4/5/13…the jobless economy

From the Friars Club Encyclopedia of Jokes: “A conference is a gathering of important people who singly can do nothing but together can decide that nothing can be done.” – Fred Allen…and:

“Business meetings are important – because they’re one way of demonstrating how many people the company can do without.” Ka-ching!

Bloomberg Quote of the Day: “The whole of science is nothing more than a refinement of everyday thinking.” – Albert Einstein, you don’t have to be a genius to think that way. TB

Bloomberg Top Stories:

*U.S. Payrolls Rise Less Than Estimated as Jobless Rate Hits Four-Year LOW – but!!!

*European Stocks Tumble With S&P 500 Index Futures on U.S. Employment Data

*Central Banks Unleash Stimulus as Kuroda’s BOJ Joins U.S. Easy Odyssey

*George Soros Joins Bill Gross in Warning Kuroda Stimulus Risks Rout in Yen – !!!

*Just When Swiss Say Chocolate is Safe Cyprus Debt Crisis Strengthens Franc

*Trade Gap in U.S. Unexpectedly Narrowed in February on Lower Oil Imports

*Canada Records Biggest Decline in Employment in March Since 2009 Recession

*High Grade’s Bottom Eclipses AAAs Over Interest Rate Risk

*Blair Scorned by U.K. Becomes Dealmaking Impresario Nourished by JPMorgan – can you imagine a former U.S. President taking a job like that…ok, besides Clinton!

*Detroit Three Posting Best Profits Challenging Most of Japan’s auto Lineup

*Obama Budget to Include Changing Social Security Calculation, Tax Brackets –GOOD!

*North Korea Warns Foreign Embassies to Evacuate as Regional Tensions Mount

*Secretaries Vanish With Neat Desks as Technology Kills Professional Wives

*Rutgers Ambitions Threatened as Abuse Brings Calls for President’s Ouster – what about the A.D. who because of neglect caused coach to get a $100,000 bonus???      

(the payrolls data is today’s commentary and it isn’t pretty.TB)

…suppose they had a rally and nobody came…yesterday was a classic dead cat bounce! The Dow rose by 56 points and at the high was up 75 – almost exactly half of Wednesday’s decline. All indices were up led by NYSE Financials +1% by following a 1.6% decline! Next came Dow Utilities +0.9% vs -0.3%, and the Russell 200 +0.8% vs -1.7%…got it? The gains were all early in the session and made no sense whatsoever with global weakness before, then tanked and only bounced in…you guessed it: the final 45 minutes – short covering ahead of payrolls (which proved unnecessary and will further exacerbate today’s selloff!  Total NYSE volume declined sharply (as did Real NYSE), to 3.32B from 4.04B on the selloff. Advance/declines and breadth were positive but paled compared to the prior days negativity, while the VIX declined??? Here are some takeaways that indicate we just had a market ‘top’:

*Dow Transports were the worst performer of the majors for a fourth straight day, rising  by just 0.1% vs -1.3% vs -1.2% vs -1.5%, contrast to last Thursday’s 1% gain! The S&P 500 was up 0.4%,  Nasdaq Composite +0.2 vs -1.1%, the 100 FLAT vs -0.9%, and the Dow +0.4% vs -0.8%. Upside was out of the shoot then down continuously until the final 45 minutes as was prior day. Short-covering rally – nothing more! This market is totally controlled by high frequency geeks!.

*NYSE Volume FELL sharply to 3.32B shares vs 4.04B (highest since 3/15’s options expiry!) vs 3.29B vs 2.74B vs 3.27B vs 2.9B shares. REAL Volume was worse at 647M vs 812M vs 639M vs 573M shares vs 876M (high since since 3/15) vs 596M shares vs 558M shares –the range since 2/11 is 558M to 1.825B on 3/15’s options expiry and a near 12 month high, second only to 12/21’s 1.88B shares. Note that 3/15’s (options expiry) was the only day since 2/28 to register over 1B shares! Ave vol. 12 mos. 738M, ytd 717M. There have been just 11 800+M shares in 2013 – mostly on DOWN days!

  1. new 52 week highs which have ranged from 121-709, fell again to 143 vs 193 vs 417 vs 388 vs 613 vs 348 vs 422 vs 512. New lows slipped to 81 vs 114 vs 64 vs 69 vs 36 vs 60 vs 44 vs 56 vs 33 vs 36 vs 43 vs 50; recent high 98.
  2. Advance/Declines were positive but compare to prior day: +1.6% vs -3.7x vs -1.1x vs -2.2x vs +1.7x vs on NYSE and +1.8x vs -3.3x vs -1.3x vs -2.7x vs +1.3x vs -1.1x on Nasdaq. Breadth was similar: +2.4x vs  -5.7x!!! vs -1.2x vs -3.4x vs +1.7x on NYSE and +2.1x vs -4.3x!!! vs +1.1x vs -3x vs +1.6x on Nasdaq.
  3. The Dow rose by 0.4% vs -0.8% vs +0.6% vs +0.4% vs -0.2%. Dow Transports were rose by 0.9% BUT vs -1.3% vs -1.2% vs -1.5% while Dow Utilities took honors at +0.9% vs -0.3% vs +0.3% vs +0.2% vs +1.2%.The two Nasdaq indices rose by 0.2% and FLAT respectively vs +1.1% and +0.9% respectively!!! The Russell 2000 rose by 0.8% after falling for four sessions vs -1.7% vs -0.5% vs -1.3% vs -0.1%…hmmm. NYSE Financials ROSE by 1% vs -1.6% vs +0.7% vs -0.8% vs +0.4%. Brokers +0.8% vs -2.1% while the two bank indices rose by 0.9% and 0.6% respectively vs -0.2% and -1.2% respecitively!. BofA again most active +1.1% vs -2.8% to close at $11.94 +.13, so much for $12 for second day since 3/6- the range is $11.11, on 12/17 to $12.78 on 3/20. Note: 12 cents is a 1% change!!! C +0.5% vs -3.7%!!!
  4. Lastly, volatility (S&P VIX), dipped slightly to 13.89 vs 14.21 (high of 14.66 from a multi-year low!!!), it is oscillating wildly in a narrow range of 12.30-14.66, average 13.23, and remains above the 40/50 day m/a’s (13.53/13.49) and approaching the 200 day at 15.72…ytd the average has been 13.53 with a range of 19.28 (2/25!) to 11.05 (3/14) – 12 mo. ave 16.64!!!

Global equity markets weaker again ex-Japan which is up for a third straight session: UK -1.8%! vs -0.8% vs -0.4% vs +1.2%; France -2%!!! vs -0.3% vs -0.2% vs +0.9%; Germany -2%!!! vs -0.3% vs-0.2% vs +1.1%; Japan UP 1.6% vs +2.2% vs +3%!!! vs -1.1% vs -2.1% vs +0.5% vs -1.3%!; Hang Seng -2.7%!!! vs -0.1% vs -0.1% vs +0.3% vs -0.7%; Kospi -1.6%!!! vs -1.2% vs -0.2% vs -0.5% vs -0.4%; India -0.3% vs -1.6%! vs -1.2%! vs +0.9% vs +0.2%. U.S. stock futures were lower overnight ahead of U.S. payrolls then PLUNGED on the release: DOW -160!; SPX -18; NDQ -41!!! After the open  Dow -163; SPX -18; NDQ -51; Transports -89!!!

Bonds were incredibly strong yesterday even as stocks ‘bounced’ and are strong overnight: 10 yr Treasury 1.69% +11/16 vs 1.75% +7/8 (recent range WAS 2.06% to 1.85%), and the 30 yr’s 3.26% to 3.05%, closed 2.90% +1-5/16, now 2.85% +2-3/4!!! The long TIP is at a new (record?) low of 0.36% +3-1/4, the high yield was 0.67%! Libor update: 0.240% 3 mos., 0.442% 6 mos. – unchanged. Foreign bond yields all sharply lower, led by France for a second say, ex-Greece/Japan! Germany 1.20% -3; UK 1.63% -8; FRANCE 1.73 -13!, Italy 4.44 -11; Spain 4.80% -10; Portugal 6.27% –2; Greece 11.9% +14!!! vs 11.2% vs 11.94% vs 12.09% vs 12.30% vs 12.57%!!! vs 11.66% vs 11.37% vs 11.48% vs 11.21% vs 11.06% vs 10.58%…exciting!!! Hoopa! Japan 0.52% vs 0.44% +9!!!  

Gold kissed $1600 goodbye Wednesday, closing at a VERY WEAK $1552.40 -$1.10 – $47 in three days  but not before putting in a new low of $1539.40, lowest since 6/29/11!!! It is now way below resistance and the 1/17 high of $1699.90. The recent intraday high was $1618.30, almost to the 40 day on 3/21!  We are now below the 2/21/13 low of $1554.30 – not seen since May 2012! Last time it was below $1500 was Sept. 2011, now critical. The breakdown puts first resistance at $1556.40, the 2/21/13 low, then the 40/50 day m/a’s $1602-1616 – still falling steadily. Overnight it is $1566.10 +$13.70. Crude also slammed to $92.12, lowest since 3/21 before closing at $93.26 -$1.19 wiping out all gains since 3/21, and now below BOTH the 50 day ($94.57) and 40 day ($94.14), just three days following the rally intraday high of $97.35, highest since 2/15! The range is $91.60-$97.35 since 3/12! The recent low is $89.33, lowest since 12/26, set on March 4. Now $92.36 -.92 with an overnight low of $91.91!!!

Some random thoughts:

Song of the day: What Kind of Fool Am I???

Isn’t that the truth…we have ingorned the obvious by focusing on quarterly corporate earnings convincing ourselves that ‘the trend is your friend’ despite the peaking first in the Russell 2000 and Nasdaq indices, then S&P and Dow…not to mention the lesser followed but even more important NYSE Financials, Brokers, and Banks. Despite their strong prior 12 months 14.8% gain and 7.3% 1st Qtr they were still -4.3% from five years ago! Not that stopped senior management, most notably JPM’s Jamie Dimon from collecting huge salaries, bonuses, and stock options…and in his case a $6 billion hit largely due to his telling traders to take more risk (a la Bob Rubin at Citi in the last fiasco)!

We ignored…and were perhaps persuaded by the inflows from Europe on the various crises there…where else were they to go with their money…also the first quarter always implies reinvestment which generally produces a rally…but that led to the two crashes in 2000, and the market tops in 2007 and 2008…and for the last two (three now?) years an outstanding selling opportunity. Indeed, there has been a lack of retail throughout the rally which has been dominated and controlled by high frequency traders.

Now on the release of the payrolls data, we are paying a huge penalty. Here is the data, note there is just one positive – the unemployment rate – but that is a sham:

Unemployment FELL by 0.2% to 7.6% (actually due to rounding 1.6%). What’s not to like? BUT that was due to two factors:  a decline in the labor force of 496k taking the participation rate to just 63.3% – lowest since 1979!!! Hello??? Actually the employment to population ration fell to 58.5% – lowest since October 1983. Hmmm, doeasn’t this coincide with the entry of Reaganomics aka supply-side economics? What did we get for that? A sharp and increasing wealth gap with over 90% of assets owned by the top 1% of the population!

Meanwhile, despite the ADP employment report which indicated an increase of about 188k jobs – same as consensus – non-farm payrolls rose by just 88,000 – private adding 95,000 while government (as usual ) subtracting 7,000 – downsizing and effects of the beloved sequestration that due to political infighting is a dark stain that cannot be removed and will result in even more lost jobs. The only good news here was that January was revised to 148k from 119k and combined with December made a total of 61,000 in positive adjustments. But wait…an average of 248k per month of new jobs would only take us back to the level of 1993!!! Reread the unemployment rate stats in the prior paragraph! This prompted NBER Chairman Martin Feldstein to remark on CNBC the “we will be lucky to get 2% growth.” Or as TB has been saying even with job growth there is NO increase in earnings (hourly earnings were FLAT this month and up just 1.8% from a year ago…guess you should just be happy to have a damned job, right? Not CEO’s of course who are granted more and more each year for mostly mediocre performance!

But lets look at the real unemployment rate – at least there were declines in all categories but look at the levels in comparison to that headline 7.6% (by the way, household jobs declined by 206k last month!):

Add discouraged workers: 8.1% vs 8.6%

Add those who have given up looking: 9% vs 9.6%

Add part time for economic reasons:  13.9% vs 14.9% – remember these are jobs with NO benefits. Yet Congress refuses to raise the minimum wage which hasn’t risen since 2004 and is below the mandatory in 19 states! It would cost jobs or so they say? More supply side or voodoo economics! The CEO’s must be laughing their heads off over this!

Is TB upset? He damned well is and you should be too…at least Nero was entertaining as he fiddled while Rome burned…even though that is a fable but it fit nicely.

In spite of it all…get out of here ASAP and have a great weekend!

TB

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