Friday, December 4, 2009

Time for an Emergency Rate Hike? Gold (GLD) Takes 2% Hit

All these years in the market and I've only seem emergency rate cuts to goose the stock market (and economy). With the "good news" today, should Ben Bernanke not be holding an emergency meeting to increase rates today?  Will that ever happen in the next 200 years?

Gold is taking a hit (-2%+) as the most crowded trade on Earth takes some water... the dollar actually rallies.

I am not surprised by the drop in unemployment rate since the 0.4% increase last month (we jumped from 9.8% to 10.2% in a single month) was so atypical... in fact I emailed a reader this last night:

Mark H  
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I would be surprised if the rate jumped so much because it surged so much last month.  I believe 0.4% which is huge for 30 days.  If anything I was wondering if the rate would flatten or indeed drop because 0.4% month over month is just so rare.

That said does it matter?  more bad news = more free money .  Thats all the market cares about. 

However the -11K jobs was a surprise but again who knows how true it is and what it will revised to in 6 months.  The government likes to play with numbers due to seasonality, and we'll see how accurate this number is about this time in 2010.

Things I am looking at are (1) temporary job force growth and (2) hours worked.  The latter jumped from record low 33.0 hours to 33.2 which is a positive, as that is the high end of the range 'hours worked' has been stuck in for many months.

(Edit 9:15 - looks like temporary work, which increased 30,000+ last month is up 50,000+ this month, which is the typical place jobs are added first - Temporary help services.... adding 52,000 jobs. )

Wages were up 0.1% which has been pretty typical during this downturn; quite limp.

On the negative side the workforce participation rate, already at a record low last month contracted yet again... which is amazing.  Basically that means the % of workers in the workforce, versus those willing and able to work actually decreased.  This is the data set the unemployment rate is based on (there are 2 employment reports that actually are released today, not one)

Over and above that, all the other data in these reports is subject to massive revision so useless to look at.

So with 1 million Americans about to be hired as census takers in 2010, it appears there is no need for stimulus, more government handouts in the housing market, and we can reverse all these emergency measures.  Right?

Remember... as I've been saying, I think this market actually wants bad news not good news.  The knee jerk reaction is up but let's see how it works in the interim as the only thing this stock market knows now is bad news = free money.  One data point means little to the Fed, especially one that gets revised 6 times to Sunday - but as a speculator I want to see how markets respond to the "threat" of easy money being taken away earlier than they anticipated.

Either way, this is a relative figure... 10% unemployment = 14% if we still measured unemployment as we did pre early 1990s before "adjustments" by government to data measuring were introduced.  And with workforce participation at record lows, in theory all these people detached from the work force should be re-entering it (which drives up the unemployment rate) as they hear the "good news".  Remember, in America - if you have been discouraged and not looking for a job for 4 weeks - you are no longer unemployed by official measures.

Let's see if we can escape day 18 in "the box" as investors who are living on Federal Reserve free money contemplate the fact they might actually have to think of another trade.  Or if they just dismiss this as 1 random data point and we're back to normal business next week.

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