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Dubious Payroll Numbers Ignite Wall Street

By Rick Ackerman Posted on February 6, 2012, 3:26 am EST Last Updated February 7, 2012, 3:40 pm EST

As last week ended, one might have believed Wall Street investors had just about everything wrong.  Stocks were up sharply on bullish payroll news that flatly contradicted something every American knows – i.e., that the Great Recession is still very much with us; T-bonds were getting whacked on the flimsy assumption that the economy is picking up strength; and gold and silver were under attack because, well, because all was right with the world.  Even the hacks and scribblers who bring us the news did their bit to feed Friday’s feel-good binge.  For one, there was nary a discouraging word on the Web’s main news pages about Greece and its slow-motion bankruptcy – only a story about how Europeans were working diligently to protect the homeless from a cold snap.  And the left-tilting L.A. Times, thinking wishfully, weighed in with the most fatuous story of the day:  an analysis piece saying that the payroll numbers could prove to be a turning point in Obama’s reelection year — the day when he shifted from slight underdog to favorite.

All of which led us to post a link at Rick’s Picks to some sobering counterpoint in the form of an essay, Peak Money Arrives. Here’s an excerpt to ponder lest you grow giddy over Friday’s silly headlines: “The world is running out of money. If money is credit, and credit relies on confidence, there is not enough confidence in the financial system to supply the world with the money it needs. Since the initial credit crisis struck in 2008, credit and money have been withdrawn from the system in such staggering amounts that international trade can no longer grow. The world’s central banks are playing a rear guard action by acting as lender of last resort to banks that no longer trust each other and have stopped lending in the interbank market. As liquidity flows out from the system, the rottenness that has corrupted the foundations of global finance is now exposed for all to see.”

Bullion Selloff a Fake

Although these are not the sort of facts on which one should base short-term trading decisions, they are all but certain to affect the larger trends.  And that is why we would counsel bullion bulls to take Friday’s selloff in stride. Our forecast calls for a swing high in April Gold at 1799.50, nearly $34 above Friday’s peak, and we would be very surprised if gold futures did not get there this week. We should caution, however, that as bearish as we are on the U.S. and global economies, higher stock prices seem likely over the near term. If so, we would view it as an excellent opportunity to get short – especially the shares of bank stocks that have been manipulated higher in recent weeks by institutional sleazeballs eager to dump them onto widows and pensioners.  We singled out two stocks in particular – Bank of America and Goldman Sachs – during an impromptu online trading session that drew an unusually large crowd for a Friday afternoon. Our rally targets for these stocks lie, respectively — and precisely — at 8.09 and 120.03. If you’d like to find out how we plan to get short, and to receive alerts when our frequent impromptu analysis-and-trading sessions are about to take place, try a free subscription to Rick’s Picks by clicking here.

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  • Steve February 6, 2012, 11:59 pm

    Real unemployment, using Clinton era stats is reported over 20%. Who’s beans are we counting with?

  • C.C. February 6, 2012, 7:31 pm

    Currency debasement/’currency wars’ (Jim Rickards) are the norm from here forward. If the Eurozone isn’t doing it, the U.S. & Japan will and are. So too is a populace so fixated on the Dow/S&P as proxy for economic health, ‘recovery’ and ‘hope’, even if there isn’t any in real, lasting form, that all what seems necessary are periodic interventions to keep the machine oiled. After all, isn’t that pretty much how it’s been since 2008?

    Gary has a good point regarding Obama. Let’s dig deeper to gain better insight:

    – A masterful and clever move was made by this administration right outta the chute to ‘co-opt’, rather than fight against, a sizable chunk of the electorate voting bloc who wanted either a continuation or acceleration of our foreign adventurism abroad (read: wars). Hence, we have under this administration, (2) Arab baddies captured/killed and more on the run in various Gawd-forsaken places hither & yon. Argue or disagree on the veracity and/or tactics employed, from a dumbed-down public PR standpoint, it’s a winner in the eyes of a certain (large) segment of the voting bloc he will need come November. The Democrats have effectively taken the Neo-Con’s foreign policy swag and slapped them silly with it. Stick a fork in that one.

    Next up, the economy:

    It is known that the Fed chairman is friendly to this administration, not to mention his own preconceived ideals for how an economy ought to run. As long as:

    – Unemployment is held under 9% until November

    – The stock market stays above 12,000/1200

    – Iran is ‘stabilized’ – and/or neutralized (quickly and ‘positively’)

    This current administration is going to ROLL OVER anything the Neo-Cons can toss at them. They’ve already Spit on the only one who could present a credible threat to Obama, Ron Paul, so that is out of the question now.

    It would take either some outlier economic event or protracted war in the persian gulf for this president to lose.

    Damn shame, but one should never underestimate the ignorance or stupidity of the American electorate.

    • Mark Uzick February 6, 2012, 10:56 pm

      The instincts of the American electorate may be smarter than you think: If Ron Paul is not the nominee, if the race for President is close in my state and if Republicans are expected to sweep both houses of Congress, then I’ll have to vote for Obama. We cannot afford the risk of having a Neo-Con Republican in the White House with Republicans controlling congress. It would, I hope, resemble Clinton’s second term; and that’s certainly better than another W. Bush administration.

      I’d only vote for a third party if my state was clearly going for one of the major party’s candidates; otherwise I’d have to vote for Obama in a republican sweep or the Republican in the event that the Democrats look like they’ll hold the senate.

  • Bradley February 6, 2012, 5:57 pm

    Gary, could you expand on your gold/silver, USD/Euro comment?

    The currency charts I look at show that some gold volatility has occurred when the USD has shown strength vs the Euro, but with the USD at nearly the same level it was vs the Euro in late 2004, gold is selling for a substantially higher price (in USD) now, so overall, the trend has been higher regardless of USD strength or Euro weakness.
    Are you thinking that pattern has changed, and if so, why?

    • gary leibowitz February 6, 2012, 9:18 pm

      Trend higher because of other factors. Fear of defaults are much higher than 2004. You really can’t compare the two since the global environment is very different.

  • gary leibowitz February 6, 2012, 4:13 pm

    I don’t see any fudging of the numbers. In fact I stated months ago that I see a “sweet spot” where the stock market should do well. Employment is picking up. Not expecting much more growth but anytime we see close to 200,000 new emplyees the street will cheer. Election years usually coincide with a friendly FED. As for elections, if the market holds up till November Obama should be the clear favorite.

    Now to the debt problem. It is huge and in fact getting larger. Global credit is something like 100 trillion. A report came out not long ago that stated we would have to double that by 2020 in order to be solvent. Staggering numbers. Thats why it is extremely unlikely we come away unscathed. Ireland is the next country to hit a major crisis this year. I suspect many countries will roll over befor we hit critical mass.

    As for this year, if elections mean anything, the market should hit an interim top soon, but not crash as most suspect.

    I still see problems with gold/silver. The EU is surely going to get hit multiple times this year and as a result the US dollar should rise.

    • Cam Fitzgerald February 6, 2012, 7:39 pm

      Yes, I agree with you Gary. What I am seeing is that the dollar will head back for a retest of .82 and probably form a double top at that juncture. Plenty of action to follow on that news you can be sure.

      My prognosis for gold therefore is for it to fall to the 1550 range and in fact I think it will be lead by a strong correction in copper. That looks like a good short to me today.

      The market is indeed topping and should correct this week. Way too overbought and far too much bullish sentiment. I don’t think it can hold, especially if the dollar rises again as I am anticipating.

    • gary leibowitz February 6, 2012, 9:28 pm

      Cam,

      I see the dollar going higher than you do and agree we are due for a correction in the next 10 days. I don’t see it breaking trend though.

      Long term we are in for major trouble but timing this event is hard to do. If the EU and big money lenders can hool off any more major defaults this year might be a good one. In fact I would be very happy to declare a major drop in equities next year should we skirt it this election year. In fact I hope we do so I can double up on my bets in 2013.

    • Cam Fitzgerald February 7, 2012, 12:30 am

      You could be right about the dollar going above 82 but I have my doubts. A devaluative stage is more likely and it would conveniently feed into improved exports in an election year. The thing is that there is major resistance at that level. The other consideration I have is that another QE may be coming and so this will weigh down any major dollar rise. Not to mention that the odds of gold falling steeply at this stage is very unlikely. With Europe slowly getting its act together it seems more likely to me that a double top signalling a dollar decline is coming into focus and that should set the trend for at least the next half year. Whatever happens, we won’t have long to wait.

  • John Jay February 6, 2012, 3:56 pm

    Latest news from B.B. is that chocolate rations have been increased from 30 grams to 25 grams!
    Now don’t be a crimethinker about this, or you may be headed for the joycamp!
    Have a nice day citizen!

  • RichardB February 6, 2012, 3:37 pm

    Excellent article on peak money. Seems like lots of things are peaking these days.

  • Mark Uzick February 6, 2012, 9:02 am

    “Since the initial credit crisis struck in 2008, credit and money have been withdrawn from the system in such staggering amounts that international trade can no longer grow. ”

    The anti-free trade protectionists – you know who you are – should take heart from this ‘good news’.

    I had an e-mail from an economically naive friend who was unsure of whether Ron Paul’s free trade convictions were really a virtue, doing so by bringing up a criticism of Milton Friedman:

    “What about when Friedman uses the example of outsourcing to maximize profits? The people who are hurting are the Americans who cant find jobs because of the foreign outsourcing. Steve Jobs spent a lot of American money on foreign outsourcing. The jobs he could have made here in the states would have kept some of that money here.”

    My answer to him is similar to my arguments that some here have found objectionable:

    “If Jobs was a stupid “Buy American!’ economic nationalist, then he would have created a very small number of low paying assembly line jobs; had an inferior and very expensive product; then would have gone out of business and never have created huge numbers of high paying engineering, design and marketing jobs; never have revolutionized electronic and tech industries and everyone, even those using his competitor’s products, would be less efficient and poorer.

    If putting up protective barriers to trade created prosperity and better jobs for everyone, then putting up protective barriers to trade between the 50 different United States would make us all rich; and by the same reasoning, building 100′ tall fences between all neighborhoods to ‘scientifically’ regulate all travel and trade would make us all gazillionairs.

    Protective barriers to trade, of any kind, only protect established interests from having to compete; and they come at the expense of everyone else’s liberty and well being.

    The very thing you want to protect us from a loss of competitiveness – state regulations to protect business – is one of the actual main causes of the loss.

    Regulations have strangled manufacturing and service industries. The only thing that has saved American businesses from total devastation and Americans from deep poverty is the ability to relocate and outsource production to friendlier jurisdictions. Of course the propaganda that you’re reading is from people who would like to cut off all avenues of escape from persecution so they can bring about their socialist totalitarian ‘utopia’, sparing no expense nor lives to achieve this goal. – Mark”

    • Onoiro February 6, 2012, 10:11 am

      Setting up shop in China is a costly venture. From my understanding businesses in the U.S. have been fleeing a tax structure that fluctuates on a near intraday basis. A modern day myth is that they seek out cheap labor, it is more likely they are seeking out stability first.

      -Onoiro

    • mario cavolo February 6, 2012, 11:15 am

      …lots of pros and cons on doing business in China, Gents…cost-wise, financial/bank/credit wise and other-wise… many well written insightful reports and articles available at http://www.amcham-shanghai.org, which by the way is the largest and most active AmCham in the world, while Brazil’s AmCham is the 2nd largest in the world…Cheers, Mario

    • Benjamin February 6, 2012, 12:08 pm

      “Protective barriers to trade, of any kind, only protect established interests from having to compete”

      No, not of any kind. The Founders realized that unrestricted importing was not the way to independence. Thus the Constitution allows Congress to impose tariffs on foreign imports.

      “If putting up protective barriers to trade created prosperity and better jobs for everyone, then putting up protective barriers to trade between the 50 different United States would make us all rich”

      And if skin is such a great protector of the human body, then perhaps the human body should be made entirely of it. Of course, I only present that whacky argument to prove that we don’t really need skin. Skin clearly protects the organs of less fit people, when Darwin ought to be deciding who can live and die without it.

      Anyway, just as the Founders realized that unrestricted importing was a deteriment to independence, they also realized that fragmented regulation of commerce by the states was not going to last. Under the Articles of Confederation, states were allowed to seperately regulate commerce, with the result being near-disaster. Governments and citizens went broke, inflation rose, disputes (and even conflict) arose among the several states… It was a mess. That is why a convention was called, to establish a new set of rules. Both prosperity and stability increased drastically after the Articles of Confederation were replaced with the Constitution that, among other things, allows the vile, Congressional influences over foreign trade.

      Did the early U.S. go stagnate and broke because of that? Was the U.S. a cesspool of stagnation and banruptcy when Grover Cleveland sought tariff reductions?

      “The only thing that has saved American businesses [consumption] from total devastation and Americans from deep poverty [independence] is the ability to relocate and outsource production to friendlier juridictions [more esnalved countries].”

    • john February 6, 2012, 3:59 pm

      Mark a simpler answer would be that Paul is an Austrian and Friedman clearly was not. Rothbard wrote a great piece about him and their differences.http://www.lewrockwell.com/rothbard/rothbard43.html

    • Mark Uzick February 6, 2012, 4:33 pm

      Benjamin: ” The Founders realized that unrestricted importing was not the way to independence. Thus the Constitution allows Congress to impose tariffs on foreign imports.”

      Reply: Wrong, “In 1789, our first year under the new Constitution, Congress passed the first tariff, primarily for revenue purposes.” http://www.landandfreedom.org/ushistory/us7.htm

      Later, this power was abused to protect special interests from competition, dividing the country and finally culminating in the civil war.

      Benjamin: ” And if skin is such a great protector of the human body, then perhaps the human body should be made entirely of it.”

      Reply: This is a false analogy; a society is made of individuals who, when acting within an environment of liberty, create spontaneous order through voluntary interaction that serves each person’s personal interest. America isn’t supposed to be a single body under central control; we’re supposed to be free men, not insects ruled by a collective hive.

      Benjamin: “Anyway, just as the Founders realized that unrestricted importing was a deteriment to independence, they also realized that fragmented regulation of commerce by the states was not going to last. Under the Articles of Confederation, states were allowed to seperately regulate commerce, with the result being near-disaster. Governments and citizens went broke, inflation rose, disputes (and even conflict) arose among the several states… It was a mess. That is why a convention was called, to establish a new set of rules. Both prosperity and stability increased drastically after the Articles of Confederation were replaced with the Constitution that, among other things, allows the vile, Congressional influences over foreign trade.”

      Reply: You’re making the free trade argument until the last part, where you distort the intent of the Constitution in the same way that the courts have distorted the first part to mean that the federal government can regulate commerce between the states.

      Benjamin: “Did the early U.S. go stagnate and broke because of that? Was the U.S. a cesspool of stagnation and banruptcy when Grover Cleveland sought tariff reductions?”

      Reply: Is that what it would take for you to decide that protectionist tariffs were bad?

      In subsequent years the standard of living has risen enormously while we’ve steadily become more socialistic; so, using your logic, you must be a hard- core socialist.

      Benjamin: “The only thing that has saved American businesses [consumption] from total devastation and Americans from deep poverty [independence] is the ability to relocate and outsource production to friendlier juridictions [more esnalved countries].”

      Reply: I see…
      ‘we shouldn’t allow free trade with people from any countries that don’t first allow free trade themselves; America should always be last to embrace free trade.’
      and
      ‘America should embargo any country that isn’t as free of injustice as America.”

      Is that right? Then I’ll bet you hate Ron Paul’s policies.

    • Mark Uzick February 6, 2012, 4:42 pm

      john: The difference between Austrians and Monetarists wouldn’t be a simpler answer or any answer to his question at all; the Austrians are just as in favor of free international trade, while your statement seems to imply the opposite.

    • Benjamin February 6, 2012, 7:35 pm

      I might answer your response later in the day, Mark, if things aren’t too lively here today. But the day’s too young to enage in lengthy banter now. I will, however, adress the following remark…

      “I’ll bet you hate Ron Paul’s policies.”

      I could always use more money. How much would you like to lose on that bet, then?

      Speaking of Paul, you might want to point out to your friend that, as president, his free-market views would have about as much effect on commerce and trade policy as they do as Congressman. The president doesn’t have any direct powers in that matter. The most he could do in that regard (and because he’s a strict Constitutionalist, would) is veto improper legislation proposed by Congress and advise as to what he will pass.

      The real teeth of a Paul presidency would be his ending of alphabet-soup agencies, eliminating departments, and ending active military deployments. Can I presume that your friend wants these things gone as well, but isn’t willing to vote for them because of his free-market fears? If so, I suggest that if you just get to the heart of the matter (see above), you might more easily win Ron Paul another supporter.

    • Mark Uzick February 6, 2012, 10:30 pm

      Benjamin:

      That bet was meant sarcastically, as I know you think you want Ron Paul to win, but I didn’t know that you thought of him as the lesser of evils.

      You apparently dislike his free-trade policies, but feel confident that he will be ineffectual in that realm; and that America will be safe from the threat that his veto power and influence will help move America back to obeying the intent of the constitution.

    • Benjamin February 7, 2012, 10:37 am

      Mark,

      “That bet was meant sarcastically, as I know you think you want Ron Paul to win, but I didn’t know that you thought of him as the lesser of evils.”

      Very well. I accept your nothing as payment. And if you re-read what I wrote, I merely suggested that a simple truth, rather than a flawed and empassioned stance, might better persuade your friend. To point to a legit short-cut is not siding with the “lesser of two evils”. Nor is it just grounds for presuming so much about what I think. Now, getting back to the main O/T topic we were on…

      Yours: “In 1789, our first year under the new Constitution, Congress passed the first tariff, primarily for revenue purposes.”

      “The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States”

      Revenues for specific purposes, plus one implied purpose, which is for building reserves to be drawn from in the future (rather than always relying on revenues). But even discounting that implied purpose, the effect of levying a tariff for the expressed purposes is that imports become more expensive. To meet demand, the people have to bear the burden and/or start to meet the demand for themselves.

      That is a far cry from directly giving revenues to individual businesses, which would be abuse. Even with the potential for abuse though, one cannot rightly make the argument that tariffs should be done away with. Nor write off the promotion of internal independence, springing naturally from them, as un-free market and/or unconstitutional.

  • b2525 February 6, 2012, 5:48 am

    I’ve never seen any reputable poll showing Obama being anything close to an underdog; that’s ludicrous and a sad bias.

    • TKO February 6, 2012, 7:30 am

      google gallup and check presidential approval ratings or check any of the match-up polling data available from any of the “reputable” statistical outfits readily available online and then you might want to revise your sad statement.

    • b2525 February 6, 2012, 6:20 pm

      TKO, either you’ve been TKO’d one too many times for running your mouth off and don’t have the mental capacity to process information correctly or your thick bias has fogged your brain, but here goes:
      http://www.realclearpolitics.com/epolls/2012/president/us/general_election_romney_vs_obama-1171.html

    • Mark Uzick February 7, 2012, 12:44 am

      I know that if Ron Paul is rejected and some other conditions are met, (see one of my posts below) I’ll be voting for Obama while wearing a nose plug.

      The Neo-Cons are worried that people like me will vote third party; I say, “Let’s do double the damage, making sure that Romney or Gingrich lose.” They should know that only Paul has a chance to make the White House Republican.

    • TKO February 7, 2012, 8:21 am

      thanks for the link. now just read the information for the 6 months and you will see the (in this case) Romney was ahead of Obama numerous times in various polls. A generic Republican candidate generally fared much better than Romney during the year. Now your statement might be true for yourself if you started looking at the polls about three days ago. Your statement is incorrect on its face.

  • SD1 February 6, 2012, 4:24 am

    We need only look at the charts, not the questions that surround them. What do the charts say? Are we going higher or lower?

    • SD1 February 6, 2012, 4:27 am

      Still sucks to be a bear, from what I can gather.


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