Quality Of Jobs Created In August Deteriorates Again

Back in January 2012 we noted that while the market, and at the time the Fed, have been focused exclusively on the quantity of jobs created each month, a far more important aspect of the US economic recovery is the quality of newly created jobs. It took the Fed about three years to catch up but it finally did, and Yellen no longer cares so much about the headline NFP print or the unemployment number but rather how good the newly created jobs are, manifesting in the quality of wages and earnings. So what was the quality of seasonally-adjusted job gains in August? In a word: disturbing. Of the 142K jobs created, just under half came from the lowest paying jobs possible: education and health; leisure and hospitality; and temp-help. The best paying jobs, finance and information, added a whopping 4K jobs between them. Finally, about that much delayed US manufacturing renaissance: stick a fork in it – in August the number of manufacturing jobs created was exactly 0.

This post was published at Zero Hedge on 09/05/2014.

The Market Reacts To Mark Zandi’s “I Don’t Believe It” Jobs Data

While Mark Zandi may not “believe the data,”
It appears the market does (for now). The dismal jobs data sparked a kneejerk bond rally, sending yields plunging from the week’s highs, and stocks and gold jumped higher (we assume on hopes that bad news is great news for assets as Yellen will have an excuse to be more dovish). The initial moves are fading (as always) but stocks are still pushing higher.

This post was published at Zero Hedge on 09/05/2014.

Best And Worst Performing Hedge Funds In August And Year-To-Date 2014

Superficially, there are two amusing observations to make about a New Normal in which the S&P, courtesy of its Chief Risk Officers Yellen, Draghi and Kuroda, continues to vastly outperform virtually all hedge funds for a 6th year running: the first is that one of the very few funds in our universe which is doing better than the broader market is named Tulip Trend Fund, which in itself speaks volumes, while the other fund that is creating outsized “alpha” is Bill Ackman’s Pershing Square, which has made the bulk of its gains on the back of the Allergan deal where he frontran the investing public, knowing full well Valeant would make a hostile bid, a transaction which the SEC better strike as illegal or else the farce of a market will get even more farcical.

This post was published at Zero Hedge on 09/03/2014.

Don’t Believe Government About Price Inflation

It is an old adage that there are lies, damn lies and then there are statistics. Nowhere is this truer than in the government’s monthly Consumer Price Index (CPI) that tracks the prices for a selected “basket” of goods to determine changes in people’s cost of living and, therefore, the degree of price inflation in the American economy.
On August 19th, the Bureau of Labor Statistics (BLS) released its Consumer Price Index report for the month of July 2014. The BLS said that prices in general for all urban consumers only rose one-tenth of one percent for the month. And overall, for the last twelve months the CPI has only gone up by 2 percent.
A basket of goods that had cost, say, $100 to buy in June 2014 only cost you $100.10 in July of this year. And for the last twelve months as a whole, what cost you $100 to buy in August 2013, only increased in expense to $102 in July 2014.
By this measure, price inflation seems rather tame. Janet Yellen and most of the other monetary central planners at the Federal Reserve seem to have concluded, therefore, that they have plenty of breathing space to continue their aggressive monetary expansion when looking at the CPI and related price indices as part of the guide in deciding upon their money and interest rate manipulation policies.

This post was published at The Daily Bell on September 02, 2014.

Jared Bernstein Confirms That Austrians Aren’t Paranoid

For years a growing number of self-identified Austrians have been warning that the USD’s days as the world’s reserve currency are numbered. For example, I myself recently wrote:
I believe that the U. S. dollar, U. S. Treasuries, and the U. S. stock market are all overvalued – in a ‘bubble,’ as they say…
If and when the U. S. dollar bubble bursts, we will see prices rise not just because of what Bernanke (and now Yellen) have pumped in since 2008, but because of the rush of dollars flowing back to the U. S. that have accumulated from years of trade deficits. At that point, the Fed will have to decide: Does it wreck the U. S. financial sector and broader economy in order to save the dollar (comparable to what Volcker did in the late 1970s, only on a much grander scale)? Or will it go the way of several other central banks in history, and run the printing press until the game ends? Either way, it’s going to be ugly.
Often in reaction to such dire predictions we Austrians will hear critics say, ‘Oh give me a break, you guys are paranoid! Gold bugs have been warning about hyperinflation since 1971. What other currency are people going to use? The euro? The ruble? The dollar is here to stay.’

This post was published at Mises Canada on August 31st, 2014.

Everyone’s Fighting The Fed Now

Yesterday we noted the fact that Biotech stock investors has ‘fought the Fed’ and won (for now) in the last few months after Janet Yellen’s “stretched valuations” warning. With bond yields continuing to collapse, despite Bullard’s ongoing demand that the market ‘sell sell sell’, we thought a glimpse at just how dovish the market is compared to the ‘hawkish’ Fed would be useful…

This post was published at Zero Hedge on 08/27/2014.

Meet The LMCI – -The Fed’s New Goal-Seeked, 19-Factor Labor Market Regression Rigmarole

In the rush to make QE’s taper and the follow-on ‘forward guidance’ appear more data-related than of due concerns about the structural (and ultimately philosophical) flaws in the economy, the regressionists of the Federal Reserve have come up with more regressions. The problem was always Ben Bernanke’s rather careless benchmarking to the unemployment rate. In fact, based on nothing more than prior regressions the Fed never expected the rate to drop so quickly.
Given that the denominator was the driving force in that forecast error, the Fed had to scramble to explain itself and its almost immediate violation of what looked like an advertised return to a ‘rules regime.’ When even first mentioning taper in May 2013, Bernanke was careful to allude to the crude deconstruction of the official unemployment as anything but definitive about the state of employment and recovery.
So at Jackson Hole last week, Bernanke’s successor introduced the unemployment rate’s successor in the monetary policy framework. Janet Yellen’s speech directly addressed the inconsistency:
As the recovery progresses, assessments of the degree of remaining slack in the labor market need to become more nuanced because of considerable uncertainty about the level of employment consistent with the Federal Reserve’s dual mandate. Indeed, in its 2012 statement on longer-run goals and monetary policy strategy, the FOMC explicitly recognized that factors determining maximum employment ‘may change over time and may not be directly measurable,’ and that assessments of the level of maximum employment ‘are necessarily uncertain and subject to revision.’
Economists inside the Fed (remember, these are statisticians far more than anything resembling experts on the economy) have developed a factor model to determine what Yellen noted above – supposedly they will derive’nuance’ solely from correlations.

This post was published at David Stockmans Contra Corner on August 26, 2014.

What Yellen’s Speech Means For Gold And Bitcoin

Ms. Yellen clarified the Federal Reserve’s most recent FOMC meeting minutes, as it did not divulge into the finer details underlying their decisions to keep their policy rate at 0-0.25%. They are maintaining accommodative monetary policy because the labor conditions are so nuanced, they cannot use the simple unemployment figure and inflation itself as the deciding point to raise the fed funds rate.
While a full fledged discussion of her take on labor conditions would be too onerous for this context- I will summarize. One of the primary issues is the labor force participation rate: its dynamics have changed since the great recession of 2008, such that more people are removing themselves from the available labor pool for a variety of reasons. Some are taking disabilities, others are going back to school (become more competitive to get a job), and many are retiring early(if you can’t get a job now, why not just start living off of government payments and your 401K); much of this is caused by the prevailing conditions following the recession, and will likely abate once the economy turns around substantially.
Another major issue lies in what we consider ‘employed’: after 2008, we have been continuing to count people who work part-time jobs, but who are really seeking full-time employment, as employed. In reality, someone working only a part-time job, or two of them, is not in the same boat as a person will a full-time job for reasons like reliable hours, job security, and benefits. When you have a disproportionate amount of people in the former condition, making judgments about the economy can be spurious at best.

This post was published at GoldSilverWorlds on August 26, 2014.

The Winner-Take-All Economy

When the majority of Americans examine the world around them, they see a stock market at record highs and modest apparent improvement in the economy, but, as John Hussman notes, they also have the sense that something remains terribly wrong, and they can’t quite put their finger on it.
Exceprted from John Hussman’s Weekly Market Comment,
According to a recent survey by the Federal Reserve, 40% of American families report that they are ‘just getting by,’ and 60% of families do not have sufficient savings to cover even 3 months of expenses. Even Fed Chair Janet Yellen seemed puzzled last week by the contrast between a gradually improving unemployment rate and persistently sluggish real wage growth.
We would suggest that much of this perplexity reflects the application of incorrect models of the world.
Before the 15th century, people gazed at the sky, and believed that other planets would move around the Earth, stop, move backwards for a bit, and then move forward again. Their model of the world – that the Earth was the center of the universe – was the source of this confusion.
Similarly, one of the reasons that the economy seems so confusing at present is that our policy makers are dogmatically following models that have very mixed evidence in reality.

This post was published at Zero Hedge on 08/25/2014

Yellen Served a Heaping Plate of Waffles and Syrup at the FED’s Annual Jackson Hole Junket

If Janet Yellen had not earned her Ph. D. in economics, she could have been a great short-order cook at Waffle House.
Yellen is as long-winded as Bernanke. She lards her speeches with footnotes, just as he did. She is as evasive as Greenspan, but she uses academic jargon and peripheral statistics to do her work.
Her first Jackson Hole speech shows how adept she is.
First, some background. The FED said in December 2012 that an unemployment rate of 6.5% was one of the two benchmarks to use as a way to evaluate when to raise interest rates. The other was CPI growth at 2%.
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. The Committee views these thresholds as consistent with its earlier date-based guidance. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.
The CPI increase, July 2013 to July 2014, was 2%.
In short, both of the targets have been reached.
So, will the FED raise rates? Which rates? How? The European Central Bank has contracted the monetary base for over a year, and long-term bond rates have fallen. Meanwhile, the short-term ECB rate has dropped like a stone since October 2013.
To avoid dealing with this problem — the #1 policy problem facing the FED — Yellen is waffling. Her speech was pure waffles and syrup.

This post was published at Gary North on August 25, 2014

Jim Kunstler’s 2014 Forecast

Over at ZeroHedge, Jim Kunstler’s latest post on his forecast for 2014 is a MUST READ!!  Readers should greatly benefit from his astonishingly honest take on everything from the shale oil sham to last year’s gold slam.  He even gets into Obamacare, Bitcoin the Euro crisis and the middle east.

Excerpt: Paper and digital markets levitate, central banks pull out all the stops of their magical reality-tweaking machine to manipulate everything, accounting fraud pervades public and private enterprise, everything is mis-priced, all official statistics are lies of one kind or another, the regulating authorities sit on their hands, lost in raptures of online pornography (or dreams of future employment at Goldman Sachs), the news media sprinkles wishful-thinking propaganda about a mythical “recovery” and the “shale gas miracle” on a credulous public desperate to believe, the routine swindles of medicine get more cruel and blatant each month, a tiny cohort of financial vampire squids suck in all the nominal wealth of society, and everybody else is left whirling down the drain of posterity in a vortex of diminishing returns and scuttled expectations.

Read the entire article at ZeroHedge.

Jim Rickards: 2014 Expectations

In this audio clip from Physical Gold Fund, James Rickards of Tangent Capital talks about the Fed’s alternatives in 2014 and how they may carry out their tapering plans.  Rickards reviews the Fed’s actions, and how they’ve been unable to attain their specific goals, the forces of deflation versus inflation, as well as affects of nominal GDP growth in lieu of real GDP growth.  He also discusses gold and gives some interesting comments regarding why he holds it, how much of it should be a part of any investment portfolio, and its current trading environment  (specifically, that the current set-up could yield a major short-squeeze opportunity).  Listen to mp3 audio.

And in the following Bloomberg interview, Rickards talks more about gold and how even though 2013 has seen a bad year for the metal in paper terms, there is still major demand for obtaining gold in physical form.  Physical gold has been leaving the GLD ETF and going straight to China.  That the central banks have to drain the ETF in order to get the physical metal shows that there is very little of the stuff available elsewhere.  This is a must watch interview with James Rickards.




Grant Williams: Wizened in Oz

Grant Williams, author of the newsletter, Things That Make You Go Hmmm, reviews the results of the last decade of Central Bank activity – namely: Bubbles.  Bubbles are everywhere…. stocks, bonds, commodities, real estate.  But Williams goes on to explain how the central bankers are stuck.  There is no way out of this mess without severe pain.  They (the central bankers) have found themselves in a position where they can only talk about halting the easy money policies, but cannot actually do it without completely crashing the system.  He notes that Janet Yellen may indeed try to taper from $85 to $65 billion per month, but soon would have to re-engage more QE because the US economy is not strong enough on its own.

So what to do?  Williams recommends holding a lot of cash right now in order to take advantage of the situation coming after the crash.

Jim Rickards on All the Taper Hype: Look at the Data!

Here’s some level-headed thinking from Jim Rickards, who was proven to be correct on his call that the Fed would not taper.  While the Fed would certainly like to taper, they’ve always stated that they would do so on the condition that the economic data continues to be strong.  But the economic reporting has been terrible, so the Fed didn’t taper and won’t until those reports show viable strength.  Jim also discusses what differences, if any, the upcoming Fed-chair change may make (none), gold’s future price expectations (higher) and his new book, The Death of Money (due out in April, 2014).