The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

My early morning reads:

• What Game Theory has to do with Market Volatility (Bloomberg)
• Bernanke-Led Economy Shows Critics Wrong About Fed (Bloomberg) see also To Senators, Bernanke Defends the Fed’s Dual Objectives (NYT)
• Retail: The decline of the shopping mall (CS Monitor)
• Blue Chips Hit a Yearly High (WSJ) see also Stop The Presses, Dr. Doom Is Turning Bullish (WSJ)
• Proposed settlement with banks over foreclosure practices dealt a setback (Washington Post)
• Another Year of Fear for Municipal Bonds (WSJ) see also BlackRock, Fidelity, Schwab Signal Demand for Corporate Bonds (Bloomberg)
• Time to close the carried-interest loophole (Washington Post)
• Self-Inflicted Blindness: The Austerity Threat To Innovation (Forbes) see also The hazards of crisis management (The Economist)
• Apparently, Richard Nixon was a Leftist: 1971 SOTU Address (Credit Rightdowns)
• The iPhone is a nightmare for carriers (CNNMoney Tech)

What are you reading?

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It’s Time To End the Greek Rescue Farce

Source: Spiegel.de

Dow Theory — a study of the relationship between the Industrials and the Transports — are suggesting a potential inflection point is nearing.

A move above 12,900 in the Dow Industrials would surpass the April 2011 highs, and the bulls would like to see that confirmed by the Trannies getting over 5630.

As we see from the indices via The Chart Store below, both the Industrials & Trannies are on the verge of that breakout. Just note that Classic Technical analysis requires you wait for the breakout/breakdown confirmation, rather than anticipate it.

Caveat: I am not a Dow Theorist, and this is a grossly oversimplified explanation. For more details, Wikipedia has an excellent primer on the major tenets of Dow Theory. Or check out Richard Russell’s The History of the Dow Theory.

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Click to enlarge:

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Source: The Chart Store

My afternoon train reading:

• Americans Gaining Energy Independence With U.S. Emerging as No. 1 Producer (Bloomberg)  see also Messages show conflict within NRC after Japan earthquake and tsunami (Washington Post)
• Advice for Advisors: Stop Talking and Start Listening! (Financial Sense) see also Mastering the Mad Scramble for New Clients (Registered Rep)
• Target at Post-Bailout GM: Earning $10 Billion a Year (WSJ) see also Bush Tells Dealers He Avoided ‘Gamble’ in Bail Out (Bloomberg)
• Bernanke: Fed Policy’s Encouragement of Risk Is by Design (Real Time Economics) see also Investors Place Their Money on Fed (WSJ)
• Is Facebook accurately counting its daily active users? (CNet) see also Facebook “Jumps the Shark” Interview with Michael Whalen (IRA Analyst)
• MF Trustee Traced $105B in Cash Movement (Bloomberg) see also Challenges for MF Trustee (WSJ)
• Bartlett: Tilting the Budget Process to the G.O.P. (Economix)  see also The Business Cycle Throws The GOP A Curveball (Forbes)
• Beast With Four Tails: Milky Way Devouring Neighboring Dwarf Galaxies (Science Daily) see also Galaxy Hosts 100 Billion Planets, in New Estimate (WSJ)
• Romney Finding Support Where Women Hold Sway (WSJ) but see Are Republicans About To Commit Medicare Suicide? (TPM)
• Truth, lies and Afghanistan (Armed Forces Journal) see also What goes on in the mind of a sniper? (BBC News)

What are you reading?

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Dollar’s China Conundrum

Source:WSJ

Click interactive chart to see which sectors have lost or gained the most jobs cumulatively since the recovery started:

Source: WSJ, January 4, 2012

Nice SocGen expression of how the search for yield has manifested itself in different asset classes:

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Click to enlarge

Source:
Societe General – Cross Agent Research
The Global Income Investor
January, 30, 2012

Barry has been crushing the BLS flat-earthers the past few days.

Resistance, however, is futile.  Try as I might not to opine on the 1.2-million-one-month-drop-in-the-labor-force, I cannot help but spill a few pixels of my own.  So here goes.

Let’s start with last month’s BLS Employment Situation release.  It contained a box, on Page 4 (of the PDF), that included the following heading and text (emphasis mine):

Upcoming Changes to the Household Survey

Effective with the release of The Employment Situation for January 2012 scheduled for February 3, 2012, population controls that reflect the results of Census 2010 will be used in the monthly household survey estimation process. Historical data will not be revised to incorporate the new controls; consequently, household survey data for January 2012 will not be directly comparable with that for December 2011 or earlier periods. A table showing the effects of the new controls on the major labor force series will be included in the January 2012 release.

So right there, in black and white, BLS explicitly told its users that January 2012 and December 2011 (and earlier) simply would not be comparable — and that would obviously be the case notwithstanding how the various numbers broke.

Overlooking that caveat is one thing, I guess.  Being corrected all over the web and then not correcting and/or retracting is something else altogether.

ADDING:  For what little I’m sure it’s worth, whenever I have had a question about an economic release — and that’s dozens (hundreds?) of times — I have picked up the phone and inquired directly of the issuing agency.  Guess what?  They’ve always been happy to help.  Point being, there’s no need to go out with bad information or run your mouth when you have doubts.  Of course, this will be of no comfort to the tin-hatters who claim the agencies are in the bag.

Source:
December 2011 Employment Situation
BLS Employment Situation News Release, Friday, January 6, 2012
USDL-12-0012

My morning reads:

• Those Millions on Facebook? Some (most, actually) May Not Actually Visit (DealBook)
• All measures of unemployment are falling (Washington Post) but see Is glass half empty or half full? (Market Watch)
• This is NOT a tech bubble (CNN Money)
• Yeah! DOX Faces Forgery Charges in Mortgage Foreclosures (NYT)
• Admit It: Countrywide Is Bankrupt (American Banker) see also For Sale: AIG’s Subprime Bonds (WSJ)
• The downward mobility of the American middle class. (CS Monitor)
• Bondpocalypse? Again, Don’t Count On It (WSJ)
• CR says “The Housing Bottom is Here” (Calculated Risk) see also Banks Pay Homeowners to Avoid Foreclosures (Bloomberg)
• The meaning of the Transports’ weakness (Market Watch)
• Chrysler and Clint Make Obama’s Day (and Ruin Karl Rove’s) (NY Mag) and Clint Eastwood defends himself over ‘political’ Super Bowl ad (Telegraph)

What are you reading?

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Bulls on Asia See Room to Roam

Source: WSJ

Yesterday, I went into some detail as to why a few people got the NFP data so (disingenuously) wrong. Then Invictus pointed me to this Economic Populist post, titled, Getting It Wrong on the BLS Employment Report. It came out late on Friday, hence why it may have been overlooked.

The long term chart via FRED shows the impact the Census has every 10 years on the civilian population. As you can see in the first chart below, this baseline adjustment to population is about 25% larger than 1989′s, but 35% smaller than 1999′s:

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Decennial Change Reflecting BLS incorporating Census Readings

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The next chart shows the BLS annual population benchmark to make sure their models reflect the latest estimates of population size, growth and characteristics. Note the monthly change between December and January every year — that is the yearly population adjustments.

These are not month-over-month changes, they reflect the adjustments made for the prior year showing up all at once in the month of January.

Hence, to quote the Economic Populist, “it is statistically invalid to compare December to January monthly changes. You simply cannot compare a change of a month, when one of those month’s includes a year of population adjustments.”

Annual Change in BLS Population Measures

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Anyone who thinks that 1.2 million people suddenly dropped out of the labor force needs to take a basic statistics course. I wont hold my breath waiting for the usual suspects to admit their errors.

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Source:
Getting It Wrong on the BLS Employment Report
Robert Oak
Economic Populist Fri, 02/03/2012 – 21:46,
http://www.economicpopulist.org/content/getting-it-wrong-bls-employment-report

I cannot go into the details, as the entire conversation was off the record — with an adversary of Hank Paulson’s.

However, I can tell you that, despite disagreeing with the bailouts & TARP that was put into place under his regime at Treasury, Hank Paulson may actually be a decent guy.

When you look at the rest of the parade of folks who helped contribute to the crisis — from the people at Treasury (Paulson, Geithner, Summers, Rubin) to the Fed (Greenspan, Bernanke) to Senate (Gramm, Leach, Bliley, Schumer), there certainly is plenty of blame to spread around a bunch of unsavory characters. Greenspan deserves much more blame than Bernanke (I also believe Bernanke is a decent man).

But Paulson did a few things that are not known, and probably wont be publicly revealed until the end of this year — if at all. His subsequent actions since leaving Treasury have actually surprised me.

This actually comes from an adversary of his. I will reveal all when I get permission, or when the book comes out, if ever — and if not, well, you just have to trust my judgment on this.

More to come later . . .

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UPDATE:  February 7, 2012 4:57am

Geez, y’all completely misread this.Settle down.

I didn’t say I upgraded him to Saint — I thought he was an god-awful jackass who oversaw the greatest theft in history, transferring trillions from taxpayers to incompetent bankers. After leaving Treasury, Paulson did a few things that surprised me and made me think he was more decent than I previously did — thats all.

However negative I was previously about current Treasury Secretary Tim Geithner, after Monday’s lunch I am even more negative than ever.

My afternoon train reading:

• Stocks Least Loved Since ’80s (Bloomberg)
• Ahhhnold & Michael Lewis: California and Bust (VF)
• The Unintended Consequences of Tech Stock Repurchases (NYT)
• Debit-Card Pitchwoman Orman Flirts With Conflict (Bloomberg)
• Old mortgages rise from the dead, haunt homeowners (Reuters)
• If I Were a Broker, Here’s How I’d Sell Facebook (The Reformed Broker) see also Tech Survey (Financial Planning)
• Never Mind the Tax Cheats — Go After the Tax Code: The Ticker (Bloomberg)
• Obama holds edge over Romney in general election matchup, poll finds (Washington Post)
• Macworld 2012 (Shawn Blanc)
• Ground Hog Day Comedy First (New Yorker)

What are you reading?

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Shaky Profits Threaten U.S. Stock Rally

WSJ