On Friday, 04-06-2012 the Non Farm Payroll numbers came in at 120,000, far below what the worst government figures expected. The futures dropped Friday, followed today by the market retracting a bit as well. We have known for a long time now that the Employment numbers have been squeezed, twisted and generally massaged to make the 'Sheepies' feel better I think.
For a better metric all you have to do is ask one of the millions of unemployed how he feels about not having a job for over a year. Or one of those part-timers at a fast food joint who has a Masters degree and can't find a decent form of employment. And then there are those who have just given up. Where are the reports about these folks and why don't the employment numbers add up?
To really understand these employment numbers you have to understand how the game is played.
First you need to read Steven Hansen's article below.
“Bad decisions are made when understanding is obfuscated. Is unemployment falling – generally yes, but specifically this month – NO. The size of unemployment is not correctly understood because of silly definitions and moveable baselines which prevent comparative analysis to other periods of time.
There are a variety of reasons exact understanding of unemployment is necessary. The primary reason for me is understanding economic slack. A large unemployed population puts downward pressure on wages, and it is an economic pulse point.”
This is my primary issue with the unemployment numbers. Anyone who is responsible for directing real work knows that an extrapolated estimated number divided by another extrapolated estimated number is garbage. This is how the headline unemployment rate is derived.” (Read Article >>)
With this information in hand the question impending is what direction is the market going to go because of altered employment numbers? Or will it matter as the power brokers and DaBoyz, who understand this reality, keep the market on track or are we in for a correction most of the pundits are calling for?
In reality, the US Markets are in pretty good shape right now baring any undo influence from the Eurozone and poorer than expected Corporate earnings. But unfortunatly that isn't how Mr. Markets works and therefor making things difficult for the average investor grasping the meaning of macro events such as Friday's “poor” NFP report and subsequent 'minor' decline in today's market.
This week we are entering the beginning of the Corporations financial reports for the 1st. Quarter and that most likely will set the tone for any further market advancement. Alcoa (NYSE:AA) will kickoff this quarter’s earnings season when it announces its Q1 results after the market closes on tomorrow.
“We expect the company to record its second consecutive quarterly loss as it continues to battle with a decline in aluminum demand and the subsequent decline in prices due to global economic conditions.”
Until the dust settles I will be VERY cautious making ANY moves, long or short. Personally, sitting on my hands with a big wad of cash suits me just fine. If you are in, remain there and be cautious, if you are out of the market, just wait as the direction signal will be obvious to everyone. But the news isn't all that bad as Rick Ackerman points out.
Stocks were struggling to get airborne late Sunday night after dive-bombing the tarmac Friday on news that the U.S economy had created a measly 120,000 jobs last month. Index futures traded just briefly on Good Friday before electronic markets closed at 9:15 a.m. for the holiday, but that was long enough for DaBoyz to take stocks down to fire-sale levels on near-zero volume.
We say “ostensibly” because, for every trader who was disappointed that the alleged economic recovery appears to be losing steam, there were undoubtedly others who saw a new excuse for yet more Fed easing.
But for the time being, a rampaging stock market still holds the promise of reviving job creation and perhaps even of causing home prices to start recovering.
We see neither happening, implying that the stock market could be on shaky ground. » Read the full article
On the same line of thinking, are we going to have a correction, are we in a correction or are we going to continue the rise unabated to some lofty number as 1600 for the SP500? The short answer is no, not likely and the true course lies somewhere in between.
One needs to consider the World events and financial statistics at hand as it could save you a headache or two juggling your portfolio. In this article below we have an opinion of Dr. Ben and his Keynesian 'round-table' of Doves. It doesn't inspire a lot of faith in our economy and its direction, but it is necessary to look at both sides of the coin.
Since most people live in the real World, this concept of cyclical versus structural falls on deaf ears.
Cyclical simply means the regular ebbs and flows of a market. For example, what happens if suddenly in the middle of the night the bridge everyone uses collapses. Suddenly your commute has become a lot more complicated and will remain complicated for a long time. In the real World, 6 million people had their bridge collapse and lost their jobs.
Yet, in Mr. Bernanke’s World this cyclical inconvenience could easily be fixed simply by cutting interest rates to 0%, spending billions on “shovel ready” projects, and cutting taxes. Sadly, a funny thing didn’t happen - the usual boomerang (or cyclical) rebound in new jobs has not occurred, and for some strange reason the collapsed bridge hasn’t been replaced either.
The high levels of employment reached during the 2004-2007 period were achieved on the backs of the housing and debt bubbles. During that time, economic growth was boosted by 400% as a result of people taking equity out of their homes (mortgage equity withdrawal).
Considering no one has any equity left in their homes to withdraw, economic growth and the jobs that come with it are going to have to find another adrenalin shot.
The financial issues facing the Eurozone are still painfully there unfortunately. They haven't gone away and will be a continuing hazard in the Eurozone recovering financially. If that were not enough more Eurozone problems continue to crop up everyday as recently seen in the poorly received selling of the Spanish bonds.
This only exacerbates the debt problems facing all the banks and the tax payers in the Eurozone countries. Now it is rumored that the ECB may have to start up the printing presses somehow as Greece is expecting more relief and Spain and Portugal are in question. When and where is this financial irresponsibility going to stop. More importantly, how is this going to reflect on our portfolio's?
Lastly, we have a 'REAL' Black Swan event waiting in the halls. Iran is a prime candidate for an attack from Israel, simple as that. If and when it happens, the markets will fall like Niagara and oil will spike to new highs never seen before. Every day the event becomes more likely as Iran rattles its sabers and continues to stonewall international efforts to defuse the nuclear armament issue. Keep your eyes open for the “new Moon” every month as a possible time of attack. In other words I would NOT want to be long during the 4 days before the New Moon and 4 days after for the next several months.
There is so much going on and so many things happening in today's World. This includes whatever Dr. Ben has to say in future speeches that will effect the market in strange ways. These convoluted issues make decisions extremely difficult and dangerous should you GUESS incorrectly. I expect the markets to be volatile in the coming weeks making this a traders market.
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Written by Gary