…while not the carnage TB predicted, a lot of pain was felt on Friday on a nonsensical rally following a weak payrolls report…but it could have been worse. Sure, and losing one limb would be worse if you lost two but can’t fathom someone holding a party to celebrate! Payrolls declined by 20k vs consensus for a 75k loss…mind you we are an economy that normally produces 100-150 jobs a month! Besides five year old could have dissected the data and seen what was wrong.
First, let’s take the unemployment rate which declined 0.1% to 5.0%…certainly that is a good thing, no? No, because it was out to the third decimal place…a minor change…also remember that adjusting for discouraged workers and part-time for economic reasons (that number surged by 325k to 5.1 million and you have to go back to 1993 to find a number that high), the rate is 7.8% pretty much where it has been for the past six months. But what caused the jobless rate to decline, even if it was infinitesimal? The civilian labor force grew by 173k, yet over the past three months it has grown by just 44k, but the big change was Household Employment which rose by 362k to 146.3 million…never mind that the average growth over the past 12 months has been just 52k and that the average for 2007 was 146 million and for 2006 was 144.4 million…this is a meaningless number…first because it includes working for free on mom and pop’s farm…internet businesses even if you work just one hour a week, etc. This is one of those wonderful things economists love to play with which are meaningless drivel.
Second, this is the first time since 2003 that we have had four consecutive months of negative growth: in an economy that should add 100-150k per month…TB knows he said that earlier but it bears repeating.
Worse yet, Good producing declined by 110k with 61k coming from Construction and 46k from manufacturing. So where did the jobs come from? 90k services…note professional and business services +39k which to TB has a lot to do with tax preparation which likely came in earlier due to the tax rebates. Consider, that area lost 44k in March, 28k in Feb, and 30k in Jan. Education and Health Services added 52k just a little above average, while Leisure and Hospitality added 18k…these are low paying jobs and probably being supported by foreigners taking advantage of the weak dollar.
Yet we rallied stocks on this? Oh better still, just before the open the bi-monthly TAF auctions were increased from $100 billion to $150 billion…these started last year at $50 billion…does this look like the situation is improving…otherwise why are they taking in more of that derivative rubbish and exchanging it for treasury bills? By the way, a friend tried to get a list of the eligible collateral and was told by the Fed that that information is not being provided to the general public at this time.
Now let’s look at just what happened with the Dow during the session: right out of the chute it rallied 100 points on about 112 million shares; at the end of the first half hour it gave back 50 on 110M shares and by the end of the first hour it gained back 50 on 100 million shares (100-150 is average in the early half hour segments), then down 75 in the next half hour on 50M, up 25 million in the next 25 then it was under water by 20 million at just after 1pm EDT, rallied to +35 the back to -38M fifteen minutes later, and then fought its way back up to close up 48 points on 265M in the final hour. A totally unimpressive but highly volatile day. Volume was just 1.27B shares…a pathetically low number but one we have learned to live with since March 24. A market rally against that backdrop is totally meaningless, and shows a lack of conviction…on the part of bulls…and bears who are afraid to short…hence options business is very good.
So TB continues to wear his bear hat and suit…as it appears this market is on borrowed time. Not so, for the stock market cheerleaders who as soon as we crossed 13k on the Dow and 1400 on the S&P 500 were salivating and adding another point to their targets…a foolish exercise…and a costly one? Note also that the Dow Transports which had a big day Thursday closed down as once again oil reared its ugly head and the Nasdaq Composite was also negative, along with the Russell 2000 and AMEX.
With gold and crude surging already this morning and Globex weak can we honestly expect a rally?
Here are some headlines: UBS to cut 8,000 jobs…does that sound like things are getting better? Their Q1 loss is over $11 billion (by the way, Citi took things to a new low by selling preferred again, and then selling common after saying the preferred would be the last time they had to come to the well…but WSJ reports they indicated they would be selling the common when the preferred was offered!). Sir Alan of Greenspan says the US is in a “Pale Recession”…that my extend through year…wait a minute, doesn’t that mean the stock market rally was premature? He is a master of understatement lately too! Oh and good old Microsoft…scrapped the Yahoo! offer and poor old Yahoo! can’t find a suitable suitor. That is driving Globex prices lower this morning. TB could go on but you get the picture.
Hope you all had a terrific weekend…TB settled in and watched the Kentucky Derby…and incredible race…he was pulling for the filly, Eight Belles (which TB liked due to his Navy days), she ran a beautiful race as the rest of the field just gave up to Big John…a horse with a Seabiscuit air…a loser for a trainer, a jockey that had to move east after being in west coast scandals…reminiscent of the line in Seabiscuit: “the horse is too small, the jockey to big, and I am too stupid to notice.”, the owner. But alas, poor Eight Belles had to be put down after suffering compound fractures of both ankles…TB watched the reruns and could not see where it happened…how to ruin an otherwise wonderful day.
Speaking of days being ruined…the come from behind San Jose Sharks finally lost to the Dallas Stars in quadruple overtime…both goalies played phenomenally…not the same could be said of the offense. As for the Sharks, goalie Nabokov played and outstanding game…couldn’t find out how many saves, especially in OT, and Stars goalie Turco had 61 with 31 in the overtime periods…Bloomberg didn’t post Nabokov’s stats but they must have been even better including an incredible save that took them to OT.
As the dyslexic Mexican said, “Tienes un bueno Minco de Cayo!
Adios, compadres,
TB
Trader Bill thinks it is clear to anyone reading these missives that they are merely commentaries…as he sees it…and do not necessarily reflect the views of anyone other than his own. Information is gathered from sources he has found reliable, but no guarantees of accuracy are implied. These are merely observations of events in the marketplace offering in an attempt to offer a non-mainstream viewpoint. Hope you find it useful.
Copyright TBD Capital LLC May 5, 2008
