The character of what’s in this gold market is so different from the bull market of the 1970s. The bull market of the 1970s was mostly traders and some central banks, but there wasn’t a huge sovereign interest...What you are dealing with now is China and Russia, who are doing what they are doing in terms of accumulating gold because they know the end game. The manipulators of the market will come face to face with that physical reality. When they mess with these markets now they are playing with China and Russia. - Jim "Mr. Gold" Sinclair (LINK)The statistical magicians at the Bureau of Labor Statistics (BLS) managed to manufacture a headline grabbing non-farm payroll report that added jobs in February beyond anyone's expectations - or even imagination.
The headlines suggested that our economy in February added 236,000 jobs. And unemployment fell to 7.7%. But, once again, when you dig through the details, the facts are not surprisingly significantly different than the hype.
If you review the trading pattern of the S&P 500 and gold/silver futures, you'll find that the SPX spiked and gold/silver did a waterfall when the headline number hit. Over the next 90 mintues, the SPX faded hard and the metals and the mining stocks hit their highs of the day. Why, you might ask? Because the market had digested the analysis as I'm laying it out just below and adjusted accordingly.
To begin with, and most significantly, the statistical magicians use an "adjustment" to the numbers with something they dreamed up called "the birth-death model." Briefly, this model guesstimates the number of jobs that would have been created and deleted - on a net basis - by guesstimating how many new businesses opened and closed during the month. According the BLS, this number was 102,000 in February, adding that many theoretical jobs to the monthly not seasonally adjusted jobs number. Then the BLS does its seasonal adjust hocus pocus and spits out the headline number.
You can see where the new businesses supposedly opened up last month, creating 102,000 jobs here: LINK. All service-based industries highly dependent on either consumer disposable income or Government spending. Does it make any sense whatsoever that leisure, hospitality and business service businesses started up, given that the consumer is getting squeezed both by increased payroll taxes AND record gasoline prices for the month of February?
Here's the distribution by industry of the jobs supposedly created by the economy overall, including the birth-death adjustment for February: LINK You'll note that retail trade supposedly added 24,000 jobs in February. But how can this possibly be true when we know that retail sales have been coming in nearly flat on a nominal (with inflation) basis and negative on a real (inflation-adjusted) basis? Not only that but I posted a piece several weeks back which highlighted the massive number of store-closings that would occur this year by many of largest, national chain retailers. How can that retail trade number have any credibility whatsoever, given this? 14,000 jobs created in manufacturing. Manufacturing what? Printing presses for the Fed? Professional and business services at 73,000 stands out as a serious outlier. This is almost 1/3 of the total jobs gains in both the BLS headline calculation and the in the birth-death model plug. I would love to see the back-up inputs for that number.
Finally, Zerohedge did a nice job pointing out some more inconsistencies with the "quality" of the BLS number. The number of full-time jobs declined by 77,000 and the number of part-time workers rose by 27,467. Also, the number of multiple jobs holders rose by 340,000. Either people who can get them are taking more than one job because they're struggling financially or the employment number as calculated is completely bogus. Either way, it's not a healthy number. Here's the LINK
On another note, an interesting occurrence has surfaced in the precious metals and mining stock bounce that we've had this week. The best moves during the trading day for this sector have been occurring when the Dow/SPX sell-off. I bring this up because someone sent me an interesting chart that suggests that the Dow/SPX have a high probability of selling off severely:
The reason I mentioned that gold/silver/mining stocks were "decoupling" from their correlation with the equity markets is that I've suggested privately to colleagues that the next big move in the precious metals sector might occur with the metals/miners moving in the opposite direction of the stock market. In fact, the tremendous gains that occurred after October 2008 started when the Dow/SPX started tanking hard into the end of 2008 thru March 2009 and the precious metals/mining stocks - starting in October 2008 - spent the next 3 1/2 years ramping up to new all-time highs (silver up to its 1980 all-time high).
Have a great weekend.