Futures Pushed Higher On Weaker Yen, But All Could Change With Today's "Most Important Ever" Jobs NumberSubmitted by Tyler Durden on 12/06/2013 07:58 -0400
The latest "most important payrolls day of all time" day is finally upon us. Of course, this is a ridiculous statement: considering that the average December seasonal adjustment to the actual, unadjusted number is 824K jobs, it will once again be up to the BLS' Arima X 13 goal-seeking, seasonal adjusting software to determine whether the momentum ignition algos send stocks soaring or plunging, especially since the difference between up and down could be as small as 30K jobs. As Deutsche Bank explains: " today's number is probably one where anything above +200k (net of revisions) will lead to a further dip in risk as taper fears intensify and anything less than say +170k will probably see a decent relief rally after a tricky week for markets. Indeed yesterday saw the S&P500 (-0.43%) down for a fifth day - extending a sequence last seen in September." And then consider that nearly 30 times that difference comes from seasonal adjustments and it becomes clear why "farcial" is a far better definition of labor Friday.
Previewing the rest of this week’s events, we have a bumper week of US data over the next five days, in part making up for two days of blackout last week for Thanksgiving. Aside from Friday’s nonfarm payroll report, the key releases to look for are manufacturing ISM and construction spending (today), unit motor vehicle sales (tomorrow), non-manufacturing ISM (Wednesday), preliminary Q3 real GDP and initial jobless claims (Thursday), as well as personal income/consumption and consumer sentiment (Friday). Wednesday’s ADP employment report will, as usual, provide a preamble for Friday’s payrolls.
Asian equities have gotten off to a rocky start to the week despite some initial optimism around the twin-Chinese PMI beats at the start of the session. That optimism has been replaced by selling in Chinese equities, particularly small-cap Chinese stocks and A-shares after the Chinese security regulator issued a reform plan for domestic IPOs over the weekend. The market is expecting the reforms to lead to a higher number of IPOs in the coming quarters, and the fear is that this will bring a wave of new supply of stock to an already-underperforming market. Indeed, the Chinese securities regulator expects about 50 firms to complete IPOs by January 2014 – and another 763 firms have already submitted their IPO applications and are currently awaiting approval. A large number of small cap stocks listed on Hong Kong’s Growth Enterprise Market were down by more than 5% this morning, while the Shanghai Composite is down by 0.9%. The Hang Seng (+0.4%), Hang Seng China Enterprises Index (+0.8%) are performing better on a relative basis, and other China-growth assets including the AUDUSD is up 0.5%. The Nikkei (-0.1%) is also a touch weaker after Japan’s Q3 capital expenditure numbers came in well below estimates (1.5% YoY vs 3.6% forecast). Elsewhere Sterling continues to forge new multi-year highs against the USD (+0.3% overnight).
From consumer and retailer surveys to quantitative data such as household spending and private jet bookings, ConvergEx's Nick Colas has amassed a collection of 10 clues about this year's holiday shopping season. On the plus side, disposable personal income and consumer spending on discretionary items are rising, and travel to Palm Beach via private jet is quite popular this Christmas season. However, consumer confidence surveys are particularly weak, and consumer debt has ballooned to a 5-year high. Roughly equal parts good and bad, Colas' collection of holiday spending indicators points to a mediocre (at best) 2013 shopping season (as we noted earlier).
However, the reality of higher inflation won’t show up in China’s inflation data (which clocks in at an absurdly low 3%). However, you can see clear signs of this in China’s civil unrest: you don’t get wage and labor strikes for nothing.
As H.L. Mencken opined, 'The most dangerous man to any government is the man who is able to think things out for himself, without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane, and intolerable.' It is no wonder that, according to a Gallup Poll conducted in early October, a record-low 14% of Americans thought that the country was headed in the right direction, down from 30% in September. That's the biggest single-month drop in the poll since the shutdown of 1990. Some 78% think the country is on the wrong track. Simply put, Faber explains, it is most unlikely that US economic growth will surprise on the upside in the next few years. It is more likely there will be negative surprises.
On December 23, 2013, the U.S. Federal Reserve (the Fed) will celebrate its 100th birthday, so we thought it was time to take a look at the Fed’s real accomplishment, and the practices and policies it has employed during this time to rob the public of its wealth. The criticism is directed not only at the world’s most powerful central bank - the Fed - but also at the concept of central banks in general, because they are the antithesis of fiscal responsibility and financial constraint as represented by gold and a gold standard. The Fed was sold to the public in much the same way as the Patriot Act was sold after 9/11 - as a sacrifice of personal freedom for the promise of greater government protection. Instead of providing protection, the Fed has robbed the public through the hidden tax of inflation brought about by currency devaluation.
Discussion of a market bubble (in stocks, credit, bonds, Farm-land, residential real estate, or art) have dominated headlines in recent weeks. However, QEeen Yellen gave us the all-clear this morning that there was "no bubble." Are we currently witnessing a market bubble? It is very possible; however, as STA's Lance Roberts notes, if we are, it will be the first market bubble in history to be seen in advance (despite Bullard's comments in opposition to that "fact"). From a contrarian investment view point, there is simply "too much bubble talk" currently which means that there is likely more irrational excess to come. The lack of "economic success" will likely mean that the Fed remains engaged in its ongoing QE programs for much longer than currently expected - and perhaps Hussman's pre-crash bubble anatomy is dead on...
This past week saw the initial public offering of the single most anticipated IPO of 2013 - Twitter. If you tweeted about it then you are not alone as the news dominated the media headlines and the market. With Twitter already sporting a 11x price-to-sales ratio, and no earnings, what could possibly go wrong? However, it is that growing complacency among investors that should be the most concerning as the general sentiment has become that nothing can stop the markets as long as the Fed is in the game. This week's issue of things to ponder over the weekend provides some thoughts in this regard...
While today's big event is the October Non-farm payrolls print, which consensus has at 120K and unemployment rising from 7.2% to 7.3%, there was a spate of events overnight worth noting, starting with Chinese exports and imports both rising more than expected (5.6% and 7.6% vs expectations of 1.9% and 7.4% respectively), leading to an October trade surplus of $31.1 billion double the $15.2 billion reported in August. This led to a brief jump in Asian regional market which however was promptly faded. Germany also reported a greater trade surplus than expected at €20.4bn vs €15.4 bn expected, which begs the question just where are all these excess exports going to? Perhaps France, whose trade deficit rose from €5.1 billion to €5.8 billion, more than the €4.8 billion expected. Of note also was the French downgrade from AA+ to AA by S&P, citing weak economic prospects, with fiscal constraints throughout 2014. The agency added that the country has limited room to maneuver and sees an inability to significantly cut government spending. The downgrade, however, was largely a buy the EURUSD dip event as rating agencies' opinions fade into irrelevance.
Looking ahead, Thursday will be a busy day with the ECB (plus Draghi’s press conference) and BoE meetings. Some are expecting the ECB to cut rates as early at this week although most believe the rate cut will not happen until December. Draghi will likely deflect the exchange rate’s relevance via its impact on inflation forecasts. This could strengthen the credibility of the forward guidance message, but this is just rhetoric — a rate cut would require a rejection of the current recovery hypothesis. They expect more focus on low inflation at this press conference, albeit without pre-empting the ECB staff new macroeconomic forecasts that will be published in December.
Just as Friday ended with a last minute meltup, there continues to be nothing that can stop Bernanke's runaway liquidity train, and the overnight trading session has been one of a continuing slow melt up in risk assets, which as expected merely ape the Fed's balance sheet to their implied fair year end target of roughly 1900. The data in the past 48 hours was hot but not too hot, with China Non-mfg PMI rising from 55.4 to 56.3 a 14 month high (and entirely made up as all other China data) - hot but not too hot to concern the PBOC additionally over cutting additional liquidity - while the Eurozone Mfg PMI came as expected at 51.3 up from 51.1 prior driven by rising German PMI (up from 51.1 to 51.7 on 51.5 expected), declining French PMI (from 49.8 to 49.1, exp. 49.4), declining Italian PMI (from 50.8 to 50.7, exp. 51.0), Spain up (from 50.7 to 50.9, vs 51.0 expected), and finally the UK construction PMI up from 58.9 to 59.4.
If one looks at various sovereign states, it seemingly doesn't matter that their public debts continue to rise at a hefty clip. The largest ones are considered to have economies that are big and resilient enough to be able to support the growing debt load. Part of the calculus is no doubt the notion that they contain enough accumulated wealth to allow their governments to confiscate even more of their citizens property and income in order to make good on their debts. Then there are the small and mid-sized states in the EU that are getting bailed out by their larger brethren, or rather, the tax payers of their larger brethren. However, things are different when the territories or municipalities concerned are considered too small and have no such back-up. Detroit was a recent case in point, and it seems that the US territory of Puerto Rico is the next domino to fall.
U.S. Debt Limit To Be Raised For 18th Time In 20 Years - Gold Vulnerable Short Term But Real Record High LikelySubmitted by GoldCore on 10/11/2013 12:05 -0400
The dangerous habit of politicians and governments continually ‘kicking the can down the road’ cannot go on indefinitely. Eventually, the ramifications of this profligacy will be clear to all.
Yet another increase in the debt ceiling and the increasingly parabolic nature of the rise in U.S. government debt will be very supportive of gold in the medium and long term.
Normally, we would report the change in total consumer debt (revolving and non-revolving) in this space, but today we will pass, for the simple reason that the number is the merely the latest entrant in a long series of absolutely made up garbage. It appears that in the "quiet period" of data releases, when the BLS realized its "non-critical", pre-update 8MHz 8086-based machines are unable to boot up the random number generator spreadsheets known as "economic data", Ben Bernanke decided to quietly slip a modest revision to the monthly consumer credit data. A modest revision, which amounts to a whopping $180 billion cumulative increase in non-revolving credit beginning in January 2006.