Andy Hoffman ~
Every first Friday of the month, for the past eleven years, I have been forced to endure the Cartel's top "Key Attack Event"; i.e., the NFP employment report. As the government controls the highly manipulatable data - and "short sell" buttons on COMEX keyboards - it can turn any such report into a major economic "statement." Over the years, the NFP has become the world's most blatantly "cooked" report; with the Obama Administration taking such rigging to a new level ahead of last year's re-election campaign. Not only that, it can't even "keep its algos to itself"; as for the second straight month, pre-release market moves - in what else, but gold - indicate illegal front-running of its own report.
Of course, just as I wrote yesterday regarding the supposedly "strong" GDP report, the extent of data manipulation has become so transparent, even a reasonably intelligent fifth grader could spot it. When it comes to GDP, both its components and "price deflator" are highly suspect; particularly the latter, as government inflation assumptions have never been further from the reality of our daily lives. As for the NFP report, the "birth-death model" alone should alert you jobs are literally being made up; much less, the fact that historical birth-death data is nonsensically altered and/ordeleted each month. Then you have the pathetic job "quality," available for the entire world to see. With continuously strong growth in waiters and bartenders, as well as temporary help and other minimum wage service jobs, it's plain to see that such "growth" is, if anything, depicting a dramatic weakening of core economic activity. And I won't even speak of Obamacare, which will only accelerate the secular trend toward part-time, no benefits jobs.
Finally, you have the math itself; depicting a real rate of unemployment dramaticallybelow the reported "headline number." This month (October), the latter was reported at 7.3%, up from 7.2% last month - and a far cry from the Fed's "taper target" of 6.5%. However, John Williams of Shadow Stats depicts a true 'underemployment' rate closer to 23%; which, in my vernacular, measures the percentage of people that can't pay their bills with employment wages. Perhaps, this explains why more than half of all Americans receive government entitlements, including nearly 60 million on either food stamps or the world's fastest growing program, "disability" (watch this). Don't believe me? Just watch a few episodes of Judge Judy, and you'll be shocked at how many healthy-looking people claim to receive taxpayer-funded disability checks.
After such reports, gold typically "soars" (in quotes, because such gains are typically capped at 1.0%), or plunges into a bottomless pit; as after years of such manipulation, the handful of remaining "market participants" have been conditioned to believe gold is by far the most "sensitive" asset to employment data. Yes, gold; an inert metal, that has preserved purchasing power for centuries against government printing presses, has been deemed to be massively vulnerable to the whether or not fabricated monthly jobs reports are "better" or "worse" than expected. And as I noted earlier, "better" and "worse" have now become so subjective, it's hard to believe anyone can make a decision in such a rapid amount of time - such as today's prototypical waterfall decline; which as I noted above, commenced a minute before the report was released...
Regarding this particular NFP report, it takes data manipulation to a new low. But then again, as noted above, one simply needs to look to its internals to realize how poor the report really was. Sure, the headline print of 204,000 was well ahead of the 125,000 "consensus estimate"; and sure, the past two months were revised upwards. However, last month they were all revised downward; and over time, nearly all such data trends in the latter direction. Combine these monthly revisions with the annual "benchmark revisions," and the picture of a BLS with utterly no clue what it's doing emerges.
Next, throw in 126,000 phantom "birth/death jobs"; plus, the fact that more than600,000 full-time jobs were lost, in lieu of part-time ones; and the miserable qualityof new jobs created, and it becomes painfully clear the data is horrible, erroneous, or both. Not to mention, the fact that essentially all pre-NFP data suggested decliningOctober employment - including the typically over-optimistic ADP report, which last week reported a decline in employment growth to six-month lows. Throw in the 16-day "government shutdown" and the likelihood of "much stronger than expected" NFP employment was slim to none. That is, if such data were real.
Irrespective of government lies, absolutely nothing reported would have causedfreely-traded gold and silver prices to decline - let alone plunge; particularly the fact that the Labor Participation rate plummeted from 63.2% to 62.8%, as a whopping 932,000 people dropped out of the U.S. labor force, to a record 91.5 million. Yes, the third largest monthly Labor Participation decline in history - dropping it to 1978 levels; and yet, we're told this was a "great" jobs report.
As for equities, their initial reaction was to decline; as they should, per the title of this article. Throw in today's S&P downgrade of France - from AA+ to AA; a report depicting record Japanese poverty (money printing causes the same income disparity everywhere); the negative aftermath of yesterday's ECB admission that the European economy is collapsing; and a shocking report depicting how 99% of all U.S. consumer credit over the past year has been utilized to pay off student or car loans; and the net impact is actually a quite miserable day of "horrible headlines." And oh yeah, 90 minutes after the NFP report, U.S. consumer sentiment printed way below expectations; depicting a sharp decline, to December 2011 levels.
However, equities have not been allowed to turn negative; and as I write at 10:00 AM EST, are taking off, per a perfect, POMO-driven dead ringer trade pattern; as for the time being - and I do mean time being - Federal Reserve printing presses and PPT algorithms are in control. And that includes scarce "down days" as well; as I'm sure it won't shock you that yesterday's Dow "plunge" stopped at exactly 1.00% - i.e., what I long ago deemed the PPT's "ultimate limit down." To wit, I wrote yesterday of how the stock market has officially moved into bubble territory; as beyond the typical PPT buying of Dow Jones Propaganda Average futures, the public is finally being drawn in near its all-time highs (excluding inflation, of course). IPO mania - particularly in the amorphous tech space - has nearly reached 1999's historic levels, and the Fed's money printing is entirely to blame - per below. In fact, Twitter's current valuation is so off-the-charts, it makes Facebook look cheap.
As for the title of this piece, I'm sure some of you have already figured it out. For months, I have written of why TPTB's "Achilles Heel" is the artificially low interest rates they have predicated their historic "can kicking" scheme upon. No matter what it has caused massive global inflation - per the "Most Important Article I've Ever Written" - or the greatest income disparity since pre-revolution France. No matter how you slice it, the only way to maintain the soon-to-be-short-lived status quo is by holding rates at record low levels - by hook or crook. This is why the Bank of Japan is doubling its money supply in a two year period; whilst the Bank of England continues with a $600 billion QE program amidst an historic housing bubble; the ECB lowered rates from 0.50% to 0.25% amidst a supposed "recovery"; and the Fed has not "tapered" despite repeated calls for such.
In a nutshell, the Fed cannot reduce purchases of Treasury or mortgage bonds underany circumstance - particularly as the Chinese have now become net sellers. I'm not sure how much clearer the housing data can be, with mortgage applications this weekhitting 10-year lows, whilst pending home sales plunged to three-year lows amidst already plunging home affordability. This week's interest rate surge will only make things worse; and if the government continues to put out "better than expected" economic data, it will only put the final nails in its own financial coffin.
Higher rates will destroy what's left of the "recovery" - if there ever was one; much less the solvency of thousands of institutions holding overweight positions in fixed income assets - particularly the Federal Reserve itself. Yes, care of "Operation Twist," QE3, and QE4, the Fed now owns a whopping 32% of all outstanding Treasuries and 45% of all mortgage-backed securities; numbers, by the way, that continue to rise with each passing day. Moreover, in forsaking its historical practice of holding onlyshort-term bonds - due to the necessity of bailing out insolvent TBTF banks holding toxic, longer-dated paper - the Fed has created an historic duration trap that will consume all its capital. This, of course, will only prompt it to turn up the printing presses higher.