Monday, October 29, 2012

BLS May Delay Jobs Numbers Until After Election (UPDATED)

BLS now says they will release employment data this Friday-on time.

You may recall in early October I posted a story called BLS(BS) Strikes Again where I noted that the lower jobless claims was attributed to "one large state" that did not report their numbers. The number were revised upwards by 3,000 workers.  In addition, I pointed out that the seemingly impossible drop in unemployment (the biggest drop in 24 years), where only 114k jobs were added, was the result of the "household survey" that samples 50k households. Because the sample is small it often has a large margin of error of about plus or minus 500k jobs! As a result we would expect that this was merely an outlier that would be adjusted in the final jobs figure to be reported this Friday.

Or maybe not.

Today, the Wall Street Journal reports that the BLS will try to release the figures:

The U.S. Labor Department on Monday said it is “working hard to ensure the timely release” of the October jobs report, saying it intends to released the report on schedule Friday despite Hurricane Sandy.
“It is our intention that Friday will be business as usual,” said Carl Fillichio, a senior press advisor at Labor. Mr. Fillichio’s statement provided clarity to an earlier Labor statement that said the agency would assess how to handle data releases this week after the “weather emergency” is over.
Friday’s employment report will be the final read on the labor market ahead of the November elections. Initial reports that a delay was possible briefly fueled speculation that the jobs data, good or bad, might not be revealed until after the elections.

Given the likely correction in the household survey that will likely correct upwards the unemployment rate and the strong likely hood that new unemployment figures will be higher given all the layoff notices going out, the administration would like nothing better than to have these numbers delayed until after election day.

Too conspiratorial? Maybe, but it would fit a pattern lately of flawed data coming out of the government.

We'll see.

Friday, October 26, 2012

Q3 GDP Prints at 2%. More Funny Numbers?

In the second Quarter GDP first printed at 1.7% and then was revised downward to 1.3% which is quite anemic and well within the the fudged CPI variance between the BLS(BS) and reality. Though 2% doesn't sound too bad consider this:

click to enlarge graph

Government consumption, primarily defense spending was .71%! Pretty unusual if you look at the graph above where government consumption was a drag (negative) on the economy. I'm sure, however, this is completely coincidental.  So if GDP was 1.29% without this one time spending and revised down by .4 as it was last quarter we would be left with .89% GDP for the quarter. That would be more than just anemic, but indicative of a coming recession.

But does it make sense? Well, given that corporate earnings reported over the last two weeks have not been good and the seemingly endless announcements of layoffs, it would indeed, seem to make sense.

Oh, and to add to that list of newly unfortunate newly laid off you can soon add another 10,000 at UBS.

Thursday, October 25, 2012

It Wasn't Just my Imagination

In the beginning of October, in a post titled More BLS(BS) and dead fish I noted that there had been an uptick in lay off notices lately. It wasn't just my imagination:

As I said then, we may be entering a recession once again before we've recovered from the last one. If so, this would be similar to that of the Great Depression where there were periods of growth but without a full economic recovery. 

Sunday, October 21, 2012

China Gold Imports Up 512 Tons Year to Date and Counting

Over the last ten months I have pointed out that demand for physical gold was increasing and that much of the demand was coming from China. Because China does not often provide information on their gold holdings it is often difficult to know just how much gold they have. This has led to much speculation. Today though, we get a least a partial update (Though I suspect given Chinese lack of transparency the real number may be even higher):

First it was more than the UK. Then more than Portugal. Then a month ago we said that as of September, "it is now safe to say that in 2012 alone China has imported more gold than the ECB's entire official 502.1 tons of holdings." Sure enough, according to the latest release from the Hong Kong Census and Statistics Department, through the end of August, China had imported a whopping gross 512 tons of gold, 10 tons more than the latest official ECB gold holdings. We can now safely say that as of today, China will have imported more gold than the 11th largest official holder of gold, India, with 558 tons.
Yet despite importing more gold than the sovereign holdings of virtually all official entities, save for ten, importing more gold in July than in any month in 2012 except for April, importing more gold in 8 months in 2012 than all of 2011, and importing four times as much between January and July than as much as in the same period last year, here is MarketWatch with its brilliant conclusion that the 'plunge' in gold imports in August can only be indicative of the end of the Chinese gold market, and the second coming of infinitely dilutable fiat.
“China’s near-term appetite for gold appears to be waning as bullion imports from Hong Kong slow,” HSBC analysts said in a note following the data release last week.

Anecdotal evidence also pointed to the cooling trend, with one Hong Kong bullion dealer saying the word from mainland clients was that gold inventories are saturated.

“What we are hearing from our customers is that they were buying gold rapidly over the last couple of years, but they would now see some of their stocks sold off before they rebuild some of their inventories,” Scotia Mocatta managing director Sunil Kashyap said in Hong Kong.
There is spin, and there is of course, reality. We urge readers to identify where on the chart below is the evidence of Chinese disillusionment with gold:

Furthermore, with the status quo cartel in desperate need of China stepping up its monetary easing, and jumping right into the race to debase, which is absolutely critical to halt the plunge in tech company revenues and earnings, any interim slowdown in purchases is merely a springboard for even more purchase in the future once inflation does come back to China with a bang.
Incidentally, one thing that MarketWatch completely forgot about is that in Q4 Chinese gold purchasing, all monetary else equal, is set to spike in Q4. From the South China Seas:
Fung expects gold imports on the mainland to stay soft this month as prices have continued to remain high.

"However, gold consumption is likely to climb again in the fourth quarter, a traditionally peak season when Chinese people buy gold jewellery for weddings and presents," he added.
All rhetoric aside, one unspinnable aftereffect of China's relentless appetite for gold comes from a different place, namely Australia, where gold just surpassed coal as the second most valuable export to China. From Bullionstreet:
Australia's gold sales to China hit $4.1 billion in the first eight months of this year as it surged by a whopping 900 percent.

According to Australian Bureau of Statistics, the yellow metal became the second most valuable physical export to China, surpassing coal and only behind iron ore.

The unprecedented jump in gold sales, along with continued acceleration of export revenues for other commodities led by coal, up 80 per cent to $4bn, caused total exports to China to rise by 10.7 per cent for the year to August, the Bureau said.

Perth Mint supplied most of the gold to China through a variety of banks.

Analysts said Chinese buyers are hoarding the precious metal amid a slowing economy, property-buying restrictions and uncertain financial markets as its central bank increases its holdings.

China's foreign currency reserves of gold are low and its move to build them up will provide an important base demand for gold, they added.
In other words, take the chart above, showing only Chinese imports through HK, and add tens if not hundreds more tons of gold entering the country from other underreported export channels such as Australia. One thing is certain: China no longer has any interest in buying additional US Treasurys. What it does have an interest in is up to readers to decide.

For previous stories on Chinese gold buying click the links below:

 Titanic War in Gold Between East & West

 Hong Kong to Open 1,000 Metric Ton Gold Vault

 China Imports More Gold From Hong Kong In Five Mon...

 News From the "London Trader"

 More Gold is Leaving "The System"

 John Embry on China & Gold

 More on China and Gold

 China takes advantage of US Fed stupidity

Wednesday, October 17, 2012

How Gold Gets to $12,884 per Oz (Updated w/ Further Explanation)

In my last post I pointed out the relationship between gold and both the monetary base and the national debt. Gold prices in US dollars has an extremely high correlation to both. Today, via Zerohedge, I'll point out gold's value using the metric of the "coverage ratio" which is merely the price gold would have to trade at to back the amount of dollars printed 100% by the gold the Fed claims we hold in our national vaults.

As we will see, this historic average has been 40%. That is, we could back 40% of the currency outstanding with the national gold holdings we have. To be on a true gold standard would require 100% backing of our currency with gold. Today, as you will see below, the ratio is at the historic low of 17%. Which means we have printed so much money in recent years, we can only back 17% with gold at the current price. Below, the chart shows the required gold price at several ratios given the an anticipated $700 Billion of added dollars to the Fed's balance sheet through continued QE operations.

Even though we have presented comparable scenarios looking at the coverage of the US money base in gold terms previously, aka "gold coverage" ratio, including once from Dylan Grice, and once from David Rosenberg, now that we have drifted into a new, previously unchartered and very much open-ended liquidity tsunami, it is time to revisit the topic. Luckily, Guggenheim's Scott Minerd has done just that. Not only that, but he presents three distinct gold pricing scenario, attempting to forecast a low, medium and high price range for the yellow metal.
To wit: "The U.S. gold coverage ratio, which measures the amount of gold on deposit at the Federal Reserve against the total money supply, is currently at an all-time low of 17%. This ratio tends to move dramatically and falls during periods of disinflation or relative price stability. The historical average for the gold coverage ratio is roughly 40%, meaning that the current price of gold would have to more than double to reach the average. The gold coverage ratio has risen above 100% twice during the twentieth century. Were this to happen today, the value of an ounce of gold would exceed $12,000.” 

Tuesday, October 16, 2012

Gold Price Got You Down?

Here's just a reminder of one of the factors with the highest correlation to gold:

Now I may not be a genius, but I can see that as long as the national debt is increasing, so to must gold. And Where is our national debt at?

Click here for a live update

Jeff Clark from Casey Research also points out the high correlation with the monetary base:

Friday, October 12, 2012

The US Will Be the Last Domino to Fall

Michael Krieger is a former oil analyst for Lehman Brothers and writer of opinions about global macro economics for the investment community around the world. Many of his opinions reflect my own, though he is much better at articulating them than I am. For this reason I'm re-posting  his writing. Michael describes in the post below his surprise that the central banks have been able to hold things together as long as they have since the crisis of 2008 just as I have been. But unlike me, Michael sees a bigger picture and sees the collapse has already begun in other countries and will soon spread here. Markets can often seem completely calm on the surface just before things quickly go terribly wrong. This was the case with Greece sovereign bonds. Greece enjoyed low interest rates as a member of the EU until one day...they didn't anymore. Markets are like that. They can switch on a dime. Pay special attention to his analysis of the Dow:Gold ratio and his thoughts on Treasuries. The most important message though is that time is running out to prepare.

Titanic War in Gold Between East & West

As gold moves mostly sideways since the announcement of QEternity its worthy to note there is a titanic struggle in the gold markets between central banks of the West who want to keep gold prices down to hide the negative effects of unlimited printing and Eastern (mostly China) central banks that are using the artificially low prices to acquire huge amounts of gold to diversify their currency reserves and hedge their US dollar and Euro positions in government bonds. There's no way to know how long this struggle continues or which way gold might break in the short term but one thing is for sure: Western central banks must supply the gold that Eastern central banks are taking delivery of. Paper derivatives are not going to satisfy the Chinese. They know the game. So how much gold will Western central banks give up to preserve the current price? Who knows, but I'm sure this won't end well for those of us in the Western hemisphere. John Embry has more:

Thursday, October 11, 2012

BLS strikes again. Jobless #'s Missing CA!


Just a quick note following the manipulated jobs figures. Today the BLS(BS) reported the number of new jobless claims dropped from an adjusted figure of 369,000 last week to 339,000 this week.

From the Department of Labor:

The Labor Department said weekly applications fell by 30,000 to the lowest level since February 2008. The four-week average, a less volatile measure, dropped by 11,500 to 364,000, a six-month low.
Applications are a proxy for layoffs. When they consistently drop below 375,000, it suggests that hiring is strong enough to lower the unemployment rate.

Only problem? The new numbers are missing a "large state" that did not submit their numbers in time.

From businessinsider:

  • It is likely that some of the jobless claims in one large state--California--were not included in the claims reported to the Department of Labor this week.  This happens occasionally, our source says. When a state's jobless claims bureau is short-staffed, sometimes the state does not process all of the claims that came in during the week in time to get them to the DOL. The source believes that this is what happened this week.
  • The California claims that were not processed in time to get into this week's jobless report will appear in future reports, most likely next week's or the following week's. In other words, those reports might be modestly higher than expected.
  • The source believes that the number of California claims that were not processed totalled about 15,000-25,000.

Read more:

I'm sure this was just an oversight by the Democratically controlled state of California.

In normal times it would be absurd to think that agencies of the government would manipulate economic data. But one wonders, in light of a highly politicized EPA and National Labor Relations Board that has openly pushed a partisan agenda, just how far and deep does the rot go?

If you go back to my last post you'll see a list of mass layoffs announce by large companies. Ask yourself, "Do the unemployment numbers and new unemployment claims numbers make sense?"

UPDATE 10/12/12

Looks like California is denying the state is them, but businessinsider is holding to their guns.

Click below for more

Tuesday, October 9, 2012

More BLS(BS) and dead fish

Suspicion of the 7.8% unemployment rate is rising not waning.

From Trimtabs:

  • Largest September one month gain in BLS data since 1948!
  • Rarely in September do the number of employed increase.
  • Has happened only six times. Four times it was less than 100k.
  • 775k This time!
  • Since 1955 every September the number of part time workers fell. This time it exploded.

Friday, October 5, 2012

Unemployment at 7.8%????

The Bureau of Labor Statistics (BLS) reported today that 114,000 jobs were created last month and the unemployment rate fell to 7.8% (U-3). Some have been a little more than skeptical. Rick Santelli of CNBC, who had predicted the rate would cross below 8% before the election said, "I told you so!".

Jack Welch Tweeted: Unbelievable jobs number..these Chicago will do anything..can't debate so they change the numbers".

One might be excused for a little suspicion. The economy must add anywhere from 150-200K jobs per month to just keep up with the population increase. So how does an anemic 114K jobs lower the unemployment rate the most in 24 years??