Friday Already? Non-Farm Follies.
Well I promised a thrilling ride yesterday and we sure got one! We had a quick and wild drop right out of the gate, falling 75 points off Wednesday ’s drop from 10,589 at 3pm. But we rapidly gained it all back after holding our watch levels across the board, which was certainly technically bullish. Our big mistake this year has been to ignore the technicals and worry about the fundamentals and we are very much on the wrong side of this trade if we do hold our breakouts into the weekend. It’s all about the jobs report, of course - and we’ll get that news at 8:30. We are going to have to not worry and be happy about our breakouts should they come today. I think it’s all a load of ridiculous crap and we had a long discussion this morning in Member chat about my fundamental concerns but the GS trade-bots don’t care what our fundamental concerns are, especially now that the heat is on Geithner and the great gifts he bestowed on GS et al through the AIG payments (following through on exGoldman CEO Paulson’s plans). If the markets falter, the Congressional investigations begin again so everyone involved now has more of a vested interest than ever to keep these plates spinning no matter what the underlying fundamentals may be.
We’ll get a jobs number shortly but, as Mish points out, the government spent a record $14.7Bn on unemployment benefits in December, up 24% from November’s record $11.8Bn, "Yet the DOL has disclosed a mere 1.7% increase in those to whom insurance benefits are paid." Did we pay thos 200,000 newly unemployed people $7,350 a month each or is there some kind of nonsense going on with the statistics? As you can see from the chart, "emergency compensation" is flying, even as the standard-measured continuing claims numbers begin to slow down. The black line on this chart illustrates what happens when you count what the government doesn’t - the emergency and extended unemployment benefits. How long can we keep sweeping $14.7Bn a month under the rug while claiming to be in recovery? Apparently, a long time! 8:30 Update: Hey, maybe I’m wrong. Somehow we lost 85,000 jobs, which is a lot more in-line with reality than the bullish expectations we’ve been hearing all week. November was revised to +4K from -11K so we did get out positive month but it sure didn’t last long and that revision is offset by a 16K downward revision to October. Despite yesterday’s uber-bullish run in the housing sector (and see my comments on that nonsense in chat), 53,000 jobs were cut in construction last month and another 27,000 manufacturing jobs were deleted here in favor of our Chinese masters. Where did the additions come from? Well TEMPORARY help jumped 47,000 so that is just GREAT as long as "temporary" lasts. Will this send the market into a tailspin? Of course not weren’t you paying attention 4 paragraphs ago? Martians could land on the White House lawn and enslave Congress and Geithner and Goldman would still pump this market higher because (the Goldman analyst would say) this will open a new era of trade with our new Martian Overlords and we expect them to come to Earth and buy expensive Manhattan apartments and, of course, oil! What’s the positive spin of this continuing, relentless, devastating destruction of American jobs that is crippling the bottom 90% of our country? Well, no jobs gives the government an excuse to keep giving free money to the banks (because that’s been working so well, hasn’t it?) and the free money train keeps the dollar down (it dropped more than 1% within minutes of the 8:30 announcement), which keeps commodities up (gold jumped from $1,120 to $1,140 in 15 minutes following the announcement), which is great for the top 10%, who speculate in those things.
This is also great for our American corporations as a plentiful supply of workers who are desperate for work and a captured workforce that is terrified of losing their jobs leads to lower wages and higher productivity, which is great for the bottom line. As our companies learn to make more for less (revenues), the long-term danger is that austerity becomes the de facto business model for US corporations and then the market is unlikely to reward companies with expansion plans that require hiring because the comparative returns of the companies pulling back will be greater. That can lead to more aggressive job cutting and even lower wage and benefit packages and, before you know it - we’re Japan! So gambatte kudasai America - which loosely translates to "good luck" but is a combination of "work hard" and "do your best" - a very appropriate sentiment for such a sad day in our economy. Asia was flat going into the weekend and Europe was flat as well but fell off sharply as they don’t want to see a faltering dollar or another 85,000 consumers drop out of the US shopping pool. We’ll see if the fundamentals of 85,000 less people driving to work every day trump the idiotic speculative bubble that’s kept oil over $80 this week but I wouldn’t bet against gold because, if we have another year of job losses like last year, they WILL have to crank up the printing presses to keep this country from sprialing into a deep, dark pit. So happy Friday to you! We’ll see how things shake out but I’m still looking for a test of our lower levels at Dow 10,457, S&P 1,127, Nasdaq 2,242, NYSE 7,380 and Russell 630 - if we hold 3 of 5 of those, we will be more neutral into the weekend but, at the moment, we’re maintianing our very, very painful (so far) bearish stance. Have a nice weekend, - Phil