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5.8.2016 - Financial Intelligence Report Bookmark


Who is Kidding Who?

On Friday we got the non farm payroll report. On the first Friday of every month we get a reading concerning the prior months job hiring’s.  They discuss the breakdown of where the jobs came from, the sectors, the pay changes, etc. It really is a deep report.

Well, this month the spinner head economists were all on board for the economy to have created 205 – 220,000 jobs.  Well, at 8:30 am, we got the results and it was a “swing and a miss”.  According to OFFICIAL Government bean counters, we got 160,000 jobs.  So right off the bat, the “experts” missed the estimates by about 24%.  In any other profession other than weather forecasting, they’d be fired.
But okay, lets run with it for a minute. They say 160K jobs were created. Were they really? Well  let’s look at some other data points.  The “household” survey, gave us a much different picture. So first, what’s the difference?

The Current Population Survey (CPS) is based on household interviews conducted each month by the U.S. Census Bureau for the Bureau of Labor Statistics and provides comprehensive data on the labor force, including those who are employed and unemployed. The data are further classified by age, sex, family relationship and marital status. Fifty thousand households located in 792 sample areas, including all counties and independent cities in the country, participate in the survey. The household survey provides data that is used to calculate the Local Area Unemployment Statistics (LAUS) for regions, counties and selected cities and towns.

Got that?  Okay, now the CES model….

The Current Employment Statistics (CES) survey utilizes payroll records and is designed to provide industry information on nonfarm wage and salary employment, average weekly hours and average hourly earnings for the nation, states and metropolitan areas. The employment, hours and earnings data are based on payroll reports from a sample of over 390,000 establishments employing over 47 million nonfarm wage and salary workers, full- or part-time, who receive pay during the payroll period beginning on the 12th of each month.

The best way to distinguish between the two types of employment numbers is that LAUS data is based on residence (i.e., household) whereas CES data is based on place of work establishment taken from payroll records.

So, you’d expect them to vary a bit and they do. They’ll never hit the same numbers, but you should expect them to at least point in the same direction. Well, Houston…we have a problem.  While the CES model tells us that we created 160K jobs, the household survey said “NOT!”. They said we LOST 316K jobs.  

Which brings up my next little gem. What’s my favorite data point to beat the hell out of? The BLS’s  “Birth/Death” model.   Really quick for those that don’t know what that is…here’s the long and short of it. “They” say that for every company that closes and “X” amount of hundred folks lose their jobs, some amount of those people will go out and open new business and hire new people.  There’s NO proof of these businesses or jobs, no tax receipts or anything, just a “WAG”  or wild assed guess.  Well for this report they “guessed” that an incredible 233,000 jobs were created.  You read that right folks. 233K jobs. Phantom jobs. Jobs that really don’t exist.

Yet they INCLUDE them in the overall jobs report as if they were real. So take out the fake jobs from the overall report and what do you get? Well you find that we didn’t creat any net new jobs in April. We LOST 73,000 jobs.  See, if you take out the Birth/Death additions, at least the CES number would at least be in the same direction as the Household number.

Shall we go on? Sure, why not. They also said that an astounding 562,000 people fell out of the labor force. In ONE MONTH!!  Where the hell did half a million people go in a month? That took the labor force participation rate lower once again.

Inside the report, if you pulled out the total amount of part time jobs… you’d see full time jobs fell by 253K.  Did you get that? We lost 253,000 full time jobs.  Finally, we see that the prior month’s jobs report was “revised down” from 240K to 184K.

Are you kidding me? This is the kind of report that has idiots like Mark Zandi on CNBC Friday am talking about how it wasn’t a bad report, and everything is fine?  Really? How in your face can you get??  

But something interesting did happen Friday and it bears at least mention. In the past, when we got lousy jobs numbers that missed by a mile, the market would soar for 200 points, all in the hopes that the Fed would not hike rates, or/and they might even do more QE. This time, on what can only be called a horrid report, they didn’t do anything but rescue the morning session from being deep red. That’s an interesting change.

Maybe that’s because the “smart” money has been leaving the market? If you didn’t know the institutional money, the so called smart guys, have been pulling money OUT of the market for 15 straight weeks. Last week, 16 billion more fled the equity and ETF market.   Could it be that even with all the sleight of hand the Fed’s have been doing, their ability to push the market higher on false premise is failing?  It isn’t out of the question.

There’s NO reason for our stock market to be at the levels it is at. The Earnings stink out loud. The global economy is in recession. And I back that up with reports like Friday’s jobs report.  I don’t know how long they can keep the plates spinning, but in my view, selling stocks and buying more gold and silver wouldn’t be a bad idea. But hey…I could be nuts.  Maybe trees do grow to the moon, and unicorns are real. Maybe the Fed’s can keep the market up despite anything and everything negative. I’m just siding with Mother Nature. Gravity always seems to work and one day, it will pull stocks down to where they belong. Fed’s or no Feds. Be cautious out there.

 

The Market…

I live in Sarasota Florida. It got most of its fame early on because the Ringling Brothers circus would ‘winter over” down here.  The warm winter climate was perfect for protecting the animals they traveled with all over the country.  So Sarasota became home for “The Greatest Show on Earth”.

But Wall Street hates playing second fiddle. So they’ve created their own Greatest show, and you can see it play out daily in our equities market. On Friday morning the jobs number really couldn’t have been worse. When the market opened, it was down sharply from the day before. In mere moments we were not only below the important 2050 level on the S&P, we were flirting with 2040, which was BELOW the S&P’s 50 day moving average.  On a technical level…this was getting truly ugly.

This is a part of what I said to my insiders on Friday morning shortly after that lousy report, as the futures were falling like a rock… 

The one thing you have to keep in mind is that it is indeed a Friday and they like a green market close on Friday's. It lets them crow about how wonderful things are over the weekend TV shows”


Then at the 10:40 time slot, this was a part of our second update…

10:40

Can you explain the action of the first hour?  We opened poor and we were soon down almost 10 S&P points. The DOW was falling sharply. Then all of a sudden there was panic buying and we went GREEN.  Can you explain that?

I can. It's Friday.

Red is illegal on Friday's. Obviously I jest, but if you look at the action on Friday's over the past year, you see that no matter how low we are in the session, they tend to get us flat or green for the close. It's amazing.”


Sure enough, from a low of 2039 on the S&P, the afternoon saw them roar to life and by the close we were at 2057. Well above that 2050 danger zone and miles above the 50 day moving average.  The DOW was up 70, the S&P up 6. Magic. The Greatest show on earth.

The same thing happened last Friday. At one point we were down 155 DOW points, but with just minutes left in the session, we crossed into green. Do any of you really think that this kind of action is because millions of investors from hundreds of countries decided on those exact moments that they should buy stocks?  Do you think this is the “free market” at work?  It’s nothing of the sort. This is Central planning doing its best to keep the illusion alive.

It must be frustrating being a market manipulator for the Fed’s. Each day you have to counter act the billions of dollars that have been fleeing the market for the last 15 straight weeks. No matter how many futures contracts you buy to goose the market higher, in a day or two your actions are seen to be useless and the market is falling again.

So what happens now? I suppose that “bouncing” us off the 50 day will trigger some Algo-bot buying programs and we could see a couple green days.  But it is going to be very hard for them to conjure up a really strong rally. Consider the fact that we’re still in a pattern where the volume is larger on down days, than up days.

Friday they took us green for the close. The Volume on the S&P was 2.2 billion shares. On Wednesday’s big dip, we saw 2.4 billion. On Tuesdays big drop we saw 2.5 billion. This is nothing new. For instance one of the bigger down days was April 28th. The volume was 2.8 billion shares. One of the biggest up days recently was May 2. The volume? 2.3 billion.  See a pattern here?

So, while they might get some mileage out of the Friday bounce, I think they’ll run into resistance at the 2075 level and run out of oomph. This market is so tired, so “heavy” that Central planning is going to need a bazooka to keep it up. Stay safe.



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