The Economystic Times

The Week Ahead - 27 September 2010

2010-09-27T10:37:00.004+10:00

Themes for me this week will be the longer tern notes being auctioned by the US Treasury on Monday, Tuesday and Wednesday where I'll be looking for any weakness. Then on Thursday there is the US Initial jobless and continuing claims for September plus on Friday I'll be paying close attention to US ISM manufacturing for September.

I'm keen to see if there is any real improvement in US jobless numbers and manufacturing or if the can is just continuing to be kicked down the road in the hope of better days materialising all by themselves.

Australasia, Japan and China
All times are AEST

Mon 27 September
09.50 Japan Merchandise trade balance total August
09.50 Japan Adjusted merchandise trade balance August
09.50 Japan Merchandise trade exports August
09.50 Japan Merchandise trade imports August
12.00 China Industrial profits August

Tue 28 September
15.00 Japan Small business confidence September

Wed 29 September
07.45 New Zealand Trade balance August
07.45 New Zealand Trade balance 12 month August
09.50 Japan Tankan large manufacturers index Quarter 3
09.50 Japan Tankan large manufacturing outlook Quarter 3
09.50 Japan Tankan non-manufacturing Quarter 3
09.50 Japan Tankan non- manufacturing outlook Quarter 3
09.50 Japan Tankan large all industrial Capex Quarter 3
10.00 Australia Conference board leading index August
12.30 China HSBC manufacturing PMI September

Thu 30 September
07.45 New Zealand Building permits August
09.15 Japan Nomura/JMMA manufacturing PMI September
09.50 Japan Retail trade August
09.50 Japan Large retailers sales August
09.50 Japan Industrial production August
11.00 Australia HIA new home sales August
11.30 Australia Building approvals August
11.30 Australia Private sector credit August
11.30 Australia RP data-rismark med val August
12.00 New Zealand NBNZ activity outlook September
12.00 New Zealand NBNZ business confidence September
14.00 Japan Vehicle production August
15.00 Japan Housing starts August
15.00 Japan Annualized housing starts August
15.00 Japan Construction orders August

Fri 1 Oct 09.30
Japan Job-to-applicant ratio August
09.30 Japan Overall household spending August
09.30 Japan Tokyo CPI September
09.30 Japan Jobless rate August
09.30 Japan Tokyo CPI ex-fresh food September
09.30 Japan Tokyo CPI ex food, energy September
09.30 Japan National CPI August
09.30 Japan National CPI Ex Food, Energy August
11.00 China PMI Manufacturing September
15.00 Japan Vehicle Sales September

North America & Europe
Times are London, UK time

Mon 27 September
UK Hometrack housing survey September
13.30 US Chicago Fed national activity index August
15.30 US Dallas Fed manufacturing activity September

Tue 28 September
Germany CPI September
Germany CPI - EU harmonised September
07.00 Germany GFK consumer confidence survey October
09.30 UK GDP Quarter 2
09.30 UK Current account Quarter 2
09.30 UK Total business investment Quarter 2
11.00 UK CBI reported sales September
14.00 US S&P/CaseShiller home price index July
15.00 US Consumer confidence September
15.00 US Richmond Fed manufacturing index September

Wed 29 September
09.30 UK Index of services (3mth/3mth)
09.30 UK Net consumer credit August
09.30 UK Net lending sec. on dwellings August
10.00 Euro Zone Business climate indicator September
10.00 Euro Zone Economic confidence September
10.00 Euro Zone Industrial confidence September
10.00 Euro Zone Services confidence September
13.30 Canada Industrial product price August
13.30 Canada Raw materials price index August

Thu 30 September
00.01 UK GFK consumer confidence survey September
08.55 Euro Zone Unemployment change September
08.55 Euro Zone Unemployment rate September
13.30 Canada GDP July
13.30 US GDP (annualized) Quarter 2
13.30 US Personal consumption Quarter 2
13.30 US GDP price index Quarter 2
13.30 US Core PCE Quarter 2
13.30 US Initial jobless and continuing claims September
14.45 US Chicago purchasing manager September
15.00 US NAPM-Milwaukee September

Fri 1 October
09.30 UK Bank of England housing equity withdrawal Quarter 2
09.30 UK PMI manufacturing September
10.00 Euro Zone Unemployment rate August
13.30 US Personal income August
13.30 US Personal spending August
13.30 US PCE deflator August
13.30 US PCE core August
14.55 US University of Michigan confidence September
15.00 US ISM manufacturing September
15.00 US ISM prices paid September
15.00 US Construction spending August
22.00 US Domestic vehicle sales September
22.00 US Total vehicle sales September

Upcoming Treasury Auctions
As found at http://www.treasurydirect.gov/RI/OFAnnce

Long term notes are highlighted.

As always, do your own research and have a great week.

Buffett contradicts himself on recession

2010-09-24T01:46:00.007+10:00

Last week Billionaire investor and Berkshire Hathaway Chairman, Warren Buffett appeared via video link at the Montana Economic Development Summit and made some very bullish statements about the economy, the state of Berkshire Hathaway's businesses and the recovery.

In an article by MATT GOURAS published online by The Washington Post on Monday, September 13, 2010 Buffett is quoted as saying;

"I am a huge bull on this country. We are not going to have a double-dip recession at all, I see our businesses coming back across the board."

Yet just 10 short days later Buffett is interviewed by CNBC's Becky Quick.

Becky - The NBER said this week that the recession officially ended back in June of last year.

Buffett - Well, they define it differently. But I mean, I define it, I think we're in a recession until real per capita GDP gets back to where it was before. That is not the way the National Bureau of Economic Research measures it. But I will tell you that to any, on any common sense definition, the average American is below where he was before, or his family, in terms of real income, GDP. We're still in a recession, and we're not gonna be out of it for awhile, but we will get out of it.

Check the video out for yourself.

US Housing Market Still Stalled

2010-09-21T00:17:00.008+10:00

The NAHB builder confidence survey released today in the US points to a continued lack of confidence from home builders.

Unchanged from previous month

Builder confidence remained unchanged from the previous month at 13, the lowest since March 2009. According to the news release on the National Association of Home Builders web site

"Neither the component gauging current sales conditions nor the component gauging sales expectations in the next six months budged in September from their low readings in the previous month, holding at 13 and 18, respectively. The index gauging traffic of prospective buyers edged down a single point, to 9."

A reading above 50 indicates that more builders see the market as good than see it as poor, the reading has not been above 50 in over 4 years, the last time being in April 2006.

Departing from reality

In the minutes following the release of the NAHB builder confidence survey stock indexes surged up 0.5%, with the S&P 500 presently sitting at 1137 after shooting up from from 1128 just minutes before the announcement. On the surface of it you would have expected this news to be at best neutral to stocks and at worst perhaps create a slight fall, however in a complete departing from reality stocks have surged in what looks on the surface to be clearly some sort of market manipulation. It's little wonder Small Investors have been exiting the market in their droves as covered in depth in this article by Graham Bowley published by The New York Times August 21, 2010.

Uncertainty increases

"In general, builders haven't seen any reason for improved optimism in market conditions over the past month," noted NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. "If anything, consumer uncertainty has increased, and builders feel their hands are tied until potential home buyers feel more secure about the job market and economy."

FOMC tomorrow

With a statement from the Federal Open Market Committee due tomorrow and major stock indexes globally sitting on or just below resistance it will be interesting to see what news that brings and whether indexes will break resistance and run upward or has today's news and subsequent manipulation of the market just been to suck in the long positions prior to an announcement from the FOMC that will see the market reverse and head lower again, only time will tell.

The Week Ahead - September 20, 2010

2010-09-20T10:34:00.001+10:00

Australasia, Japan and China
All times are AEST

Mon 20 September
13.00 New Zealand ANZ Consumer Confidence Index September

Tue 21 September
08.45 New Zealand Net Migration August
11.30 Australia Reserve Bank's Board Minutes September
13.00 New Zealand Credit Card Spending August
15.00 Japan Leading Index CI July
15.00 Japan Coincident Index CI July
16.00 Japan Machine Tool Orders August

Wed 22 September
08.45 New Zealand Current Account Balance Quarter 2
08.45 New Zealand Account Deficit-GDP Ratio Quarter 2
10.30 Australia Westpac Leading Index July
14.30 Japan All Industry Activity Index July

Thu 23 September
08.45 New Zealand GDP Quarter 2

Fri 24 September
11.30 Australia Financial accounts Quarter 2
11.35 China MNI Business Condition Survey September

North America and Europe
All days and times are London UK time

Mon 20 September
United Kingdom Rightmove House Prices September
13.30 Canada Wholesale Sales July
15.00 US NAHB Housing Market Index September

Tue 21 September
09.30 UK Public Finances (PSNCR) August
09.30 UK Public Sector Net Borrowing August
12.00 Canada CPI August
12.00 Canada Bank Canada CPI August
13.30 US Housing Starts August
13.30 US Building Permits August
19.15 US FOMC Rate Decision September
19.15 US FOMC Statement September

Wed 22 September
09.30 UK Bank of England Minutes September
10.00 Eurozone Industrial New Orders July
13.30 Canada Leading Indicators August
13.30 Canada Retail Sales July
15.00 Eurozone - Euro-Zone Consumer Confidence September

Thu 23 September
08.30 Germany PMI Manufacturing September
08.30 Germany PMI Services September
09.00 Eurozone PMI Composite September
09.00 Eurozone PMI Manufacturing September
09.00 Eurozone PMI Services September
13.30 US Initial jobless and continuing claims September
15.00 US Leading Indicators August
15.00 US Existing Home Sales August

Fri 24 September
09.00 Germany IFO - Business Climate September
09.00 Germany IFO - Current Assessment September
09.00 Germany IFO - Expectations September
13.30 US Durable Goods Orders August
15.00 US New Home Sales August

Upcomming US Treasury Auctions

* Long term notes are highlighted.

Have a great week...

The Week Ahead US Treasury Auctions - September 13, 2010

2010-09-14T11:15:00.000+10:00

Upcoming US Treasury Auctions

Here is a copy of the upcoming auctions for this week.

Only short term bills being auctioned this week.

More About Treasury Auctions

2010-09-14T10:44:00.005+10:00

Not quite as expected
If you've been following my recent posts about US treasury bonds, you'll know that I've been suggesting a connection between the auctions of longer term US treasuries and stocks falling. You may have also observed what I had suggested may happen last week didn't really eventuate, well not to any great degree anyway. Sure the S&P 500 fell on the 7th only to recover on the 8th and 9th to finish just a few points below where it started it's fall on the 7th, going on to round off the week higher.

This doesn't mean there isn't a link
Although last week stocks the fell on first day of the longer term treasury auctions (7th Sep) they didn't continue to fall for the following two days, during which time more long term treasuries were being auctioned. I have previously shown that this has generally been the case during previous auctions. There was however an article on Reuters that would suggest that there is a direct correlation between the auction of longer term US treasuries and falls in shares. Here is a snippet from the Reuters article

"30-yr auction tails, dealing Treasuries another blow, NEW YORK, Sept 9 (Reuters) - U.S. Treasuries fell on Thursday after jobs and trade data suggested the economy wasn't as weak as feared, boosting riskier assets such as stocks and hurting demand at the government's long-bond auction."

Admission of a link
That single paragraph above confirms to me what I have long believed and have confirmed over number of months, that there is a direct connection between these two areas of investment. It would appear that if investors are dissatisfied with the risks associated with holding stocks, they flee to the perceived safety of US Treasuries, a perception that seems to be re-enforced with the help of the media.

I'll continue to follow bond auctions
I will to continue to follow the Longer term US treasury auctions going forward as I'm of the opinion there is risk of downward movement in the stock indices each time longer term treasuries come up for auction. Whilst I won't be writing weekly/fortnightly posts on the subject, I'll be including a copy of the US treasury auction details as it appears on this page in my "The week ahead" posts so you can be informed, do your own research and make informed investment decisions.

If you missed it
Past posts that cover this topic are US Treasury Auctions, US Treasury Auctions Part 2 and More Market Manipulation.

The week Ahead - September 13, 2010

2010-09-14T09:46:00.000+10:00

Australasia, Japan and China

Please note all times are AEST

Monday 13 September
08.45 New Zealand Food prices August

Tuesday 14 September

08.00 New Zealand REINZ housing price index August

08.00 New Zealand REINZ house sales August

08.45 New Zealand Retail sales July

08.45 New Zealand Retail sales ex-auto July

11.30 Australia NAB business conditions August

11.30 Australia NAB business confidence August

12.00 China Conference Board, China, July leading economic index

14.00 Japan Tokyo condominium sales August

14.30 Japan Industrial production July

Wednesday 15 September
11.00 Australia MI/WBC consumer confidence September

11.00 Australia DEWR skilled vacancies September

11.30 Australia Dwelling starts Quarter 2
11.30 Australia Motor Vehicle Sales

Thursday 16 September
07.00 New Zealand Reserve Bank of New Zealand official cash rate September

08.30 New Zealand Business NZ PMI August

09.50 Japan Tertiary industry index July
11.00 Australia MI/WBC consumer inflationary expectations September

11.00 Australia MI/WBC unemployment expectations September

11.30 Australia Labour force - industry August

11.30 Australia RBA Bulletin - quarterly Quarter 2

13.00 Australia Speech by Philip Lowe, Assistant Governor (Economic)

North America and Europe

Please note times are London UK time.

Monday 13 Sep
10.00 Eurozone Industrial production July

19.00 US Monthly Budget Statement August

Tuesday 14 Sep
United Kingdom RICS house price balance August

09.30 United Kingdom CPI August

10.00 Eurozone Labour costs Quarter 2

10.00 Eurozone ZEW survey (econ. sentiment) September

10.00 Germany ZEW survey (econ. sentiment) September

13.30 Canada Labor productivity Quarter 2

13.30 Canada Capacity utilization rate Quarter 2

13.30 Canada New motor vehicle sales July

13.30 US Advance retail sales August

15.00 US Business inventories July

Wednesday 15 Sep
09.30 United Kingdom Unemployment Rate
10.00 Eurozone CPI August

10.00 Eurozone Employment Quarter 2

13.30 Canada Manufacturing sales July

13.30 US Import price index August

13.30 US Empire manufacturing Index September

14.15 US Industrial production August

14.15 US Capacity utilization rate August

Thursday 16 Sep
09.30 United Kingdom Retail Sales
09.30 United Kingdom Consumer Inflation Expectations
10.00 Eurozone Trade balance July

13.30 US Producer price index August

13.30 US Initial jobless and continuing claims August

13.30 US Current account balance Quarter 2

15.00 US Philadelphia Fed. September

Friday 17 Sep
07.00 Germany Producer prices August

09.00 Eurozone ECB Euro-Zone current account July

10.00 Eurozone Construction output July

13.30 US CPI August

14.55 US Uni. of Michigan confidence September

Have a great week.

The week Ahead - September 6, 2010

2010-09-08T22:25:00.002+10:00

Australasia, Japan and China

All times are AEST

Tue 7 Sep

Japan BOJ target rate September

14.30 Australia RBA Cash Target September

15.00 Japan Leading index CI July

15.00 Japan Coincident index CI July

Wed 8 Sep

08.45 New Zealand Manufacturing activity Quarter 2

09.50 Japan Machine orders July

09.50 Japan Adjusted current account total July

09.50 Japan Trade balance (Balance of Payments Basis) July

11.30 Australia No. of owner-occupiers July

11.30 Australia Value of all loans July

Thu 9 Sep

08.45 New Zealand Card spending August

09.50 Japan BSI large all industry Quarter 3

09.50 Japan BSI large manufacturing Quarter 3

11.30 Australia Employment change August

11.30 Australia Unemployment rate August

11.30 Australia Participation rate August

15.00 Japan Consumer confidence August

15.00 Japan Consumer confidence households August

Fri 10 Sep

China Trade balance August

China Exports August

China Imports August

08.45 New Zealand Terms of trade index Quarter 2

09.50 Japan GDP Quarter 2

09.50 Japan Nominal GDP Quarter 2

09.50 Japan GDP deflator Quarter 2

09.50 Japan Domestic CGPI August

North America & Europe

Times are London, UK time.

Tue 7 Sep

11.00 Germany Factory orders July

Wed 8 Sep

UK NIESR GDP estimate August

07.00 Germany Trade balance July

07.00 Germany Current account July

09.30 UK Industrial production July

11.00 Germany Industrial production July

13.30 Canada Building permits July

14.00 Canada Bank of Canada Rate September

15.00 Canada Ivey purchasing managers index August

19.00 US Fed's Beige book

20.00 US Consumer credit July

Thu 9 Sep

07.00 Germany CPI - EU harmonised August

12.00 UK Bank of England Announces Rates September

13.15 Canada Housing starts August

13.30 Cnada New housing price index August

13.30 Canada International merchandise trade August

13.30 US Trade balance July

13.30 US Initial jobless and continuing claims September

Fri 10 Sep

09.30 UK PPI input NSA August

09.30 UK PPI output NSA August

09.30 UK PPI output core NSA August

12.00 Canada Net change in employment August

12.00 Canada Unemployment rate August

12.00 Canada Participation rate August

15.00 US Wholesale inventories July

Sorry for the delay in getting this out this week, have a great week.

More market manipulation

2010-09-07T20:46:00.005+10:00

Here we go again

If you have been following my recent posts about the correlation between US treasury bond sales and drops in the market you won't be the least bit surprised to hear that I'm banging the drum yet again. First let me apologise for not making a post over the past week or so, I've been away in Sydney and then laid up with a virus I brought back with me.

More BS safe haven stories doing the rounds today

I had taken the snapshot below from the Upcoming Treasury Auctions page earlier yesterday and thought we might see some stories trotted out today so as to drive fear into the punters and in-turn driving the money out of stocks towards US Treasuries. Here are a few ~~stories~~ news items from Reuters today;

Global stocks, euro down on Europe banking concerns and
Wall St futures signal weaker start for stocks and
Bonds rise on renewed European bank jitters

What are the auction details?

Note the 182 day bills and more importantly the 3 year notes up for auction today and also the 9 year 11 month notes tomorrow followed by the 29 year and 11 month Bonds on the 9th September.

To often to be a mere co-incidence

This is now the third fortnight in a row I've documented the news that is circulated on the date these longer term bonds are being auctioned turns negative on stocks and suggests US treasuries as a safe haven. It's almost sad really that the public are being manipulated into buying this rubbish debt from a country that has a bigger addiction to debt than a junkie has to crack.

Don't play the game

So we can see the pattern clearly now but how might we play the game? I can only suggest that you don't get sucked into buying bonds and if you check out this post you'll see why I say that. By all means sell your long positions and take shorts for the few days that the bonds are auctioned, but be sure and exit those shorts on the morning of the last day of the longer term auctions, in this case September 9th, because as quick as the media talk it down they turn around and talk it straight back up once the demand for bonds has been filled.

As always, do your own research and stay sharp. Things aren't always as they seem.

If you missed my previous posts regarding bond auctions you can see them here and here.

The Week Ahead - August 23, 2010

2010-08-23T22:41:00.002+10:00

Australasia, Japan and China
*all times are AEST

Monday August 23

1150 Japan Supermarket Sales July (Year on year)

Tuesday August 24

1130 Australia Government Financial estimates 2010/11

1300 New Zealand Reserve Bank NZ 2 year inflation expectation Quarter 3

Wednesday August 25

1130 Australia Preliminary construction work June quarter

1150 Japan Merchant Trade Balance

Thursday August 26

1000 Australia Conference Board Leading Index

1130 Australia Private capital expenditure actual - June quarter

1130 Australia Private expected capital Expenditure 2010/11

Friday August 27

1130 Japan Jobless rate July

1130 Japan National CPI, (year on year) July

1130 Japan National CPI ex food & energy, (year on year) July

North America & Europe

*all times are London UK

Monday August 23

08.30 Germany PMI manufacturing August

08.30 Germany PMI services August

09.00 Euro Zone PMI composite August

09.00 Euro Zone PMI manufacturing August

09.00 Euro Zone PMI services August

13.30 United States Chicago Fed national activity index July

Tuesday August 24

07.00 Germany GDP Quarter 2

13.30 Canada Retail sales June

13.30 Canada Retail sales less autos June

15.00 United States Richmond Fed manufacturing index August

15.00 United States Existing home sales July

Wednesday August 25

Germany Consumer price index August

Germany CPI - EU harmonised August

13.30 United States Durable goods orders July

13.30 United States Durables ex transportation July

13.30 United States New home sales July

13.30 United States House price index June

13.30 United States House price purchase index Quarter 2

Thursday August 26

11.00 United Kingdom CBI reported sales Annual

13.30 United States Initial jobless and continuing claims August

14.00 United States RPX composite 28 day Index June

Friday August 27

09.30 United Kingdom Total business investment Quarter 2

09.30 United Kingdom GDP Quarter 2

13.30 United States GDP (annualized) Quarter 2

13.30 United States GDP price index Quarter 2

13.30 United States Core PCE Quarter 2

13.30 United States Personal consumption Quarter 2

14.55 United States University of Michigan confidence August

Have a great week.

US Treasury Auctions - Part 2

2010-08-20T03:50:00.007+10:00

More jitters in the markets again next week?

On August 9, I posted a blog titled US Treasury Auctions (view it by clicking the link). In that post I stated I had noticed a pattern where-by when the Treasury were auctioning longer term bonds and notes, news was released that created jitters and negative sentiment in global stock markets and at the same time suggested that money was fleeing to the save haven of US Treasuries. It's worth clicking the link to view the previous post if you missed it.

So further to that post I'd like to show you two things.

First here is a copy of the Treasury Bond Auctions for the week ending 14 August . Click for a larger view

From The Economystic Times

Note the long term bonds being auctioned on the 10th, 11th and 12th of August?

Now compare that to this chart of Wall Street Cash (a CFD futures chart). Click for a larger view

From The Economystic Times

See the arrows?

They highlight the dates 10th, 11th and 12th of August and show that the market fell corresponding to the longer term treasury auction dates.

What does it all mean?

Well now have a look at the US Treasury Bond auctions for next week. Click for a larger view

From The Economystic Times

I'm going to guess again this coming week that some sort of news is going to be released that will give global markets the jitters and send money fleeing to the safety of US Treasury bonds and notes perfectly timed with the auctions. I could be wrong, but based on the auctions and what I've noticed in the past we could see the market fall on the 23rd, 24th, 25th and 26th of August.

As always do your own research and back-checking before making any investment decisions. You can find the Upcoming Treasury Auctions on this page http://www.treasurydirect.gov/RI/OFAnnce

Update: 20 August 10.30am New York Time

The "Flight to safety of US Treasuries" stories and headlines have started

Check out this link from Reuters - Investors dumped risky assets on Friday and fled into bonds and safe-haven assets
and this from the folks at Bloomberg - Treasuries Rise, Stocks Fall on Economy

Update: September 8

I thought I'd ad this chart of the S&P500 futures with the yellow arrows indicating the market falling over the course of the bond auction days as I had predicted above.

US Leading Economic Indicators show growth slowing

2010-08-20T02:03:00.003+10:00

Slowest pace since mid -2009

The Conference Board Leading Economic Index^® (LEI) for the US increased by 0.1 percent in July to 109.8 after a decline of 0.3 percent in June indicating that whilst the economy is still expanding, albeit slowly, the LEI has in essence been flat-lining since March 2010.

From The Economystic Times

Yet again we get the no recession line

“The indicators point to a slow expansion through the end of the year,” says Ken Goldstein, economist at The Conference Board. “With inventory rebuilding moderating, the industrial core of the economy has moved to a slower pace. There appears to be no change in the pace of the service sector. Combined, the result is a weak economy with little forward momentum. However, the good news is that the data do not point to a recession.”

Personally I think that the more we see slowing in the economic indicators, be they employment numbers, leading economic indicators, retail sales figures or Manufacturing data, the more likely we'll see another recession. Looking at the LEI on the above graph it's not to hard to see that given another three or four months of flat or declining numbers, the point we're looking at now may well be the top.

The ten components that make up The Conference Board Leading Economic Index^®

Average weekly hours, manufacturing
Average weekly initial claims for unemployment insurance
Manufacturers’ new orders, consumer goods and materials
Index of supplier deliveries – vendor performance
Manufacturers' new orders, nondefense capital goods
Building permits, new private housing units
Stock prices, 500 common stocks
Money supply, M2
Interest rate spread, 10-year Treasury bonds less federal funds
Index of consumer expectations

Read the full News release here

Weekly Initial Jobless Claims hit 500,000

2010-08-19T22:53:00.017+10:00

New US Jobless claims rise to highest level in 9 months.

Here's a straight cut and paste from the United States Department of Labor website.

UNEMPLOYMENT INSURANCE WEEKLY CLAIMS REPORT

SEASONALLY ADJUSTED DATA

In the week ending Aug. 14, the advance figure for seasonally adjusted initial claims was 500,000, an increase of 12,000 from the previous week's revised figure of 488,000. The 4-week moving average was 482,500, an increase of 8,000 from the previous week's revised average of 474,500.
The advance seasonally adjusted insured unemployment rate was 3.5 percent for the week ending Aug. 7, unchanged from the prior week's unrevised rate of 3.5 percent.
The advance number for seasonally adjusted insured unemployment during the week ending Aug. 7 was 4,478,000, a decrease of 13,000 from the preceding week's revised level of 4,491,000. The 4-week moving average was 4,526,750, a decrease of 1,500 from the preceding week's revised average of 4,528,250.
The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.010 million.

Bond market trap

2010-08-17T14:42:00.007+10:00

Biggest risk to bond holders

It's said that the biggest risk to bond investors is rising interest rates, this is because if you buy a bond with a 10 year maturity which pays a yield of say 4%, then in two years time you want to sell that bond and rates for similar term bonds have risen to 6%, you're going to need to sell your bond at a discount to it's face value to entice a buyer to buy it.

Why?

Who's going to want to buy your 4% bond when they can buy one that pays 6%. This being the case, what will happen to all this long term bond debt the United States Treasury has been issuing lately when interest rates start to rise again?

Yields on 30 year notes are now below 4%, so it's hard to imagine they can get any lower and still remain as an attractive form of investment. Sure, investors like safe investments but they also demand returns and for my money, there is simply too much risk to take on one of these long term bonds at such low rates of return.

Fleeing to the safety of US treasuries

It's only a matter of time before the "Flee to the safety of US Treasury Bonds" line, which is about as see-through as a Paris Hilton party dress, is seen for the bullshit it is and when that time comes the yields will rise and the game will be over.

To start with what's going to happen to the big licks of debt that have been sold at the super cheap rates of the past year and a bit?

It's all going to need to be sold at a huge discount or held at a shitty rate of return for what will seem like an eternity for the holders. I mean lets face it, who's going to want to hold 30 year bonds at 3.8% if yields were to rise to say 6.9%, think bursting bubbles, think huge discounts to face value.

Sure the Fed will tell you today that they expect rates to be low for an extended period, but their track record on economic predictions is as about as credible as a Goldman Sachs investment advisor trying to sell you something named after an ancient calculator.

Besides have you ever considered the Fed might have a vested interest in putting out that line? What would happen if no-one wanted to buy these trillions of dollars in bonds, how would the US Government raise the cash is desperately needs going forward? What would happen to the US economy and the sale of US Treasuries if people started to question the ability of the US Government to honor it's commitment to repay it's debt? What would happen to the US dollar? More importantly, what will happen to the Fed?

Rising rates

One of two things, if not both are likely. Rates will rise as they always do when the risk is seen to be greater. Then if a higher rate of return isn't enough to entice buyers, there is the real risk of collapse of the US treasury bond market as everyone discounts the existing bonds they hold to dump them on the secondary market.

To understand where I'm coming from, you first need to be clear on how the value of a bond is calculated when sold on the secondary market. Below is a simple back of the envelope calculation, there are a few other factors that need to be considered to get an truly accurate figure but this will serve to give you the general idea.

What's a bond worth on the secondary market?

OK for arguments sake lets work with a $1000 bond for the purpose of this example and lets also assume you paid face value for it, that is you handed over $1000 and for the sake of the calculation we'll also say it's a 30 year bond at 3.80% with interest paid annually just to simplify the whole calculation and demonstrate a worst case scenario. Worst case because the longer the term the greater the discount required.

So based on the above you'll receive interest payments of $38 every year and on maturity you will be handed your $1000 back.

However lets say you hold it for 2 years at which point rates for similar term bonds have risen to say 6.9%.

At this point the same $1000 would purchase a bond that pays $69 every year or $31 more than the bond purchased 2 years earlier.

So to work out how much you need to discount your bill by to sell it you need to multiply the difference ($31) by the years remaining on your bond, 28. So that's 28 x $31 = $868 which is the discount you'd need to apply to your bond to sell it.

$1000 - $868 = $132. Yep you've read that right, your original $1000 has turned into $132 in the space of two years just because rates moved upwards. You might need to re-read that sentence again slowly to take it all in.

So unless you expect either massive deflation and/or a protracted period of really low interest rates you should steer well clear of US treasury bonds at these ridiculously low yields, let someone else pick them up, then buy them from those suckers for a song in a few years time.

The Week Ahead - August 16, 2010

2010-08-16T18:02:00.006+10:00

Australasia, Japan and China

Mon 16 Aug

09.50 AEST - Japan Tertiary industry index June

09.50 AEST - Japan Gross domestic product Quarter 2

09.50 AEST - Japan Nominal GDP Quarter 2

09.50 AEST - Japan GDP deflator Quarter 2

11.30 AEDT - Australia New motor vehicle sales July

12.00 AEDT - China Conference Board China June leading economic index

Tue 17 Aug

Australia - RBA Governor Stevens speaks in Perth

11.30 AEDT AUSTRALIA Reserve Bank's Board August minutes

Wed 18 Aug

11.00 AEDT Australia Westpac leading index August

11.00 AEDT Australia Dept. Employment and Workplace Relations skilled vacancies August

11.00 AEDT Australia CBA HIA house affordability Quarter 2

11.30 AEDT Australia Wage cost index Quarter 2

15.00 AEDT Japan Leading index CI June

15.00 AEDT Japan Coincident index CI June

Thu 19 Aug

08.45 AEDT New Zealand Producer prices- outputs Quarter 2

08.45 AEDT New Zealand Producer prices- inputs Quarter 2

11.30 AEDT Australia Average Weekly Earnings May

13.00 AEDT New Zealand ANZ consumer confidence index August

14.30 AEDT Japan All industry activity index June

Fri 20 Aug

08.45 AEDT New Zealand Net migration July

13.00 AEDT New Zealand Credit card spending July

17.00 AEDT Japan Convenience store sales July

North America & Europe

*All times are London UK

Mon 16 Aug

10.00 Eurozone CPI July

13.30 United States Empire manufacturing August

14.00 United States Net long-term TIC flows June

15.00 United States NAHB housing market index August

Tue 17 Aug

09.00 Eurozone ECB current account July

09.30 United Kingdom CPI July

09.30 United Kingdom RPI July

10.00 Eurozone ZEW survey (economic sentiment) August

10.00 Germany ZEW survey (economic sentiment) August

13.30 Canada Manufacturing sales June

13.30 United States Producer price index July

13.30 United States Housing starts July

13.30 United States Building permits July

14.15 United States Industrial production July

14.15 United States Capacity utilization July

Wed 18 Aug

09.30 United Kingdom Bank of England minutes August

10.00 Eurozone Construction output June

Thu 19 Aug

07.00 Germany Producer prices July

09.30 United Kingdom Retail sales July

09.30 United Kingdom Public sector net borrowing July

13.30 Canada Leading indicators July

13.30 Canada Wholesale sales June

13.30 United States Initial jobless and continuing claims August

15.00 United States Philadelphia Fed. August

15.00 United States Leading indicators July

Fri 20 Aug

12.00 Canada CPI July

Happy trading...

Is the Mortgage Bond Market broken?

2010-08-13T17:15:00.003+10:00

Today I came across a story by Jim Willie CB, Editor of the “HAT TRICK LETTER” in which he pointed to this story by Caroline Salas and Jody Shenn that appeared on Bloomberg.com August 2, 2010.

The essence of the story here is that for the week ended 21 July, 2010 Wall Street was unable to complete an unprecedented amount of trades in the Mortgage bond market. $1.34 Trillion worth of trades were unable to be completed that week by comparison to a weekly average of $150 billion, that's almost 10 times the weekly average.

The implications of this are many and varied, but rather than me repeat what has already been said by Jim in his story and also the Bloomberg story I've provided links at the bottom of this post so you can check them out for yourself.

It's also worth noting that the total Mortgage bond market is said to be worth $5.2 trillion, so that said, $1.34 Trillion would amount to over 25% of the entire Mortgage bond market.

Mind blowing really, that in essence 25% of the entire Mortgage bond market was sold as naked short sales that week. With behaviour like this in the markets, you have to wonder how long before all confidence in markets is shot.

You can read Jim Willie's story in full here and Caroline Salas and Jody Shenn's story on Bloomberg here.

US Treasury Auctions

2010-08-09T19:28:00.004+10:00

It's a busy week for auctions this week and going on past history we may well see the markets take a bit of a hit to encourage the fleeing to bonds.

It's just a theory of mine, but I've noticed over the past couple of weeks that just prior to US Treasury Auctions, news is released that seems to give the markets jitters causing people sell stocks and flock to buy US treasuries just as they are being auctioned. Kind of handy really if you want to firm the demand for bonds and drop the yield to effectively get your hands on the money at a cheaper rate.

I could be wrong, but I'm going to have a punt here and guess that we will see a few days of losses on the markets this week as there are quite a few auctions.

This weeks auction dates.

92 and 182 day bills - 9th August

28 day bills - 10th August

3 year notes - 10th August
10 year notes - 11th August
30 year bonds - 12th August

Here's the official details, cut and past from the treasury direct website. Click image for a larger view.

From The Economystic Times

Source http://www.treasurydirect.gov/RI/OFAnnce

When bad news turns good

2010-08-09T18:59:00.004+10:00

Ok perhaps I'm just being a little cynical now, but I have to wonder what happened in the space of 45 minutes last Friday morning in the US that caused a complete about face from the mainstream media outlets.

The first headlines on the websites of the major news outlets, (and no I won't name names) were "Economy sheds 131,000 jobs".

However less than 45 minutes later, after the dow had plunged 160 points, the original negative headlines disappeared and the stories re-written with the headline "US Companies add 71,000 jobs".

I'm not saying the new headline is incorrect, as technically it's not. The truth is that Private employment was up 71,000 in July, but it's hardly representative of what happened with employment overall in the United States during the month of July.

Talk about torturing the numbers!

Here is an exact cut and paste of the Employment Situation Summary as it appeared as it appeared on the United States Department of Labor Bureau of Labor Statistics website.


THE EMPLOYMENT SITUATION -- JULY 2010


Total nonfarm payroll employment declined by 131,000 in July, and the unemployment rate was unchanged at 9.5 percent, the U.S. Bureau of Labor Statistics reported today. Federal government employment fell, as 143,000 temporary workers hired for the decennial census completed their work. Private-sector payroll employment edged up by 71,000.

Household Survey Data

Both the number of unemployed persons, at 14.6 million, and the unemployment rate, at 9.5 percent, were unchanged in July. (See table A-1.)

Among the major worker groups, the unemployment rate for adult men (9.7 percent), adult women (7.9 percent), teenagers (26.1 percent), whites (8.6 percent), blacks (15.6 percent), and Hispanics (12.1 percent) showed little or no change in July. The jobless rate for Asians was 8.2 percent, not seasonally adjusted. (See tables A-1, A-2, and A-3.)

In July, the number of long-term unemployed (those jobless for 27 weeks and over) was little changed at 6.6 million. These individuals made up 44.9 percent of unemployed persons. (See table A-12.)

The civilian labor force participation rate (64.6 percent) and the employment population ratio (58.4  percent) were essentially unchanged in July; however, these measures have declined by 0.6 percentage point and 0.4 point, respectively, since April. (See table A-1.)

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged over the month at 8.5 million but has declined by 623,000 since April. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job. (See table A-8.)

About 2.6 million persons were marginally attached to the labor force in July, an increase of 340,000 from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. (See table A-16.)

Among the marginally attached, there were 1.2 million discouraged workers in July, up by 389,000 from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.4 million persons marginally attached to the labor force had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities. (See table A-16.)

Establishment Survey Data

Total nonfarm payroll employment decreased by 131,000 in July, reflecting the departure of 143,000 temporary Census 2010 workers from federal government payrolls. Total private employment edged up over the month (+71,000). Thus far this year, private sector employment has increased by 630,000, with about two-thirds of the gain occurring in March and April. (See table B-1.)

Manufacturing employment increased by 36,000 over the month. Motor vehicles and parts had fewer seasonal layoffs than normal for July, contributing to a season- ally adjusted employment increase of 21,000. The industry had added 32,000 jobs in the first 6 months of the year. In July, employment in fabricated metals rose by 9,000. Manufacturing employment has expanded by 183,000 since December 2009.

Health care added 27,000 jobs in July. Over the past 12 months, health care employment has risen by 231,000.

In July, employment in transportation and warehousing edged up by 12,000. Since a recent low in February, transportation and warehousing has added 56,000 jobs.

Mining employment rose by 7,000 in July, with the gain concentrated in support activities for mining. Mining has added 63,000 jobs since October 2009.

Employment in professional and business services was little changed (-13,000) in July. The number of jobs in temporary help services showed little movement (-6,000) over the month.

Employment in financial activities continued to trend down in July, with a decline of 17,000. So far this year, monthly job losses in the industry have averaged 12,000, compared with an average monthly job loss of 29,000 for all of 2009.

Construction employment changed little (-11,000) in July; 10,000 construction workers were off payrolls due to strike activity.

Employment in other private-sector industries, including wholesale trade, retail trade, information, and leisure and hospitality showed little change in July.

Government employment fell by 202,000 in July, largely reflecting the loss of 143,000 temporary workers hired for Census 2010. Employment in both state and local governments edged down over the month.

In July, the average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.2 hours. The manufacturing workweek for all employees increased by 0.1 hour to 40.1 hours, following a decrease of 0.5 hour in June. The average workweek for production and nonsupervisory employees on private nonfarm payrolls increased by 0.1 hour to 33.5 hours in July. (See tables B-2 and B-7.)

Average hourly earnings of all employees on private nonfarm payrolls increased by 4 cents, or 0.2 percent, to $22.59 in July. Over the past 12 months, average hourly earnings have increased by 1.8 percent. In July, average hourly earnings of private-sector production and nonsupervisory employees increased by 2 cents, or 0.1 percent, to $19.04. (See tables B-3 and B-8.)

The change in total nonfarm payroll employment for May was revised from +433,000 to +432,000, and the change for June was revised from -125,000 to -221,000.
__________
The Employment Situation for August is scheduled to be released on Friday,
September 3, 2010, at 8:30 a.m. (EDT).

What's on this week

2010-08-09T10:21:00.007+10:00

Here is a brief rundown of economic events due this week 9 August - 13 August.

Australia, Japan & China

Monday 9th Aug

11.30 AEST Australia NAB Business Conditions, Australia NAB Business Confidence, Australia Home Loans, Australia Value of Loans and Australia ANZ Job Adverts

09.50 AEST Japan Current Account Total

15.00 AEST Japan Eco watchers survey: outlook

Tues 10th

China Trade balance, China Exports, China Imports

Japan BOJ target rate

09.50 AEST Japan Housing Loans

16.00 AEST Japan Machine Tool orders

Wednesday 11th Aug

09.50 AEST Japan Machine orders

11.00 AEST Australia Westpac Consumer Confidence

12.00 AEST China Producer Price Index, China Consumer Price Index, China Retail sales, Industrial production, China Fixed Asset Investment urban

Thursday 12th

11.00 AEST Australia Consumer Inflation expectation

11.30 AEST Australia Employment change, Australia Unemployment rate and Australia Participation rate

14.30 AEST Japan Industrial production, Capacity Utilization

15.00 AEST Japan Consumer Confidence

North America and Europe

Mon 9th

07.00 GMT Germany trade balance, Germany current account

09.30 GMT Eurozone Sentix Investor confidence

Tues 10th

00.01 GMT UK BRC July Retail sales monitor, UK RICS house price balance

07.00 GMT Germany CPI-EU harmonised

09.30 GMT UK Total Trade Balance

13.15 GMT Canada Housing Starts

13.30 GMT Canada New housing price index

13.30 GMT US Nonfarm productivity, US Unit Labor costs

15.00 GMT US Wholesale inventories

19.15 GMT US FOMC rate decision

Wed 11th

09.30 GMT ILO unemployment rate (3mths)

10.30 GMT UK Bank of England qtly inflation reort

13.30 GMT Canada International merchandise trade

13.30 GMT US TRade Balance

19.00 GMT US Monthly budget statement

Thurs 12th

10.00 GMT Eurozone Industrial production

13.30 GMT US Import price index, Initial jobless and continuing claims

Friday 13th

10.00 GMT Eurozone Trade Balance

10.00 GMT Eurozone GDP

13.30 GMT Canada New motor vehicle sales

13.30 GMT US CPI, US Advance retails sales

14.55 GMT US University of Michigan confidence

15.00 GMT US Business Inventories

Also worth noting on your calendar for the week is upcoming US Treasury auctions.

Announcement Date	Security Term	Security Type	CUSIP Number	Auction Date	Issue Date	Maturity Date
08-04-2010	3-YEAR	NOTE	912828NU0	08-10-2010	08-16-2010	08-15-2013
08-04-2010	10-YEAR	NOTE	912828NT3	08-11-2010	08-16-2010	08-15-2020
08-04-2010	30-YEAR	BOND	912810QK7	08-12-2010	08-16-2010	08-15-2040
08-05-2010	92-DAY	BILL	912795W72	08-09-2010	08-12-2010	11-12-2010
08-05-2010	182-DAY	BILL	912795V40	08-09-2010	08-12-2010	02-10-2011
*08-09-2010	28-DAY	BILL	912795VA6	08-10-2010	08-12-2010
*08-12-2010	91-DAY	BILL	912795UJ8	08-16-2010	08-19-2010
*08-12-2010	182-DAY	BILL	9127952B6	08-16-2010	08-19-2010

Source http://www.treasurydirect.gov/RI/OFAnnce

Have a great week...

What's the deal with the PPT?

2010-08-07T00:02:00.014+10:00

It's the stuff conspiracy theories are made of.... Men in Black suits who don't exist, doing a job that doesn't exist...

Ok for those of you that are lost, I'll fill you in. I've often wondered if perhaps from time to time, governments or mega rich bankers step in and manipulate the market for reasons unknown to the average Joe. A few weeks ago I came across the term Plunge Protection Team (PPT) in an article I was reading and having not heard of it before, I Googled it.

I can't really say I was all that surprised to read there's a school of thinkers out there who believe the government step in from time to time to buy the market to prop it up.
But what did surprise me was coming across this clip of a CNBC panel discussion in which Damon Vickers of Nine Points Capital states...

"unless the plunge protection team comes in over the next couple of days, the markets are looking very dicey here"

Now you have to wonder, here is a guy who makes his living from the markets, you'd think he'd have a pretty good idea of the goings on, did he actually mean to divulge this information on TV or did he simply forget where he was?

Either way, it appears that after Joe Kernan tries to deflect Damon's statement by asking him if he was joking, he replies with

"Absolutely not, it's common knowledge that the government steps in and does things to step on the gas on the buy side here and there"

See for yourself, it's quite comical really, in particular the way in which Byron Wien and Joe Kernan try to make light of Damon's belief in the PPT. After you watch it, consider the events of May 6 2010 and the intra-day plunge of almost 1000 points on the Dow. The suggestions as to how it happened ranged from a fat fingered trader to faulty algorithmic trading of e-mini's. Regardless of how it happened, what interests me most was how it came back, and the subsequent ruling that effectively drew a line in the sand and anything traded below that line is considered not to have happened, with all trades below the line cancelled.

So if there is a PPT, and they did step on the gas on the buy side to reverse the plunge on May 6, drawing that line in the sand meant that most of the buying they may have done to reverse the plunge on that day would have been below the line and in effect would have been cancelled and not required to be settled.

July Non-Farm Payrolls

2010-08-06T22:25:00.009+10:00

The US non-farm payrolls data has just been released, here's a quick summary...

The US economy has shed 131,000 Jobs in July after having shed 125,000 jobs in June. DJI Futures turned negative dropping almost 100 points in the minute following the announcement and Gold has risen almost 1% or $11.00/oz to $1207/oz in the ten minutes following the announcement in what we have come to expect as a typical flight to safety.

A Reuters survey of economists had forecast the US economy to shed only 65,000 jobs in July.

Update

Ok... I've had a chance to take a deep breath and checked out a bit of the reporting by the mainstream media outlets and after reading between the lines, I think that there is now an increased chance we could be headed down the "double dip recession" path.

It appears that as the stimulus packages dry up, so do the jobs, and although unemployment in the US has not increased from last month and remains steady at 9.5% it's pretty hard to see how the US economy is going to create jobs at a rate even close to the rate at which they were lost during the GFC.

Local and state governments in the US are grappling with massive deficits and have shed 202,000 workers in July after a drop of 252,000 in June. The only bright light seems to be in manufacturing which saw gains of 36,000 in July and 13,000 in June, hardly figures to be breaking out the champagne out over.

Whilst it's a given that some 144,000 workers had been let go by the Census Bureau and there are those who claim this serves to distort the figures somewhat, the fact still remains that these 144,000 people no longer have jobs and there's another 200,000 temp workers still on staff at the Census Bureau that will eventually be let go and when the are, (let go) they'll need jobs too. The real question is, will the private sector grow fast enough to create all the employment required to make any sort of dent in the unemployment numbers or will unemployment continue to remain high for the foreseeable future?

The Fed don't have much left in their arsenal, with rates at almost 0% all that is left is more Quantitative easing, (just a fancy term for printing money from thin air). The concern here is, the more money the Fed prints the less appeal it has as a reserve currency, in fact I wouldn't be too surprised to see China offload more US Dollars over the coming months anyway considering the rumblings from them in over the past couple of months about the size of the US sovereign debt and the speed at which it is growing.

The Day Ahead - 6 August

2010-08-06T11:08:00.011+10:00

Calendar of events for today Friday, August 6, 2010

Australasia, Japan and China

09.30 AEST - AI Group performance of construction index

11.30 AEST - Reserve Bank Quarterly Monetary Policy Statement

15.00 AEST - Leading index CI Japan, Coincident Index CI Japan

North America & Europe

Time	Economy	Event	Measure	Last	Forecast
09.30 GMT	UK	Industrial production Jul	m%ch	0.7	~
09.30 GMT	UK	PPI Output July	m%ch	-0.3	~
11.00 GMT	Germany	Industrial production Jun	m%ch	2.6	~
12.00 GMT	Canada	Net change employment Jul	'000's	93.2	~
13.30 GMT	US	Non-farm payrolls Jul	'000's	-125	-100
13.30 GMT	US	Unemployment rate Jul	%	9.5	9.6
15.00 GMT	Canada	Ivey PMI	Index	58.9	~
20.00 GMT	US	Consumer credit Jun	$bn	-9.1	-5.5

Investors sweat on non-farm payrolls report

2010-08-06T11:07:00.005+10:00

Due out Friday at 13.30 GMT.

With economic data from around the globe being a little up and down over the course of the last month it appears that both the bulls and the bears are waiting on the sidelines, holding their breath for the next snippet of news in the hope of seeing signs of either a definitive recovery taking place or the economy slipping into "double dip". It seems, however that with each passing week there just seems to be more and more contradiction and somehow I don't think that tonight's Non-farm payrolls reports from the US are going to provide anything other than more of the same.

Sure the US reporting season has been reasonable with many entities coming in at or exceeding analyst's expectations, but when you break the numbers down how much of it is due to increasing top line revenue and how much is due to bottom line savings?

When it come to bottom line savings, sure it's a good thing to see in a company's financials, but shareholders and businesses can not live on savings alone. Nor can they achieve the same profit year after year on cost savings alone, eventually they need to grow sales again.

What's more you have to wonder if savings in a company's expenditure are good for the economy as a whole.

Just what do I mean by that?

Well, if a company was to make savings by reducing it's workforce, then it may be good for the company but at the same time it's going to add to unemployment, which in turn isn't that good for the overall economy. The knock on effect is that the employees that loose their jobs are no longer contributing to the tax system, nor are they able to consume at the same rate and if they have to apply for some form of unemployment benefit, they place further strain on the public finances. It's not really rocket science is it.

So as far as I'm concerned at this point in time until I start to see some real growth in sales, I'm more likely to base my opinion on the current state of the economy on things like unemployment numbers and retail consumption as I think they provide a better picture of the overall health of the economy.