The Most Cynical Take On Friday’s Jobs Number: “The Fed Will Not Hike In September With Trump In The Race”: Citi

If traders have a feeling that there is a prevailing sense of blase disenchantment involving not only US macro data but the overall market, you are not alone. Here is arguably the best, and thus most cynical take, of Friday’s impressive seasonal adjustment factor payrolls report, from Citi’s Brent Donnelly:
Summer apathy and generally high frustration levels related to poor returns, extreme bearishness and existential questions around the death of price discovery due to central bank meddling.

This post was published at Zero Hedge on Aug 7, 2016.

Why The Jobs Report Is Not Nearly As Strong As You Are Being Told

Happy days are here again? On Friday, the mainstream media was buzzing with the news that the U. S. economy had added 255,000 jobs during the month of July. But as you will see below, the U. S. economy did not add 255,000 jobs during the month of July. In fact, without an extremely generous ‘seasonal adjustment’, the number of jobs added during the month of July would not have even kept up with population growth. But the pretend number sounds so much better than the real number, and so the pretend number is what is being promoted for public consumption.
Why doesn’t the government ever just tell us the plain facts? Unfortunately, we live at a time when ‘spin’ is everything, and just about everyone in the mainstream media seemed quite pleased with the ‘good jobs report’ on Friday. However, as Zero Hedge has pointed out, the truth is that the ‘unadjusted’ numbers tell a very different story…
As Mitsubishi UFJ strategist John Herrmann wrote in a note shortly after the report, the ‘jobs headline overstates’ strength of payrolls. He adds that the unadjusted data show a ‘middling report’ that’s ‘nowhere as strong as the headline’ and adds that private payrolls unadjusted 85k in July vs seasonally adjusted 217k.
In Herrmann’s view, the government applied a ‘very benign seasonal adjustment factor upon private payrolls to transform a soft private payroll gain into a strong gain.’
He did not provide a reason why the government would do that.
Every month, the U. S. economy must create at least 150,000 new jobs just to keep up with population growth. According to the unadjusted numbers, we did not hit that threshold, and so the employment situation in this country actually got worse last month.
In America today, there are 7.8 million Americans that are considered to be officially unemployed, and another 94.3 million working age Americans that are considered to be ‘not in the labor force’.
When you add those two numbers together, you get a grand total of 102 million working age Americans that do not have a job right now.
Rather than focusing on the headline ‘unemployment’ figure, we get a much fairer look at the employment crisis in the United States when we examine the employment-population ratio. The following chart comes directly from the Bureau of Labor Statistics, and it shows that the percentage of Americans that are employed has never even come close to getting back to where it was just prior to the last recession…

This post was published at The Economic Collapse Blog on August 7th, 2016.

CNN Host Slams America’s Greatest Olympian Ever For Not Being Black, Muslim Woman

Michael Phelps may be the greatest Olympian the world has ever known but for CNN host W. Kamau Bell, he is just a “tall, successful, rich white guy” who clearly didn’t “need the honor” of being chosen by his athlete peers as America’s flag-bearer. Instead, Bell exclaims, Ibtihaj Muhammad, a woman, an African-American and a Muslim to boot, should have been chosen because “right now America has enough tall, successful, rich white guys hogging the spotlight trying to make America great.”
After Phelps was chosen by his fellow Olympians, the U. S. Olympic Team tweeted proudly….

This post was published at Zero Hedge on Aug 7, 2016.

The Indexing End Game: The Wilshire 5000 Only Has 3,607 Stocks

Numbers and false advertising have a long history: 4.9% unemployment, 2.5% GDP growth, 72 virgins. Now we can add the Wilshire 5000 to the list.
What started with good intentions ended with embarrassment as American economic dynamism collapsed in a cascade of falling profit margins, financial engineering, labor devaluation, and lopsided “free trade” agreements. In 1974, Wilshire Associates created the Wilshire 5000, an index of 5,000 stocks that represented nearly the entire stock market. As new companies went public, the index expanded over the years, reaching a peak of 7,562 on July 31, 1998. Since then, the number of companies has been cut in half to 3,607 as of March 31, 2016. Wilshire notes, “The last time the Wilshire 5000 actually contained 5,000 or more companies was December 29, 2005.”

This post was published at Zero Hedge on Aug 7, 2016.

Employment Railroad Tracks Formation Epitomizes the Rigged US Economic Data and Markets

I’m not here to argue whether the July report was lousy or not. The US economy may well be spawning big numbers of crappy low paying jobs. Withholding tax collections were huge in the last 4 weeks of July. We know that that didn’t come from big wage gains by existing workers. They’re running at about a 2.5% annual growth rate. So when tax collections increase by a significant margin over a similar period a year ago, it suggests that there were new jobs, maybe a lot of them.
I’m also not here to argue that the headline number bears any semblance to reality. The headline number is the seasonally adjusted month to month gain in the estimated number of jobs. The whole process of seasonal adjustment is a bogus attempt to smooth a jagged trend with peaks and valleys into a continuous modified moving average. The number is a fiction. Because it’s based on a moving average it has a built in lag, for which statisticians try to compensate with a bunch of statistical hocus pocus. That includes constantly revising the number based first on subsequent surveys, and then on benchmarking the data with actual tax collections in the 5 subsequent years. Not only is the number revised twice after the first month it’s issued, but it’s then fit to the curve of actuality for the next 5 years until the reading is finalized. July’s reading won’t be final until July 2021. The process is really ‘seasonal finagling.’ It’s abstract impressionism. It’s a joke.
What I have come to argue here is that the not seasonally adjusted (NSA) numbers, which I have always relied upon in my analysis of the jobs trend, is probably also a joke. Look at this chart. Do those railroad tracks look like the real world to you, or are these some kind of computer generated auto-numbers that merely make a pretense of reality. Law of Large Numbers or not, I have never seen any other economic series behave with such regularity.

This post was published at Wall Street Examiner by Lee Adler ‘ August 7, 2016.

The S&P Is Now Set To Report Its Second Consecutive Annual Earnings Drop Since The Financial Crisis

With 86% of the companies in the S&P 500 reporting earnings to date for Q2 2016, Q2 earnings season is almost over. 69% of companies have reported earnings above the mean estimate and 54% have reported sales above the mean estimate. Still, despite the beat (on the back of what may be Reg-FD busting leakage of company earnings to sellside analysts just so companies can beat EPS in the last moment as described on Friday), earnings growth, or lack thereof, for Q2 2016 is expected to be -3.5%. This will make the first time the index has recorded five consecutive quarters of year-over-year declines in earnings since the financial crisis.
As the chart below shows, the forward PE of the S&P500 has now been flat for two years, even as the actual index has surged to record highs on the back of even greater multiple expansion, as both the economy and profit growth has slowed down: a Finance 101 paradox.

This post was published at Zero Hedge on Aug 7, 2016.

Chart of the Day – Gold’s Multiple Resistance Zones

Gold has multiple resistance zones at the 1380-1400 level. It’s going to take some work to break through these. Gold will need some help from the dollar, which it will eventually get as the dollar will be due for its intermediate cycle low by the end of September or early October. Once the breakout occurs, gold should make a beeline for the 50% Fibonacci retracement, and then maybe to $1550 before this intermediate cycle tops.
Price is trapped between the 200 week moving average and the bear market trend line. I’m going to say that there is almost no chance of gold dropping back below the 200 WMA for the rest of this bull market.

This post was published at GoldSeek on 7 August 2016.

Goldman: Sell Right Now And Go Away For The Next 365 Days

It really has not been a good year for Goldman forecasts. Alternatively, it has been a phenomenal year to fade every prediction made by Goldman (and Gartman) in the past 12 months.
Just last weekend, Goldman once again doubled down on what has been a distinctly wrong call since the Brexit aftermath, urging clients to “sell” equities for the next three months even as central banks unleashed one of the most forceful monetary reactions in recent history, steamrolling over all shorts. In response to this latest reco, wewondered if “Goldman again be wrong? It’s distinctly possible, in which case we expect the firm to capitulate some time in September, when the S&P is around 2,300 and urging what clients it has left to buy stocks at all time highs. That would clearly market the moment to sell everything. On the other hand, considering Goldman dreadful forecasting record over the past year, it is about time the firm got one reco right, if only purely statistically.”
So far, that has not happened, and to the contrary, in his latest weekly weekly kickstart note, Goldman’s chief equity strategist David Kostin once again warned of an imminent drawdown, followed by a slow grind higher, predicting “no medal winner in the race for highest 12-month returns given each region is ‘fat and flat’”

This post was published at Zero Hedge on Aug 7, 2016.

This Trend Is Not Your Friend

The S&P 500 hit another record high last week on the back of an employment report that was boosted by ‘large seasonal adjustments,’ which is really just another way of saying the government is manipulating the numbers.
Even after these adjustments, however, three- and six-month average job growth is below 200,000 and also lower than a year ago. The last two months’ reports were boosted by higher government hiring ( 71,000, the highest two month level since 2010).
Private sector jobs growth is running at a lower 3-month average of 150,000, down significantly from 221,000 in 2015 and 240,000 in 2014.
Don’t fall for any of this…
A Vested Interest in Phony Numbers
I am sure that the sudden boost in government hiring (it was averaging 10,000 jobs per month before June) has nothing to do with the desire of the current administration to see its failing economic policies continue under its unimaginative and discredited former Secretary of State.
I am equally certain that there was no desire to dress up the numbers after the catastrophically low 1.2% second quarter GDP print.
U6, which measures underemployed and discouraged workers, rose from 9.6% to 9.7%, an unacceptably high level, though one we will have to accept until better economic policies come around.

This post was published at Wall Street Examiner on August 7, 2016.

Now The Markets Themselves Are Too Big To Fail

The First Rebuttal website has coined a term that gets to the heart of an increasingly dysfunctional system: The too-big-to-fail stock market. The general thesis is that most major countries are over-leveraged to that point of maybe being unable to survive a garden variety equities bear market – and are doing their best to avoid finding out. Here’s First Rebuttal on the effects of such a prop-up-asset-prices-at-any-cost policy:
The structural economic problems of stalled incomes, peaked debt and welfare make operational expansion i.e. sustainable growth extremely difficult, which has led to investment concentration in secondary equity markets. And that means the higher valuations simply represent higher risks.
The offshoot is that as such a large concentration of total asset value is dependent on the market, it becomes necessary to maintain the market at all costs. The market has become too systemically important to allow it to fail. And that means policymakers have changed the function of the market. The market left to its own devices is a consequence of the underlying economy. Today, however, the market is being used as a (false) portrayal of the underlying economy. It is intentionally using the logical fallacy of confusing cause and effect.

This post was published at DollarCollapse on AUGUST 7, 2016.

Cup and Handle Shakedown

Another solid week for stocks and the positions we bought off the Brexit vote.
Summer continues to be great in general after buying right and sitting tight, in terms of stocks.
The weather, music, family, friends and fun factor is also at an all-time high!
That said, we are getting a dip in the miners and metals, and in a bull market, buying the dips is the right strategy so we should be able to add a few miners to the portfolio in the coming days.
Gold lost just 0.99% this past week and technically has broken the beautiful cup and handle pattern.
That said, charts are painted to shake those not in the know out of their positions.

This post was published at GoldSeek on 7 August 2016.

“Sell Everything”… But Why: What Has The Smartest Investors So Spooked?

Many of the smartest investors out there hate stocks. Since May, we’ve heard negative equity calls from Stan Druckenmiller, George Soros, Carl Icahn, Jeff Gundlach and Bill Gross. Wall Street lore says ‘Never argue about markets with a guy who is much richer than you’. So we’ll take the discussion in a different direction: what do they know?
Successful investors are always more plugged in than the market as a whole – hence their success. And while we can only guess at the lynchpins of their negative take on stocks, we do have some idea of how significant they must be. For example, in 2016 the S&P 500 is up 5.9% on a price basis after 1) the Brexit ‘Leave’ vote, 2) dramatically disappointing Q1 and Q2 U. S. GDP, 3) a correction of 20% in oil prices, 4) a Fed that has incorrectly calibrated its public stance on monetary policy, 5) Donald Trump as the Republican candidate for president, and 6) the U. S. 10 Year Treasury at near record low yields.
None of that has been enough to spook U. S. equity markets. So whatever the big boys think they know, it must be really bad. But what is it, and why is it so hidden from view?
‘Someone is getting this information before you.’ If you’ve ever worked at a hedge fund, you know this is the worst thing you can hear. It means you are behind the curve, providing yesterday’s news into an investment process meant to predict the future. ‘Titanic sinks!’ or ‘man lands on the moon!’ are the more playful retorts you’ll get from co-workers. But it all means the same thing: up your game, or get a white box from the mail room.

This post was published at Zero Hedge on Aug 7, 2016.

This is How Much Investment Banks are Marking off Italy’s Banking Crisis

Fee nirvana for the biggest on Wall Street.
Bank bailouts are a big profitable business. And the collapsing Italian bank Monte dei Paschi di Siena – whose stock is nearly worthless (0.25), and which was ‘rescued’ twice by investors since 2014, and which now must getan even larger ‘rescue’ or else – has turned into fee nirvana for investment banks, particularly JP Morgan.
Monte dei Paschi was the worst performer in the EBA’s stress test. Under the adverse scenario, its Tier 1 capital ratio plunged into the negative (-2.4%), meaning that its capital would be more than wiped out.
Now there’s another rescue deal in the works, this one far larger than the prior two that have failed so elegantly to solve the bank’s problems. It involves a consortium of banks, led by JP Morgan, according to CEO Jamie Dimon, and in a secondary role, by Italian investment bank Mediobanca. Monte dei Paschi seeks to raise 5 billion in new capital and sell 9.2 billion in bad loans at a deep discount to get them off its books. And the underwriting fees are going to be extraordinarily juicy.
‘Three sources involved in the deal’ told Reuters that the banks would extract 250 million in underwriting fees from the equity portion of the deal (raising 5 billion).
And there’s more. The deal would also set up a special purpose vehicle (SPV) that would purchase Monte dei Paschi’s bad loans. Funding the SPV would require a 6-billion syndicated bridge loan. JP Morgan is trying to arrange that bridge loan, for which the investment banks could be paid up to 300 million in fees.

This post was published at Wolf Street by Wolf Richter ‘ August 7, 2016.

Goldilocks and Stagflation

‘Inflating the money supply now would only aggravate the situation,” Paul Volcker, Former chairman of US Federal Reserve.
Stagflation combines the worst extremes of a deflationary bust with an inflationary boom. Parts of the global economy risk entering a phase of stagflation – and Brexit could make the UK an early victim. Metaphorically speaking, if economic growth is the amount of porridge and inflation is its temperature, Goldilocks is being offered a portion that is both too small and too hot.
Stagflation occurred in a number of countries in the 1970s. Although inflation in those days reached double digits, the modern ‘trickle-down’ kind1 is more moderate. But at the zero-bound, it has the same effect in that it pushes both growth and returns into negative territory in real terms. Should loose monetary policies be joined by loose fiscal ones, inflation is likely to heat up, becoming a threat to investors chasing yields and growth.
In an earlier article on economic tides, I mentioned that I expect an interim phase of stagflation, between the current deflationary wave and a future tsunami of inflation. I believe the conditions that would facilitate such a transition are falling into place, although this form of stagflation will be weaker than that of the 1970s. I also believe that stagflation is more likely than secular stagnation. To make my general case, I paint with a broad brush while penciling the UK as a special case. I will focus on growth and inflation, as well as on issues of supply and demand. Let’s start with a brief summary of the current economic climate (as if we need reminding).

This post was published at FinancialSense on 08/05/2016.

Gold Medal Shooter Looking To Make History In Rio Blows Holes In California’s Gun Laws

In a little dose of irony, America’s first gold medal of the Rio Olympics came from a shooting event. Turns out that Southerners “clinging to their guns” is good for something. Ginny Thrasher, NCAA champion shooter for the West Virginia Mountaineers and a Virginia native, won gold in the 10-meter air rifle event Saturday morning.
After poking liberal gun control activists in the eye with her victory, Ginny couldn’t pass up the opportunity to also offend PETA activists recalling to the Richmond Times-Dispatch how the “adrenaline rush” of obliterating her first deer solidified her interest in shooting:
She wanted to be an Olympic figure skater when she was younger, but became enthralled with shooting after joining her grandfather, father and two older brothers on a hunting trip.
On the second day of the trip, the group stopped to eat lunch when Thrasher’s father, Roger, told her there was a deer right behind her.
“The adrenaline rush was incredible,” Thrasher said.

This post was published at Zero Hedge on Aug 7, 2016.

Who’s Raking in the Money off the Italian Banking Crisis?

The biggest on Wall Street.
Bank bailouts are a big profitable business. And the collapsing Italian bank Monte dei Paschi di Siena – whose stock is nearly worthless (0.25), and which was ‘rescued’ twice by investors since 2014, and which now must getan even larger ‘rescue’ or else – has turned into fee nirvana for investment banks, particularly JP Morgan.
Monte dei Paschi was the worst performer in the EBA’s stress test. Under the adverse scenario, its Tier 1 capital ratio plunged into the negative (-2.4%), meaning that its capital would be more than wiped out.
Now there’s another rescue deal in the works, this one far larger than the prior two that have failed so elegantly to solve the bank’s problems. It involves a consortium of banks, led by JP Morgan, according to CEO Jamie Dimon, and in a secondary role, by Italian investment bank Mediobanca. Monte dei Paschi seeks to raise 5 billion in new capital and sell 9.2 billion in bad loans at a deep discount to get them off its books. And the underwriting fees are going to be extraordinarily juicy.
‘Three sources involved in the deal’ told Reuters that the banks would extract 250 million in underwriting fees from the equity portion of the deal (raising 5 billion).

This post was published at Wolf Street on August 7, 2016.

Global Equity Rally Facing Next Big Hurdle

A key index of global equities is hitting a significant confluence of chart resistance.
Back in early April, the global equity rally began to look a bit tired after 2 months of rallying. This was especially the case in the major U. S. averages and defensive sectors that had been bearing the brunt of the advance. Shortly thereafter, we saw a number of previously lagging areas of the market break out above key resistance that had been holding them back. This gave the rally some new fuel and propelled stocks higher for a couple more weeks before pausing.
Included among this ‘new fuel’ were global stocks, which had been lagging for some time. And a barometer of global stocks that we like to monitor, the Global Dow Index (GDOW), was able to achieve one of the aforementioned breakouts. In the process, the GDOW jumped above a plethora of key resistance levels, including the post-2009 Up trendline as well as the post-2015 Down trendline. After following through on the breakout for a few weeks, the GDOW was halted at another key level of resistance: the 61.8% Fibonacci Retracement of the May 2015 – February 2016 decline at 2412 (the GDOW closed at 2410 on April 20).

This post was published at Zero Hedge on Aug 7, 2016.