comment.  I was in a meeting today where the analyst said that CBs are forcing us to buy the risky assets, and that you would be a fool not to follow the trade.

I had to laugh at his analysis and completley dismissed the -ve fund flow to retail rebalancing their portfolios

The only way you get out of this is jobs period.  Fighting deflation is hard because its a mindset, unlike inflation where you price money out fo reach by moving rates.

Thu, 10/07/2010 - 22:45 | Link to Comment cjbosk
cjbosk's picture

Inconvenient..."BTW, the only scenario where i get killed is equities to the moon and gold/silver dropping like a stone, dollar strong. It's been a long time since I've seen that pattern."

 

Equities to the moon, dollar strong?  When has that happened in this carry trade?  Am I missing something???

 

Don't fight the tape, it's stronger than it looks...

Thu, 10/07/2010 - 22:47 | Link to Comment cjbosk
cjbosk's picture

99er, nice chart...

Looks like Lenoir could have called it way back when...1161ish SPX.  Regardless, someone is always right, someone is always wrong. 

Bye the way, keep those charts a-comin'

 

 

Thu, 10/07/2010 - 22:50 | Link to Comment lawrence1
lawrence1's picture

¨Fear¨ is not driving the PMs, rather the correct perception that the fiat system is failing or, as Martin Armstrong argues, gold rises with the fall in confidence in the government´s economic policies. That is the primary reason, simply that. Well, and the growing re realization that gold is money (store of wealth).

As for gold ¨getting hit,¨ falling or whatever term, this only means that the current paper is doing what it does best... fluctuate, as it is not grounded in anything real. But, hey, I´ll give you my paper anytime for gold at this

ridiculously low level.  

Thu, 10/07/2010 - 23:16 | Link to Comment 99er
Thu, 10/07/2010 - 23:25 | Link to Comment Fearless Rick
Fearless Rick's picture

Just a late night note on why the government policy of "kicking the can down the road" coupled with QE (kind of in the same mantra) is great for most PM investors. Simply, it offers more opportunity to purchase more, besides the obvious devalued dollar / loss of confidence = higher gold/silver.

Keep kicking, Ben, Barack and Timmy. We LUV IT!!

Thu, 10/07/2010 - 23:58 | Link to Comment chopper read
chopper read's picture

+1

 

my only fear is that i cannot get my very last USD in PMs before this fiat bubble goes 'pop' for good. 

Fri, 10/08/2010 - 07:11 | Link to Comment 99er
99er's picture

(Reuters) - Japan said it will continue to intervene to curb a strong yen if necessary, just hours before G7 and IMF officials meet to discuss escalating tension over currency policies, and Thailand is also poised to act.

China, which has rebuffed calls from the West to let its currency rise faster, allowed the yuan to firm on Friday to its highest against the dollar since a revaluation in July 2005.

Traders said Beijing may be making some concessions ahead of International Monetary Fund and World Bank meetings this weekend. But they said any further rise would be limited so as not to harm its exports.

With positions entrenched, expectations for any meaningful agreement in Washington are low although fears of a global currency war have jumped to the top of the agenda.

Fri, 10/08/2010 - 13:58 | Link to Comment chopper read
chopper read's picture

long PMs has got to be the easiest money since tech stocks in the 90's.

 

thanks for the update, 99er.

Wed, 10/27/2010 - 08:44 | Link to Comment daniel
daniel's picture

 

ucvhost is a leading web site hosting service provider that is known to provide reliable and affordable hosting packages to customers. cheap vps company believes in providing absolute and superior control to the customer as well as complete security and flexibility through its many packages................  windows vps Moreover, the company provides technical support as well as customer service 24x7, in order to enable its customer price. Thanks forex vps

 

 

Do NOT follow this link or you will be banned from the site!