Non-bombastic overview of the forces influencing the capital markets in the week ahead.
What these voters said with their votes was “I’m in favor of making it illegal for people with low productivity to get a job. Teenagers, people who were poorly educated by failing public schools, people who have never had a job, and people who are not very intelligent, should all just stay home and do nothing because we want to make sure that no one can afford to hire those people.”
This week's 'shellacking' of the administration suggests all is not well among the people of the Land of the Free. While headlines crow of plunging unemployment rates and record high stock prices, middle-class incomes remain stagnant at best (and sliding in most cases) and job quality continues to tumble. There is, however, a silver lining... as Bloomberg reports, "in a sign of lower income and middle income consumer stress, some prostitutes are dropping prices." Of course, this is terrible news for GDP (now what happens if the price of 'blow' also drops). This confirms our previous note on the deflation of prices in the oldest profession in the world... question is, will Yellen abhor this price drop too?
"Sample issues: we aren’t controlling for changes in the quality of job growth when measuring average hourly earnings"
Economic forecasting is a dangerous job. As Mark Twain put it in his novel Pudd’nhead Wilson, “October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.” Every wrong prediction could doom a career, or a bank account. Prudence and humility are the only sound tools for building one’s reputation. The talking heads on CNBC appear to know neither. They pledge allegiance to the flag of the tinkering bureaucracy. It explains the loss of ratings, and loss of confidence in the ability of “experts” to see what’s coming down the tracks. Refusing to learn from mistakes will lead to future blunders. Pundits that don’t heed this message are doomed to fail.
Job cut announcements in tech doubled from a year ago. Worst year since 2009.
The 'miss' on nonfarm payrolls but 'beat' on the unemployment rate appear to have been the perfect anti-goldilocks - not bad enough to warrant Fed speakers to discuss resurrecting QE and not good enough to confirm the growth meme... Having initially tumbled, Treasury sellers came in quickly after the NFP print, but since that BTFD, yields have collapsed 9bps... As we warned here, the market is still notably short bonds and liquidity is anything but strong.
In October the US economy added the most waiters and bartenders in over a year. In fact at 42K, one in every five jobs "created" in the US economy went to a bartender, or a waiter.
Having promised that he would not run again if unemployment rates remain high, French President Francois Hollande faces not just record low approval ratings but feces-flinging-farmers. In a show of protest against expressing their anger at collapsing prices (due in part to sanctions against Russia), increased environmental regulations, cheap imports, and high costs, thousands took to the streets, dumping pumpkins, potatoes, and carrots, burning cars, flinging apples, and spraying shit all over a government building in Toulouse. The French are not amused...
Treasury yields were leaking higher into the print then collapsed on the headlines. Stocks smashed higher on the 'good' news of a lower unemployment rate then read the details and have plunged. Silver prices smashed higher, futures were halted, then tumbled back. Total and utter chaos in the liquid markets... Is "good" news now bad news?
Following the gross distortions of the ISM Services Employment index, which printed at a seasonally adjusted near record high, the whisper number for today's NFP was well above the official consensus estimate of 235K. Instead what happened was, naturally, what nobody expected: a miss, with the headline print coming in at 214K, well below the 235K expected, and down substantially from last month's upward revised 256K. Looks like the momentum is stalling fast. And just to complete the farce, the unemployment rate of the nation that just threw out democrats in protest over the economy.... dropped to 5.8%
The All-Important Seasonal Adjustment That Everyone Will Ignore: Previewing Today's Non-Farm Payrolls ReportSubmitted by Tyler Durden on 11/07/2014 08:04 -0500
- US Change in Nonfarm Payrolls (Oct) M/M Exp. 235K (Low 140K, High 314K), Prev. 248K, Jul 180K.
- US Unemployment Rate (Oct) M/M Exp. 5.9% (Low 5.8%, High 6.1%), Prev. 5.9% European
- This will be the first employment report since the Fed announced the conclusion of QE3
- Stronger data of late has increased expectations of a solid October report
- Seasonal factors could also be supportive
- Focus could again may turn to the wage component of the jobs report as the Fed looks to exit easy policy
- The $9 Billion Witness: Meet JPMorgan Chase's Worst Nightmare (Matt Taibbi)
- Explains the midterm results: Optimism precedes job data (Reuters)
- EU Dream Ebbs Amid Weak Growth, Putin's Jets, 25 Years After Wall Came Down (BBG)
- SEC Probing Trading Activity at Apple Supplier GT Advanced (WSJ)
- Boehner touts bills to repeal Obamacare, build Keystone (Reuters)
- China Gold Buying Means Price Floor to Standard Chartered (BBG)
- High-Speed Ad Traders Profit by Arbitraging Your Eyeballs (BBG)
- Central Banks Can’t Be ‘Only Game in Town’ Boosting Economies (BBG) - less talking, more getting to work
European shares fall, reversing earlier gains, with the banks and tech sectors underperforming and basic resources, oil & gas outperforming. Companies including ArcelorMittal, Allianz, Swiss Re, Richemont released results. The Spanish and Italian markets are the worst-performing larger bourses, the U.K. the best. The euro is stronger against the dollar. Japanese 10yr bond yields rise; German yields increase. Furthermore, the pullback in the USD-index from overnight highs has also provided the commodity complex with some upside and thus has seen basic materials and energy name outperform to the benefit of the FTSE 100. Elsewhere, Allianz’s (+4.9%) impressive pre-market report has helped halt the move to the downside for the DAX which trades with modest gains of 0.3%. Fixed income markets continue to hold fire (albeit in marginal negative territory) with volumes exceedingly thin ahead of key risk events. And with that, all eyes move to today's Nonfarm payroll expected to print at 235K, after last month's 248K. Something to keep in mind: the average seasonal adjustment to the October data is almost exactly 1 million, so yet again the fate of the US and global economy, will be determined by an Arima X 13 "fudge factor."
The Keynesian notions of “potential GDP” and “aggregate demand” have no basis in the real world. They are revealed doctrine. They are the religion of the state’s economic policy apparatus. Its bad enough that this destructive economic religion leads to the farcical forecasting games evident in the EC’s chronic updates and slow-walks of the GDP numbers down. The evil, however, is that the Keynesian apparatchiks will not desist in their destructive money printing and borrowing until they have suffocated free market capitalism entirely, and have monetized so much public debt that the financial system simply implodes.