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US EMPLOYMENT - Recovery Rate Comparisons
The latest jobs report came out today with the Labor Department reporting that nonfarm payrolls (jobs) increased by 163,000 in July. Today's chart puts the latest data into perspective by comparing nonfarm payrolls following the end of the latest economic recession (i.e. the Great Recession -- solid red line) to that of the prior recession (i.e. 2001 recession -- dashed gold line) to that of the average post-recession from 1954-2000 (dashed blue line). As today's chart illustrates, the current jobs recovery is much weaker than the average jobs recovery that follows the end of a recession. Today's chart also illustrates that the jobs market continues to improve at a fairly steady pace -- a pace very similar to what occurred following the recession of 2001.
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08-06-12 |
CATALYST EMPLOYMENT |
7
7 - Chronic Unemployment |
ECB - Draghi Has A Rationale
Back In December, Mario Draghi Gave A Speech That Explained Everything That's Happening In Europe 08-04-12 BI
Simone Foxman explained here that Mario Draghi had essentially made European leaders a promise. If they get their act together on activating their various bailout funds and moving more towards fiscal union, then the ECB as a matter of policy will work to depress short-term borrowing costs in Italy and Spain.
This is actually much more powerful than mere bond buying. After all, last year the ECB engaged in sovereign bond buying, via a program called the SMP, but the program wasn't that affective since it didn't seem unlimited. It seemed temporary and only marginally helpful.
What's key is that Mario Draghi has been hinting at this kind of deal for several months now.
In a speech in December, Draghi said two paragraphs in a speech which at the time got people excited (though the excitement didn't last long):
What I believe our economic and monetary union needs is a new fiscal compact – a fundamental restatement of the fiscal rules together with the mutual fiscal commitments that euro area governments have made.
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Other elements might follow, but the sequencing matters. And it is first and foremost important to get a commonly shared fiscal compact right. Confidence works backwards: if there is an anchor in the long term, it is easier to maintain trust in the short term. After all, investors are themselves often taking decisions with a long time horizon, especially with regard to government bonds.
This word "sequencing" is everything. If European leaders agree to budget controls, then the ECB will do stuff. Now Mario Draghi, by talking about short-term bond buying is spelling out what those "other elements" that "might follow" are.
If the Euro is going to survive, everyone knows it needs at least two elements: Some kind of ceding of budget control, and a willingness by the ECB, with its printing press, to be the backstop for the other thing. Maybe we're getting closer.
Draghi Just Staged A Dramatic Powerplay That Could Change Everything In Europe 08-03-12 BI
Draghi set forth criteria that EU political leaders must abide by in order to receive monetary policy assistance, while at the same time promising that EU countries like Spain and Italy won't fail in the short term.
In other words, he sent the following message: "If you do that, then I will do this."
This is a divergence from earlier policy, which was unpredictable and reactive.
For example, the ECB revved up its bond purchase program (SMP) last summer only once tensions in Europe neared unbearable levels. The move felt rushed and panicked, nobody trusted it, and so it became less of a bazooka and more of a squirt gun.
Even the central bank's more effective three-year long-term refinancing operations (LTROs)—two massive liquidity operations that stoked bank lending and pulled down borrowing costs—came as a surprise to investors. They only believed Draghi might be using his leverage to force European leaders to action after the fact.
Now, however, Draghi is clearly spelling out his demands and the rewards, somewhat tyrannically forcing EU leaders to move forward.
This diminishes some uncertainty in the real economy.
- The ECB will purchase shorter-term debt and attempt to push down the front end of the yield curve.
- EU leaders will resolve concerns about official sector creditors as de facto senior bondholders and they will start using the European bailout funds to purchase sovereign bonds.
- Not to mention that the central bank has also confirmed it will make reducing sovereign borrowing costs (at least at the short end) a matter of clear policy.
Draghi is essentially holding a bullet to the heads of country leaders, explicitly refusing to do anything beyond preserve the situation until EU leaders earn the long-term reward.
Economist Constantin Gurdgiev (@GTcost) explains this in more detail in a blog post written today:
By focusing SMP on shorter term end of the yield curve, ECB will indeed lower shorter-term borrowing costs for Italy and Spain (3-5 year max maturity), while steepening 10 year instruments costs to discourage, relatively, longer term borrowings. This means Italy and Spain should get an added incentive - growing over time as overall maturity profile of their debt starts to shorten as well - to enact long-term reforms. At the same time, ECB will be buying (assuming it does go through with the threat) shorter-term instruments, implying that unwinding these assets will be a natural process of maturity. ECB will not commit to sacrificing long-term flexibility of its policy tools by expanding SMP on the longer end of the yield curve, thus reducing overall risks to the monetary policy in the future.
These latest moves show that Draghi has European leaders over a barrel. The ECB has typically been more proactive than EU leadership, and this amounts to little less than a power play.
That's not to say that these latest announcements will necessarily be good for financial markets. Draghi's plan confirms that he will push EU leaders to the brink before he does anything, and such pressure typically leads to losses in equities.
However, in the real economy, Draghi's promises to act are invaluable. Such clarity could give investors faith enough to invest in the real economy, despite continued volatility in the markets.
This tyrannical but—for now—positive structure does have one fatal flaw, however. Should Draghi underestimate market angst and should EU leaders fail to deliver appropriate reforms in time, the ECB chief will have to wage a speedy retreat to save the financial system even without his demands fulfilled.
Thus, there's chance that EU leaders could call Draghi's bluff.
Europe Is Japan? Goldman Expects ECB To Become The BOJ, Purchase Private Assets 07-30-12 Zero Hedge
- We have argued in the past that the next step in the escalation of the ECB response would be outright purchases of private assets.
- This would allow purchases of unsecured bank debt and corporate debt, enabling NCBs to ease private-sector financial conditions where such support is most needed."
- Why would the ECB do this: "A natural objection to outright purchases of assets issued by the private sector is that they involve the assumption of too much credit risk by the ECB. But substantial risk is already assumed via credit operations." In other words, the only thing better than a little global central banker put is a whole lot global central banker put, and when every central planner is now all in, there is no longer any downside to putting in even more taxpayer risk on the table. Or so the thinking goes.
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08-06-12 |
MONETARY
MMC-R08 |
CENTRAL BANKS |
ROMNEY VERSUS FED: Tightening the "Bernanke Box"
Romney: Fed should steer clear of new stimulus 08-05-12 Washington AP
Mitt Romney says the Federal Reserve shouldn’t use new stimulus measures to boost the still-sluggish economy. The Republican presidential hopeful says he doesn’t think another round of stimulus would help the economy, arguing that previous measures didn’t work. Romney tells CNN’s ‘‘State of the Union’’ in an interview scheduled to air Sunday morning that business incentives are preferable to more government intervention. The Fed held off last week on taking further action to boost economic growth, but indicated those measures could be announced in the near future. The Fed also opted to keep interest rates near zero in an attempt to keep borrowing costs low. Romney also doubled down on his vow to create 12 million new jobs during his first term, calling that goal realistic and achievable. |
08-06-12 |
MONETARY
MMC-R08 |
CENTRAL BANKS |
ANALYTICS - Removing the Analysts' Estimates Charade - A Subtle Leading Indicator
Charting The Un-BEAR-able Lightness Of Equity Analyst Credibility 08-04-12 Zero Hedge
While Mario Draghi has done wonders to expose his total and utter lack of credibility - no matter how much spin is pushed at us - it seems that equity analysts still (somewhat remarkably) move markets and remain credible in the eyes of what we assume is an entirely cognitively dissonant self-perpetuating market-structure in need of 'excuses'. To wit, the following chart, from Strategas, which illustrates perfectly the herd-like upward-biased and constant shift in year after year of S&P 500 earnings expectations that quickly and inexorably smashes lower in the face of the reality of a crushed credit cycle and 'whocouldanode' recessions/stagnations. It seems we (as investors) and they (as shills analysts) will never learn - or maybe we all will this time (as it's never different!).
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08-06-12 |
FUNDAMENTALS EARNINGS
PATTERNS CANARIES |
ANALYTICS |
ANALYTICS - Market Generals Leading Move Down
152 Top 10 Blue Chip Index Shows Unhealthy Market 08-03-12 Swenlin - Decision Point
Decision Point publishes a daily Tracker report of our 152 Blue Chip list. This list is composed of the stocks in the S&P 100 Index, the Dow 65, and some large-cap Nasdaq stocks. We also track the Top 10 stocks in ths list, ranked by relative strength measured by Decision Point’s proprietary PMO (Price Momentum Oscillator).
I have observed this list over a long period of time, and my impression has been that the top stocks do exceptionally well during a bull market, and extremely poorly in a bear market; however, I wanted to develop a more objective way to measuring the performance of these top stocks.
To do this I constructed a “Blue Chip Top 10 Index”. This is done by calculating the daily change of the Index as being the daily average percent change of the securities in the Blue Chip Top 10 list. Stocks are tracked from the day after they enter the Top 10 list through the day they drop off the list.
The Top 10 Index is equally weighted, so theoretically one could only replicate the performance of the list with real money by reallocating an equal amount to each stock each day (and somehow avoid transaction fees in the process). More to the point, the Top 10 list are a good place to look for securities that will out-perform the market, but it will be impossible for you to duplicate the Index. You could also lose a ton of money if you are long these top ranked securities during an extended market decline.
The primary purpose of the 152 Top 10 Index (BC Top 10) is to how see well these top ranked large-cap stocks are doing in relation to the broader market. Specifically, in a bull market or extended rally we expect the Index to out-perform the broad market. This is because, when stocks reach the top of the list, they tend to stay on top due to persistent upward momentum. This is a healthy condition. In an unhealthy market, stocks tend to rotate through the Top 10 rather quickly, and the performance of the index poor in relation to the broad market.
Comparing three-year charts of the SPX and BC Top 10 Indexes we can see that the Top 10 have been underperforming for the entire time. Since the June low the BC Top 10 has advance only 5.9% versus 9.5% for the SPX. And while the SPX has been trending up for the period shown, the BC Top 10 has been trending down since the February 2011 top.
Conclusion: In spite of upward movement of the SPX, the Blue Chip Top 10 Index tells us that the leadership of the market has been rotating too rapidly, which suggests confusion and weakness. By the time a stock reaches the Top 10, it loses momentum and drops right back out again. This is evidence that for a long time the internal condition of the market has been turbulent and confusing, in spite of generally rising market prices.
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08-06-12 |
PATTERNS
CANARIES |
ANALYTICS |
| MOST CRITICAL TIPPING POINT ARTICLES THIS WEEK - August 5th - August 11th, 2012 |
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EU BANKING CRISIS |
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| SOVEREIGN DEBT CRISIS [Euope Crisis Tracker] |
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| RISK REVERSAL |
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| CHINA BUBBLE |
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| JAPAN - DEBT DEFLATION |
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| BOND BUBBLE |
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| CHRONIC UNEMPLOYMENT |
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| GEO-POLITICAL EVENT |
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| TO TOP |
| MACRO News Items of Importance - This Week |
GLOBAL MACRO REPORTS & ANALYSIS |
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US ECONOMIC REPORTS & ANALYSIS |
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| CENTRAL BANKING MONETARY POLICIES, ACTIONS & ACTIVITIES |
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| Market Analytics |
| TECHNICALS & MARKET ANALYTICS |
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| COMMODITY CORNER |
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| THESIS Themes |
FINANCIAL REPRESSION |
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| CORPORATOCRACY -CRONY CAPITALSIM |
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| GLOBAL FINANCIAL IMBALANCE |
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SOCIAL UNREST |
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STATISM |
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CURRENCY WARS |
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STANDARD OF LIVING |
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| GENERAL INTEREST |
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| TO TOP |
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