After the recent ugly Greek news, which prompted me to alter my Audioblog title to “The Big One has started – Protect Yourself Now!” – gold and silver’s gains were magically vaporized at the “2:15 AM EST” open of the London paper “pre-market” session, for the 376th time in the past 430 trading days; and when they returned to the nearly unchanged level around the NYSE opening, following a slew of PM-positive news and no material moves in other markets, they “magically” plunged anew. Meanwhile, Miles Franklin’s physical PM business has increased significantly in recent weeks, in line with that of the entire planet – which, of course, will inevitably cause something to “give”; and likely, quite short.
I don’t have the time – or space – to write of each of this morning’s other “horrible headlines,’ but suffice to say, the Greek situation actually worsened considerably, as this morning’s meeting between Greek Finance Minister Yanis Varoufakis and German Finance Minister Wolfgang Schauble ended with extremely aggressive words, prompting Greek Prime Minister Alexis Tsipras to maintain Greece won’t back down, in its aim of writing off a significant portion of its €320 billion of debt. And to give you an idea of how PM-positive the other key headlines of the day are, a smattering of such include “Challenger Report layoffs surge to highest monthly reading in three years”; “Bulk shipping bankruptcies begin as Baltic Dry Index collapse continues”; “Ukraine currency plunges 30% after Central bank gives up on indicative rate”; “Denmark cuts rates for fourth time in three weeks, to negative 0.75%”; and my favorite, of how the Swiss National Bank has created a new, “unofficial” Euro/Franc peg at 1.05, just three weeks after its official 1.20 peg was vaporized. And I haven’t even mentioned the horrific explosion in the U.S. trade deficit, which surged from $39.0 billion in December to $46.6 billion in January, versus expectations of a decline to $37.9 billion. Which, by the way, nearly guarantees the already punk initial 4Q GDP reading will be revised downward. Gee, I wonder if sub-$50 oil prices had something to do with that.
And finally, we’re at the tail end of the fourth quarter earnings season; which according to Zero Hedge, produced ZERO growth when excluding Apple. The vast majority of companies reduced 2015 guidance as well – including the largest negative revisions in the history of the consumer discretionary sector. Consequently, Q1 2015 earnings are expected to decline year-over-year, for the first time since 2012; and even perpetual MSM cheerleader CNBC admits “consumer spending weakest since 2009.” However, the perpetual party line of “second half recovery” continues ad infinitum – or at least, as long as the PPT maintains control of the
And one final note on this topic; of how company after company seemingly beat “expectations,” despite reporting cumulatively weak earnings. Let me tell you how this is so, from someone who worked as an award-winning sell-side equity analyst for seven years – including six at Salomon Smith Barney. OK, here’s how said “expectations” are created. First, at the time of each earnings report, nearly all reasonably sized companies issue “guidance” for the coming quarter, and sometimes the coming year – either via press release, conference call, or informal discussions with equity and fixed income analysts. Outside the press release route, such practices are borderline illegal, and certainly unethical; but nonetheless, this is how Wall Street works.
Using said guidance, analysts spend the ensuing weeks prodding the CFO, Investor Relations Officer, or otherwise specified “point person” for incremental information regarding the validity of such guidance. Said “point person” is carefully schooled as to what he or she can say, particularly as material guidance changes are considered “inside information,” which must be disseminated broadly, via press release. However, some analysts have better “relationships” with point persons than others; and inevitably, earnings trend changes – at times, material - translate into analyst estimate revisions. Next, competing analysts call up said “point person” and say, for example, Goldman Sachs lowered their estimate below the consensus (which in most cases, is based on “official” guidance). WHY? Said point person, depending on his or her “relationship” with the analyst, will proceed to clam up or play game like “20 questions” or “colder, warmer” until the analyst has the truth; causing him to lowers his estimates accordingly. Inevitably, analysts with lesser “relationships” with corporate insiders – or lesser incentive to pursue a particular company – simply revise their estimates to match those of the implicit “axes” on the name; and voila, reduced estimates – of which, the company inevitably “beats,” causing the MSM to fall over themselves in excitement, even if said “beat” is of a number well below initial guidance. And the beauty of it is, unless the earnings “miss” is that bad, no one questions the odd, “prescient” estimate trends; let alone, when the PPT is constantly supporting the stock market, hiding earnings “misses” with offsetting “multiple expansion. And I haven’t even discussed the historically high, comically liberal usage of “adjusted” (non-GAAP) earnings to exclude “non-recurring charges.”
And with that “tutorial” on Wall Street chicanery – aided by PPT manipulation and perpetual regulatory “undersight” – a few words on the greatest accounting fraud of all (paraphrasing the Gallup CEO); i.e., “employment, American style.” To that end, it’s nothing new for me to describe how ridiculous NFP “employment” data has become, per “island of lies“; “the lie to end all lies“; and “all economic data are lies,” to name a few articles. Much less, the “new employment paradigm” I discussed two years ago – of the part-time, minimum wage, non-benefit paying jobs, dominated by senior citizens, that have taken over the American landscape; but nonetheless, are now considered “statistically equal” to full-time, high paying, benefit accruing jobs. And of course, the 38-year low in the Labor Participation Rate (actually, much more when considering males only), which is why John Williams calculates actual unemployment to be closer 23%, compared to the Depression Era high of 24.9%.
Anyhow, January 2015 can best be economically characterized by a collapse in global trade (and the U.S. trade deficit), amidst plunging U.S. consumer spending, retail sales, durable goods, factory orders, and construction output. And, oh yeah, the utter implosion of the U.S. energy sector, which accounts for roughly one-third of corporate capital spending; and an exploding dollar, which is severely crimping earnings and earnings expectations. And yet, we’re told to expect 230,000 new “jobs” were created, yielding a 5.6% “unemployment rate,” last seen in July 2008, just before the worst financial crisis of our lifetimes. And this, despite ADP’s report yesterday – which admittedly, has been known to be VASTLY incongruous to the NFP report – which decidedly missed expectations.
Again, all we ask is for you to use your common sense, when determining if such “jobs” actually exist. For example, how many “mass hiring” announcements have you seen, compared to mass layoffs – as demonstrated by this morning’s Challenger Layoff report, which surged 70% from December to January, to its highest monthly reading in three years. Let alone, the steady stream of energy-related layoffs; and not just for the oil companies themselves, but service companies like Schlumberger, Halliburton, and Weatherford (three of my former coverage companies), and anyone else whose business is tied to energy.
Next, consider the incongruence of the BLS’ “birth/death model” assuming net gains of hundreds of thousands of jobs each year, despite small business ownership utterly imploding – to the point that small business formation and ownership are at record lows, and small business deaths at record highs. Heck, even the long-time MSM cheerleaders at the Washington Post admit it. And last but not least, the utter ridiculousness of the BLS reporting the lowest weekly jobless claims – shale collapse notwithstanding – since April 2000; i.e., the global economic peak of our lifetimes. To that end, I discussed in yesterday’s Audioblog how 1099 workers – which increasingly, are becoming the dominant worker category due to employers’ ability to avoid payroll taxes and benefit requirements by classifying them as such – are NOT ALLOWED to file for unemployment. In other words, “jobless claims” are not declining because the economy is improving, but due to a decidedly negative structural change in the U.S. labor market.
Well, that’s enough “preliminary” info for now – other than to say that atop the aforementioned litany of employment headwinds (not to mention, countless surveys and diffusion indices indicating declining employment trends), January is by far the most negative “birth/death” month of the year. Last year, for instance, the January birth/death adjustment was -307,000 jobs; and thus, if the BLS is to meet the comical +230,000 expectation, it will have to come up with 537,000 actual jobs. To that end, we give the same “advice” as always. Which is, no matter whether “headline numbers” beat or miss “expectations,‘ the devil will be in the details; invariably, demonstrating the reality of a dying labor market.
OK, it’s Friday evening, and no word better describes the Bureau of Labor Statistics data conjurers than the aforementioned devils. I mean, I’m not sure what more can be said of the propaganda they produce; which not only has no semblance to the economy we live in, but like the rigged financial markets, becomes more detached from reality each day.
As discussed above, essentially every imaginable data point – both in the U.S. and worldwide – screamed not just “weak” January employment, but outright contraction. Which, by the way, goes for GDP as well. And yet, the BLS produced a number that soundly beat “expectations” – for the second straight month, following a disappointing ADP employment report – and furthermore, revised prior months significantly higher. Not due to empirical data, of course, but because “adjustment” algorithms were arbitrarily altered to produce the desired result.
No, I’m not going to go over every detail of this farce of a report; but suffice to say, that just like the unfathomable complexity of rigged financial markets – in which billions of computer generated bids and offers, largely from a handful of players, move stocks, bonds, commodities, and currencies at will – BLS’ “adjustment” algorithms have become so complex, it is impossible to decipher them. Much less, as they continue to change each month – like a mutant virus – apples-to-apples comparisons are impossible, rendering interpretation and analysis useless.
Not that you need a doctorate in economics to identify how detached from reality the numbers have become. To wit, oil companies officially announced nearly 20,000 layoffs in January; let alone, oil service and other related industries, and countless thousands of unannounced energy-related layoffs. And yet, the BLS reported that energy sector employment contracted by just 1,900 workers! Or how about the “average hourly earnings” being celebrated for rising sharply, when it was nearly entirely to the one-time boost provided to low-end workers by mandatory minimum wage increases?
To that end, I could go on and on with the ridiculous inconsistencies in the data; but putting it in the simplest possible terms, it all comes down to one thing. Which is, the BLS literally makes up the numbers, to meet the agenda of the politicians and bankers that run it. To wit, the chart below, depicting what the BLS itself admits to be the actual change in employment, versus what the reported “headline numbers” after myriad “adjustments.”
Yes, actual employment declined by 2.75 million in January – partly due to the weak economy, and partly the seasonality of post-holiday hiring practices. Not to mention, December’s “revised”
actual employment change of a measly 5,000 workers. And yet, the BLS arbitrarily reported December gains of 329,000, and 257,000 in January. In fact, word has it that due to last winter’s “polar vortex,” the BLS arbitrarily increased its January “seasonal factor.” So does that mean that any time it’s exceptionally cold, subsequent jobs numbers will be higher? In other words, like nearly everything the government publishes, the NFP report has become pure, agenda-driven fabrication; as if the government could accurately measure the precise amount of job changes in such a large economy in the first place. Let alone, current BLS protocol now defines
all jobs – even the part-time, minimum wage type – as equal. And thus, with the percent of full-time workers near record lows, the more crappy “jobs” people get, the more the fraudulent NFP report is boosted.
As I’m out of space, I’m not even going to get into the subsequent PM attacks; which not only “suspiciously” started a half hour before the report, but were “turbo-boosted” by last night’s nonsensical, arbitrary, needless increase in COMEX silver margins. I’ll have more to discuss on this, and many other topics next week. But for now, I’ll conclude by saying not a shred of reality emanated from today’s NFP report; as “employment, American style” no longer resembles actual employment trends, either here or anywhere else.
Courtesy of http://blog.milesfranklin.com
Andrew ("Andy") Hoffman, CFA joined Miles Franklin, one of America's oldest, largest bullion dealers, as Media Director in October 2011. For a decade, he was a US-based buy-side and sell-side analyst, most notably as an II-ranked oil service analyst at Salomon Smith Barney from 1999 through 2005. Since 2002, his focus has been entirely on precious metals, and since 2006 has written free missives regarding gold, silver and macroeconomics. Prior to joining the company he spent five years working as an investor relations officer or consultant to numerous junior mining companies.