Tag: finance

Submitted by Lance Roberts via RealInvestmentAdvice.com,

President Obama Creates 15M Jobs

In a recent op-ed by President Obama for the economist wrote that his team has created a “more durable, growing economy” with “15 million new private-sector jobs since early 2010.”

No. Not Really.

But, hey let’s give him, and the mainstream media that recirculated this overly-optimistic spin, an “A” for effort. The chart below shows the total number of jobs created by each President going back to Ronald Reagan. Since the President takes office on January 20th, I have calculated the job gains from February 1st through the end of their Presidency. (Importantly, President Bush only served one term following Reagan.)

“But, hey, he still created almost 11 million jobs. That’s good, right?”

But even this measure of job-creation is inaccurate for several reasons.

First, the President DOES NOT create jobs but hopefully fosters an economic environment that is beneficial for job growth. Given the onset of a massive number of additional regulations, the attack by the EPA on companies progress the Administrations “climate change agenda,” higher levels of taxation and higher health care costs due to the Affordable Care Act, it is actually surprising job growth has been as strong as it has. According to the NFIB, small businesses make up roughly 80% of all businesses that hire employees in the country. It is difficult for them to hire when their top three concerns are Government Regulations, Taxes and Labor Costs. (Note: When labor costs become a rising concern, as they are now, it has generally been a decent leading indicator of a recession.)

Most likely, had the President not done anything, job growth would have actually been the same or better. This is simply due to the fact that employment increases are affected by increases in the working-age population. Which brings me to my second point. 

What is never discussed in the monthly job reports are the number of jobs created versus the growth in the working-age population of the country. This is an important and overlooked concept. If 1-million jobs are gained, but the working-age population gains 2-million, there is a deficit of sufficient job creation to keep up with those needing work. When comparing job creation to working-age population, a different story emerges.

With the exceptions of Presidents Reagan and Clinton, the working age population has significantly outpaced the level of actual job growth leaving a rising level of individuals unemployed.

Importantly, as opposed to the total labor force calculation, this measure includes ALL individuals available, and of age, to work. 

It is here that we find the problem with the employment reports. The problem shown above is most often explained away by a rather sweeping statement:

“The problem with the labor force is due to the large number of ‘baby boomers’ retiring.” 

As I discussed recently in “Don’t Blame Baby Boomers For Not Retiring,” that argument doesn’t fly.

“This divide is clearly seen in various data and survey statistics such as the recent survey from National Institute On Retirement Security which showed the typical working-age household has only $2500 in retirement account assets. Importantly, ‘baby boomers’ who are nearing retirement had an average of just $14,500 saved for their ‘golden years.’”

With 24% of “baby boomers” postponing retirement, due to an inability to retire, it is not surprising the employment level of individuals OVER the age of 65, as a percent of the working-age population 16 and over, has risen sharply in recent years.

This should really come as no surprise as decreases in economic and personal income growth was offset by surges in household debt to sustain the standard of living. The reality is “baby boomers” are not retiring at a record clip. They simply can’t afford to.

 

If You’re Not Counted, Do You Not Count?

The most recent release from the Bureau of Labor Statistics on employment for the month of September was mostly disappointing with fewer jobs created than originally thought. But that begs the question of who is actually counted:

In order to be considered as unemployed by the BLS one must be:

• Unemployed, obviously, AND;
• Have ACTIVELY looked for work in the prior 4-weeks, AND;
• Are currently available for work.

If you do not fit that criterion you are not counted in the “official” employment report known as the U-3 report. Today there are more than 94-million individuals that do not fit the criteria and are simply not counted.

This is where the employment measures get a lot more obscured. As stated, out of the total population of 254,091,000 working-age individuals (16 and over) more than 94-million are not counted as part of the labor force currently. In other words, 37% of the working-age population is excluded from the employment statistics.

However, even with the exclusion of 1/3 of those of working-age, the labor-force participation rate, the number of individuals employed versus those counted as part of the labor force is still hovering at the lowest levels since the 1970’s. 

Importantly, there is also a stark difference between today and the 1980-90’s where the LFPR was rising versus a steady decline. Demographic trends, structural shifts in the employment makeup, and statistical measures all feed into this phenomenon and there is little data on the horizon which suggests this will change anytime soon.

If we really want to know how each President has fared in creating a better economic environment for average American’s, we should measure how they fared in improving the overall participation in the workforce. The chart below shows each President’s performance in the monthly net changes of the LFPR.

This paints a very different picture about the success of job creation in the country post the last recession. This is particularly the case when:

• 1 out of 5 households has NO ONE employed,
• 1 out of 3 individuals are dependent on some sort of social support program, and;
• Over 20% of personal incomes are comprised of government transfers.

But, despite all of the rhetoric, discussions, debates, excuses and finger-pointing in regards to the latest jobs report; there is only one chart of employment that truly matters: the number of full-time employees relative to the working age population. Full-time employment is what ultimately drives economic growth, pays wages that will support household formation, and fuels higher levels of government revenue from taxes.

Since this is a real measure of economic success, we can once again compare each President’s performance of the growth of full-time employment under their tenure.

The “good news” is that for those that are currently employed – job safety is high. Businesses are indeed hiring, but prefer to hire from the “currently employed” labor pool rather than the unemployed masses. More importantly, businesses are hiring only enough to keep up the incremental demand of population growth rather than expanding on the assumption of future growth.

This is the “new normal” of an economy where real economic prosperity remains elusive as the Federal Reserve’s interventions continue to create a wealth effect for market participants which, unfortunately, is only enjoyed by a small minority of the total population. For the other 80%, it remains a daily struggle to make ends meet.

 

More Deaths Than Births

 

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An oldie but a goodie… Didn't work today…

 

China's return from Golden Week combined with a dismal dump in ist trade data overnight has seenYuan volatility back on the rise…

 

Stocks are the biggest losers post-Fed Minutes…

 

Crude inventories rose, jamming oil lower, and then the narrative changed on the build (it was an imaginary build that was actually a yuuge draw) and oil ripped back above $50 and supported stocks…

 

Dow dipped below 18,000 but as Europe closed VIX was smashed lower and 18,000 was rescued…

 

Total desperation was unleashed to get stocks back into the green on the day.. but it failed…

 

Notably, the S&P 500 closed below its 100DMA for the 3rd day in a row – not happened since Feb…

 

Treasury yields fell on the day with the shorter-end back to unchanged on the week (2s30s slightly steeper)…

 

The USD Index fell for the first time in 6 days..

 

Copper was clubbed as Crude bounced and gold gained…

 

Copper was the biggest deal today but the dump'n'pump in crude was just farcical…

 

Leaving Copper at one-month lows…

 

Charts: Bloomberg

Bonus Chart: It appears the market is growing increasingly concerned at Hillary's lead…

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In recent weeks, Ray Dalio – a vocal proponent of QE4 and certainly against any form of monetary tightening – has been about as doom and gloomy as we have ever heard the head of the world’s biggest hedge fund. Just last week, we reported that the founder of Birdgewater, when speaking before the New York Fed, voiced his latest warning about the potential losses that would befall asset holders if interest rates rose by just 1%. Recall from his speech that “if interest rates rise just a little bit more than is discounted in the curve it will have a big negative effect on bonds and all asset prices, as they are all very sensitive to the discount rate used to calculate the present value of their future cash flows. That is because with interest rates having declined, the effective durations of all assets have lengthened, so they are more price-sensitive.”

And the punchline:

… it would only take a 100 basis point rise in Treasury bond yields to trigger the worst price decline in bonds since the 1981 bond market crash. And since those interest rates are embedded in the pricing of all investment assets, that would send them all much lower.

Using a Goldman calculation which we showed earlier in the year, we estimated that the impact of a 100bp shock to interest rates – the same one that Dalio envisions – and assuming a total US bond market size market size of $40trn, in line with estimates…

 

… the market value lost would be roughly $2.4 trillion. 

However, it is not just rising rates that trouble Ray Dalio. Recall that in an interview Ray Dalio gave to CNBC’s Andrew Ross Sorkin and Becky Quick in late January during this year’s Davos boondoggle, the Bridgewater founder made an even more stark warning: he said that if assets remain correlated and things continue to move in the “wrong” direction, “there’ll be a depression.” (3:35 in the clip below).

So, nearly one year later, where are we now? Sadly, it appears that at least one half of Dalio’s warning is being validated and is something traders should be concerned about, because as Citi’s Matt King reveals in his latest report today Asset correlations are not only higher, but the correlations themselves are becoming more correlated.

 

In case someone missed the message, here it is again…

Yet while traditionally rising cross-asset volatility has been resulted in volatility spikes, that is no longer the case due to outright vol suppression by central banks.

… or maybe vol is still present: one just needs to look elsewhere…

… and at different products, like the volatility of volatility.

Where does this repressed volatility come from? By now everyone should know the answer: central bank policies, of course.

And while central banks may have given the superficial impression of stability by pressuring volatility, they have also collapsed liquidity in the process, leading to less liquid markets, a surge in “gappiness”, and “jerky moves that are typical of penny stocks.”

And as the flow chart on the right shows, the greater the cross asset correlation, the lower the vol, the greater the repression, the more trading illiquidity and wider bid ask-spreads, and ultimately increased “gap risk”, which becomes a feedback loop of its own.

* * *

All of the above means that nearly one year after Dalio’s stark warning, the cross-asset correlations have grown even greater, and continue to rise with every passing day as central banks are forced to intervene increasingly more forcefully to suppress volatility – as of this moment, global central banks inject a record $2.5 trillion in fungible liquidity every year – in the process further fragmenting and fracturing an illiquid market which, as City wrily notes,  is only fit for “penny stocks.”

The good news, at least for the time being, is that Dalio have not liquidated his $150bn+ exposure; when considering that we now live in a world in which vol targeting and risk-parity funds such as Bridgewater’s All Weather fund, are some of the biggest marginal price setters, this may be the only thing preventing the market’s terminal breakdown, and the onset of the depression which Dalio himself predicted at the start of the year.

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While Deutsche Bank credit instruments hover near their worst ever, the stock price had been jawboned and squeezed higher enabling the issuance of more junk-priced debt… until today. The first close back below €12 in over a week has some worried, confirmed by Buba’s Dombret denial – “European bank sector concerns are overstated.”

• *DOMBRET SAYS CONCERNS ABOUT EUROPE BANK SECTOR OVERSTATED
• *DOMBRET SAYS SOLVENCY OF EUROPE BANK SECTOR NOT IN DOUBT

Record wide credit spreads, surging interbank rates, yuuge USD liquidity demand…

 

Yeah no ‘doubt’ at all.

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While markets wait for the election, getting closer by the day- one big question – in fact maybe the most important question – What is Trump’s plans (if any) for Fed policy?  As we explain in Splitting Pennies – Understanding Forex – Fed Policy (Monetary Policy) TRUMPS any regulation, domestic political policy, corporate policy, or social movement.  In fact – the only thing more powerful than Fed policy is a nuclear arsenal (which is why – there is a correlation between the most powerful currencies and the most powerful militaries).

The BIG Question

Even TRUMP supporters don’t know the answer to this question – because Trump never explicitly said it.  Maybe Trump doesn’t understand Fed policy.  He is sure of himself that he understands debt.  Maybe he does know – but also knows that the people don’t know so it’s pointless to talk about it.  Whatever is the case – we don’t know where Trump stands on the one issue that will determine America’s economic fate one way or another – Fed policy.  Will the Fed continue Quantitative Easing?  Will radical Fed policies clean up a junk filled economy (for example, by raising rates to 10%) ?  Will Trump nationalize the Fed?  (Maybe – that’s what the Elite are worried about!) – Let’s make one thing perfectly clear.  He can do it!   99% of ‘folks’ don’t understand what the President really does, what his powers are, for example the President is more of a ‘ceremonial’ and ‘cultural’ leader than anything else.. But Trump would have the power to do something like this if President.  Would he do it?  Something like this – just as an example – would transform Wall St. and the US economy completely.  Maybe, as we’ve covered in previous articles, this is THE REAL DEBATE going on right now at the Fed, and behind closed doors on Wall St.  

Let’s take a step back, and understand how far Presidential power stretches.  A great President, maybe one of only great Presidents-  Richard Nixon – Created the Forex market as we know it today.  In one swift move, Nixon defaulted on Bretton Woods and in the same moment, defaulted on his Gold obligations, and made the US Dollar the World’s Reserve Currency.  For detailed info about Nixon checkout this book.  Practically, although Nixon stiffed the French and other potential Gold customers that wanted payment in Gold – the world didn’t have many other choices.  For example, had France been stronger in that time, we’d all be using French Francs instead of USD.  Anyway, Nixon’s actions were a pro-Fed, pro-USD move- whether this was calculated or not is irrelevant.  The fact is that, the USD is really the only “One World Currency” in operation today, and will be for the forseeable future.  

In case you are not following the way the world really works, Read this book: Confessions of an Economic Hit Man.  This is a MUST READ for any trader, investor, economist, businessman, politician, lawyer, or anyone interested in the world.  The point here is that, yes – it’s true.  The Fed Chairman is the most powerful person in the world, because they control the money supply, the amount of US Dollars in the world, and the interest rates.  But – Trump could oust-em!  What does Trump think about the current Fed?  Well, he’s not happy with Fed policy, and says The Fed and in particular Chairman Yellen “Should be Ashamed”-

Republican presidential nominee Donald Trump on Monday accused the Federal Reserve of keeping interest rates low for political reasons, the latest in a string of often contradictory critiques of the nation’s central bank.

The Fed vehemently defends the setting of its influential interest rate as independent of political considerations — a principle that is considered fundamental not only to the Fed but for central banks around the world. Yet speaking on CNBC, Trump said Fed Chair Janet L. Yellen should be “ashamed” of keeping interest rates so low for so long.  “She’s obviously political and doing what Obama wants her to do, and I know that’s not supposed to be the way it is,” Trump said.

In another moment, Trump stated in crystal clarity, a moment of sobriety of sorts for Trump, that he’s aware – the game is rigged, and it’s all a house of cards waiting to crash:

The latest such comment came Monday, when Trump responded to a question from a reporter about the potential for a Federal Reserve interest rate hike this year. “They’re keeping the rates down so that everything else doesn’t go down,” Trump said, according to reports. “We have a very false economy.”  “At some point the rates are going to have to change,” Trump added. “The only thing that is strong is the artificial stock market.”

There we go- we have our answer.  At least, we have a hint on the answer.  But the BIG QUESTION remains – will Trump simply put in his own chairman – or abolish the Fed altogether?  Wouldn’t that be something.  Either way it seems Dollar Up for a Trump victory.  Put your limit orders in now – Open a Forex Account.

To learn more about how Trump can really affect the markets, if elected – checkout Splitting Pennies – Understanding Forex – YOUR GUIDE TO THE ELECTIONS ON HOW THEY CAN IMPACT MONETARY POLICY or in Plain English – How politics determines the value of what our dollars are worth, i.e. the dollar in your pocket.  For a more detailed Forex Education – Checkout Fortress Capital Trading Academy.

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Via The Daily Bell

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Submitted by Michael Krieger via Liberty Blitzkrieg blog,

I recently watched the recent Noam Chomsky documentary, Requiem for the American Dream, and it was excellent. I highly recommend everyone watch it since it provides a historical roadmap for how positive change happens. Lessons that we will all need to put into practice in the coming years if we want to take the world off its current collision course with disaster.

With Chomsky already on my mind, I was excited to see an article published yesterday at AlterNet titled, Noam Chomsky Unravels the Political Mechanics Behind His Gradual Expulsion From Mainstream Media.

Here’s what we learned:

Ralph Nader and leading linguist Noam Chomsky engaged in a much anticipated discussion in early October on Ralph Nader Radio Hour. The two raised questions about changing the media narrative in a totalitatian-like state, and how Chomsky got dismissed from the mainstream altogether.

 

“How often have you been on the Op-Ed pages of the New York Times,” Nader asked Chomsky.

 

For Chomsky, the last time was over a decade ago.

 

“[I was asked] to write about the Israeli separation wall, actually an annexation wall that runs through the West Bank and breaking apart the Palestinian communities… condemned as illegal by the World Court,” Chomsky told Nader.

 

Chomsky would later pen a similar piece for CNN on the 2013 Israeli-Palestinian peace talks. But Chomsky has never been interviewed on the network; Nor has he appeared on NBC, ABC or CBS.

 

“How about NPR and PBS, partially taxpayer-supported.. more free-thinking and more tolerant [outlets]?” Nader wanted to know.

 

“I’ve been on ‘Charlie Rose’ two or three times,” Chomsky told Nader, adding that he had a curious story about a particularly Boston outlet for NPR based in Boston University.

 

“They used to have a program in their prime time news programs all things considered some years ago at 5:25… maybe once a week or so, a five-minute discussion with someone who had written a new book and there’s a lot of pressure,” Chomsky began.

 

NPR was going to allow Chomsky to present his book, “Necessary Illusions: Thought Control in Democratic Societies” (1989).

 

“I  got a call from the publisher telling me when I should tune [in at 5pm] and I never listened [before], so I tuned in [and] there was five minutes of music… I started getting phone calls from around the country asking ‘What happened to the piece?'” Chomsky remembered.

 

He didn’t know.

 

“I then got a call from the station manager in Washington who told me that she’d been getting calls and she didn’t understand it because it was listed… she called back saying kind of embarrassed … that some bigwig in the system had heard the announcement at five o’clock and had ordered it cancelled,” Chomsky explained.

This is not what a free press looks like.

The irony of Chomsky’s media criticism being dismissed by the media is not lost on the former MIT professor, who remains constantly awed by America’s level of censorship.

 

“Any one of the former Bush-Cheney warmongers like Paul Wolfowitz and John Bolton and others have gotten far more press after they’ve left federal positions; in the New York Times The Wall Street Journal the Washington Post,” Nader said.

 

And unlike Chomsky, “They’ve been on television public television, NPR and they have a record of false statements; they have record of deception, they have record of pursuing policies are illegal under our Constitution under international law and under federal statutes such as criminal invasion of Iraq and other adventures around the world,” Nader pointed out.

 

But the media problem permeates thouroughly throughout other industries, like education and government.

 

“Now a society that operates in a way where propaganda is not only emanating from the major media but it gets into our schools, the kind of courses are taught, the content of the history, is a society that’s not going to be mobilized for its own survival, much less the survival of other countries whose dictators we have for decades supported to oppress their people,” explained Nader.

Below you can find Nader’s full interview of Chomsky as well as the trailer for the documentary, Requiem for the American Dream.

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One year ago, when it was still widely accepted conventional wisdom that NIRP would “work” to draw out money from savers who are loathe to collect nothing (or in some cases negative interest) from keeping their deposits at the bank, and would proceed to spend their savings, either boosting the stock market or the economy, we showed research from Bank of America demonstrating that far from promoting dis-saving, those European nations which had implemented NIRP were, “paradoxically”, also observing a jump in their rate of savings.

In what arguably was the first shot across the bow of conventional economic wisdom, BofA first admitted something which at least to its own conventional sensibilities, was quite amazing: NIRP is achieving the opposite of what it was meant to achieve.

The problem of low inflation remains evident. Swiss inflation has collapsed into very negative territory, albeit precipitated by the SNB abandoning their currency peg earlier in the year. While Danish inflation has moved away from zero post big rate cuts in 2015, it is still hovering at just 0.5%. And Swedish inflation has been stuck around zero since early 2013.

In other words, NIRP was pushing inflation lower, not higher, as the following stunner admitted:

Yet, household savings rates have also risen. For Switzerland and Sweden this appears to have happened at the tail end of 2013 (before the oil price decline). As the BIS have highlighted, ultra-low rates may perversely be driving a greater propensity for consumers to save as retirement income becomes more uncertain.

And the evidence as of October 2015:

 

One year later, everything has changed: not only has NIRP become “non grata” even among the caste of perpetually wrong career economists, but as a result of a scarcity in monetizable assets, something we first warned about in 2012, QE is no longer the preferred mode of monetary policy intervention, instead as the BOJ revealed last month, the current central banker intervention mechanism of “choice” is yield and curve targeting, something which has never been tried before, and which many – including Goldman Sachs – believe will fail.

But until it does, we present the latest testament to Europe’s 2+ years of failed Negative Interest Rate Policy. This week Eurostat published the latest quarterly savings rate data for the Euro area. What it found is that not only has NIRP not pushed savings lower, but at 12.8%, the gross household savings rate in Q2 2016 had risen to the highest level observed since the 13% in Q3 2011.

The good news: Europe’s savings rate still has a ways to go before it hits the crisis high 14.7% during the final quarter of 2008. But give it time, thought: with central bankers now openly improvising and in the process making the economic situation worse day by day, it is only a matter of time before savings not only hit new all time highs, but what until recently has been a trickle of disgruntled depositors pulling their cash from the bank and putting it in gold, as observed recently in both Switzerland and Germany, becomes a flood, presaging the end of the fractional-reserve banking model.

Until then, we can at least conclude that NIRP, yet another contraption created by economists to part savers with their money, has failed.

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