Wednesday, January 7, 2009

Jobs! Jobs! Jobs! Where are they?

Apparently not in America!

What an ugly day today in the markets. The stock sell off today was fueled by Intel's profit warning and ADP's shockingly horrific December jobs report.

Lets get right to ADP:

"Jan. 7 (Bloomberg) -- Companies in the U.S. eliminated an estimated 693,000 jobs in December, the most since records began in 2001, a private report based on payroll data showed.
The drop in the ADP Employer Services gauge was larger than the median estimate of economists surveyed by Bloomberg News. Today’s report is the first to reflect methodological changes that ADP says will narrow the differences between its calculations and the government’s payroll numbers.

Companies are accelerating the pace of firings as the recession plaguing the world’s largest economy heads into a second year. The Labor Department may report in two days that employers slashed jobs in December for a 12th consecutive month, putting total job cuts at 2.4 million for 2008, according to a Bloomberg survey median.

The ADP report was forecast to show a drop of 495,000 jobs, according to the median estimate of 24 economists in a Bloomberg News survey. Projections ranged from declines of 250,000 to 550,000. "

Quick Take:

As you can see, nearly 700,000 jobs evaporated in December according to ADP! Gone! Poof! Just like that! The scary thing here is ADP has consistently been light numberswise versus the government print that we will see on Friday. Supposedly ADP claims that they have fixed the discrepancy. Yeah OK. I will believe that when I see it.

This was way worse than expected and the market sold off almost immediately. What I find amusing is how shocked everyone is when these terrible economic reports come out. I was not surprised the losses were this bad.

Here is my question, How can these economists be so consistently wrong on the bullish side month after month regarding everything around the economy? I almost feel like plugging my ears anytime I hear an economist speak! Whats troubling is most of these economists graduated from the finest universities in the country. Yale, Harvard, and all the other ivy's should be embarrassed!

Who are teaching these brilliant economists? Dick Fuld and Madoff?

The bottom line here is consumers without jobs cannot continue to consume or pay mortgages. I am almost afraid to hear how bad the jobs number will be on Friday.

Tomorrow we get December retail #'s. I am sure those will be just rosey.

Trading Thoughts

The ADP number ruled the day in my opinion. I wanted to share a few thoughts around the market:

I took some profits today on a few shorts. I sold some QID and all of my TBT. I held onto all of my financial shorts even though I see no price action here. The only reason I keep them on is because I pretty much hate this sector with a passion. These greedy pigs have possibly destroyed this country and our way of life. They can all rot in hell as far as I am concerned. I will keep these shorts on based purely on principle. They are small positions, and I hope someday they will payoff when these bloated pigs finally are forced to admit they are broke.

Folks, from a trading perspective the financials are DEAD. I am going elsewhere for trading ideas. No one wants to buy financials and no one wants to sell financials.

I have come to the conclusion that the market doesn't view this area of the market as tradeable anymore. Everyone knows they are all insolvent but the government won't let them fail. They also continue to refuse to admit their losses. I think the market has totally lost interest and confidence in this area of the market as a result.

There are way better places to trade in my view. I am even starting to question SRS at this point. You cannot do TA on this one because it settles at the end of each trading session, but the traders seem to have commercial on ignore as well.

In my view, no one wants to play in these stocks because they have been so manipulated via government interventions, fraud, and lack of transparency. Placing bets on the financials at this point is pure gambling. You better know someone at the Fed if you plan on making money trading here.

The area that is starting to get hot again is commodities. They are volatile as hell which makes them a traders dream! I continue to own CHK which held up well today considering the selloff. Gas inventories are out tomorrow so this one should move depending on the #. I am out on a nice pop. I think oil got a little too pricey at $50. I am not surprised to see this selloff today.

So where are we now? I think shorting the hole here is dangerous. Obama is out with a big economic speech tomorrow. I gotta say folks: This guy is smooth as silk. I am really impressed with his presence. His stimulus will never work, but he sure makes it sound like it will when he speaks! The retail #'s will be terrible tomorrow, but I don't think the market reacts to it much unless the numbers are way worse than expected.

I plan on sitting on my hands on Thursday. I think the next opportunity to trade is following the jobs report on Friday. If the jobs number is ugly but within reach of ADP, I plan on taking a little long position following any drop at the open. I may make this trade a larger position if we sell off again tomorrow because the entry point will be even more yummy.

Guys and Gals, I don't think this corrective bounce in the markets is over yet. There was some buying at the end of the day today. Obama continues stay in the news each day preaching hope and government stimulus. For now, it seems the both Americans and the bond market are buying it.

Eventually, this hope is going to turn into anger and despair as the job losses continue to mount.

This psychological shift is rapidly approaching, but I don't think we are quite there yet.

Stay Tuned!

16 comments:

Anonymous said...

The jobs can be found in Mexico, India and China.

Minton Mckarkquey said...

Go Jeff! God I hate the banks too! I'd really like to see economics kick-in and let them understand the meaning of 'normal profits'. And I completely agree with your assessment - why would anyone invest in a business where the balance sheets are so murky?

I thought the ADP number would be bad - and as you correctly mention, they're consistently light on the the official count. Literally everyone I know is getting fired, and just anecdotally it seems that unemployment must be picking up momentum.

I've been wondering if the bad news on retail is already factored in, so I suspect retail trading will either be light and uneventful or a total sell-off. I know predicting both side of a coin toss doesn't really add much, but the bad news in retail has been a nonstop sh**storm. Btw, I'm still waiting for Borders to collapse, but it keeps hanging it there...

Jeff said...

Anon

Yup

However if we stop consuming those jobs will be lost as well!

Jeff said...

Minton

I hear ya!

My friends are dropping like flies as well. Especially my friends wives for some reason.

Panic is right around the corner. I am just afraid to front run it short here. This has been one heck of a bounce.

Who knows, we could drop straight down like a rock from here. The numbers are bad enough!

Did you see another real estate mogul killed himself? Article below

They are dropping like flies. Thats like 3 or 4 this week. Many more to come.

My father told me that u were warned about walking on the sidewalks of Wall St. during the depression because so many traders were jumping out of buildings.

I thought he was kidding but he was serious.

Its amazing what the banks have done to us isn't it? Scumbags!

Jeff said...

HEre is the suicide link if anyone is curious:

http://money.aol.com/news/articles/_a/bbdp/real-estate-mogul-apparently-kills-self/297546%20?icid=200100397x1216295589x1201094209

Joey said...

"The only reason I keep them on is because I pretty much hate this sector with a passion. " - I actually laughed out loud when I read this.

Today was the first in a few weeks that I was able to get a smooth entry on a number of issues. I ended up putting aside a strategy I've been using (almost exclusively) because prices wouldn't hit highly probable entries. Instead, I dusted off the ole' scalping strategy. Suffice to say, it was very productive, however, not so much that I wish to continue on a regular basis.

Jeff said...

Joey

I see it the exact same way. I have been scalping myself. I see no clear trend long or short.

I am just trying to stay nimble until the market finds a direction. My gut says a little farther north followed by a massive last wave down.

1000-1100 on the S&P should be close to the top IMO. Then we blast south.

You have a range for the top?

ZMonet said...

Great comments as always Jeff. I've been sitting on my hands the last few days not trading. Yesterday I was going to pull the trigger at market close on some short trades (SRS, QID and FAZ) but I figured the Obama rally would continue and I'd get a better entry on Wed., or Thursday. I didn't anticipate the ADP numbers being that bad, ALCOA or Intel...

I agree with you that some of these short plays seem dead due to lack of sellers in the market. Still, I think SRS, despite its daily settlement, will see a ride significantly higher when the real fallout from commercial occurs. I think the government will continue to bail out the financials and do their infrastructure/health care stimulus, but I think the only thing they are doing directly for the real estate market is buying MBS and moving rates lower. Don't get me wrong, that is something but not nearly enough. I picked up some SRS on the open but I might be a little early to the party. Some trades you do well on and you keep going back to...that is my Achilles heel; going to the well one too many times.

ZMonet said...

When you guys say "scalp trading" do you mean in its purest form, holding a trade for only a few minutes and making many many trades a day, or are you more generally saying that you do quick trades and don't hold through close?

Joey said...

Jeff,

My initial top was around 950, followed by 1000-1020'ish.

I grabbed some Shorts around 941 yesterday. Weather they'll be swing trades or part of a larger move, I haven't a clue. I do know most of my indicators have been in over-bought territory. Friday, I imagine, should give us a direction.

Besides two small scalps I intend to perform tomorrow at open, I won't be trading until next week (visiting family).

johndaniels said...

give this one a listen, guys:

Peter Schiff: 1/7/09

http://au.youtube.com/watch?v=3OVXzCcgDzI

Avl Guy said...

Was this December rally far too early in relation to the stimulus legislation?
Suppose that continued deterioration in retail, jobs, and real estate is indeed already factored in by the street. It may turn out that the "timing of actions" expectations of the street are way way off. The stimulus may be significantly delayed. The dems admit they wont have a package of legislation until Feb or March; today the blue dog dems and the GOP began firing test shots across the bow of $1.2 Trillion budget deficit PLUS $1 Trillion stimulus. Worse, Meredith is trumpeting that 08 TARP funds were easily swallowed by the downgrades, with more TARP request forthcoming from banks. And if the weak German Bond sale is a harbinger of tough times for the next round of US corporate bond refinancing, then ... this December 'psychology' rally may prove to have been months too early in relation to the expected pay-off in the form of signed legislation for a $ trillion stimulus package.
Will the markets stay at these heights for months while the nation debates stimulus v. deficits? Or will it sink and try a new rally once the debate ends in Feb or March? By then, all the #s for retail, jobs and real estate, will smell far far worse.
Will there be enuff Stimulus ‘Viagra’ to get it (rally) to rise again if it goes limp?

Jeff said...

Zmon

A "scalp" is usually a daytrade. Get in and get out quick and take profits.

I usually scalp using options which is risky. For example I "scalped" QID calls two days ago that were deep in the red yesterday.

After the sell off today I went from down 40% on a trade to up 40% on the plunge and promptly sold off most of it.

You can buy the ETF's using PUTS and CALLS but its extremely volatile.

When I do this I play very small. If I see a trend I don't make these "scalp" trades.

I think your SRS will work nicely for you long term. Commercial will tank, but you hit the nail right on the head. This industry is in deep trouble and prone to bailouts. These will ultimately fail and you will win on your trade. You just gotta be patient.

I will dip my toe in to SRS again if it pulls back further, but I am kinda avoiding anything financially related for now. Other sectors like tech and energy are seeing much better price action.

Jeff said...

Joey

Good luck with your trades. 940 is about where I got in on a few trades. I own some SPY's that I bought too early around the 890-900 area. I might dump them if we plunge further this week.

Its a tough market.

I always try to go flat if I am on vacation. Especially in this market when you have profits!

Be safe if you travel next week!

Jeff said...

JD

I love Schiff at times. Thats a great video.

I just wish he we realize the world is worse off than we were. China and Europe is screwed worse than we are. His decoupling theory still is still confusing to me.

Great catch though. He is so right on the Obama stimulus.

Jeff said...

AVL

Great insight.

Maybe the timing of this is all wrong now. I was listening to a Republican on Kudlow tonight proposing their own economic legislation.

Perhaps I need to rethink the timing of this whole scenario. When the TARP got delayed the market tanked.

Imagine what would happen if Obama got shot down with his FDR stimulus?

Hmmm...Good food for thought.