When it comes to the NEW QE, everyone has an opinion, and most seem to believe that the NEW QE will come next week, now that the US economy added "just" 96,000 people (but, but, the unemployment rate 'fell'). Certainly, and far more importantly, if the most recent FOMC minutes are any guide, the Fed shares this view. Sadly, as so often happens, most, and this includes the FOMC's various voting members, have once again made up their minds without actually evaluating the limitations posed by simple math. After all it is far easier to form an opinion, and actually think about the underlying facts later. The math, for those who actually have looked at the numbers behind the scenes, is scary (in UBS' words, not ours).
Here is the math.
Explaining The Market's Brand New 15x Forward Multiple
Actually not really, but all one can do is laugh since in some centrally planned parallel universe, the entire world entering manufacturing contraction translates into a 4 year (and just shy of all time) stock market high...
Stocks Spike In (And After) Close To New Post-2008 High As Volume Resumes Slide
A
few hours after the US reported a jobs number which missed consensus
estimates on broad weakness, which saw a nearly 400K increase in those
no longer even caring about work, and which confirmed that the economic
deteriorating is nowhere close to ending, stocks did their thing and
with no news, and on no volume (the same reason why like Nomura, ever
fewer banks can afford to keep trading desks), decided to surge into the
close even as volume slid, with the NYSE trading its new post-Knight
normal average of a few shares over half a billion. This sent the ES to a
new post-2008 high. In other news, we are approaching 15x forward P/E
even as the world's global economies are grinding to a screeching
halt.Central planning is here to stay and the stock market will merely
levitate ever higher on hope that the central bankers have it all under
control.Friday Humor: The New Normal Asset Manager
Curious
why legendary hedge fund managers are shutting down shops left and
right in disgust with the mockery that central planning and algorithmic
short-termism had made of equity markets? Don't be: his name is Julian
Marchese, he runs a "macro fund"... and he is 16.
Don't get us wrong: we enjoy the next youth trading prodigy, and here
the Schwab baby comes to mind, as much as everyone else. Our concern is
when it is the people who have never even seen half of a business
cycle that start running your money, and, probably worse, making money,
which leads them to believe they know what they are doing, and gets
gullible LPs to allocate capital to them based on a 3 month track
record, when in reality the entire market is one merely primed for
outperformance courtesy of central planner puts and priced to Bernie
Madoff ponzi perfection, targeting a specific investor type. And here
the Schwab baby comes to mind again.Junkie Recovery
If
the point of quantitative easing was to provide enough liquidity to
keep the massive, earth-shatteringly large debt load serviceable, then
quantitative easing succeeded — but the “success” of sustaining the
crippling debt load is that it remains a huge burden weighing down on
the economy like a tonne of bricks. This “success” has turned markets
into junkies, increasingly dependent on central bank liquidity
injections. After QE3 will come more and more and more easing until the
market has either successfully managed to deleverage to a sustainable
level (and Japan’s total debt level as a percentage of GDP remains
higher than it was in 1991, even after 20 years of painful deleveraging —
so there is no guarantee whatever that this will ever occur),
or until central banks give up and let markets liquidate. Quantitative
easing’s “success” has been a junkie recovery and a zombie market.Patents Wars 2: The Asian Empire Strikes Back - Are The Tables About To Turn On Apple?
Much
has been said about Apple's recent victory over its key component
supplier, Samsung, in a recent US court decision the direct result of
which has been the halt of sales of several Samsung products which are
already obsolete in cell phone year terms. The paradox here is that
AAPL's victory is quite pyrrhic: if and when Samsung feels sufficiently
threatened, it can just pull a Gazprom and halt the supply of mission
critical components to the world's biggest publicly traded company.
Alternatively the Chinese politburo can one day decide to pull FoxConn's
operational license, in the process bankrupting AAPL overnight. But
these are of course M.A.D. scenarios which in rational, non-centrally
planned market would never take place, and so we have no reason to worry
about them. That said, it is increasingly becoming clear that patent
warfare fought in partial domestic judicial systems, will be the next
form of protectionism as pertains to that most faddy of technology: the
ubiqutous smartphone. And while Apple may have won the first battle,
the outcome of the war is still very much unclear: in fact, the return
salvo after Samsung's big defeat on US soil may come quite soon, this
time courtesy of another Chinese Apple "clone", HTC Corp, which if it
goes against the Cupertino company, could have a large impact on
revenues.Friday Comedy - Obama Show
Dave in Denver at The Golden Truth - 1 hour ago
*I buy every month, and I will never, ever sell it as long as people such
as Mitt Romney, Paul Ryan, Obama, Biden, Bernanke, and Geithner are in
government. I will never sell it. Never.* - Marc Faber, Swiss Investor,
King World News
I couldn't let the monthly Non-Farm Payroll Report go by without shooting
it down, however an easy target it may be. It's easier than shooting fish
in a barrel, really. At first blush on the headlines, in which the
supposed number of jobs gained, 96k, badly missed the consensus expectation
by 29k, I was shocked that Obama would let the BLS releas... more »
China approves $157 bln infrastructure spending
Eric De Groot at Eric De Groot - 4 hours ago
Jim, Monty, plus a few others saw it coming. If you have eyes to see,
coordinated central bank monetary and fiscal stimulation action is taking
place. Headline: China approves $157 bln infrastructure spending By Pete
Sweeney and Langi Chiang SHANGHAI/BEIJING (Reuters) - China has given the
green light for 60 infrastructure projects worth more than $150 billion as
it looks...
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content, and more! ]]
Do you want fries with that?
Eric De Groot at Eric De Groot - 5 hours ago
“Do you want fries with that?” could very well be the appropriate political
slogan to use when discussing the labor market in the United States.
Rising service-producing and falling goods-producing jobs has been eroding
Americans’ standard of livings for years. The effects of which cannot be
swept under the rug indefinitely. Most of the western economies will be...
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content, and more! ]]
Video: Train Yourself Not To Depend On The Internet & Mobile Phones
Admin at Marc Faber Blog - 5 hours ago
Marc Faber, "Gloom Boom & Doom Report" editor, explains why he believes the
entire global financial system will "go broke" within the next three to ten
years, and why investors need to train themselves not to depend on the
internet and mobile phones.
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets around the world.*
Another Weak Jobs Report
Eric De Groot at Eric De Groot - 7 hours ago
A weak August report reinforces already decelerating labor trends (chart 1
and 2). The upward push in gold and silver correctly anticipate more
liquidity, currency devaluation, and further deterioration of confidence in
the coming months/years. Chart 1: Birth/Death Model (BDM) Contribution to
Nonfarm Net Payrolls (NFP) Added/(Lost) Chart 2: Job Creation...
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content, and more! ]]
Summer drought takes its toll on local fruits and vegetables
Eric De Groot at Eric De Groot - 8 hours ago
Classic cause and effect. This could mark yet another trend
acceleration for the great secular bull market for foodstuffs. Chart:
CRBFoodstuffs And Year-over-Year (YOY) Change Headline: Summer drought
takes its toll on local fruits and vegetables QUINCY, Ill. (WGEM) - The
drought has made 2012 a tough year for farmers in the Tri-States,...
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content, and more! ]]
Follow The Money, Not Opinion
Eric De Groot at Eric De Groot - 8 hours ago
I have absolutely no doubt there's an issue with economy. Nikki Rocco's
assessment of the summer box office take embodies one of my core guiding
principles of trading and investing: Follow the Money, Not Opinion! People
vote with their feet in the real world. If families or individuals can
afford frequent moviegoing, a surge in box office receipts will...
[[ This is a content summary only. Visit my website for full links, other
content, and more! ]]A Bright Future For Greeks:"Now I Clean Swedish Shit"
One
look at the short squeeze in the EURUSD, coupled with the endless
jawboning out of Europe, and one may be left with the faulty impression
that Europe has been magically fixed and that Greece couldn't be more
delighted to remain in the Eurozone. One would be wrong. This is what is
really going on in Europe: "As a pharmaceutical salesman in Greece for
17 years, Tilemachos Karachalios wore a suit, drove a company car and
had an expense account. He now mops schools in Sweden, forced from his
home by Greece’s economic crisis.“It was a very good job,” said
Karachalios, 40, of his former life. “Now I clean Swedish s---." That more or less explains everything one needs to know about the "fixing" of Europe.Central Planning Sends Gold To Seven Month High As EURUSD Hits 1.28 On Massive Short Squeeze
Total
meltup panic and confusion in all but the US equity market where the
INTC punch has sent stocks reeling, as an epic, Volkswagen-like short
covering squeeze has taken the EURUSD up well over 100 pips in the past
few hours (with technicals now running rampant as predicted three months ago),
and where gold has now soared by nearly $40 on the day, sending it to
just shy of $1740 and at the highest level since February. And all of
this is happening without the Fed having announced QE, which it very
well may not as it would then be seen as a largely political
organization, or the ECB having bought a single bond under its restarted
conditional monetization program, which paradoxically still needs
Spain to crumble and demand a bailout before any of its bonds are
eligible for purchases. In short: total centrally planned confusion,
whose ultimate achievement will be to scare the last remaining non
vacuum-tube based traders out of the market. Real Unemployment Rate Hits 11.7% As Spread Between Reported And Propaganda Data Hits Record
Today's reported unemployment rate: 8.1%.
The reason: the labor "participation" dropped to a 31 year low 63.5%
as reported earlier. Of course, this number is pure propaganda, and
makes no sense for one simple reason: despite the economic collapse
started in December 2007, the US civilian non-institutional population since then has grown by 186,000 people every month on average
hitting an all time high of 243,566,000 in August. These people need a
job, and the traditional shorthand is that at least 100,000 jobs have
the be generated every month for the unemployment rate to merely stay
flat, let along improve. So what does one get when one uses the
long-term average of the past 30 or so years which happens to be 65.8%?
One gets an unemployment number that is 45% higher than the reported
8.1%, or 11.7%. That
is what the real unemployment rate is assuming the US labor
participation rate was realistic and not manipulated by the BLS cronies
and the Bank of Spain assisted Arima-X-13 seasonal adjustment models.
It also means that, as the chart below shows, the spread between the real and propaganda data hit an all time record, which was to be expected two months ahead of America's banker muppet presidential election.German State Of Saxony Supports Legal Action Against ECB
Since there have been tens of thousands of lawsuits filed internally in Germany with its constitutional court alleging the ESM is illegal, it was only a matter of time before the Germans decided to sue the ECB as well for its "unlimited" bond buying. The time has arrived. From Bloomberg:- TILLICH SUPPORTS LEGAL STEPS AGAINST ECB BOND BUYING: WELT
- TILLICH SAYS ECB BOND BUYING SIGNALS EFSF, ESM NOT ENOUGH: WELT
- TILLICH: ECB MANDATE SHOULD NOT INCL. UNLIMIT. BOND BUYING:WELT
Where The Jobs Are: Low Wage Sectors Add Most Jobs In The Past Year
As we continue spreading today's NFP report, here are two chart summarizing which sectors are hot, and which are not. In another indication of just how weak the US jobs market truly is, as the second chart from Bloomberg Brief confirms, the bulk of the job additions have been in low-wage sectors. The one highest paying, and thus greatest tax-generating, sector - financial jobs - will continue to bleed more and more workers as the credibility of the broken casino formerly known as the capital markets continues plumbing negative territory.
Spot The Housing Recovery: Building Construction Workers At One Year Lows
This chart probably needs no explanation. Number of employees engaged in the construction of buildings just dropped to 1,217,000 down from July's 1,220,000, and the lowest number in a year. Just as telling is that the number was a mere 5,600 workers above the depression lows of 1,211,400 recorded in May of 2011.Chart Of The Day: 25,792,000 Unemployed And Underemployed
Sadly
for the US labor force, today's number of reported unemployed people
according to the Household Survey, which came at 12,544,000, or a drop
from 12,794,000 (even as the number of employed declined as well from
142.2MM to 142.1MM), tells only half the story. As the following chart
of the day, a bigger problem comes from the fact that in August another
8 million Americans were working part time, double what it was at the
start of the Depression. Additionally, 5.2 million, also double the
number 4 years ago, are marginally attached to the labor force.
Combined, this adds up to 25.8 million, which is the real number of
interest, even ignoring the nearly 400,000 who mysteriously dropped out
of the labor force. As Bloomberg concludes, "It is likely firms have
altered their hiring behavior following the recession, which has
resulted in a low-wage bias that favors part-time and temporary
workers." Sadly, this means that the change in the labor market is now
secular, and the Fed will have to reassess everything it knows, just as
it had to reevaluate its flawed understanding of Stock vs Flow, and why more and more are now calling for endless QE.Goldman's Prepared NFP Kneejerk Reponse: "QE Probability Now Above 50%"
The NFP number was released at 8:30 am. At 8:40 am Goldman Sachs' Jan Hatzius hit "send" on a 356-word email to clients which was checked, vetted, and given the sign off by compliance, in which the Goldman head economist read through the NFP data, and concluded that "Probability of QE3 Next Week Now Above 50%." Curious why the risk assets first dropped then soared as if stung? Because today, once again, good is great, but worse is greater. Let the global liquidity tsunami continue!The Reason Why The Unemployment Rate Dropped: The Labor Participation Rate Is At Fresh 31 Year Lows
Curious
why the unemployment rate dropped from 8.3% to 8.1%, even as just
96,000 jobs were added? The labor participation rate declined from
63.7% to 63.5%, the lowest since 1981. It means that somehow in August the labor force declined by 368,000 people, which is a paradox since according to the household survey 119,000 jobs were lost in August, yet at the same time the unemployment rate dropped. Remember: it is an election year.US Added Just 96,000 Jobs In August, Far Less Than Expected; Unemployment Rate Slides To 8.1%
In August, two months ahead of the presidential election ahead of which this number will be one of the most critical and talked about, the US generated just 96,000 non-farm payroll jobs, on expectations of 130K additions, and compared to the July number of 163,000, now revised to 143,000K. Private payrolls rose by a modest 103,000, much lower than the expected number of 142K, and down from July's revised 162K. -15,000 manufacturing jobs were lost, compared to the expected +10K, and sadly just a little bit short of Obama's recent promise to add 1 million manufacturing jobs by 2016. Finally, while the unemployment rate came lower (surprise, surprise: this is what appears in newspapers) at 8.1%, far lower than expectations of 8.3%, and below last month's 8.3%, the broad total underemployment rate (U-6) continues to be sticky at 14.7%. Birth Death added 87,000, up from July's 52,000. The reason for the drop in the unemployment rate: labor force participation dropped to 63.5%, down from 63.7%. Oddly enough, this report leaves the NEW QE door open, even as Obama can take the accolade for a declining unemployment rate. Win-win for everyone.When Unlimited Has Limits
In very real terms the ECB is now no longer an independent institution. The ECB has promised not to act unless the EU assents. The ECB is now totally subject to the whims of the politicians in Europe and whether the markets ignore this for the moment or not that is the truth of it. In promising redemption the ECB has also traded away its ability to act on its own and it will be interesting to see how this plays out.Intel Cuts Revenue Guidance For Q3, Withdraws Full Year Revenue, Gross Margin Guidance
When it comes to corporate cash flows, profitability and actual trade and product demand, central banks still appear to have little to very little ability to jawbone immediate results, as Fedex found out three days ago, and Intel has just confirmed.- INTEL SEES 3Q REV $12.9B-$13.5B, SAW $13.8B-$14.8B, EST. $14.2B
- INTEL WITHDRAWS YEAR FORECASTS FOR GROSS MARGIN, REVENUE
Spot The Superpower
We
came across this rather telling chart showing the net petroleum
imports of the US and China. We present it on a standalone basis, as
the price of oil, and certainly gas, will once again become a key
sticking point in the days and weeks ahead, as always happens whenever
there is either global coordinated monetary intervention, or relentless
jawboning thereof. To present some context to the chart, which
forecasts China overtaking the US and becoming the world's largest net
oil importer in the world, the official US GDP number presented for
public consumption is just under $16 trillion (or 98% of US debt),
while China's is, publicly, less than half this number.Today’s Items:
The European Central Bank held its main
interest rate at a record low of 0.75 percent. Meanwhile, the official
bogus rate of inflation in the euro zone accelerated to 2.6 percent in
August from 2.4 percent in July. It looks like the EU, and the US, are
seeing the negative repercussions of an easy money policy as the
currency goes down in value.
Leon Cooperman, of Omega Advisers,
believes that U.S. government bond yield are a “mispriced asset class”
and represent a bubble to avoid. He goes on to say that there is a
price structure that is subsidized by the government. In short, get
out of paper folks.
Marc Fabor, the legendary optimist,
believes that central bankers are intellectually, completely dishonest
or incompetent an printing is all they know. He goes on to say that
the biggest threat to gold owners is that if the price of gold goes
ballistic, or above 10% annually, governments will simply take it
away. Of course, if the U.S. has this situation, there will not be
many turning in their physical gold.
Well, while the majority of Californians
are stupid when it comes to whom they elect at the state office, they
are able to miraculously recognize that their tax-hole with online
dealers, like Amazon, will close on September 15th. To that end, and
to save anywhere between 7.25 to 9.75% sales tax, they are rushing their
online purchases before the deadline. Of course, if Californians, and
many others in the U.S., had thought about their respective state
government a little more often in the past, they would not be in this
financial mess.
Here are a few of the differences between Republicans and Democrats when it comes to TV viewing habits…
1. Republicans watch less TV than Democrats.
2. Republicans favor NASCAR, “Cops”, and “Entertainment Tonight” while Democrats favor “Glee”, “Family Guy”, and daytime shows.
3. There are no shows for independent thinkers simply because the TV may not even be present in their homes… turn the page.
1. Republicans watch less TV than Democrats.
2. Republicans favor NASCAR, “Cops”, and “Entertainment Tonight” while Democrats favor “Glee”, “Family Guy”, and daytime shows.
3. There are no shows for independent thinkers simply because the TV may not even be present in their homes… turn the page.
Many of my new subscribers may not know
about my other channel called the “Diaper Report”, with its single video
“Happy Trails.” This one video is my attempt to convey a positive
message for those who, even with everything still going on, are still
clueless as to what may be in store. So please, view and share with
others this wonderful video.
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