Monday, February 6, 2012

Bureau of Lying Statistics

There are three kinds of lies: lies, damned lies and statistics - Benjamin Disraeli, Lord Courtney, et al
Before I get to the employment report fraud, I had to unload two observations:  1)  Yesterday's Super Bowl was an epic game, especially if you like to watch hard-hitting defensive battles - AND the Super Bowl ads on TV were probably the worst in memory.  2)  The metals got hit on Friday as the jobs report was being released with the idea that a number as strong as the one released might delay more Fed money printing and therefore the report was bearish for gold and silver and there might be some downside action for a while.  I mentioned to a colleague, though, that the number was total bullshit and that if smart money examined the number with scrutiny over the weekend, we might see some surprising strength in the metals this week.  Well, as you may have already read and I will further detail below, the jobs report in truth was extremely negative.  It also shed more light on just how manipulative of statistics the Government has become.  In fact, Government economic reports are so distorted from the truth now that it brings to mind both recollections of 1970's Soviet-style political gamesmanship and frightening Orwellian visions.

The Government's Bureau of Labor Statistics (BLS - take the "L" out of "BLS" and you get "BS") released its version of this country's employment situation last Friday for the month of January.  The reported number was a massive and unexpected increase in employment, with the BLS making the claim that 243,000 thousand people found jobs in January and the unemployment rate dropped to 8.3%.  However - there's that "notwithstanding" conditional term again, as in "these numbers notwithstanding the truth" - a close look beneath the reported and appallingly cheered headlines reveals a very ugly truth about the quality and reliability - or lack thereof - of Government statistical reporting - especially in a Presidential election year.  My friend "Jesse" provides an excellent description of data manipulation that occurred in order to produce this latest "jobs" report:
Back in Stalinist Russia, they had whole departments of people that were responsible for rewriting history and documents in order to support the latest Party lines. When a particular person fell out of favor, for example, they not only altered the documents, but even went so far as to air brush them out of important historical photographs. Today the US reported a remarkably high Non-Farm Payrolls number, well in excess of even the most optimistic estimates. 243,000 jobs added, and unemployment has dropped to only 8.3 percent. Isn't that good news indeed. If one tracks the data closely, and keeps their own copies of the records, what we see instead are revisions, sometimes going back as far as ten years, that most greatly affect the 'seasonally adjusted' numbers, but also affect the raw numbers as well. The Obama Administration, as well as the previous Administration, have been going back and tinkering with history, rewriting the numbers here and there, in most cases 'rolling jobs forward' to the current months to make the current headlines look betterLINK
The real laugh comes when you look at the full BLS report and see that two sets of data:  the seasonally adjusted report that gets reported by the media and promoted by Wall Street and the not seasonally adjusted actual amount of jobs outstanding.   The Soviet-style manipulated seasonally adjusted number to which everyone is doing the Soul Train boogie shows 243,00 new jobs in January and 446,000 jobs over the last two months.  Compare this to the actual number of jobs, not seasonally adjusted, which shows a massive reduction of 2.9 million jobs over the last two months - 200k in December and 2.7 million in January. 

Now consider that there isn't anyone outside of the BLS statisticians that knows how the seasonal adjustments are calculated.  I guarantee that the massive historical revisions discussed by "Jesse" in the link above were part of the formula.  One reality check against the jobs report is to look at actual income tax collections for January 2012 were $308 million lower than for January 2011.  That certainly is not consistent with the idea that the economy added 243,000 wage paying, tax producing jobs.  You can check the number here:  Jan 2011 and Jan 2012  If those links fail, you can recreate them HERE  Also note that part of the "seasonal adjustments" used by the BLS include assumptions about the strength of the economy.  In this regard, the BLS assumptions are in direct contradiction to the snapshot of the economy as delivered by the FOMC two weeks ago.  Furthermore, that the economy in truth shed 2.9 million jobs is consistent with the view that the economy is actually in a recession, which is what most of us who examine the data on a daily basis believe.  This would also be consistent with the rapidly deteriorating home sales numbers and the cliff dive that is occurring in the Baltic Dry Index:  LINK  The BDI measures the supply and demand for dry bulk shipping cargo by sea.  It is considered a measure of the relative strength or weakness of the global economy.  When it plunges, like this it is good indicator that the world economy is in trouble.  It's now lower than where it was at it's lowest point in Sept 2009.

The point here is that many real-time economic indicators are directly in conflict with the employment report released by the BLS.  For those who still want to place faith in the BLS, here's an excellent presentation of the facts by Trim Tabs' Charles Biederman:  LINK  It's worth spending the 4 minutes to listen to what he has to say on the matter.

The other headline number that was cheered heavily was the unemployment rate, which "fell" to 8.3%.  This was accomplished by the BLS adding 1.17 million people to the "not in the labor force" category of  the population.  The labor force is defined as the "those employed plus those not employed but actively looking to be employed."  The BLS decided that 1.17 million people no longered wanted to work and thus removed them from the labor force.  Since the unemployment rate is defined by the those in the labor force who are not employed but looking for a job divided by the total labor force, reducing the size of the unemployed by removing them for labor force data will lower the rate of unemployment, which is how the BLS produced a lower unemployment rate.  If you look at the more comprehensive "u-6" calculation found in Table A-15 of the employment report, it shows an unemployment rate of 15.1%.  This is unequivocally NEVER reported by mainstream media and it was suspiciously absent from Obama's remarks about Friday's jobs report.   The "u-6" calculation includes a lot of the people that the BLS eliminates with the stroke of a pen from the numbers which get reported in the headlines.  Here's a description of the "u-6" number:  LINK

Those of you who are familiar with John Williams and his Shadow Stats report know that his alternative calculation of the BLS statistics yields a more comprehensive 22.5% unemployment rate. This calculation includes a much more comprehensive definition of "long term discouraged" workers, which are the people who have been looking for work for more than a year and but have given up for now and live off of Obama's extended jobless benefits welfare program. Speaking of Williams, this was his commentary on Friday's payroll report: LINK
In any event, beyond the revisions, the headline numbers for January 2012 generated by the revamped systems simply were not believable. New online help-wanted advertising fell sharply in January, indications from the January purchasing managers survey were mixed, and anecdotal evidence still is running to the contrary of happier numbers. Accordingly, I would expect reporting in the months ahead to revise and weaken with the payrolls, and would expect deterioration in the headline unemployment rate ahead, assuming some catch upfactors, if that is an issue...As an aside, there is precedent for direct political manipulation of headline economic data, from a number of administrations—both Democrat and Republican from the early 1960s and from the onset of modern economic reporting, into the 2000s. A down economy is extremely difficult for an incumbent party to overcome politically in a presidential-election year. During the first Bush Administration, with George Bush up for re-election, the economy was in recession. An administration official approached an individual in the computer industry about boosting reporting of computer sales to the Bureau of Economic Analysis (BEA), which reported the GDP. The sales reporting was boosted, the reported GDP improved, but the public viewed the administration's improving economic claims as being out of touch with reality.
Circling back to how I see the action in the metals unfolding in light of Friday's tragicomedy, the metals were technically set up for a pullback correction after January's torrid rally, especially in silver. We were a bit cautious going into this week, but not because of the jobs report. The "strong" jobs report gave the technical traders a reason unload their positions and take profits and there's no doubt this dynamic was aided and abetted by the big banks who seek to manipulate the metals. The metals once again sold off at the open of London trading but have rebounded sharply from their lows in the Comex session. Again, I think a close assessment of the employment report has further convinced smart money that the economy is weaker than is being promoted by Obama/Wall Street and at some point soon the Fed will be forced to unleash the printing presses again. In this regard, smart money will be adding to positions on all price takedowns. Although I think we'll consolidate January's move for awhile, the metals are set up fundamentally for a massive move this spring.


  1. There are 2 elements of the BDI that must be addressed. The BDI is the lease rate for large ships, it is not a level of shipping activity. Several factors apply to this rate. 1. It is daily, weekly etc. In times of high fuel costs, ships are driven slower. The weekly rate reflects the longer shipping time via the lower rate. 2. The geniuses built too many ships during the credit bubble. There is an excess of ships. A ship running is better than a ship rusting.

    Low BDI rates don't necessarily mean less goods are being shipped. There are other indicators for that. I believe something about loadings/unloadings and conatainers moved, etc.

    The BDI can't tell me if we're shipping as much stuff as 2005 or 2009.

    In your defense for using the BDI, it does have (and has hsitorically had,) positive correlations to economic turns. Surely a high BDI and ships moving full speed ahead filling "just in time" inventories is desirable over a low BDI, where ship owners may be running ships to break even. Perhaps we could get more info? Does Jim Rogers read this blog?

  2. I agree that there a lot of factors with using BDI as an indicator of economic strength or weakness. However, when it makes big moves like there's more than just excess shipping capacity hitting the market. A colleague of mine knows a guy who used to be on the board of a ship owner company. He said ship owners are worried that the operators who lease ships are going to walk away from leases now. zerohedge reported today that Glencore hired a ship at a negative lease rate - i.e. Glencore was paid to use the ship. I think in the latest case, the BDI is reflecting a collapsing global economy.

  3. Nuff said

    1. If the shaded areas are recessions, what does that really say about this recovery?

  4. Have you read where Richard Fisher, President of the Dallas Fed, bought $1 million in GLD and $50,000 in physical platinum? I've always been cautious of platinum because it's an industrial metal used mostly in catlytic converters. It seems like Palladium would be a better risk because it has the same uses and cost less. What are your thoughts on platinum?

  5. In looking at the two Daily Treasury Statements that you provided links for, it appears to me that the $308 mil difference that Jesse provided is calc'ed from the Fiscal Year to Date column (which would be Oct 2011-Jan 2012) and not the Jan '12 vs Jan '11 totals (158,745 vs. 152,867). Are the numbers not taken from Table IV, Withheld Income and Employment Taxes?
    That said, I am full agreement about the BLS manipulation intended to blow tremendous amounts of sunshine up the collective a$$es of the American public.

    1. I see what you are saying. I sourced the links from the King report and checked King's math w/out looking at the column heading. I actually had to recreate the link for 2012 which as a pain in the ass. If I have time I'll spend more time going over the data. Thanks

  6. Will Big Banks Get Free Pass in Robo-Signing Mortgage Mess?

    The State AG’s are supposed to settle the enormous mortgage mess for a mere $25 billion. The alleged fraud has been reported to be in the neighborhood of $13.5 trillion. Will the crooked big banks who perpetrated this scam on America get a free pass in the so-called “robo-signing” mess? There have been multiple lawsuits over the rip-offs, and there are at least a few states that are holding up the settlement for a better deal and the right to proceed with possible criminal investigations. is reporting some of the negotiations going on with a story filed yesterday that said, “New York Attorney General Eric Schneiderman expressed confidence Friday that his main concern with a pending settlement of alleged foreclosure abuses by U.S. banks would be resolved, but he didn’t commit to participating in an agreement. Schneiderman also said the settlement is being structured so as to not interfere with a separate probe into the packaging of shaky loans into mortgage- backed securities, a practice that preceded the financial crisis.”

  7. Government 'may sanction nerve-agent use on rioters', scientists fear

    Leading neuroscientists believe that the UK Government may be about to sanction the development of nerve agents for British police that would be banned in warfare under an international treaty on chemical weapons.

    A high-level group of experts has asked the Government to clarify its position on whether it intends to develop "incapacitating chemical agents" for a range of domestic uses that go beyond the limited use of chemical irritants such as CS gas for riot control.

    The experts were commissioned by the Royal Society, the UK's national academy of sciences, to investigate new developments in neuroscience that could be of use to the military. They concluded that the Government may be preparing to exploit a loophole in the Chemical Weapons Convention allowing the use of incapacitating chemical agents for domestic law enforcement.

  8. The bankers really screwed these people....good luck Greece

    Irish Urge Children to Leave Amid Job Losses

    Anthony Roche is urging his unemployed son to emigrate to Australia from Ireland to escape joblessness stemming from the country’s economic collapse.

    “I’ve seen the good times and the bad and these are the worst,” Roche, 45, who works a day or two a week after closing his business laying floors for bars and restaurants 18 months ago, said outside a welfare office in Dublin. “There are plenty of people there to work, but there isn’t any work out there. That’s why people are leaving these shores again.”

    While signs are emerging that Ireland is beginning to recover 15 months after an international bailout, the government says the economy is in the midst of the worst crisis since World War II. The nation’s unemployment rate, at 14.2 percent in January, is close to the highest level since the 1980s when the country last endured similar austerity measures. Only Spain and Greece have a higher jobless rate in the euro region.

  9. Gold nudges up but facebook rips...where does the money come from to pay up for nothing?

    Facebook IPO Hubris a Sad Commentary on America

    It’s a sad time for America when a firm that does what Facebook does is on track to become one of our largest companies. Based on capitalization, the web-based lubricator of social interaction could be in the top 50 within a few years, or even in the top 25 if analysts’ wildest expectations pan out. Facebook’s IPO promises to top Google’s $27 billion offering, reaping early backers a giant windfall. But wouldn’t it be far better if a company that actually made something were to enjoy such extravagant enthusiasm on Wall Street? Facebook of course makes nothing, and what it sells is of little economic value to anyone. And yet its founder, Mark Zuckerberg, is about to become one of the wealthiest men in the world.
    Meanwhile, if Zuckerberg is so smart, how come he hasn’t figured out a way to monetize a billion-and-half eyeballs? At present, Facebook’s profits are only a tenth of Google’s. More to the point, at least where investors are concerned, profits seem unlikely to grow significantly unless Facebook gets in users’ faces far more aggressively. This implies intruding on their privacy and selling their “information” in ways even more appalling than those that are already troubling civil libertarians. Users will become appalled too if and when Facebook is legally forced to disclose the nature and extent of the personal data it has been collecting on them and selling to who-knows-whom. On the day that law is enacted, we can imagine Facebook shares losing 30% of their value.

    How Facebook uses your data

    Facebook makes money by selling ad space to companies that want to reach us. Advertisers choose key words or details - like relationship status, location, activities, favorite books and employment - and then Facebook runs the ads for the targeted subset of its 845 million users. If you indicate that you like cupcakes, live in a certain neighborhood and have invited friends over, expect an ad from a nearby bakery to appear on your page. The magnitude of online information Facebook has available about each of us for targeted marketing is stunning. In Europe, laws give people the right to know what data companies have about them, but that is not the case in the United States.

    Facebook made $3.2 billion in advertising revenue last year, 85 percent of its total revenue. Yet Facebook's inventory of data and its revenue from advertising are small potatoes compared to some others. Google took in more than 10 times as much, with an estimated $36.5 billion in advertising revenue in 2011, by analyzing what people sent over Gmail and what they searched on the Web, and then using that data to sell ads.

  10. Has Derivatives Deleveraging Fueled the Stock Rally? (February 7, 2012)

    But a funny thing happened on the way to the derivatives market: wise guys realized they weren't limited to selling CDS to the owners of Greek bonds--anyone could buy a CDS on Greek debt. So why not sell $1 trillion in CDS against Greek bonds? That's ten times the premium.

    Some issuers hedged their bet by buying CDS issued by other institutions. These other institutions are the "counterparty", that is, the party who pays off the CDS I bought from them so I can pay off the owner of my CDS. Thus the derivatives market for Greek debt is a daisy-chain of counterparties, all planning to use the proceeds from the CDS they own to pay off the CDS they sold.

    It was a license to print money--until Greece defaults. Yikes, now what? Just as in the classic film The Producers, where 100% of the proceeds of the Broadway play were promised to ten different investors, the CDS schemers reckoned the odds of a Greek default were effectively zero--"the E.U. will never let a member state default."

    Ahem. Until they do. In The Producers, the schemers devised a play so odious, so bad and so repellent that they felt extremely confident it would close after one night for a tremendous loss--and they would get to keep the 10X oversubscribed investors' money.
    This was the same bet made by sellers of CDS on Greek debt--and on Italian, Portuguese, Spanish, Irish et al. debt as well.

    Now that leaves the canny financiers in a pickle, as they owe various parties $1 trillion when $100 billion in Greek debt goes up in smoke.

    Now we get to the deleveraging part. As I understand it, some of these CDS are written against various swaps or stock indices, meaning that the asset to be delivered upon default is ultimately a claim against stock indices, currencies, etc.

    That means that those holding the CDS obligations have to acquire these assets so they can pay off their obligation when Greece defaults.

  11. I'm not really sure why the author thinks there's been derivatives "deleveraging." According to BIS quarterly reporting, the amount of derivatives outstanding now is more than 25% greater than it was in 2008 when the banking system de facto collapsed. These people who write about "deleveraging" need to get their facts straight. The debt load in this country in aggregrate is higher now than in 2008.

    1. And the consumer has barely deleveraged and most of that is a function of debt write-downs by the banks in which a large part of the losses were transferred to the Treasury by Geithner. Student loans outstanding are approaching $1 trillion. Every day the amount outstanding hits a new record. I would bet most of that debt never gets repaid.

  12. So ....just how is he going to do this ...three guesses. Those having read this blog for long will get it first time round.

    "Federal Reserve Chairman Ben Bernanke on Tuesday renewed a pledge to prevent Europe's financial crisis from damaging the U.S. economy in testimony before Congress that mirrored remarks he made last week." - Headline on CNBC.

    This is the umpteenth support to QE to infinity - what more do we need. Oh we need to actively change statistics - recently achieved on Friday.

  13. Well I'm pretty sure there's a lot of people that fall under the 3rd definition...?

    FBI warns of threat from anti-government extremists
    By Patrick Temple-West
    Mon Feb 6, 2012 7:21pm EST

    Reuters) – Anti-government extremists opposed to taxes and regulations pose a growing threat to local law enforcement officers in the United States, the FBI warned on Monday.

    These extremists, sometimes known as "sovereign citizens," believe they can live outside any type of government authority, FBI agents said at a news conference.

    The extremists may refuse to pay taxes, defy government environmental regulations and believe the United States went bankrupt by going off the gold standard.

  14. Paul Brodsky and Lee Quaintance: An adult approach -- Part I

    In their latest market letter, Paul Brodsky and Lee Quaintance of QB Asset Management in New York argue that investors shouldn’t fight the Federal Reserve but rather bet on it and other central banks. Brodsky and Quaintance write that indebted governments have ceded to banking systems, without conscience or public accountability, the power to inflate currencies. They write:

    “If the global banking system has ultimate power over how global wealth is perceived, (as it does), and it is the only institution powerful enough to keep indebted governments in control of their societies (which it is), then the only reasonable strategy for an independent investor is to think like a Rothschild: Don’t fight the Fed — Bet on it.”

    Today’s meddling policy, broadly defined as manufacturing and distributing new base money, is a necessary follow-up to yesterday’s meddling policy, broadly defined as aggressively promoting when-issued base money (i.e. credit). In other words, policy makers must now rob Peter and Paul to pay Jamie, which is only slightly more acceptable than the previous policy of robbing Peter’s and Paul’s children to pay Lloyd. We have children, including young girls (sugar and spice and all that), but quite honestly the only apt response for this vulgar state of affairs is: “WTF?”

    1. He who is conscious of secret and dark designs, which, if known, would blast him, is perpetually shrinking and dodging from public observation, and is afraid of all around him, and much more of all above him.--WIRT.

  15. Where's the "deleveraging?"

    Consumer credit up 3.7% in 2011, biggest since '07

    Consumer credit surges again in December

    1. Credit VROOMs: Auto Loans in 30 Seconds

      Three years ago, credit was so tight that the owner of a legal firm with a $400,000 salary and a very good credit score of more than 700 couldn’t get financed to buy the car he wanted from Michael Mosser’s dealership.

      “The world is upside-down compared to then,” said Mosser, general manager of Chevrolet and Cadillac stores in Ann Arbor, Michigan. “Today, somebody with a 500 credit score, I can get approved and in a Malibu,” which starts at $22,110.

      Lenders resisted extending credit to car buyers when the mortgage market collapsed in 2008, helping push General Motors Corp. and Chrysler LLC into bankruptcy and sending U.S. sales to the lowest point in almost three decades. Amid a slow housing market, auto demand is rebounding, spurring lenders from Bank of America Corp. to Capital One Financial Corp. to approve buyers faster and at better rates to compete for a piece of an expanding market.

      “Banks have had to look elsewhere for growth opportunities, and auto has been one of the nice spaces over the last couple years,” Curt Beaudouin, a bank analyst for Moody’s Investors Service in New York, said in a phone interview.

    2. "There are two ways to conquer and enslave a nation. One is by the sword.. The other is by debt."
      -John Adams 1826

  16. SEC Money Market to Throttle Withdrawals and Break a Buck

    What is being hidden from customers now? Reuters "Fidelity customers sour on SEC proposals" is a propaganda-misstatement-falsity. Proposals would allow money market mutual fund values to float; another would force the staggering of withdrawals. This has the makings of a modern day run on the bank.. I have looked at the lack of quality in some money market mutual funds. This is a problem with all brokerage companies pegging funds to a dollar. If these funds are floating below a dollar now how are they being squared to a dollar in a hidden fashion without your knowledge. This squaring would mask risks in money market mutual funds. The astounding thing with Fidelity was their lack of response to a certified letter to clarify risk levels in my interests and their lack of response. This backhanded article is saying that clients of money market mutuals are balking; but it really should be refocused to tell the truth about investor the current management of funds in black box (private balance sheet) brokerage and money market mutual companies.

  17. Bill Black on Financial Fraud Investigations

    Riley: What would you like to see happen?
    Black: We have descended too fully into the cesspool of crony capitalism when our most elite banks can commit what SEC investigations find to be fraud and still claim in filings to the SEC that they have “a strong record of compliance with securities laws” — and the SEC buys such a preposterous claim hook, line, sinker, rod, reel, and the canoe they paddled into the swamp.
    Where are the “soft on crime” conservatives when you need them? This is the perfect story for Republicans to use in attacking President Obama’s policies. Why are they so silent?
    I want the elite criminals who ran the control frauds to be prosecuted and imprisoned if found guilty. Under President Bush, the Justice Department’s prosecution of financial frauds was pathetic. Even though financial fraud reached unprecedented levels, the Bush administration prosecuted fewer than one-half as many financial frauds as during the S&L debacle. The bad news is that the Obama administration has proven even more disgraceful failures in holding elite criminals accountable than did the Bush administration. The Obama administration has convicted a few bankers from non-elite banks and it may eventually convict a token elite banker, but it will continue to fail systemically to hold elite bankers accountable for their frauds.

  18. And so did the world….the island of Sicily was shut down. It was? Yes, by citizens armed with pitchforks.

    Sicily Pitchfork Movement in Revolt – Western Media Blackout

    On January 16th, middle class Sicilians began a popular uprising appropriately called the ‘Pitchfork Movement’…’Movimento Dei Forconi’.

    There are shades of the Occupy movement within it, but the core is not dissatisfied unemployed youth with no property or businesses to lose.

    They are middle aged and older. They know that what they have left has been targeted by their own elites to bear the economic pain.

    The other difference is size. Sicily’s five million people, their grass roots people, have occupied themselves.

  19. funny money in action....

    Facebook Graffiti Artist Could be Worth $500 Million

    In his conversation with Mr. Stern, Mr. Choe reiterated his original feelings about Facebook in 2005, saying: "People don't remember, Facebook was a joke." But his tune has changed since then. Mr. Choe talked about how much he likes Mark Zuckerberg, the company's founder. Mr. Choe also said he recently painted the company's new headquarters free.

    When Mr. Stern asked him if he was "half out of his mind to turn down the $60,000 dollars," Mr. Choe said he "likes to gamble" and noted that he believed in Sean Parker, then Facebook's president, who had hired Mr. Choe to paint the offices.

    As we noted in our original article, the payout to Mr. Choe would provide more money from his paintings than Sotheby's attracted for its record-breaking $200.7 million auction in 2008 for works by Damien Hirst.