Reality

While usually prepared to rant and rave about how misleading the SA numbers, this month, Lee can't.  

Here is $107 billion of OTHER debt; guaranteed debt that does not appear to be included anywhere in the official Greek sovereign debt figures. Contingent liabilities that are not counted any longer perhaps as the accepted manner of doing business now in Europe. Most of these issuances are governed under British law with “Default” clauses and “Negative Covenant” clauses. Greece defaults on €105 billion Euros and adds new debt, the IMF/EU loans, of 130 billion Euros and we are told that Greece is better off today than yesterday. What drivel! With the addition of the new IMF/EU loans of $172 billion and the revelation of the guaranteed debt at $107 billion Greece now has $279 billion of new and hidden debts.  All of the meandering, all of the charades, all of the red nail polish applied will, in the end I forecast, not be able to hide the reality that the barking dog is a greasy Pig.

There was a time when Bank of America's archoptimist David Bianco would take any economic data point, no matter how fecal mattery, and convert it into 24-carat gold. Then, in late 2011 Bianco was fired because the bank realized that its only chance to persevere was if the Fed proceeded with another round of QE, (and another, and another, ad inf) and as such economic reporting would have to lose its upward bias and be reporting in its natural ugly habitat. And while many other banks have in recent days become content with every other central bank in the world easing but not the Fed in an election year due to the risks of record gas prices, BAC's push for QE has not abated and in fact has gotten louder and louder. So exposes us to some oddities. Such as the firm's 29 year old senior economist Michelle Meyer literally demolishing any myth that yesterday's job number was "good." Needless to say, this will not come as a surprise to Zero Hedge readers. Nor to TrimTabs, whose opinion on the BLS BS we have attached as exhibit B as to the sheer economic data propaganda happening in an election year. Yet it is quite shocking that such former stalwarts of the bullish doctrine are now finally exposing the truth for what it is. Presenting Bank of America as we have never seen it before - throwing up all over the Bureau of Labor Statistics.

As Portugal gets jealous of Greece's ability to just not pay bills, insurance portfolios will suffer greatly as the FIRE sector burns! The first domino has fallen, yet the MSM is taking this as a non-event!

The Ministry of Propaganda and its media minions are announcing that "job growth is on a tear" and the "best growth since 2006." How about we look under the hood of the employment euphoria? Here is an example of the Ministry's work: Best U.S. employment growth in 12 years Almost all the data agree — labor market’s on a tear.

Over the past six months, the number of people who are employed has risen by 2.3 million — an average of 385,000 per month. That’s the best growth since early 2000, when the dot-com bubble was in full flower. Since August, the unemployment rate has fallen by 0.8 of a percentage points, to 8.3%. For adults over 25, the jobless rate has fallen to 7%.

In other words, people who generally work full time so they don't have to share a bunk in a flop house or live in their parents' basement are almost fully employed, as 'full employment" typically generates an unemployment rate of 5% just due to churn. Would we as a nation be better off dealing with the truth rather than believing fantasies that prop up the Status Quo and the Fed's dearly beloved measure of the economy, the stock market? How often does accepting illusion help us navigate real life? Short answer: never.

According to the doctrine of pre-emptive war, Iran can be attacked based on its alleged desire to develop nuclear weapons, just as Iraq was attacked in 2003. In fact, Congress is currently debating whether a nuclear capability alone (which Brazil, Japan, and other countries enjoy) could justify the 'preventive' attack. I believe it is time to negate this doctrine by postulating that Iran in fact has a right, as a sovereign nation, to a nuclear capability. Having traveled to Iran recently, I can attest to the Joint Chiefs' General Dempsey's reference to Iran as a 'rational' actor. The Iranians have no interest in destroying America, or Israel, at the expense of one of the oldest continuous civilizations in the world, dating back about 2600 years. Iran is currently surrounded by over 40 U.S. military installations, not counting Israel's still-unaccounted nuclear arsenal. To assert that Iran would jeopardize its culture for a one-shot nuclear attack is a complete miscalculation of the Iranian spirit; that spirit gave rise to a revolution in 1979 against what they perceived as Anglo-American imperialism in the form of the Shah, much as our own revolution opposed British imperialism.

While not shocking to most, the jump in temporary workers that we cited earlier is perhaps the biggest indicator of job 'quality' gains. As we discussed here last month, the US market economy remains mired in a low quality (“first-fired, first-hired categories rather than the type of core hiring that would build a stronger foundation for income growth,”  as FTN's Jim Vogel describes it) recovery. About 160k of private jobs added in Feb are 'low-paying work' which left average hourly earnings up only 0.1% (notes David Ader at CRT) - hardly the recipe for a sustainable recovery and perhaps the slow leak in stocks post the number is the rude awakening to that reality. As w enoted before, "not only is America slipping ever further into a state of permanent "temp job" status, but that a "quality analysis" of the jobs created shows that the US job formation machinery is badly hurt, and just like the marginal utility of debt now hitting a critical inflection point, so the "marginal utility" of incremental jobs is now negative"

D.C. is fudging the books big time according to the CBO.

Japan's Trade and Current Account imbalances appear to be hitting some kind of terminal velocity and while neither JGBs nor CDS seem to reflect the ensuing chaotic recognition that perhaps the can that has been so faithfully kicked down the "Nishi-no-michi" or the West Road may have plunged over the lip of Mount Fuji (conjuring images of Mordor), FX markets recent and abrupt weakness brought on by yet more printing (a topic we discussed in great detail recently as the chosen heretical method du decade) may well be coming face to face with reality. We assume Azumi is faithfully watching these market moves but we wonder at what point the quasi-intentional weakening of local currencies flares into a full-blown currency war - and instead of merely encouraging simpleton FX-carry strategies chasing momentum and leverage - quickly becomes the hyperinflationary super nova that many have been waiting for over the last decade. Dismal demographics aside, we wonder how long before Koo prescribes yet more of the same medicine for this constant state of deflation and at what point does inverted-Apple-looking charts for Trade and Current Account balances become simply too hot to handle...

I think it is clear that extremists in an environment of despotism are in most cases people who refuse to abandon that which makes humanity whole.  We are, indeed, dangerous, but only to those who would do liberty harm.  A life of conformity is a life wasted, and a life of slavery is no life at all.  Whatever we may be called today, what we leave behind is ultimately what defines us.  Labels are irrelevant.  If I am an “extremist” because I refuse to participate in the delusion that is America in the new millennium, then so be it.  I am more than happy to join the long list of insurrectionaries who inhabit this nation today and who have been the legitimate makers of the world for generations.  Everything in history revolves not around governments, but rule-breakers.  They alone decide whether humanity will live tight in the fist of the authoritarian machine, or live free in the wilds of unbridled independence.

Even With Back Dated Deals Featuring Only One Party, One Can't Escape Greece's Problem Shared By Much Of The EU. Let's look at some nasty consequences...

As we head into tomorrow's all-important NFP print, that will make or break the next month's market action and political posturing, we thought it worth highlighting just how statistically farcical the accuracy bias is in this data. As we pointed out in January, this time of year is prone to extreme seasonal adjustments and moreover, this year has seen these adjustments breaking records in their relative scale. As TrimTabs notes the seasonal adjustment for February is likely to exceed 1.5 million jobs, which is many times greater than the job growth the BLS is trying to measure. They expect a 149k add, down from their 180k add forecast for January, which is well below the 210k consensus estimate but we note that the difference between the highest analyst estimate (+275k and no its not Joe LaVorgna) and the lowest (+125k) is entirely covered by a mere 10% disturbance in the BLS-'force' of adjustment. Critically, this means that whatever they need the number to be, it will be though we hesitantly point out the sad reality that while we have added jobs for 17 consecutive months (apparently), the average 133k addition is still insufficient to absorb all the new entrants to the labor force, suggesting the unemployment rate is likely to remain above 8%.

When it comes to economic data, there is the BLS's seasonally-adjusted, Birth/Death-ed, Arima-factored, goal-seeked, election year propaganda, or there is real time polling such as that conducted every month by Gallup. And while there is no doubt tomorrow's NFP number will be just better than expected (after all it is an election year for the Derpartment of Truth), the reality is that in February unemployment, that measured by the impartial polling agency Gallup, soared by 0.5%, the most since late 2010, from 8.6% to 9.1%, and back to August 2011 levels. As for the U-6 BLS equivalent, Gallup's underemployment metric rose to 19.1% from 18.7% in January, and a 18% low in mid 2011. The good news, it is just modestly better than the 19.9% in February 2011. Gallup's conclusion, which should be pretty obvious: "Regardless of what the government reports, Gallup's unemployment and underemployment measures show a substantial deterioration since mid-January. In this context, the increase in unemployment as measured by Gallup may, at least partly, reflect growth in the workforce, as more Americans who had given up looking for work become slightly more optimistic and start looking for work again. So while there may be positive signs, the reality Gallup finds is that more Americans are looking for work now than were doing so just six weeks ago....In mid-February, Gallup reported that its U.S. unemployment rate had increased to 9.0% from 8.3% in mid-January. The mid-month reading normally provides a relatively good estimate of the government's unadjusted unemployment rate for the month." Ahh.. Unadjusted. As for tomorrow, expect the BLS to continue in treating seasonally-adjusted Americans like idiots, and pushing the disconnect between the economy as seen by DC bureaucrats and Joe Sixpack to record spreads.

"We are a hair's breadth or, more exactly, one recession away from a market panic on outright deflation -- a panic that will send the central banks into a printing frenzy that will make their balance sheet expansion so far seem like a warm-up act for the main show." Albert Edwards

Subprime Goes to College