Thursday, June 3, 2010

Market Drops as the Jobs Number Disappoints/Housing Recovery Nowhere in Sight

So much for a blowout jobs number that was expected by many of the bulltards:

Below is the well respected Haver Analytics take on the numbers:

On the surface, the 431,000 gain in May payrolls after an unrevised 290,000 April rise looks strong but, in fact, it was not. First, the increase was raised by the one-time hiring of 411,000 Census workers. Second, the gain actually fell short of Consensus expectations for a 508,000 rise in the total. Lastly, the 41,000 gain in private sector payrolls was the weakest since January.

· The shortfall in private sector was broad-based. Construction sector hiring fell 35,000 and reversed the increases in the prior two months. Private services-sector hiring rose just 37,000 following firmer gains during five of the prior six months. The weakness reflected a 6,000 decline (-0.8% y/y) in retail sector hiring, a 12,000 decline (-2.2% y/y) in financial sector employment and a soft 2,000 increase (-0.3% y/y) in leisure & hospitality jobs.

· Countering some sense of labor-market softness was a decline in the civilian unemployment rate to 9.7%, although that just reversed the April increase. Moreover, the decline was all due to a 322,000 shrinkage (-0.4% y/y) in the labor force, the first drop since December. Household sector employment, in fact, also declined 35,000 (-0.7% y/y) which was the first drop this year."


As you can see below, housing is unwinding faster than I could have ever imagined. Mortgage applications have essentially fallen off a cliff since the tax credit ended based on yesterday's data from the MBA.

Some blurbs from the report:

"With another week of historically low mortgage rates, the trend from the prior three weeks continued, as refinance applications increased while purchase applications dropped. Purchase applications are now almost 40 percent below their level four weeks ago, while the refinance share, at 74 percent, is at its highest level since December," said Michael Fratantoni, MBA's Vice President of Research and Economics. "In addition, the ARM share dropped last week to its lowest level since March of this year, as borrowers took the opportunity to lock in at historically low fixed mortgage rates."

My Take:

Folks, both sets of data above are absolutely horrifying. Housing applications are falling at rates never seen before. At the same time, the number of potential home buyers continues to shrink due to rising unemployment.

This is a recipe for disater for the housing market and the banks that hold these bloated assets.

The jobs report looks even worse when you throw the bogus birth death rate model out of these numbers. We are essentially seeing negative job growth in the private sector.

Imagine what the jobs report is going to look like when the part time census gig dries up!

The Bottom Line

I didn't even have the chance to get into the bad news flowing out of Europe this morning. The Euro is once again hitting yearly lows against the dollar.

There are rumors floating around that banking giant Soc Gen is in trouble due to their derivatives exposure. We also learned today that the IMF is running out of money after bailing out Greece.

All in all it appears things are going to hell in a hand basket at a pretty rapid pace. Treasuries soared today as a result of the continuing fear of collapse in Europe. Lets not forget we need to peddle another $124 billion of these notes next week. Treasuries should be really interesting to watch next week.

All I can say is hold on tight folks. Things are getting seriously bad out there, and the bailout funds this go around are simply not there to create a second government based recovery.

The next time we roll over we have two choices:

1. Cut off the money spigot and sink into a deflationary depression.


2. Print our way out of this mess which will create severe inflation and the strong possibility of hyperinflation.

It's up to the Fed as to which path we take. Lets hope Ben takes door #1. Hyperinflation or even severe inflation will almost assuredly result in severe social unrest and the potential collapsing of the US government because people will not be able to afford to live.

Please take whatever measures you can to prepare yourself for whats coming. This situation is deteriorating rapidly and you are in for a rude awakening if you are not prepared:

Raise as much cash as you can, payoff debt, reduce expenses, buy some inflation protected assets like gold.

The situation is dire out there and I haven't been this concerned since late 2008.


flipdippy said...

Every time that heroin user gets high, it takes a bit more, right?

There's nothing to gain by being right, but I still think they're just pushing things closer and closer to the cliff before they pull it back.

Yes, jobs are terrible. Yes, the economy is worsening.

But what happens when Obama next week trots out Stimulus v2.0? When this time, it's a 2 trillion dollar program which includes robust expansion of the federal workforce, robust investment in alternative energy and hiring programs for people like teachers, and maybe even some sort of consumer bailout/tax break?

We're getting closer, but be careful not to let the truth lead to an irrational panic. The rug will be pulled out when nobody is looking, not when everyone expects it.

So for that reason, I remain irrationally calm and bullish for the rest of 2010.

Jeffrey said...

Whoa Flip

I will take the other side of that trade in 2010.

You make some great points but there is no money left for bailouts.

If they try and pull that stunt the bond market is going to pull a "Greece" and take yields higher because our debt vs. GDP will be insane.

Deflationary collapse is what i see out there and I think the Fed is powerless to stop it.

If they do try and stop it the dollar gets crushed.

I am sure they have a few tricks up their sleeves that will result in a few bounces but the big cannons have already been shot.

Ben is left with a pea shooter when he needs a bazooka.

we will see how it plays out.

getyourselfconnected said...

I will tell you I think I am more nervous today than even at the 2009 March lows. While I would not expect the top officials, including the president, to ever really tell things like they are it was surreal to hear Obama's speech today after the jobs report. What a clusterfXXck all around.

The IMF does not have enough cash to pay out their promised bailouts, maybe they sell more gold?

The home numbers are really rolling over. How much more can be bought by the FED?

have a great weekend!

CT-Hilltopper said...

"Mission Accomplished" my ass.

That speech Oblahma made about jobs will bite him in the ass and will make him no friends among the people.

The sheeple are waking up. The oil in the Gulf, Oblahma's constant pandering to the banksters, and the economy are waking up the sheep. That's the biggest danger we face right now.

The Obamabots are starting to come unglued. They are jusssst starting to see that there might possibly be an end to the section eight, their free health care from medicaid, their food stamps, etc. When something significant happens to them, thats when the crap will truly hit the fan.

That's why the news is being kept so upbeat. No cause for alarm here. American Idol is on soon. Nothing to see here.

getyourselfconnected said...

C-T, you may like my intro item tonight, up in a bit.

Jeff said...


Yeah I am real;ly worried.

Gold scares me right now although I continue to hold it.

I am going to stay diversified.

I have a S&P short position that hedged me out of losing a little money today.

Silver and a small treasury short tradeshurt me. The fact that silver is not moving with gold makes me want to dump all of it.

Got outta half at $19.

Scary times

Jeff said...



It pisses me off knowing that they think we are stupid enough to actually buy there BS.

Thank god for the internet. The MSM is nothing but a propoganda machine at this point.

I think the oil spill might take down Obama. Listened to T Boone Pickens tonight and he basically said nothing will stop this other than a relief well.

Lets see what the market does as the Gulf fills up with oil for the next threre months.

getyourselfconnected said...

the silver double top at 18 is not great. Given the reality on the ground I think metals long term will be ok, but even Mish tonight says a full sell off would put gold at $680. Crap, I will buy it all! Depends on time table you know. I am not selling my position but I will not sell it come hell or high water so what can you do?

Jeff said...


Take some profits on gold if you got in early.

I got in at the 900's and I can afford to take some short pain.

My position is not a huge holding relative to my total worth so I will hold.

My silver play was speculative. I may hold it for a tad.

I am now looking at some oil plays with huge dividends(9%).

More on that later. The BP saga needs to play out before I pull the trigger.

CT-Hilltopper said...

Get, I read your intro...excellent!

Flip...respectfully, I think you've been smoking too much of their hopium. But then again, only time will be able to prove who is right and who is wrong. I could be the one who is talking out my ass. But I doubt it. LOL.

The BP comments on the spill are laughable, and not in a good way. When they said they were going to plug the spill with mud, tennis balls, golf balls, Fred Sanford's junk...I knew it was a crock. My bullshit detectors were ringing off the wall. They were saying that because they had to say something.

The same with this capping thing. They put the cap on it, and we're supposed to believe that putting the cap on this thing and then screwing on the bolts for the four heads will stop this thing from leaking. It won't.

The purpose is to make it look like they are doing something, plug this leak. The PR nightmare that would result from doing nothing would be calamatous for BP and the government.

So they give all appearances of doing everything they can until they accidentally hit upon something that really will work. The problem is that the solutions they have come up with are making them look absolutely ridiculous. I know nothing about oil wells and such, but if you tell me you are going to try to stop a gushing oil well with mud, golf balls, and garbage, I'm going to laugh my ass off at you. I don't care how many degrees you have. That's ridiculous. Come up with something that makes sense.

getyourselfconnected said...

I dont think I will tell you my cost basis for gold or silver, you might throw up, LOL!

flipdippy said...

Ct believe me I am no dove or hopium smoker.

I could make a convincingly bearish argument in feb 09 but look what happened after.

I have no illusions about where we end up, I just question, after stepping back and taking a deep breath, that we are here now. It could be the end, or it could be one last final bear trap.

There is danger in reading too much, and as bears we tend to over-react to the negative and discount the positive. Look at denninger. What a crank. He is yang to cramer's yin.

I can live with being wrong, but at least I know this time I have my convictions and some calm and rational reasoning not to panic yet.

The time is near, though.

Jeff said...

Futures are getting pounded. ES -11.75

Dollar is up.

Gold is up.

Tomorrow could get real ugly.