That It Is, Edward
That it is, indeed. The April BLSBS was just like the Jelly of The Month Club. It's the gift that keeps giving the whole year or, in this case, the whole month.
As we begin, this entire clip is actually a pretty good metaphor for how we all feel. Like Clark looking at the contents of the Christmas bonus envelope, I, too, stood in stunned silence as "Hampton Pearson at The Labor Department" laid on the gravy nice and thick two weeks ago. In the days since, again like Clark, I've been sent into several tirades, railing against The Suits and demanding Tylenol.
So what do I mean by this? Recall that the April BLSBS was this wonderful and glowing report that detailed how the U.S. economy has suddenly become robust and bountiful. Of course, none of this is accurate. The BLSBS is a complete joke, easily manipulated and based upon faulty statistical assumptions and wild guesses. Regardless, it's taken as gospel by the Hot Money Momos and, in these days of endless free money, sets the tone for the weeks ahead.
I could go back and rewrite a bunch of stuff about how this particular report was bogus but I have neither the time nor the inclination. Besides, DenverDave did a fantastic job of doing just that the day the report was released. So, to save energy, here's a C&P of his remarks. (I hope he doesn't mind). His full site can be found here and you really should save it to your favorites list and check it every other day or so.
FRIDAY, MAY 3, 2013
The Government's Non-Farm Payroll Report Has Taken The Term "Farce" To A Whole New Level
I'm not even sure where to start to with today's April employment report. It was so out of line with all the other economic indicators and with what we know about big banks, big retailers and big manufacturing companies and their numerous announcements of big job-count reductions this year.
Let me give just one example. The Government and Wall Street has been telling us that there a big recovery going on the housing market. And yet, if you go to Table B1 in this report from the BLS - LINK - you see that the construction sector was said to have lost 6,000 jobs in April. That makes no sense. The Birth/Death model (see below) shows construction adding 29,000 jobs. This is completely inconsistent with the story line that housing is improving. Bernanke said so himself on Wednesday.
And on the heels of this rather "robust" employment report, the Commerce Dept releases the factory orders report for March which shows a big decline of 4%, vs an expected decline of -2.8%. Not only that, but prior report of +3% for February was revised to lower to +1.9%. And then the ISM - Institute of Supply Management (formerly the Nat'l Assoc. of Purchasing Managers) releases its "services" report, which shows a decline from March to April and the index level was lower than expected. Someone is lying. I don't think the factories and private businesses reporting data that affects their bottom line are the ones.
I could go on all day boring you with the line by line analysis of today's jobs report. But you can peruse through the report linked above if you like. Trust me, there's better things to do with your time. What I will mention, however, is that according the Government - from their nefarious "Birth/Death" model - new business formations by small businesses theoretically added 193,000 thousand jobs to the number that the Government then "seasonally adjusts." I don't really know of anyone who believes that the Birth/Death model has an credibility whatsoever.
The thinking is that people who leave their job for whatever cause - i.e. get "headcount reduced" for cost cutting purposes - decide to all of a sudden take all of the money they haven't saved and start a new business. The theory is that these "businesses" add jobs or subtract, depending on what the BLS's "voo doo black box" decides was the likely number of businesses started vs. closed. Sound credible?
Anyway, when I went through my initial glance at the non-farm payroll report, I noticed a big bulge in the number of "business and professional" jobs that the BLS said were added in April. In fact, it was 73,000 of the 165,000, or nearly 50%. Then I noticed that according to the birth/death model, new businesses in this sector created 63,000 new jobs. Know anyone who started a business consulting business last month? Certainly IBM - probably the largest "professional services" employer in the country was hiring consulting employees, because they just significantly cut hours for that segment of their workforce: LINK
In addition, the Government, despite what we know about the fact that most of the big box retailers are closing something like 10% - 20% of their stores this year, added another 29,300 jobs. No way. Sorry. That number is a complete fabrication. Here's a link this "Alice In Wonderland" fairy tale called "the birth/death model:" LINK
The sad part is that there's 89 million people "not in the labor force," most of whom would probably like to have a job if they could get one. I wonder how what's going through their mind - at the least ones not getting disability, student loans, food stamps, etc - as they see a completely fictitious jobs number and then the stock market rocketing up 155 points (the Dow) on the heels of that fictitious jobs report.
I have a feeling it's going to get very ugly in this country in the second half of this year. That's why there's a record number of people buying up a record amount of gold and silver coins minted by the U.S. mint. In fact, now there's shortages of gold and silver eagles. The mint has not reported any silver eagle sales so far for May, but it's because they don't have the silver required to produce them. I also have a feeling it's why Ben Bernanke is going to leave the Federal Reserve in January. He doesn't want to be left holding the empty bag he inherited from Greenspan and then proceeded to blow up himself with even more helium. Have a good weekend.
POSTED BY DAVE IN DENVER AT 11:44 AM
Based off of all this faulty, nonsensical data, what has happened since? I'll let the charts show you. First, here are gold and silver:
The "economically sensitive" copper and crude initially rallied because things are improving so quickly. If things really are "improving", why have they since rolled over and retraced all of the gains?
And, of course, all of this "growth" means that someday very soon, QE∞ will be ending. So, buy The Pig and dump your treasuries. This trade was further helped along by the complete MOPE/SPIN nonsense provided late Friday by TheBernankButtBoy regarding "tapering".
Put it all together and whaddayaget? Well, if you're going to get the global investment community to buy the dollar by talking down QE, you're going to get bonds to sell off. And if bonds sell off, where are all of those newly-bought dollars going to go? Not commodities, certainly not after all the effort to paint them as complete losers. The only game left in town is: EQUITIES!
Of course, this plays right into The Bernank's lust for "The Wealth Effect". And that's all well and good until the day comes when it simply isn't. For if it were truly possible to actually create real wealth and prosperity by the process of inordinate money printing, don't you think the world would have figured this out centuries ago instead of just recently? You can lie, you can deceive and you can steal but, sooner or later, certain laws catch up to you. I'm not talking about legal BS like Dodd-Frank or some other such nonsense. Just like the Laws of Physics, there are Laws of Economics. There is no "Theory of Gravity", there is a "Law of Gravity". Similarly, there is no "Theory of Supply and Demand". That said, the Bernank and his minions may manage to keep the plates spinning for a little while longer. Picking the exact date and time of his eventual failure is a fool's errand akin to predicting the next earthquake. But just as one day soon The Big One will hit, one day soon The Bernank's House of Cards will come crashing down, as well.
As this pertains to gold and silver, prices will continue lower until they won't. This moment is as unpredictable as anything else, regardless of what Bo Polny, Bo Schembechler or Bo Derek might have to say. If the Hot Money Momos are willing to sell paper metal, The Cartels will buy as much from them as they can. All of this in preparation for the day when The Great Paper Charade can no longer be maintained.
Regarding the ending of The Charade, that day IS coming. Again, though, when? Once again, this is impossible to say but we will continue to read the tea leaves which lay between the lines in the hope of finding some clues.
- London continues to deliver at a rapid pace
- Shanghai appears to be out of metal altogether
- The GLD has shed 300 tonnes YTD
- Comex vaults have lost over 100 tonnes YTD
- China imported 220 mts in March alone
- Demand from India is soaring
I could go on and on but I won't. Just keep in mind that this demand for physical metal is on a 1:1 basis while paper creation is on the level of 100:1. Therefore, every troy ounce that is removed "from the system" removes the ability to create one paper Comex contract. You do this long enough and remove enough metal and the entire Charade simply collapses. That day is certainly coming however, in the words of Johnny Keynes himself: The market can remain irrational a lot longer than you can remain solvent. Please, unless you're trading along with Andy, NO LEVERAGE. PHYSICAL ONLY.
To that end, we'll be watching the June13 Comex contract very closely in the days ahead. ZH has been following the depletion of metal from the JPM vaults and though they sometimes paint a confusing picture of eligible and registered, the fact remains that JPM is under some serious pressure. ( http://www.zerohedge.com/news/2013-05-14/jpm-eligible-gold-plunges-new-record-low-and-why-it-could-have-been-much-worse) Then add this to that: As of yesterday, the total OI in June13 gold was still 209,286 contracts. The total registered (able to be delivered) stockpile of all Comex vaults currently stands at 57.10 metric tonnes or 1,835,000 troy ounces. That's enough metal to physically settle just 18,350 contracts. Both Feb13 and April13 saw about 13,000-14,000 contracts for physical settlement so it won't take much of an increase for The Comex to have some serious problems on their hands.
What does this mean? Well, at some point The Cartels have to get on the bid. Why?
- To hedge the allocation demand they are receiving daily in London.
- To maintain the illusion of The Charade, attempting to regain confidence in the viability of the paper "markets".
- Perhaps if price is raised, some of the physical demand will wane a bit as buyers wait to see if prices will come back down?
These three items above are why gold is not going to $1100 or $800. Not going to happen. The system will break and collapse well before price could fall that far. Period.
So hang in there. If you have to, go find the Tylenol and take a few days off to relax. Your physical metal is just as shiny and lustrous as it was yesterday and the day before. It will be even more valuable in the weeks and months ahead. Keep the faith and know that you are doing the right thing in preparing for the eventuality of what is to come.