Worst jobs data of the year? BTFATH. For the 9th day in a row, S&P 2,000 was all that mattered. Thanks to the standard Friday v-shaped recovery, the Dow scrambled back to green on the week and S&P 500 hit its Maginot 'retirement on' line - all on the back of USDJPY 105.00 pinning. Trannies and S&P hit new record highs and S&P had its best day in 2 weeks (led by exuberant growthy Staples & Utilities this week). Russell ended the week red as the late-day buying-panic sent Nasdaq just green with Dow and S&P. But, away from stocks, US Treasuries had their worst week in a year with 30Y +16bps (but 2Y only +2bps). The US dollar rose to new 14-month highs with its biggest week in 10 months. Despite the USD strength, Copper manage to close marginally higher even as PMs dropped 1.6% and oil plunged almost 3% (WTI under $93) in a very volatile week. High-yield credit markets closed with their worst week in the last 5. Bad news is great news still - just six years into the 'recovery'.
Simply put, the reason why Mario Draghi's impressively-pitched ABS 'stimulus' QE-lite plan won't help can be summed up in 2 words "unencumbered assets." There is simply a lack of the right quality collateral, that has not already been swapped with the ECB (or delevered off balance sheets), for this to make a difference. However, as Bloomberg reports, the plan will not even get that far.. because the market for these assets is incapable of supporting this size of buying. As one major ABS asset manager notes, it takes him about three months to buy 1 billion euros of these securities, "the number that's circulating the market is 500 billion euros, but where is he going to get it from?" Add to that the report from Die Welt that The ECB lacks sufficient expertise for ABS purchases, and as another major European ABS manager concludes, "I don't see either a capital relief for banks or the banks giving more credit to the real economy." Still, it's fun to believe Draghi's promises, right?
Summer is over and many Europeans may have to keep warm this coming winter by thinking about their summer holidays while wrapped in blankets, praying for a short winter or for the world to come to its senses. It both cases, they may well be disappointed. The never-ending conflicts in the Middle East, mayhem in Libya, uncertainty in the Gulf and a war in Ukraine are all going to take a toll on the energy supplies this winter. Result? Many cold Europeans, many angry Europeans and many very pissed off Europeans. And what does history tell us about cold, angry, pissed-off Europeans?
Just weeks after defaulting (yet again) on its debt (whether technically or not), and shortly after raising the minimum wage by 31% (to $523 a month) amid runaway inflation, it appears Argentina has gone full-Venezuela. As WSJ reports, the great minds that 'run' Argentina have decided to pass legislation (dubbed "the supply law") letting the government regulate private-sector prices, profit margins and production levels. The opposition is up in arms, "this is absolutely ridiculous. It's part of a very primitive ideology that says government officials should decide what people should make, how much they should make and how much they should charge," adding that "we already know exactly what it is like to suffer from these kind of interventionist economic policies," in Venezuela.
The punchline: this was the lowest rated month in the core demographic since February 1993! In fact, in CNBC's entire Nielsen-rated history, there is only one month in history when demo viewership was lower, back in November 1992, when demo viewership was just 1000 less at 27,000.
What does it take to produce prosperity? Property rights – you have to believe that you can control and enjoy what you produce. Stable money – you have to be able to count on the medium of exchange. Freedom of action – you have to be able to go on with your business without too much state intrusion. Meanwhile in the US, the planners… regulators… controllers… meddlers… and zombies – all those who prevent real prosperity – grew bolder and more numerous.
After two solid days of 'discussions' at a gold course in Wales, President Obama is ready to make some new comments this morning. With a cease-fire agreed in Ukraine, and no ISIS beheadings yet today, we wonder where his ire will be pointed (or perhaps it's back to the Republicans' fault we had such a weak jobs print?)...
We are not exactly sure why Obama would be "noticeably absent" from the start of this week's NATO-Ukraine commission... but the following could provide some much needed clues (as we noted previously)...
Labor Participation Rate Drops To Lowest Since 1978; People Not In Labor Force Rise To Record 92.3 MillionSubmitted by Tyler Durden on 09/05/2014 09:03 -0400
No matter how you spin it, today's data was bad: because not only did the headline data disappoint, the labor force participation rate dropped once again to 62.8% from 62.9%, matching the lowest since 1978, as a result of the people not in labor force rising once again, and hitting a new all time high record of 92,269,000, up 268,000 from the prior month. In fact, in August the number of people not in the labor force increased by nearly double the number of people who found jobs, which as we reported previously, was only 142K.
Markets crash not from "bad news" but from the exhaustion of temporary stability. The longer that temporary stability is maintained by manipulation, the greater the severity of the resulting crash.
UPDATE: So far no good...*HEAVY ARTILLERY BLASTS HEARD IN UKRAINE'S MARIUPOL: RIA
While we had grown weary of trashed truces and snapped cease-fires in Israel, it appears, according to Interfax, that Ukraine and the pro-Russian separatists in eastern Ukraine (having gained notably over the army in recent days) have agreed a cease-fire:
*UKRAINE, SEPARATISTS AGREE ON CEASE-FIRE FROM 6PM TODAY, PRELIM. PROTOCOL TO CEASE-FIRE SIGNED IN MINSK: BBC
Great news, especially for Merkel (and Hollande) who has already come out and noted that the cease-fire means EU could suspend sanctions (saving face and avoiding some further escalation). The question is - how much of Putin's 7-point-peace-plan will Ukraine acquiesce to? If any?
As if like clockwork, on the heels of news from Russia of plans to shift their military doctrine towards pre-emptive reactions (and potential nuclear strikes), the NATO Summit has come out swinging with it's own plan change:
*GEN. BRADSHAW, NATO’S DEPUTY SUPREME COMMANDER: NATO REACTION FORCE COULD BE DEPLOYED PREEMPTIVELY
Russia's response - "not surprised" NATO is trying to dominate Europe, adding that "NATO plans undermine the Ukraine peace process."
Back in 2011 we noted that while the market, and at the time, the Fed, have been focused exclusively on the quantity of jobs created each month, a far more important aspect of the US economic recovery is the quality of newly created jobs. It took the Fed about three years to catch up but it finally did, and Yellen no longer cares so much about the headline NFP print or the unemployment number but rather how good the newly created jobs are, manifesting in the quality of wages and earnings. So what was the quality of seasonally-adjusted job gains in August? In a word: disturbing. Of the 142K jobs created, just under half came from the lowest paying jobs possible: education and health; leisure and hospitality; and temp-help. The best paying jobs, finance and information, added a whopping 4K jobs between them. Finally, about that much delayed US manufacturing renaissance: stick a fork in it - in August the number of manufacturing jobs created was exactly 0.