Friday, February 1, 2013

Follow-Up From Yesterday - Non-Farm Payroll Report

Take the "L" out of BLS (Bureaus of Labor Statistics) and you get pure BS

I'm not going to focus on the enormous revisions the BLS made to the past monthly employment reports.  If anything, it shows just how unreliable are the BLS' monthly preliminary guesstimates, as well as its follow-up revision the next month.

As most of you have read by now, the non-farm employment report released this morning came in at 157,000 LINK  vs the consensus expectation of 175,000.  As absurd as it is to discuss and debate this number, as it will change over time and no one really understands how those changes come about, the report contained some of the inconsistencies with reality that I noted we might see yesterday.

First, the BLS is claiming that the retail trade added 32,600 (Table B-1 in the link above) jobs in January, with 15,000 of those added by electronics and clothing retailers.  And yet, I linked an article yesterday which listed the top-5 retailers in terms of store closings planned.  Three of the top 5 were Best Buy, JC Penny and Sears.  In fact, I would argue that - given the reports I've been reading and hearing regarding retail sales on either coast - it is highly probable that the retail industry experienced a significant decline in jobs.  This would be especially true since the last of the seasonal workers hired for the holiday season would have been dumped in January.

In addition to this, a couple of factors make the underlying substance of the employment report appear quite weak.  If you look at Table A of the Household data, the number of people unemployed in January actually increased by 126,000 over December.  Also, the number of people unemployed for 27 weeks or longer increased in January over December by 146,000 (not seasonally-adjusted).  If you go to Table B-8, you'll see the average weekly earnings of production and non-supervisory employees declined from December to January.  This is the heart of our middle class economy and taxable base of W-2 earnings.  Not good.

The precious metals spiked on the release of the unemployment report then did a u-turn lower when one of the Federal Reserve governors made the comment that QE could end even if the unemployment rate was in the low 7%.  After the market figured out that this was just another case of a trapped policy-maker trying to jawbone the dollar higher and metals lower, the metals bounced back toward their highs of the day and the mining stocks staged a nice rally.

The ability of the bullion banks to keep a lid on metals prices using fiat paper surrogates like Comex contracts and LBMA forwards is starting to decline at these price levels.  Enormous physical appetite out of India and China is occurring at these price levels.  In fact, a report to which we subscribe reported that 31 tonnes of gold were delivered on the Shanghai gold exchange last night.  Clearly the eastern hemisphere physical metal buyers are taking advantage of this price level.

Unfortunately, based on a lot of the non-mainstream media economic reports that I peruse on a daily basis, it would appear that the grassroots economy is stalling and will likely start to plunge pretty hard.  We are seeing more signals of impending troubles in the global financial system with the recent bank blow-ups in Italy.  These banks are going insolvent on derivatives positions.  I guarantee that derivatives are a growing problem for Euro/U.S. big banks in general.  

What this means is more QE, more debt accumulation by Governments and consumers and - most important - higher gold/silver/mining stock prices.


  1. America Is Turning Into One Big Prison for People in Debt

    Debt remains, as it long has been, the Dr. Jekyll and Mr. Hyde of capitalism. For a small minority, it’s a blessing; for others a curse. For some the moral burden of carrying debt is a heavy one, and no one lets them forget it. For privileged others, debt bears no moral baggage at all, presents itself as an opportunity to prosper, and if things go wrong can be dumped without a qualm.

    Those who view debt with a smiley face as the royal road to wealth accumulation and tend to be forgiven if their default is large enough almost invariably come from the top rungs of the economic hierarchy. Then there are the rest of us, who get scolded for our impecunious ways, foreclosed upon and dispossessed, leaving behind scars that never fade away and wounds that disable our futures.

    Think of this upstairs-downstairs class calculus as the politics of debt. British economist John Maynard Keynes put it like this: “If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.”

    After months of an impending “ debtpocalypse,” the dreaded “debt ceiling,” and the “fiscal cliff,” Americans remain preoccupied with debt, public and private. Austerity is what we’re promised for our sins. Millions are drowning, or have already drowned, in a sea of debt -- mortgages gone bad , student loans that may never be paid off, spiraling credit card bills, car loans, payday loans, and a menagerie of new-fangled financial mechanisms cooked up by the country’s “financial engineers” to milk what’s left of the American standard of living.

    In 2013, you can’t actually be jailed for not paying your bills, but ingenious corporations, collection agencies, cops, courts, and lawyers have devised ways to insure that debt “delinquents” will end up in jail anyway. With one-third of the states now allowing the jailing of debtors (without necessarily calling it that), it looks ever more like a trend in the making.

    Whether in the famous Marshalsea in London where Charles Dickens had Little Dorritt’s father incarcerated (and where Dickens’s father had actually languished when the author was 12), or in the New Gaol in New York City, where men like Duer and Morris did their time, debtors prisons were segregated by class. If your debts were large enough and your social connections weighty enough (the two tended to go together) you lived comfortably. You were supplied with good food and well-appointed living quarters, as well as books and other pleasures, including on occasion manicurists and prostitutes.

    Meanwhile, the mass of petty debtors housed in the same institution survived, if at all, amid squalor, filth, and disease. They were often shackled, and lacked heat, clean water, adequate food, or often food of any kind. (You usually had to have the money to buy your own food, clothing, and fuel.) Debtors in these prisons frequently found themselves quite literally dying of debt.

  2. This comment has been removed by a blog administrator.

    1. Shoot. I accidentally nuked your comment. Was trying to respond with a "thanks for the feedback!"

      If you want, re-submit it and I'll post when I get back from a meeting.


  3. I took a p/t job with Kohls this holiday season. Our one store hired 130 people in October and then we got no hours in November. I'm not stupid... I know those hires were to pad the numbers for Nov.employment numbers before the election. Also we never really saw those new hires working after that and were constantly short staffed. It was probably one of the worst jobs I've ever done in my life even fast food. All the biggies seem to be in cahoots together (business, wall street, banking & gov't). I feel we're beyond the tipping point inthis country. I'm waiting for the house of cards to come falling down...

  4. I agree with mining stocks at this stage. The miners sentiment index has hit a low of 20, which is bullish.

  5. Matt Taibbi on Big Banks’ Lack of Accountability
    February 1, 2013

    Rolling Stone‘s Matt Taibbi joins Bill to discuss the continuing lack of accountability for “too big to fail” banks which continue to break laws and act unethically because they know they can get away with it. Taibbi refers specifically to the government’s recent settlement with HSBC — “a serial offender on the money laundering score” — who merely had to pay a big fine for shocking offenses, including, Taibbi says, laundering money for both drug cartels and banks connected to terrorists.

    Taibbi also expresses his concern over recent Obama appointees — including Jack Lew and Mary Jo White — who go from working on behalf of major banks in the private sector to policing them in the public sector.

    “The rule of law isn’t really the rule of law if it doesn’t apply equally to everybody. If you’re going to put somebody in jail for having a joint in his pocket, you can’t let higher ranking HSBC officials off for laundering $800 million for the worst drug dealers in the entire world,” Taibbi tells Bill. “Eventually it eats away at the very fabric of society.”

  6. The Securities and Exchange Commission (SEC) has named an attorney for the now-defunct MF Global as its top legal officer.

    Geoffrey Aronow, who previously served on the board of the National Capital Area Chapter of the American Civil Liberties Union (ACLU), represented MF Global CFO Christine Serwinski when the brokerage firm raided customer accounts and vaporized $1.6 billion in client funds.

    In a statement, the SEC praised Aronow’s “passion for investor protection” and said he will be a “faithful steward of the securities laws” and possesses “a comprehensive understanding of law enforcement.”

    Aronow says he’s looking forward to taking over as the SEC’s general counsel. “I’m truly honored to re-enter public service as the general counsel at an agency with such a storied history and critical mission of investor protection and effective market oversight,” said Mr. Aronow in an SEC statement.

    Despite the Obama Administration’s “get tough on Wall Street” rhetoric, the Obama Justice Department has not charged, prosecuted, or jailed a single Wall Street executive in the wake of the largest financial collapse in U.S. history.

    Indeed, no charges were filed against former MF Global chief and top Obama bundler Jon Corzine. Today, Corzine is reportedly back trading with his family’s wealth and considering opening his own hedge fund.

  7. Hi Dave, the daily price movements and delivery at the Shanghai Gold Exchange can actually be found on the website.
    My guess at the moment is that the next big movement will be in silver instead of gold. Someone is trying to defend the $32.50 line and the open interest kept rising. The recent brutal sell-off didn't seem to scare many people out.

    1. Thanks for the link.

      Watch 32.27 on the March contract. That's actually where they are trying cap the market.

  8. "the grassroots economy is stalling and will likely start to plunge pretty hard."

    I am unemployed in Nevada and its already here. My apartment complex was always full till 2010 when we went to 50% full. Now its looking 30%. People can't find jobs or only part-time pay that can't even match rent so they get evicted. We have a photo-op Governor who said he has created 30,000 new jobs but no one has seen any of them. Now they're saying the number is 8,000 less. The only thing the Governor has created is a big pot of money for his re-election campaign in 2014. With all the Government Officals and Institutions here clamoring that the worse is behind us and wanting money,money,money for their projects, when the next crisis hit, its all going to collapse like a house of cards. You can't fix stupid when nobody is listening.

    "based on a lot of the non-mainstream media economic reports that I peruse on a daily basis"

    Is it possible to have links or are they subscribers only?

  9. Destiny USA developer claims $56 million tax credit under controversial pollution cleanup program

    The Brownfield Cleanup Program’s purpose was to give developers a financial incentive to clean up polluted urban sites and put them back into industrial or commercial use. But it came under heavy criticism soon after its adoption by the state Legislature during a late-night cram session in 2003 because it allowed developers to claim tax credits worth many times more than their cleanup costs.

    With the cost of the program piling up, state Department of Environmental Conservation officials attempted to address the loophole on their own by denying entry into the program by projects where it deemed cleanup costs to be insignificant compared with their total building costs.

    The DEC initially denied Pyramid entry into the program, saying the mall expansion’s cleanup costs would be minor. Congel sued the DEC, alleging the department overstepped its authority by adopting rules not included in the legislation that created the program.

    In 2008, state Supreme Court Justice John Cherundolo ruled in the developer’s favor and ordered the DEC to admit Pyramid into the program. Two appeals courts upheld the ruling.

    Lawmakers amended the program in 2008 to limit the tax credit to the lesser of $35 million or three times the cost of the cleanup and other site preparation costs, but the old rules applied to Pyramid and other projects that were accepted into the program prior to the amendments.

    Today’s report from the Tax Department does not say how much Pyramid spent cleaning up the land under the mall expansion. It lists “site preparation costs” of $27.5 million, but that amount covers remediation, demolition, excavation and other costs to make the site usable. The report lists “tangible property costs” — the cost of the addition itself — as $534 million. It lists no remediation costs for on-site groundwater.

    read the comments...people are catching on to the thefts all around us.

  10. How Amazon Trained Its Investors to Behave

    With Amazon, though, nobody emphasizes EPS. Or, when they emphasize earnings, it's in the opposite direction from what Christensen's worried about. A few months ago, I heard analyst Mark Mahaney, now of RBC Capital markets, argue (at about minute 26 on the video) that Amazon's razor-thin profit margins were a source of competitive advantage:

    You really develop very sustainable moats around a business when you run it at low margins. Very few companies want to come into Amazon's core businesses and try to compete with them at 1% margins or 2% margins.

    This sounds eerily similar to what Yglesias was saying, half-jokingly, on Tuesday:

    Competition is always scary, but competition against a juggernaut that seems to have permission from its shareholders to not turn any profits is really frightening.

    Amazon has this permission because it has trained its shareholders to believe that everything will work out in the end. As a result, it has a shareholder base that's geared for the long-run. The biggest holder, by far, is Bezos himself. After that the No. 1 institutional holder, by a good margin, is Capital Group, the giant Los Angeles mutual fund complex with a reputation for having long investment horizons. I've been looking through transcripts of the company's past couple years of quarterly earnings conference calls with analysts (thanks, Seeking Alpha), and have learned that Bezos never participates (most CEOs do) while CFO Tom Szkutak always concludes his remarks with the sentence, "We believe putting customers first is the only reliable way to create lasting value for shareholders." Nobody complains.

    Being long-term oriented isn't necessarily the same as being right. Amazon could make the wrong bets. Bezos could get more interested in space travel than selling massive quantities of stuff at just above cost. But Bezos seems to get this. From an interview with Fortune's Adam Lashinsky last year:

    "We believe in the long term, but the long term also has to come," says Bezos, explaining that periodically Amazon wants to "check in" with its ability to make money.

    Just "check in," mind you. Wouldn't want to get hung up on flawed financial metrics when there's a world to conquer. Which Bezos can get away with — now that he has housebroken the investment community. The key to success in dog training, I'm learning (we just got a puppy), is to appeal to instinct and memory. Reasoning with the animal, or getting mad at it, doesn't get you anywhere. Neither does mockery, whatever Will Ferrell says. Bezos did lose his cool a bit over Suria's claims back in 2000 ("hogwash," he kept calling them). But in general he has exuded the steady authority of a good dog trainer. Hey, Wall Street! Roll over!

    I wonder if they can train people to stay away from resource stocks?....

    1. Thanks for the link. I actually want to work on a big post about AMZN for Seeking Alpha but it's going to require some time. It gets a way with murder with GAAP accounting. It's essentially a giant Ponzi scheme that requires perpertual revenue growth or it dies. We saw that several quarters ago when their revenues stalled for a bit (I think it was 2009) and they had trouble hiding some balance sheet/cash flow issues for a quarter.

  11. Easy on the nuke button Dave... lol
    My post was:
    Thx for your efforts Dave, they are always much needed ammo in my belt for good discussions with my in-laws. ;-)
    My question is this, a few months back you made mention that you heard thru a source some JP Morgue traders were very nervous. I was they still have the shakes?! Personally I hope they have to be carried away on stretchers...
    Thx again! ;-)

    1. Have not heard any updates on JPM specifically, but I know from good source that everyone on Wall Street is fearing the worst this year in terms of business activity and job cutback.

  12. In the second half of the show, Max Keiser talks to former Scotland Yard fraud squad detective, Rowan Bosworth-Davies of about justice departments and regulators going after the 'little guy' because he is 'easier' to get than the too-big-to-fail.

  13. BLS fakes employment stats. Gold and silver tank. Gold and silver rebound. Pump and dump.Gold writers and bloggers dutifully expose phony stats. Gold and silver rangebound, go nowhere. Wait, Gold and Silver to breakout! Gold will go through $10,000 Turk says! To QE or not to QE. That is the question. Gold loses $5. Investors pile into bonds. Investors pile out of bonds and into equities. 10 million ounces of paper contracts dumped on Comex. Silver tanks. Silver rises. Goes nowhere. Watch that $32 level! Gold fails $1700. "Investors" pull back. Jim Sinclair is swamped with e-mails. Gold will go to $3500 and beyond! Martians attack earth following giant asteroid strike! Gold mining stocks post best gains yet! Investors flee short term bonds on fear of alien invasion. Gold up $7.43.

  14. The illusion of freedom [in America] will continue as long as it’s profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way and you will see the brick wall at the back of the theater."- Frank Zappa

  15. Is there a reliable source/compilation of sales tax revenues by state.
    that show taxable sales (mostly consumer) and non-taxable (mostly business) also a breakdown of sources - at least the ability to back out sales tax on fuel. wouldn't these numbers be a good (well... better) indicator of the economy than the GDP/BLS (BS) reports?

  16. Ha ha that made me laugh despite the negative sentiment, which at first made me think you must be a troll, but then I saw there are no spelling or grammar mistakes in your text and you seem to have a sense of humour, so you couldn't possibly be a troll. But what you say is right, the Western PM community - if there is such a thing - is far too lacking in anything resembling a backbone, probably because we are so far underwater on our PM shares. We should follow the example of the Indian lady at a gas station I go to, who pumps gas summer, winter, whatever, wearing gold bangles on her arm. I bet they're real. And I bet she doesn't get her knickers into a twist every five minutes over the POG on the COMEX. But what trumps all your arguments - what crushes them into dust, are the 31 tons of sold physical gold mentioned above. Physical will trump paper in the end, and Whoever-It-Is can dangle us tiny worms up and down on its fishing line all it likes, but it will lose because there is no room on the line to also dangle all of China, India, the Middle East, Southeast Asia, and all the central banks of the world who weren't criminally stupid enough to sell all their people's gold out twenty years ago for a mess of pottage - I mean FRNs. They are the buyers, who are busy making that giant sucking sound from the East.