THE ARMY

The United States Army, besides being the most formidable fighting machine in the world is also the most cynical resivoir of black humor  around.  Killing people isn't easy and gettting killed is even worse so you need a bit of the former and a lot of the latter to survive.  On any base in the world, song will often break out;

"When you are down and out, lift up your hands and shout...S*&^!"

Or from the time in 'Nam and "Bad Moon Risin',"

"I hope you got your S*&^ together,
I hope you're ready for Paradise..."

It's one way to survive.

May jobs were revised down by 11,000.  Job growth in June was up by 287,000.  How the hell do you survive crap like this?  Join the Army?

Nobody believed it, but there it is (I want to say I told you so but I really didn't believe anything like this could/would happen).   But in a week when the head of the FBI brazenly prostitutes himself and destroys any remaining semblance of the rule of law I suppose I should have known better.

Equities went crazy with the Dow up 250 and the S & P within a smidge of it's record high.  The ten year hit it's record low--ever.  Joy in the economy?  Nope.  Two things have happened.  The consensus is..and I mean 100%...that the Fed is done until September at least; not good enough.  With the election, the Fed is done until 2017.  The second thing is the jobs number could have been a million, and it wouldn't have mattered.  Yield is all that counts and the flight to quality which continues apace has pushed investors to chase anything in equities that beats 1.33%; which means that there are a lot of people owning stocks that shouldn't.  The thing is way over-bought but unless you are willing to pay someone to hold your money it's all there is.  Normally a condition like this doesn't end well but we are in the "New Paradigme" aren't we?  Or are we?

It's going to be a lovely weekend, so I'm not going to worry.  I have a bottle of Clos de Beze in the cellar and I think I just might throw a steak on the grill and have a go.  What the heck, it's not worth anything anyway.  After all, it doesn't pay a dividend...and it's a great thing to have when you're sinkin' fore and aft.

JOBS NUMBER

For which everything stopped today in anticipation of Friday morning...but wait!  It might snow in D.C. and warnings are already out that it may be delayed!  What a country.  The nation's capital catches three inches of snow and everything stops...

There are clearly two camps emerging as to the state and direction of the economy; one is optimistic based on the data reported.  The other is pessimistic based on the data reported.  If there is any common ground it is that nobody really believes the data--or at least some of it--and the datum most in question is the jobs report

The latest argument on the optimistic side is being floated by those close to the Fed and the administration, namely that we really only need about 125,000 new entries into the work force to take care of the growing population which makes skeptics like me begin to think, "uh oh, bad news coming down."  Couple with this observation is the statement that  we have recouped all the job losses stemming from the economic crisis which while correct, doesn't mention that the country has about a 30,000,000 person increase in population since then.  Where did the rest of the workers go?  Into that 37.4% who are permanently unemployed or have dropped out.  The 4.9% unemployment rate, taking that grouping into account, quickly moves into the 8-9% range.  You see the unemployment rate only counts those who are looking for a job.  Or, as the kids say, whatupwiththat?

But, perception is damn important and if enough people perceive that things are looking up, it just might happen.  Hence, tomorrow's number is BIG.

Jamie Dimond was on TV this morning firmly placed in the optimists camp.  Of course he has just purchased $25,000,000 of J.P Morgan stock so he had better be there.  Funny thing is his chief equity guy came on later in the day and told everybody to lighten up given the chance of a recession later this year.  Gotta love those Chinese walls.  A new Fed tightening later this month is now almost completely off the table in the minds of most but "why" is the question.  Because of strength in the economy or because of fear of a new recession?  I keep be reminded of that old Chinese curse: "May you live in interesting times."

I confess, I have always been one who believed in the exceptionalism of the United States but as the world grows closer and more interdependent, I must wonder how we can be swimming against such a strong tide of economic reversal all about us.  A British newspaper carried a story yesterday that Brazil is in crisis and only the IMF could save them.  Curious, said I, and got in touch with My Really Smart Friend, Larry--who's somewhere East of Suez by the way, doing God knows what--to get his thoughts.
 
Yeah, Brazil stinks he says, but the IMF?  Nobody wants the IMF involved because they are clueless. Best thing that could happen is Dilma gets out of town as quickly as possible which probably won't happen.  He's right of course but there are an awful lot of people who would agree with the Brit newspaper and therein is the problem.  We continue to search for a savior for all our problems when the clear evidence indicates that there ain't many saviors about these days and those that were--the central banks and the IMF (a half century ago)--have run out of saving juice.  But we'll wait for the jobs report tomorrow which will of course be the definitive statement as to whether the saving best begin Over Here or not.   Yeah, sure.   Can't wait

...THE UNDISCOVERED COUNTRY FROM WHOSE BOURN

...no stock market may return (with apologies to the Bard).  The jobs number was below expectations at 173,000 but the upward revisions of those of the past two months gave a decent three month average.  That, coupled with a decline in the unemployment rate to 5.1% terrified the equity boys in their belief that the Fed now has enough ammo to raise rates in two weeks time.   Down went the DOW at the close by another 280 points.

The arguments against such an action seemed to focus on a grand worldwide economic thesis.  Simply put, we're fine, everybody else stinks and if you move Mr. Fed (or Ms., I guess) you are going to ruin us too.  I said yesterday that I can't understand how the hell a 1/4 point move on the short end could change anything and was today supported in that view with language just as strong by none other than Alan Greenspan.  I'm not sure I like that.

Mr. Greenspan gave a rather remarkable interview on CNBC this morning, not only deriding the fear of a rate hike but blasting in severe language the failure of the political class to deal with the fiscal issues facing us, particularly the growth in entitlement programs which in his words will destroy us if not reined in.  He was brutally direct which makes one wonder where the hell was THIS Alan Greenspan for the past 20 years because it was he who started this incredible flood of money into the economy and was the tutor for Mr. Bernanke who followed on and one-upped his predecessor with the completely useless QE programs which made the rich fabulously rich, did nothing for job creation or development and increased the flood of political donations to EVERYBODY to the point where no politician of any stripe gave more than lip service to fiscal responsibility.  Worse yet, the whole damned world followed our lead and aren't things looking just great out there?  Thanks Alan, ol' pal but rather than supporting me why don't you just wander off into the sunset with Andrea at your side and never be heard from again.

Labor day is upon us and the worst thing about that is we are closed for three days and the rest of the world for only two.  To say that markets are volatile would be the understatement of the year.  I can't believe that ANYBODY in any dicipline is short over this weekend and there is palpable dread over what might happen on Monday.  But if the belief that the Fed is going to move gains traction, what investors and traders will be facing is something that not too many of them remember or for that matter have seen: the end of a hugely growing pile of free money, and now what do I do Horatio?  Punt perhaps, which reminds me that all of my teams lost last night.  Today was a bummer all-around.  But comes the weekend which we will get through...we will, I'm sure of it...at least I think...oh heck, Tuesday is just four days away.

Have a great long weekend...if you are Over Here.

THE FED AND FOOLS

Three days away but the whisper number for the jobs report on Friday is a rise of over 200,000.  Now if this occurs, at some point as happened last month, someone will probably realize that these new "jobs" aren't quite what they are supposed to be consisting primarily of short-hour hiring rather that permanent jobs of a 40 or 30 hour week depending whatever the hell the administration needs to make Obama Care work.  Nevertheless, at the Fed policy meeting which began today, the number will probably be discussed and among the assembled gathering will probably be a good deal of what Sir Alex Fergie referrs to as "squeaky bum time" as the thoughts of "how the hell do we get out of this" resonates through the hallowed halls.  Therefore, everyone is waiting for the report tomorrow which, while reflecting (maybe) the consensus, could also be a pretty good indicator of the winner in the Chairman Sweepstakes: if the view is aggressive it will be taken to mean that Ms. Yellen has carried the day and that is exactly what The Leader will be looking for.  There's little secret in the fact that a Chairman Summers would get out of this thing as fast as the train would leave the station which, whilst the right decision, will spell kaput to a whole lot of things in an election year.

And speaking of The Leader, he was on the campaign trail again and while we all know he is possessed with one of the greatest intellects in history, from time to time he does mouth some curious utterances which, without the prior knowledge of his genius, might be taken for stupidity at work.  Today it was tax policy time in which the corporate tax rate was proposed to be cut to 28% leaving it at still the highest corporate tax rate  among first world nations (that means the competition) which will, we are told, result in the repatriation of some $2 trillion in cash from Over There to Over Here.  It will not.  Thank you for that Dear Leader, it is worse than useless.

Next up was the assertion that the XL Pipeline which makes so much sense not only economically but in a strategic a foreign affairs sense as to not really be worthy of discussion, would create only about 2000 jobs for a short period and no more that 50-100 jobs for the long haul.  It took about 30 seconds for a befuddled Canadian Resource Minister to point out that our Department of State in its official report to assess jobs creation at 40,000 and wonder whence this new found knowledge arrived?  He also managed to suggest that Canada might be a better partner that Venezuela and that we already import a million barrels of tar sand crude from Canada as The Leader was educating the world on this matter.  Gosh, just who can one believe these days?

But the best one of the day was the front runner for the Office of the Comptroller of the City of New York, Eliot Spitzer--you remember him, Client #9--telling Wall Street that if they play by the rules they have nothing to worry about.  That is Code for "You support me in whatever my next political campaign is and I'll leave you alone."  It is exactly the same game plan he used as the state's attorney general that got him into the Governor's mansion and his run-in with the Mann Act for which he was never prosecuted on the understanding--or so I am told--that he would never run for public office again.  This piece of garbage should be in a jail cell, but he just might win.  With the example of Detroit showing them what corrupt politicians can accomplish, the people of NYC will still vote for this guy.  Go figure.

THE NEW NORMAL?

Big day today.  Jobs number came in at 195,000, quite a bit above estimates.  The immediate reaction was the proclamation of the end of QE III and the beginning of "tapering" in September.  But unlike past good report that were interpreted to portend the end of easy money, today's report sent the DOW at the close shooting up 147 points, the ten year showing a massive rise in yield to 2.71% and the dollar rising against anything out there including the Yen (again) which seems no longer to be a real currency.  Shock all over yet just a few years ago this was what one would have expected to happen.  Are we in a New (old) Normal?  Time will tell, but in the meantime, folks are feeling pretty good which we can take except for the nagging fact that many of the jobs were part-time and that production numbers, except for motor cars, are less than inspiring.  Then again, this could be Euroland.

Speaking of which, things are looking decidedly lousy Over There highlighted by the fact that for the first time in it's history, the Bank of England, now led by a Canadian of all things, announced that no one should expect a change in monetary policies or interest rates soon, which in the trade is known as "targeting' and heretofore was simply, "not on."  Not to be out done, Sr. Draghi announced pretty much the same thing in telling people that any form of tightening or whatever the hell they call it was a long, looonnng way away.  As opposed to uninspiring, things stink.  Portugal's government barely survived.  Italy, as predicted, is floundering.  France is...well...France.  All Germany cares about is the election and Greece appears to be on the verge of not making it--whatever that may mean.

However, the true shocker of the week comes from all places, Ireland, where the release of previously unknown recordings from the bowels of the Anglo Irish Bank present a stunning picture of outright malfeasance, fraud, lying and cynicism, the fallout from which will undoubtedly extend beyond the Republic as it plays directly into the fears of the Volk as to for what their money has been used.  I must admit that way back when we used to joke about a dicey credit situation that "it wasn't our money" (ok, doesn't sound funny now) but it was in jest.  These guys were deadly serious: they knew it wasn't their money; were prepared to take stupid risks because it wasn't; expected to be bailed out and lied to insure the bail-out was coming.  They wrecked a nation's finances and were made whole on German money.  Jail is the only place for them but what sensationalism like this does is to remove all rationality from the discussion of risk and replace in with the pure thirst for revenge which does nothing now and which will affect the argument on both sides of the Pond.  Revenge, as the Italians say, is a dish best eaten cold.  Not now.  We have a long way to go as witnessed by the catastrophe that is Dodd/Frank which is proven to be even more unfixable than originally thought.  And just to square the circle, it appears that the Affordable Care Act may be even a greater catastrophe as witnessed by the Administration's executive order in delaying it's most important part for a year...although for the life of me I cannot figure out how an implementation date mandated by Congress can be delayed by another branch of government.  I'm sure The Leader will explain.

In all, this may turn out to be a blogger's summer with wild and wonderful things occuring.  In the mean time, we are off to see the triplets who turn six on Monday.  Talk about wild and wonderful.

WE

Wonderful number, super number, best imaginable number.  What?  The jobs report silly.  Not to low indicating that the economy is still in the tank and thank God not too high which might make the Fed rethink QE III.  If that were ever to happen...oh the horror of it all.

Funny part is the stock market was waaaaay up at the open and stayed up all day to close up 200+.  Helicopters for everybody out to the Hamptons.  But the big surprise of the day was the Yen/Dollar trade with the Yen coming out waaaaay on top which nobody really expected.  A new day dawning?  Not really.  With the number the Yen short positions got unwound and hence the big move to the strong side.  I suspect it will be temporary as the position of the Abe government is clear; he is determined to inflate the economy and the quickest way is through import price rises which if one stops and thinks for a minute must occur as the one critical import is oil and gas.  So I suspect that for those with staying power a short Yen position is the way to go.

Now I could care less one way or the other but I find it fascinating how we have suddenly plunged ourselves into a currency war in which the major economic players in the world are all on the same side and following the same hymnal.  Some might argue that if that is indeed the case then there is no currency war but ignore the fact that if one asks Brazil or Mexico or Thailand or Singapore the answer might be very different indeed.  A rapidly devaluing Yen plays havoc in Exporting Asia (everyone) and a falling dollar cross rate make life very difficult for a Brazil in attempting to control money flows.  Is the export scenario the only idea left to increase the economic outlook for what are supposed to be developed economies?  I hate to sound like a broken record but it should be even more apparent to everyone ( save perhaps Little Paulie) that we have been trying some version of this for the past 5 years and it hasn't worked very well.  What it has done is to place ourselves in an increasingly awkward position on which Alan Greenspan actually commented today as to whether the implied Fed target were reached or not to begin the scaling back of QE III, perhaps we should begin to do so in any case to avoid what will probably be a greater need at a more accelerated pace in the future.  An interesting comment from one who rarely has any comment on present Fed policy.

But today was "just right" as the story goes and we all went home happy.  Here's to more days like today.  But let us remember that out there in the 100 acre wood there are three bears some where none of which is named Shelia.  A wonderful forecast for the next few days in the fly-over zone.  I'm going to enjoy it.

I GIVE UP

I don't have a clue what's going on. This morning's jobs report was good--not great but good--inasmuch as it was well above estimates.  But 165,000 new jobs is going to get us out of this mess and everyone knows it.  Hoverer, the revisions for the past two months were absolutely stunning making one ask one's self. how whether is is possible to believe any of these numbers in light of revisions that are over 100% of the previously reported amount.  In any case the numbers were good and stocks reacted as expected with both the DOW and the S & P closing at all-time record levels.

But here's what I don't get.  The moment the number was announced the futures shot upwards in an almost perpendicular line.  At the very same instant, the DAX did the same thing, so what's going on?  Are German stocks now linked to the American jobs market?  Has global easing created a world-wide equity market that tracts precisely the cross border movements?  I never understood stocks and still don't but this morning was a new one for me.

Another thing.  The number was good for the U.S., no question about that.  So the country's good fortune should be good for the nation's currency, right?  Wrong.  The dollar got absolutely hammered in the morning and whilst there was some improvement as the day went on it closed down against everybody.  That goes contra to everything I was taught and runs counter to logic.  If anybody can tell me why, please call.  I called a couple of guys I still know in the business and got the same response: "Can't talk now, Charlie"...which means they learned from the same guy as did I and were being hammered.

When frustration like this sets in there is only one thing to do; go fishing!  And that is what I intend to do this weekend, heading down to Mexico in everlasting pursuit of the Marlin Azul which Captain Carlos and First Mate Lucho tell me will certainly be found and vanquished.  After 30 years, I might believe them this time but as the saying goes, They Don't Call It Catching.  Pray for gentle winds out of the right quarter.  In blue water when the wind blows sport fishing becomes a full contact sport and I may be too old for that.  See you May 13.  Feliz Cinco de Mayo!  With a bit of luck the world will survive with out me.

THE WEEKEND COMETH

...and it will be one of total politics except for one glorious interlude.  The jobs report today was awful, and while the unemployment rate ticked down to 8.1% that was only because of the fact that over half a million either left the job market or stopped looking for work.  The administration tried to hype the headline number but nobody was buying it and every market crashed including oil futures which fell four bucks to under $100.  Every talking head with an access to a microphone will be fighting for air time to tell us what this really means for the economy and for The Leader's re-election plans.  The consus  will be a grudging "not good" but rays of sunshine admid the clouds will be found.  In short, why listen.

Not so in Euroland, however, as the French will undoubtably choose a new president and the Greeks...well...the Greeks will choose someone or many ones leading to outbreaks of street demonstrations signifying...absolutely nothing as far as Euroland is concerned.  Everyone realizes Greece is gone and the only thing at stake is whether ther is a majority that pulls the country out right now or do we have to wait for another round of elections later in the year; I'm in the latter camp on this one.  Greeks are very good at theater and tragedies.  Ever hear the one about the Greek who offs his old man, marries his mother...you did, eh.  Sorry.

France is another matter. There's a bet going about as to how Hollande will approach the country in his victory speech:  fire and brimstone Euro leftist or the conciliator, "Let us together build a New France..." I'm in the minority but I think he will take the latter approach and well he might because markets are spooked enough as is.  For better or worse Frace is the keystone; oh Germany is the most powerful and important but if France chooses the hard socialist road it will be almost impossible to reach consensus within the union on just about anything and Fin as we always saw in the old black and whites.  The openings on Monday bear watching.  The results are already priced in but how the winner reacts is a game-changer.

Fortunately, amidst all this is a beacon of sanity shining from northwest London.  The FA Cup, Liverpool vs. Chelsea two storied clubs of English football.  It was an easy walk to Stanford Bridge from where I lived years ago but White Hart Lane was my Ground.  So, no dog in this fight but one can't help but wish that Liverpool, with all the tradition and support base not to mention the wonderful Dalglish, pacing the touch line on the pitch where he used to roam in front of the Kop, finds the route to victory.  Alas, I'm afraid it is not to be.  Chelsea, 3-1.  You'll never walk alone old sons.