Four months ago we presented what was easily the clearest and most undiluted by media propaganda clue about the future of the European experiment, when we noted that even immigrants from places such as Afghanistan and Bangladesh, using Greece as a stepping stone onward to the gateway Shengen country of Italy, no longer have the urge to pursue their European dreams, and instead return home. As Art Cashin explained, "Over the decades, immigrants from Afghanistan, Bangladesh and other poor nations would work their way to Patras. They would stay for days or weeks awaiting a chance to smuggle themselves on to a freighter headed for Italy. Once there, they could make their way north into Europe to find hope and opportunity and maybe a job. Last week his relatives told him that things were changing. The immigrants still come to their way station of Patras (hope still blooms). But now, after a couple of weeks in Greece, they are trying to hop ships going the other way. They are going back home. Life was better, or at least no worse, where they came from and they had friends and family for support back there." It appears that the immigrant boycott is spreading, only this time instead of "discretionary" immigrants, or those that have not been fully assumed by society (think "cheap labor" along America's south, such as California, Texas and Arizona), it is starting to hit the core of the cheap PIIGS labor force: the migrant workforce, and in this case the Albanian diaspora working out of Greece at a fraction of the normal cost. And as one Albanian migrant worker, so critical to keeping the Greek construction sector supplied with cheap jobs puts it, "It looks like there's no money left," he said of Greece. "It all dried up." As a result even the Greek illegal-yet-symbiotic-aliens are giving up and going back home. Yes folks: the "indicators" on the ground are telling us that it is now easier to make money in Albania than in Greece.
Last week Mario Monti, like a good (ex) Goldmanite, did his best to buy what Goldman is selling, namely telling anyone gullible enough to believe that the "European crisis is almost over." Funny then that we learn that just as this was happening, Ben Bernanke held a secret meeting with the entire banker caretel, in which discussed was not American jobs (seasonally adjusted or otherwise), nor $5 gas, but... helping European with its debt crisis. But, but... Mario said. In the meantime, European spreads are back to late 2011 levels.
We have previewed the phasing out of the LTRO effect previously here on several occasions. Now, courtesy of Art Cashin, everyone is aware that the eye of the European hurricane has officially passed, especially in the aftermath of this morning's horrendous Spanish bond auction, which shows that reality is back with a bang.
The labor data since last fall has been rather encouraging, writes UBS' Art Cashin in a note today. However, he is skeptical at this reality, agreeing with "lots of folks [who] think it may be the warm winter weather that accounts for it." The warm weather allows for construction (and other outdoor industries) to start p[rojects earlier than planned and also avoids the short shutdowns that winter storms often cause in Jan and Feb. While Art believes the weather could be a significant impact on the positivity, and suspects the follow-through will be disappointing (a la Bernanke), he also notes (as we have commented numerous times) that perhaps it is the distortions in seasonal adjustments that have become warped in the post-Lehman collapse era.
We have covered the topic of BLS seasonal adjustment to death and beyond, as well as the endless expansion of those dropping out like flies from the labor pool (did those not in the US labor force, one way or another, whether due to mistracking, statistical aberrations, or outright data manipulation, increase by 1.2 million in January? It did? Next question... or does the government now desperately need an apologist for its own upwardly biased data 'mismanagement'?). Yet some of the formerly relevant elements at the less than cutting edge of asset management-cum-blogging decided to call out Art Cashin for daring to point out just this glaringly obvious seasonal adjustment issue. Of course, Art does not need us rushing to his defense. He can do a good enough job on his own.
We (and Charles Biderman) have previously discussed the seasonal adjustments to NFP data, which while potentially credible in a releveraging context, is far less meaningful when used on apples to apples basis for months in which there is material wholesale deleveraging and record warm weather. Yet the rub lies precisely in the seasonal adjustment, which for January and February has "added" nearly 4 million jobs based on nothing but historical regression patterns, and the "beats" represented less than 5% of the total addition, implying even a modest miscalculcation would have had a huge impact on market, and political, interpretation of the data (as explained here). Today, it is the turn of Art Cashin, quoting Lakshman Achuthan, to provide his take on "unadjusted seasonal adjustments."
Greece just defaulted. Again. No surprise - the country has been in default half the time since 1820. Curiously, Greece is also the first recorded sovereign defaulted as Art Cashin notes in his piece today. He also reminds us that the UK's plans to return the 100 Year bond are nothing new. In fact, the Consol, or the UK perpetual, was around in the 1700's. Things did not work out very well back then...
Yesterday we were quite amused to note that following the Hilsenrath leak (pre-backpeddaling as a result of some FRBNY spanking) of a sterilized QE that for supposedly tries to avoid "generating" inflation (hence confirming that QE does in fact stimulate inflation instead of being a tool to lower rates and make housing affordable) the market reaction was... inflationary, with stocks rising, but far less than crude and gold. So much for the Fed's trial balloon to see if it can intervene in the market without costing Obama a few million ballots. Today, Art Cashin observes precisely the same paradoxical response in his daily note.
Readers know that among the things the we find most meaningless in the New Normal are those anachronisms known as 'charts' - after all when it comes to central planners exclusively running the market, this has never occurred before in history at this level. Yet the impact of technical analysis should not to be discounted, as it does create a self-fulfilling prophecy (far weaker than the impact of marginal liquidity but it is there nonetheless), in which case today's note from Art Cashin may have an impact on risk appetite. Or not - all it takes for any bout of selling to end is a sideways glance from the Chairsatan and we see a 20% surge in risk in the next few months on nothing but a whisper of a new multi-trillion liquidity injection.
The key focus of Cashin's daily letter today has to do with the steadfast resilience of the ECRI's Lakshman Achuthan, who called for a recession back in September, and when asked yesterday if he reaffirms his call, he says "Consider it reaffirmed." He then proceeds to list out the "key, hard facts" summarizing the litany of truth as follows: "The economy is weaker today than it has been in 21 months." And scene.
As the ECB supposedly takes it foot off the gas, and EU Summits and 'events' loom large for the careening wagon of shared sacrifice, unity, and sovereign risk, perhaps it is the nodding donkeys of Greek and Italian technocrats juxtaposed with Ireland's feistier "R" word gambit (and of course Zee German Overlords) that makes Art Cashin reflect somewhat philosophically on recent headlines. Their stereotypical interpretation has him concerned as the potential for ever-increasing culture clashes increases across the pond as sour memories and generational hatreds abound.
A big reason for the dour mood overcast on the market this morning is the failure of G-20 to resolve latent funding issues, with the IMF demanding more money from Germany for a global firewall, and Germany demanding more money from everyone else. A way to summarize events is that in lieu of any credible collateral left (the bulk of it has and will be pledged with the ECB in its discount window, aka LTRO operations, to keep Italian bonds bid and thus perpetuate the fallacy that things are under control), the world is now running out of ideas how to even kick the can down the road. Which is not a good sign as much kicking remains with tens of trillions in debt rollover coming up in the next few years. Below is Art Cashin's summary of this weekend's disappointing G-20 weekend retreat in Cabo san Lucas, which enjoyed the scenery but did nothing to easy the confusion over who pays for what in the next few weeks.
We have read, and written, all of this before (and speaking of, since 2012 is still a carbon copy of 2011, we could so easily just repost articles from February 2011, change the year, and nobody would notice - we could even save on robo-posting costs) but there is always something just so enjoyable in hearing the Chairman of the Fermentation Committee point out the glaringly obvious to the vacuum tubes in charge of a market which is now a 6-8 week lagging indicator to reality.
While the government propaganda machine chugs along and tells us to move along, there is nothing to see in the plunging labor participation rate, it is just 50 year olds pulling a Greek and retiring (fully intent on milking those 0.001% interest checking accounts, CDs and 3 Year Treasury Bonds for all they are worth - they are after all called fixed "income" not "outcome") there is more than meets the eye here. Yet while we will happily debunk any and all stupidity that Americans actually have the wherewithal to retire in droves as we are meant to believe (with the oldest labor segment's participation rate surging to multi-decade highs), there is a distinct subset of the population that migrates from being a 99-week'er to moving to merely yet another government trough - disability. Art Cashin explains.
On Friday, Zero Hedge presented an extensive refresh on the one latent hotbed of troubles that everyone has conveniently forgotten about, yet which is getting worse by the day: the Mediterranean region, in "What Lies In Store For The "Cradle That Rocks The World" - A History Lesson In Crisis" and specifically Egypt -that most populous Arab nation, which last time we checked, is still Israel's neighbor (and which still controls the Suez canal). Still, for some of our more attention troubled readers who may have passed on the Friday piece, here is a much shorter version from Art Cashin which focuses on just one of numerous variables in play - the relationship between the controlling military and the resurgent Muslim Brotherhood. In other words, in deposing of Mubarak, the US has once again done its bull in a china shop approach to foreign relations and replaced one quite predictable dictator with a bevy of far more dangerous unknowns. Cashin's conclusion is traditionally cryptic and ominous: "The most populous Arab nation on the Earth and Israel’s closest neighbor is on the verge of something dramatic and potentially very, very dangerous. Watch carefully and constantly."