Tuesday, February 08, 2011


2/8/2011 Hiring

David Rosenberg: "The data from the Household survey are truly insane. The labour force has plunged an epic 764k in the past two months. The level of unemployment has collapsed 1.2 million, which has never happened before. People not counted in the labour force soared 753k in the past two months.
These numbers are simply off the charts and likely reflect the throngs of unemployed people starting to lose their extended benefits and no longer continuing their job search (for the two-thirds of them not finding a new job). These folks either go on welfare or they rely on their spouse or other family members or friends for support."

Richard Fisher, the president of the Dallas Federal Reserve Bank vowed on Tuesday to vote against any additional bond-buying program once the current $600 billion purchase plan expires in June. "It is hard for me to envision a scenario where I would not use my voting position this year to formally dissent should the FOMC recommend another tranche of monetary accommodation," Fisher said in a speech in Dallas. Fisher said he also expects to be at the forefront of the effort to push the Fed to trim back its Treasury holdings and tighten policy at the "earliest sign" that inflation pressures are moving out of the commodity markets and into the general price stream.

China has announced it is raising their interest rates for a second time in a bit more than a month and that has taken the wind out of the global market's sails.

Charles Hugh Smith: "What pundits and politicos don't get is small business knows the "recovery" is totally bogus. Why hire somebody who you'll have to lay off a few months from now? Laying people off is emotionally painful--you dread it, tire of it, are wearied by it. This is a real human being who is losing their job, not some ginned-up statistic hyped by some think-tank-pundit pulling down $15K a month for dishing whatever flavor of propaganda he/she is paid to churn out.
The Washington establishment--the Fed, the Treasury, Congress, the Obama Administration-- seem to believe they've successfully pulled the propaganda wool over Americans' eyes, and that the yokels actually believe "things are getting better and better every day and in every way."
Only the yokels without clients, customers and payrolls can believe the propaganda.
Meanwhile, back in the real world, small business income is down 5%. Small Business: Still Waiting for Recovery."

The American Petroleum Institute late Tuesday said crude-oil supplies declined 558,000 barrels in the week ended Feb. 5. That contrasts with analyst expectations of an increase of 2.4 million barrels, according to a poll by Platts. Gasoline stocks rose 3.2 million barrels, the Washington-based API said. Analysts polled by Platts had expected an increase of 3.1 million barrels. Distillate inventories declined 538,000, the API said. Analysts had expected a decline of 1.4 million barrels. The Department of Energy is scheduled to report its data Wednesday at 10:30 a.m. Eastern.

ZeroHedge: ""Soaring gasoline prices slammed consumer sentiment into reverse this week, threatening the slow recovery in economic views that’s been under way. With gas now at record high for a February in Energy Department data back to 1990, the weekly Consumer Comfort Index dropped by an unusually steep 5 points to -46 on its scale of -100 to +100. It’s dropped that far only 36 times in more than 1,300 weeks of ongoing polling since late 1985; this shift erases an equally unusual 5-point gain in early January...After reaching -40 Jan. 9, the CCI is now at its low for the year, and its lowest since Nov. 21. It averaged -46 in 2010 and -48 in 2009; those compare with a lifetime average of -14 and a best-year +29 in 2000. Its single best week was +38 in January 2000; its worst, -54 in December 2008 and again in January 2009." So strange: unlike with stocks, where inflation is somehow supposed to raise confidence, inflation for the people somehow leads to a near record plunge in confidence. But who are we to believe in this centrally planned economy when every single data point is now fit to be discarded as nothing more than evidence of propaganda."

Alpha Natural Resources Inc., the third-biggest U.S. coal producer, agreed to buy Massey Energy Co. for about $7.1 billion in cash and stock, gaining the largest coal company in the U.S. Central Appalachian region.
Massey shareholders will receive 1.025 Alpha Natural shares plus $10 cash for each share held, the companies said in a statement yesterday. The bid values Massey at $69.33 a share, 21 percent more than Massey’s price at the close of trading Jan. 28. Massey has $1.63 billion in debt, according to Bloomberg data.

Payrolls in January probably grew at a pace that underscores the Federal Reserve’s concern it will take years for the job market to recover from the recession, economists said before a report this week.
Employment increased by 140,000 workers this month after a 103,000 gain in December, according to the median forecast of 59 economists surveyed by Bloomberg News ahead of Labor Department data on Feb. 4. The report may also show the jobless rate increased to 9.5 percent from 9.4 percent.

The Institute for Supply Management-Chicago said Monday its gauge of business activity rose to 68.8 in January from 66.8 in December, indicating another month of expansion, though at a faster pace. Economists polled by MarketWatch had expected a reading of 65 in January.

Consumer spending increased a seasonally adjusted 0.7% in December, above expectation and a sign the economy entered the first quarter with momentum, the Commerce Department estimated Monday. Income rose 0.4% in December for the second straight month. Consumer spending has risen in six straight months. Wall Street economists had expected a 0.4% increase in income and a 0.6% gain in spending. With spending outpacing income, the savings rate fell to 5.3% in December from 5.5% in November. This is the lowest level since last March.

Conditions for the nation's manufacturers improved for the 18th straight month, the Institute for Supply Management reported Tuesday. The ISM index rose to 60.8% in January from 58.5% in December. This is the highest level of the factory index since May 2004. The report was much stronger than expected. The consensus forecast of estimates collected by MarketWatch was for the index to remain steady at 58.5%. Readings above 50 indicate expansion. Below the headline, the report was also strong. The key employment index improved to 61.7% in January from 58.9% in December. New orders jumped to 67.8% in January from 62% in the prior month. Input prices soared in January. The price index jumped to 81.5 from 72.5 in the prior month.

John Hussman: "
On Monday, Wall Street let out a collective squeal of excitement as Thomas Hoenig, the president of the Kansas City Federal Reserve said that QE3 "may get discussed" if economic progress turns out to be disappointing as the year progresses. Part of the subtext that was lost in this enthusiasm is that Hoenig has consistently dissented on the policy of quantitative easing, and has called for the Fed to immediately raise interest rates to 1% and possibly higher. In saying that QE3 may get discussed, he wasn't offering hope to Wall Street, but was instead criticizing the existing policy of the Fed. The way to understand the comment is to put it in the context of Hoenig's long-standing dissent and open criticism of quantitative easing. My guess is that his complete remark was something like "The current trajectory of Fed policy is dangerous. When will it stop? Who knows? Aside from fueling speculation and inflation risk, QE2 won't help the real economy, but if the numbers are disappointing, even more reckless policies like QE3 may get discussed." Last week, Hoenig warned of another boom-and-bust cycle, and repeated his call for the Fed to reverse course, saying "I hope I'm wrong. I hope they're right. But I don't think so."
Near the end of the old TV series Happy Days, as the writers became desperate for material, there was an episode where Fonzie jumped his waterskis over a shark. That episode was widely viewed as the point where the show had simply gone on too long. My impression is that the sudden hope for QE3 is Wall Street's version of jumping the shark."

Ensco PLC (ESV) said Monday it would buy Pride International (PDE) in a cash and stock deal worth $41.60 a share. The deal values Pride International at a premium of 21% over its closing price of $34.39 on Friday. Shares of Pride International jumped 16% to $40 in pre-market trades. Ensco said the deal will make it the second-largest offshore driller in the world. The deal will immediately add to Ensco's earnings and cash flow. Pride International shareholders will receive 0.4778 newly issued shares of Ensco plus $15.60 in cash for each share of Pride. Ensco's cash portion of the deal is valued at $2.8 billion.

Danaher Corp. (DHR) said Monday it would purchase biomedical-equipment maker Beckman Coulter (BEC) for $83.50 a share, $6.8 billion in cash, including debt. The buying price represents a 45% premium to Beckman Coulter's Dec. 9 closing price, before rumors of the acquisition entered the marketplace. The Orange County, Calif., company's board of directors has already approved the deal, which is subject to customary conditions, including a shareholder vote. The transaction is expected to be completed by July and will become a part of Danaher's life sciences and diagnostics segment. Beckman Coulter has annual revenues of about $3.7 billion. Goldman Sachs & Co. (GS) acted as financial advisor to Beckman Coulter. Latham & Watkins, LLP served as legal counsel. Shares of Beckman Coulter jumped 10% premarket to $82.70. Shares of Washington, D.C.-based Danaher slipped a fraction to $47.88.

Robert McHugh: " We are inside one of these overbought extended rally periods, which will reach the 2.5 month age over the next week. So, based upon this time analysis, we could be about to see markets drop sharply, perhaps violently. Now do not go short the farm based upon this study, however be alert for the possibility, based upon the past four years of data, that danger could be imminent.
We would not be convinced that a multi-week decline has started until our three short-to-intermediate term momentum indicators, which are rarely fooled, generate new sell signals across the board. These important momentum indicators are our Secondary Trend Indicator, our key trend-finder indicators (which are a composite of three indicators, our Purchasing Power Indicator, and our 30 and 14 Day Stochastics), and our Demand Power / Supply Pressure indicators. We present the daily levels and signals from these indicators each night in our market newsletters to subscribers. These indicators have an excellent track record at finding both rising and falling trends, and have caught almost all the S&P 500 points up and down for years, including the rally from March 2009."

ZeroHedge: "A modest pick up in insider buying this week as 16 insider purchases for $1.7 million worth of stock put recent non-existence insider purchasing to shame. The biggest buying was seen in GE and Caterpillar, which two cumulative purchases for $800k accounted for nearly half of the buying in the week ended February 4. On the other side, it is relentless selling as usual: 126 insider sales amounted to $749 million worth of holding dispositions, with the core of the selling as usual focused on the usual suspects: MSFT ($154 million), QCOM ($73 million), Google ($69 million), GameStop ($60 million) and FCX ($30 million). This is a major pick up in the rate of selling compared to January, and represents a double from the last tracked number of $373 million for the week of January 22."