Will we blow our jobs numbers?
Even if we do get a big number, you never know how much of that is due to massaging the data so it would be premature to swallow the initial market move until we have time to get a good look at the size (168,000 expected) and decide if it's too big (over 250,000) or too little (under 125,000). Under 125,000 and we'll have to bring in the Fed to see if we can do something to grow these numbers and over 250,000 is going to be too big for any more QE – no matter how much we beg for it.
I did have some really brilliant analysis but there was a laptop mishap (I'm on the road) and I lost it so now we'll just have to wait and see what the NFP number is and, rather than speculate – we can see which way things break after the report.
Just ahead of the Data we're about flat in our futures but oil just tested the low of $100.50, where we are long now in the Futures and, of course, THRILLED with our various shot positions in the Futures ($105, $104, $103.50…) as well as our various USO shorts and SCO longs – congrats to all the faithful on that oil trade!
8:30 Update: Jobs came in at a totally limp 115,000 and that is 10,000 below the line that I said would be bad enough to be GOOD – as it's so anemic it should get the Fed just a little closer to considering additional QE. HOWEVER – the Unemployment Rate was DOWN to 8.1% and that BS number is NOT Fed-friendly but, so far, after a very quick move down, the markets are loving the low headline number and rallying to the morning's highs on expectation of more bail-out bucks heading our way.
I don't think these numbers are good at all and it's just more evidence that the economy is not picking up and still has significant weakness. If suckers want to buy into these terrible numbers – let them, it's a good chance for us to add some more shorts because your entire bullish premise cannot be that the economy sucks so badly that our Uncle Ben might give us another Trillion to play with to distract us for another year.
We didn't allow ourselves to get sucked into the pre-market pump job yesterday, following through with our plan from the morning post to use a quick momentum trade (DIA) to ride out the morning move up and thank goodness we held those short positions as I really think we'd be missing them this afternoon (or Monday for that matter!).
Oil ended up being the only short we cashed out of and we did pick up a few well-hedged longs but, on the whole, still very short-term bearish in our stance as it's not just jobs but Europe (elections on Sunday), China (very disturbing data detailed in this morning's news) and now Australia has officially cut their economic outlook from 3.5% to 3% growth.
There is word from Chineses papers that almost 500 Chinese shipyards out of a total of more than 1,600 may close because of falling orders and decreasing loans. About 80% of shipyards in the eastern Chinese province of Zhejiang either stopped production or ran at half of production capacity. New orders fell about 40% in the first two months of the year. This did not even happen in 2008-9.
UK Commercial Properties are in their 2nd consecutive quarter of decline with values 31% below 2007 levels but the Global "mark to fantasy" system is still allowing banks to carry Trillions of Dollars of real estate asset losses off their books in hopes that they will bounce back before the borrowers default. It would be exceedingly tragic if someone has miscalculated, wouldn't it?
France has a property bubble that is about to burst with prices up 160% since 1998 while incomes are up just 35% and, like the US, over 80% of that 35% went to just 1% of the population. "A number of clients tell me they think the market has topped and want to get out," said one French hedge fund manager. Standard & Poor's has told investors to brace for a 15% correction. Credit Agricole says prices may fall 12% by the end of next year, expecting a "gradual slide" that could last until 2016.
Of course, with the election this Sunday – anything can happen in France and probably will, wich is why we thought it was madness to hold long positions over the weekend – so far, that's looking like a good decision on our part, especially with Hugh Hendry warning that the economic crisis is headed for Asia, with China struggling under its own bursting property bubble and tumbling demand for its exports from the austerity nations of the Eurozon as well as slowing Australia, Canada and the US.
No wonder China is exploring other planets – they have run out of buyers on this one!
Have a good weekend,
– Phil
