If Employment Is So Great, Why Are Withholding Taxes Declining?

Lies, damned lies,...and statistics.

http://www.oftwominds.com/blogsept13/labor-WH9-13.html

US Needs To Generate 262,500 Jobs Monthly To Return To Pre-Depression Employment By End Of Obama Second Term

http://www.zerohedge.com/news/us-needs-generate-262500-jobs-monthly-return-pre-depression-employment-end-obama-second-term

December 2010 Employment ChartFest

The true story on employment (or lack thereof).

http://www.ritholtz.com/blog/2011/01/employment-chart-festival/

Fiscal Spending Jobs Multipliers: Evidence from the 2009 American Recovery and Reinvestment Act

Federal Reserve Bank of San Francisco Working Paper:

http://www.frbsf.org/publications/economics/papers/2010/wp10-17bk.pdf

The estimated jobs multiplier for total nonfarm employment is large and statistically significant for ARRA spending (as measured by announced funds) through March
2010, but falls considerably and is statistically insignificant beyond March. The implied number of jobs created or saved by the spending is about 2.0 million as of March, but drops to near zero as of August.


Lastly, I find that spending on infrastructure and other general purposes had a large positive impact, while aid to state government to support Medicaid may have actually reduced state and local government employment.

Lori Ann LaRocco must-hear interview

This is a must-hear interview from Lori Ann LaRocco, which is surprisingly but now predictably gloomy about our chances for an economic recovery. It is predictable because it's becoming quite obvious our government's stimulus programs are failing to create jobs and stimulate the economy, something us naysayers have been forecasting all along, at the risk of sounding dogmatic. With the benefit of hindsight, we were right.

But why is Ms. LaRocco's candor surprising? She happens to be CNBC's Senior Producer for Squawk Box, so one should expect her to be a cheerleader pandering to our government's propaganda on an economic recovery. Yet, she shares her honest, behind-the-scenes interactions with CEO's pessimistic about the path our country has taken. And in case readers may forget, CEO's of companies do make employment decisions.

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/9/9_Lori_Ann_LaRocco_files/Lori%20Ann%20LaRocco%209%3A9%3A2010.mp3

Employment levels

http://www.zerohedge.com/article/us-economy-will-return-december-2007-employment-levels-2021

...the study concludes that taking into account the approximately 14 million new job seekers in the future, then the December 2007 unemployment rate will not be met until April 2021! Welcome to the new normal. Of course, both of these analyses assume that the economy will immediately commence growing and generating jobs at the recovery rate seen in the 2000s, when about 166,000 jobs per month were being added. With every month that this does not happen the 2021 date will continue being pushed out further into the future.

Employment data

These are official employment data from the US Bureau of Making Crap Up--er, I mean, Bureau of Labor Statistics:

http://www.bls.gov/cps/cpsaat2.pdf

Note the column in the middle--the percentage of Employed Men, and note the downward trend since 1973, when statistics were first compiled. In 2009, the figure had reached an all-time low of 64.5% of the male population. Any lower, and well...it doesn't take much imagination to connect the dots.

The Art of (currency) Wars

I had a feeling the Chinese wouldn't just roll over due to allegations by Geithner, Obama, and Congress of currency manipulation . My take is that they don't want a weaker dollar because they own trillions of our US Treasuries. Duh.

Add to the fact a weaker yuan stimulates their huge export industries. Millions of Chinese jobs are at stake. How plausible is it to think the Chinese government will sacrifice their own workers because of some threats from a debtor nation?

Sure, they'll let the yuan appreciate slowly--but on their terms, not ours.

http://www.businessweek.com/news/2010-04-16/yuan-plan-reflects-china-consensus-not-u-s-pboc-adviser-says.html

How ironic that Chinese central bank adviser Li Daokui has a PhD in Economics from Harvard University.

We cannot enter into alliances until we are acquainted with the designs of our neighbors.

- Sun Tzu, The Art of War

Government mandate

Since Congress has passed a healthcare reform bill which would require healthcare insurance under penalty of fine, they should also mandate every US resident, legal or otherwise, to purchase a firearm. Surely that would create jobs in the firearms industry. The government could provide compelling evidence of how firearms saved victims from assailants, and cite research studies indicating employment growth due to gun ownership for every American man, woman and child.

And then they can further mandate purchase of every single product Wal-Mart has to offer--because, well, it's every American's right to purchase Wal-Mart products.

The lunacy continues.

British unemployment rate is 25%

As bad as the employment figures are in the US, the UK has it worse. The implication is that quantitative easing won't end, despite the Fed's plan to abort purchasing of US Treasury bonds and agency mortgage-backed securities. In other words, until the employment picture improves, attempts to stimulate the economy will continue.

http://www.telegraph.co.uk/finance/jobs/7465199/Quarter-of-adults-out-of-work-official-figures-show.html

Bear Market Rally

Be careful--the equities market tanked 50%, already discounting all the bad news. It could test its lows again in the first quarter, but my long positions are doing quite well. Don't get caught up in the gloom and doom that's being reported. You should have been gloomy and doomy last year--before asset values plummeted thru the floor.

Again, employment and economic stats are retroactive--markets are forward-thinking. For instance, the government declared we were in a recession a year after the fact, when the markets clearly indicated we were already deep into one the year before. As usual, investing on what the government SAYS leads to disaster; it is more fruitful to invest on what the government DOES. And right now, they are printing our way towards inflation, due fears of deflation. The outrage is the pending inflation, dampening our savings and raising our cost of living (and killing our standard of living). Inflation is a "quiet" tax that the public ignores because it is slow and insiduous. But the Fed knows it can generally get away with it, especially if it creates jobs. So they drive us further into debt, when monetized debt was what goes us into trouble in the first place.

That's why oil and other commodities are soaring off their lows. And that's why T bond yields are bouncing off their bottom. As I mentioned last week, I shorted T bonds (I'm betting on interest rates rising), and it's paid off already. I've found a timing indicator which has proven uncanny, but my fundamental and subjective analysis has to be intact first. I won't just trade off of my technical charts, but I will use them to confirm my entry point into a trade.

Wall St. has an ongoing debate between the technicals (guys who strictly rely on reading price, volume and momentum charts) and guys who only do fundamental analysis (value guys like Buffett). I say do both. If my fundamental analysis tells me to either go long or short, I will read the charts before l pull the trigger. In general, the fundamental guys do better long-term, even if they mistime their entries. Buffett pulled the trigger too early, and hence is down 30% since his recent buys, but he can afford to wait it out 10 years.

Day traders try for incremental gains, which I find hard to achieve, because you have to repeat it many times. I swing trade, looking for reversals and big moves. I can be early too, but I am exercising more discipline and patience, waiting for my targets to hit their price points, and once they reverse their trend, I pile in. No one can capture the exact inflection points, but if you are close enough, you'll be able to catch the majority of the next big move up or down.

For instance, short term T bills are yielding 0%. I consider that situation unsustainable long-term. I don't know when or how hard rates will go up, but they will at some point. I'm not shorting them because the Fed can 100% influence short-term rates by setting the Fed funds rate.

The long end of the curve (30-year T Bonds) is a different animal. They also touched all-time highs, yielding an all-time low 2.5% recently. The Fed cannot control these rates--they are market-driven, and thus depend on market participants' forecast on inflation. When inflation goes up, long-term rates go up. Right now, the bet is that deflation will be upon us for the next dozen years, similar to the Great Depression. I say hogwash--because the Fed and Treasury are making sure that doesn't happen as they liquefy the markets with credit and tons of capital.

Once investors (mostly foreign) figure out tying up their money for 30 years at 2.5% is a poor investment, they will pour out of them en masse. Right now, everything else around them has collapsed, so they are fleeing INTO US Treasuries, but once they figure out other assets have a better chance of appreciating, they will vote with their dollars OUT of T Bonds, and into equities, commodities, and precious metals.

The bond (fixed-income) market is twice the size of equities, and dwarfs the commodities market. So any small change in asset allocation into equities and commodities has a levered effect on the latter--that's why you see such violent volatility in stocks and commodities (more so in commodities). Oil is up 30% from its lows already, while the prevailing public opinion is that filling up their tanks is still really cheap compared to last year. You ask the average person off the streets about the price of oil, and they'll tell you they're happy that gas prices are low. However, as a trader, if you were short oil, you would have been killed, due to the recent price spike and leverage.

That's why I ask people all the time what their opinions are on certain financial assets. I'll inevitably go against them. They are understandably bearish on stocks after the 50% haircut, while equities have started their bear market rally (the rally is unsustainable due to rotten earnings). As you know, and it's been documented, gold mining shares are up 100%, even as people consider golf a barbaric relic. I'm considering pulling some off the table to lock in profits, and have already purchased long-term call options to capture the next big move up later this year, in case gold stalls and consolidates, before resuming its incline.

But Treasuries are a screaming sell right now, assuming we don't go into Great Depression mode, resplendent with 25% unemployment. It could happen, but the probabilities are getting smaller with each printed dollar. Until then, the big move up is interest rates, commodities, and even some stocks (high cash, cash flow, market share monopoly, no debt, and a dividend if possible)...and the big move down is T-Bonds. Precious metals should resume their increase, but like I said, I've captured the big move, so I expect a pause.

So I've got the direction on certain assets down, but I am refining my market timing. These are understandably proprietary, because if everyone catches wind of it, it will arbitraged out, and I will have no longer have a competitive advantage. That's another reason why you want to be careful about bubbleheads on TV--they're not all idiots. If it's an economist or some "pundit", they probably really are stupid--or more accurately, smart, but wrong-way Corrigans. But if the guy has a stellar track record (ie he's a billionaire trader), and keeps a low profile, he may throw people off his tracks by design.

For instance, he may tell people he's selling wheat, hoping the wheat futures tank, all the while buying up the physical inventory at a lower price. That's one more reason why following CNBC of Fox business news is not only useless, it is potentially disastrous. Unless, of course, you use it as a confirming contrarian indicator.

Greg