The How and The Why

252
Fri, May 4, 2012 - 10:25am

In a stunning development, much to the surprise of The Shill, The Coug and LIESman, today's job report was "weaker than expected". Surprisingly, the only mouthpiece that came close to predicting the actual number was former O'Bomney hack, Austin Goonsby. What does that tell you?

So here's the deal. Though I firmly believe that political pressure sways the calculative ability of those within the BLS, it's also possible that, because we are truly in a new paradigm, the current BLS methodology is simply outdated.

From 1982 to 2007, the U.S. economy was measured as expanding. Those who didn't have jobs often found jobs. Those who still couldn't find jobs, applied for unemployment "insurance". This transfer payment program provided some welfare to those in need of it until they could secure employment and, since the economy was "growing", most found work before the government checks ran out. And that's the key...the program has an expiration date for those on the dole.

The current expiration date is 99 weeks. This means that anyone receiving unemployment insurance will only receive checks for about 2 years before the government cuts them off. Now, as this pertains to today's jobs number is important. You see the BLS counts those receiving checks as part of the unemployed base. As part of the calculation, when someone stops receiving checks, they are no longer considered to be unemployed. For the 25-year period of 1982-2007, this was an OK way to do things as it was statistically correct to assume that someone no longer collecting unemployment insurance had now found a job. Now, however, that's not the case.

Instead, many folks are "long-term unemployed". They lost their job and applied for unemployment insurance and, after 99 weeks, the checks stopped coming. These folks are now considered by the BLS to have found a job but have they? Maybe a few have but just because the checks ran out does not mean that you are no longer unemployed. However, to the BLS, this is exactly what it means. So, payrolls can only increase by 115,000 and the labor force participation rate can fall to 64.3% but the stated "rate of unemployment" can also fall to 8.1%. TA-DAH!!! Barack The Magnificent can again proclaim at today's press appearance that the economy is strong and he should be re-elected.

More details can be found by reading these excellent, brief summations from ZH:

https://www.zerohedge.com/news/people-not-labor-force-soar-522000-labor-force-participation-rate-lowest-1981

https://www.zerohedge.com/news/real-u-3-unemployment-rate-116

Again, many of the people not in the measured "labor force" have simply given up. Their unemployment checks have run out and the BLS simply ignores them and fails to count them as if they don't exist at all. And this is how things work in the good ole U.S.A.

Ignoring and manipulating facts and data is also how things work in the gold and silver markets. Look, here's the deal. Everything...and I mean everything...points to a bottom here that will lead to a very strong rebound, particularly in silver. But it's a little like the BLSBS. Post-MFG, we may be in all new paradigm where the only entities left trading paper metal are Cartel Monkeys and HFT WOPRs. Under those conditions, it's going to be very difficult for the metals to surge without some type of "flipping" event which causes the algos to by tilted positively instead of negatively. A sustained short squeeze that drives price back through the 200-day MA would do the trick but can we get that to happen absent news of impending QE? More importantly, will The Gold Cartel allow that to happen ​absent the imminent appearance of overt QE3 or a Cartel switch to net long?

So, just as every traditional indicator I follow screams BUY right here, in this post-MFG world we have to remain cautious. Not so much cautious from a risk perspective, just cautious from a timing and frustration perspective.

Hang in there. Let this nonsense play out. The American economy is moribund. Europe is an economic disaster. Global demand for physical precious metal is only going to increase. Do not let the minute-by-minute, hour-by-hour shenanigans of the Comex scare you. Your silver and gold will have a higher fiat-conversion price 6 months from now. They will have a higher fiat-conversion price 12 months from now. And, if there are still traditional fiat to which you can convert 24 months from now, the price of gold and silver will be higher still.

OK, that's all for now. As I've typed, I see that we've begun to squeeze the smarty-pant shorts a bit. This is encouraging. In gold, a move abive 1650 will intensify the pressure. Silver needs to crawl back above $31 before anything other than weak hands begin to get squeezed. Keep your fingers crossed and look for a new thread after I've had an opportunity to review what should be a very interesting CoT later this afternoon.

TF

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  252 Comments

Urban Roman
May 4, 2012 - 10:39am

Like you have been saying,

The only winning move is to take delivery.

Silver Meddler
May 4, 2012 - 10:40am

Gave Up

I'm one of the people who's not counted in employment statistics because I gave up looking. The good part is it gave me time to learn about silver & gold.

crackor
May 4, 2012 - 10:42am

here is good vid on the subject

Charles Biderman has a great add on to this BLSBS.

Video unavailable
tpbeta
May 4, 2012 - 10:42am

Turd done good

Your $30 bottom seems to be holding up very well. Great calls (although I was hoping you'd be wrong, dagnabit)

Titus Andronicus
May 4, 2012 - 10:49am

Thanks Turd.

Thanks Turd.

Groaner
May 4, 2012 - 10:50am

$10 drop in 10 min.s

this stinks

OC15
May 4, 2012 - 10:51am

Kick everyone off unemployment benefits

And the unemployment rate goes to zero, problem solved.

lodmund
May 4, 2012 - 10:54am

the action in the gold market

the action in the gold market today is extremely weak and a breach of $1612 looks likely....with all those enormous london physical orders at $1635 getting filled ( or perhaps just moved down a bit as they are always are)

achmachat
May 4, 2012 - 10:56am

...the drop

sorry for that drop guys and gals; i ordered 100 silver maples at that pretty peak.

ReachWest
May 4, 2012 - 10:59am

Sudden change again

So .. what news item initiated the reversal in USD [up] and Gold [back down] over the past 30 minutes ?

I suppose they're just setting the stage for next weeks action. It never gets old.

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