Once again the ABC Consumer Comfort index indicates that it is leaps and bounds more relevant than the ADP Private Payroll number. With increasingly less relevant confidence indicators out of UMichigan and the Conference Board, which lately only seem to "poll" 20 people with a $1MM+ Schwab trading account, it is worth noting what a true polling index says about the economy. And it isn't pretty: "Soaring gasoline prices slammed consumer sentiment into reverse this
week, threatening the slow recovery in economic views that’s been under
way. With gas now at record high for a February in Energy Department data
back to 1990, the weekly Consumer Comfort Index dropped by an unusually
steep 5 points to -46 on its scale of -100 to +100. It’s dropped that
far only 36 times in more than 1,300 weeks of ongoing polling since late
1985; this shift erases an equally unusual 5-point gain in early
January...After reaching -40 Jan. 9, the CCI is now at its low for the year, and
its lowest since Nov. 21. It averaged -46 in 2010 and -48 in 2009; those
compare with a lifetime average of -14 and a best-year +29 in 2000. Its
single best week was +38 in January 2000; its worst, -54 in December
2008 and again in January 2009." So strange: unlike with stocks, where inflation is somehow supposed to raise confidence, inflation for the people somehow leads to a near record plunge in confidence. But who are we to believe in this centrally planned economy when every single data point is now fit to be discarded as nothing more than evidence of propaganda.
It has long been accepted that the stock market performs best on capital inflow days, such as the beginning of the month, or Mondays (also known as "merger" or "mutual fund" Mondays). Specifically, looking at market performance for just Monday's from the beginning of 2010, and comparing it to the cumulative "rest of the week" performance, shows a ridiculous outperformance of 16.7% (just for Mondays) to 1.3% (for the ROW) - a miracle anyone even pretends to trade on all non-Monday days. It is also well understood by now that on days in which there is a subpar trader participation, i.e., low volume, the market tends to miraculously levitate. Yet no one has combined these two studies. Sure enough, we don't think many will be surprised by what we have found. As some of the more jaded may expect, NYSE volume on Mondays should be well below the average. Indeed, that is precisely the case. As the chart below courtesy of John Lohman shows, the market, very counterintuitively considering the outperformance finding above, tends to have its lowest volume on Monday, with all other days of the week trending at around the average. Which begs the question: if everyone traded only on Monday, and the resultant volume increased five-fold, will Monday performance suddenly plunge? Is the only reason for the market's upside asymmetric performance the low-volume Monday-focused activity which leaves the HFT machines to be the marginal buyer, all the while collecting liquidity rebates and not losing money in the process? Is the entire stock market nothing than one Fed liquidity Fed, HFT-whisper volume levitating scam? Is it all really just for show, and the fewer the participants, the more money those who actually brave the ponzi make? We leave it up to readers to make their own conclusions. As usual, we leave with the question: if Madoff's investors knew his "fund" was a pyramid scheme, would they actually pull their capital?
And while the market grinds up for the 8th day in a row, the bad news for the brokers is getting acute. To wit: NYSE volume today was the lowest so far in 2011. With nearly half the quarter in the books, stock trading is persisting at the same Q4 levels that forced banks to announce a plunge in trading-related commissions. As we noted back in August, the only way for stock volume to surge is for a concerted selling event, which is the only time stock volume is beyond the good old vapor we have grown to love and expect each and every day there is an increasingly meaningless meltup in the stock market. And if we are correct about a transition from a QE2 surreality to an (in)visible hand free market occurring some time in April/May, stock volume will continue becoming progressively smaller until they finally spike in roughly three months.
Some thoughts on why the Fed's monetary policy is, paradoxically, doing everything in its power to prevent the organic growth of the economy, and to hinder employment growth.
"There's Some Crap Getting Done": BlackRock Scared We Are Going Back To "Ponzi Finance Excesses" Of 2007Submitted by Tyler Durden on 02/08/2011 - 15:55
We have now officially gone full circle. Even as CMBS delinquencies are at all time highs, Wall Street's scramble to generate yield on other people's money (which will be completely lost once the liquidity tsunami ends) is back in 5th gear, as securitizations backed by commercial mortgages are flying off the shelves. It is so bad, that even S&P (!) is questioning the sanity of all those using LP capital to sign the dotted line in pursuit of a few quarters of yield. “There’s some crap getting done,” David Jacob, an executive managing director at credit-rating company S&P, said today during a panel discussion at the American Securitization Forum trade group’s annual meeting in Orlando, Florida. “It’s surprising to me this early in the cycle that some of that could be happening.” Don't be surprised David, after all it is your company that is rating it AAA (we realize you, too, have to eat), and never ever forget that if this was merely an indication of unseen market exuberance the Chairsatan would have long since popped the latest (and luckily last - after this one, there will be no one left to bail out the world) bubble. And someone else scratching their head at the current round of irrational exuberance that would make the dot com era look like dress rehearsal for "Spiderman: The Musical" is none other than some guy from Blackrock. "It’s been surprising how quickly investors have returned to
accepting transactions with numerous AAA rated classes, said
Blewitt, co-head of securitized assets at BlackRock, the world’s
largest money manager. Some bond buyers may not be scrutinizing
offering documents closely enough to find “hidden” dangers, he
said. “I don’t think we’re going back to the Ponzi finance
excesses that we had in 2006 and 2007 just yet, but when I get a
little bit scared is when I see the old game of, ‘These are not
your droids, look over there, not over here." Blewitt is right: the current round of 'Ponzi finance excesses' is like nothing ever seen before. But then again we have QE2 (then 3, 4, 5, 6, 7, 8, etc) to mask just how enamored with droid chasing we all are. When this last bubble pops, it will be monumental.
It looks like the much maligned correction in silver is over. After surging nearly 3% on the day, silver is now back above the 20, 50 and 100 DMAs, and what was formerly resistance is now support. In fact, silver is less than $1 away from its recent nominal highs of $31.2375. It appears that speculators have Bought TFD with a vengeance. Hopefully, this also explains the massive silver purchases disclosed by the Mint (already at 838,000 ounces for February) and presented previously on Zero Hedge.
The "good money printer - bad money printer" routine is starting to get old. Dallas Fed's Fisher joins Richmond's (non-voting) Lacker in saying no more QE. Earlier today, the Dallas Fed president was heard saying anathema things like: "Very eary of further expansion of Fed's Balance Sheet", "Fed is Pushing the Envelope with Asset Purchases" and concludes that we would "probably" dissent in any vote for further QE. Um, great. You have vote Dick, use it. Same goes for Plosser and all the other wannabe Hoenigs. Oh yeah, also while you are at it, please explain just who will be buying the $4 trillion in debt to be issued in the next two years (ref: $32 Billion 3 Year Auction Prices At 1.349% As Foreign Bid Plunges And Fed Indirectly Pockets 62% Of Issue).
The way I view it, China has compressed 100 years of economic growth into 30 or 40 years, so naturally the annual growth rate has been fast. One thing that history has taught us, though, is that the free market cannot be continually outperformed by a central planning authority that inflates its money supply. Rapid credit expansions can definitely give the appearance of strong economic growth, but no credit expansion has ever lasted permanently. In the long run, an economy can only continue to move forward at strong growth rates via increases in savings, productivity, technology, and innovation. The truth is, nobody knows what China's real growth rate is. I remember spending time in the country's gray markets-- huge roadside, makeshift shopping malls with tens of thousands of people engaging in off-the-books transactions-- thinking to myself 'no way GDP numbers account for this...'
$32 Billion 3 Year Auction Prices At 1.349% As Foreign Bid Plunges And Fed Indirectly Pockets 62% Of IssueSubmitted by Tyler Durden on 02/08/2011 - 14:15
Today's 3 Year bond auction priced without much fanfare, and luckily so: while it came at 1.349%, slightly weaker than expected (1.345%), compared to last auction's 1.027%, ot a 30% jump in interest in one month, it is the internals that were most disturbing. The Bid To Cover was strong enough at 3.01, compared to 3.06 previously, and 3.14 LTM average, yet what was remarkable was the takedown. And as we have been warning for a while now, it was the Indirect Bids (the Chinas of the world) that basically decided to take a raincheck on the auction. The Indirect takedown was just 27.6% of total, with $8.8 billion of the $32 billion going to Indirects (nonetheless the hit rate was 57%). This is the lowest Indirect takedown since May of 2007! And while the direct bid was a subpar 10.1%, it was the Primary Dealers that saved the day: at 62.3%, or $20 billion of the entire auction, the Fed essentially monetized two thirds of the entire auction de novo. And remember this Cusip: QH6: we can guarantee that within a month, the Fed will buy back at least 50%, or $10 billion, of the Primary Dealer take down portion.
Memo to pundits and politicos: you worship at the altar of Capitalist profits driving small business--get real. People will do whatever they have to in order not to go broke. That's why the three guys or gals aren't renting an office--who needs the overhead? They also don't have health insurance: who can afford $1,000 a month for crappy, confusing "care" young people rarely even need? Better to pay cash. And they aren't hiring "employees": they're paying their friends with equity shares, or cash, and paying their own taxes is up to each free-lancer. That is the new model of American entrepreneurship: no office, no overhead, no employees, no health insurance, no business travel. That's the only way any new enterprise can survive. Everyone who buys into the myth and pays absurdly high rents, junk fees and healthcare insurance will be ground down and bled dry. The only exception are those well-connected enough to run a pipe into the limitless lake of Federal money. Yes, 40% of the lake is borrowed from our kids, but no matter--the "recovery" is real, and this stone with a crudely painted radio dial is in fact a working radio. It's magic. You just have to believe.
The latest development in the insider trading gate, whose sole target is and has always been SAC, appears to be closing in on the target. According to a press release to be held shortly, two former SAC employees are about to become cooperating witnesses for the government. The ex-SACites are Noah Freeman and Donald Longueuil, which according to Bloomberg worked at the fund between 2008 and 2010. The full conference by US Attorney Preet Bharara is due any moment. This is likely just an intermediate phase before the big names start being accused as bigger cases are built against those at the very top.
Thanks to the Department of Central Planning, the Beveridge Curve has recently entered the twilight zone. According to the latest job opening rate, the unemployment rate should be around 6.5%. In reality, when accounting for the record 6.6 million persons not in the labor force who want a job now, not to mention the millions of others who are not even counted in the labor force, the true jobless rate (U-3) is somewhere around 12%! In fact, if one were to represent the data in a fashion that captures reality, the curve would start resembling that of a volatility smile, which is odd now that the only Put in the market is that of one Rudolf von Bernankestein. But such are the vagaries of data reporting in a regime whose only purpose is to represent the positive side effects of 1,000% RDA consumption of hopium.
"Suez Canal Company workers from the cities of Suez, Port Said, and Ismailia began an open-ended sit in today. Disruptions to shipping movements, as well as disasterous econmic losses, are expected if the strike continues. Over 6000 protesters have agreed that they will not go home today once their shift is over and will continue their in front of the company's headquarters until their demands are met. They are protesting against poor wages and deteriorating health and working conditions." [lots of sics in there] via AhramOnline
A well-trodden meme of TV and cinema has been the plot in which someone or something uses tantalizing illusions to sap humans of their will to resist while simultaneously pursuing hostile ends. In The Martian Chronicles, the subtle race of Martians distracted the invading Americans with irresistible life-like illusions that spoke to their most intimate yearnings. In one episode of the X-Files, a fungus slowly digested an unlucky couple who lay in a field and were rendered completely passive by the fungus’ hallucinogenic properties. And then, most famously, the machines of the movie The Matrix ruled over a ruined wasteland and seduced people with a beguiling virtual reality in order to maintain their passivity while they tapped humanity’s body heat as an energy source. Now, a lot of investors believe that life is imitating art in an alliance of the Federal Reserve and the big banks to create the illusion of healthy equity markets despite massive retail equity withdrawals in the years following the financial crisis.
According to the latest JOLTS survey released by the BLS, the number of total job openings in December declined to 3,063,000 a drop from November's 3.2 million and even more so from October's 3.328 million. Expressed as a Job openings rate, this was a third consecutive decline, dropping from 2.5% in October to 2.3% currently. And while job openings were dropping, separation levels increased from 4.084 million in October to 4.154 in November and 4.162 million in December. The bulk of separations occurred in the construction industry where we saw a print of 473k, or over 100K more than November's 363K. Recall that construction jobs are what the recent NFP weakness has been primarily blamed on. Digging into the Separations numbers (which includes quits, or voluntary and discharges, or involuntary separations), the Quits level, which was at 1,991K in December was the highest Quit print since August 2010, when the number hit 1,998K.