Thursday, December 5, 2013 Zeb’s VUE

General Information and Analysis

"we are all floating around on a sea of artificial liquidity right now. This is not going to last." - Jim Rogers

US

• GDP - This morning, there were some important news announcements.  GDP and Jobless Claims were released.  GDP was stronger than expected at 3.6%.  That is even beyond the rosy forecasts by the Federal Government.  Unfortunately, the upward print was largely due to a higher estimate for inventory growth.  Exports actually fell.  (As noted below: the calculation has changed; the books were cooked to get the print the Federal Reserve wanted.) 
• Jobless Claims – jobless claims are coming down.  The Labor Department is warning, however, that this year’s late Thanksgiving is making the numbers less than accurate.  Basically it shows applications for unemployment is down.
• CONFLICT:  Challenger Job-Cut Report shows that layoffs are increasing and the trend shows layoffs are at a 2 year high.  So what is going on here?  Jobless Claims are coming down, while layoffs are climbing?  Unfortunately, I do not have insight into the report, but it would seem that the State Labor Departments report on corporate layoffs.  It does not differentiate between short term layoffs and long term layoffs.  Layoffs have continued to rise since April/May of 2013, while non-farm payrolls continue to decline. 
• Tomorrow -  the biggee “Employment Situation”.  The data that will be feeding into the Employment Situation tomorrow, has been all over the map.  Expectations are that nonfarm payrolls will increase by 180,000 jobs, but down from the previous month number of 204,000.  The headline unemployment rate is expected to be 7.2% after a slight increase to 7.3% last month. 
• What will the Fed do?  Probably nothing in 2014, but with the climb in the GDP, they could do some kind of minor tapering.   I do not believe they will, as even the Federal Reserve does not want to cause a stock market correction just before Christmas (although the way things are going, the USA stock market may correct no matter what). 
• Fed’s Beige Book (yesterday).  “Today's Beige Book shows little change from the last. "Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest to moderate pace from early October through mid-November." Seven Fed Districts see growth as "moderate" while five characterize growth as "modest."  If you do not know the “book” is produced approximately 2 weeks before monetary policy meetings of FOMC.  The Federal Reserve Banks compiles evidence on economic conditions.  Wow, it has been nearly 6 years since QE(s) started, and we are going nowhere real slow.  We are all getting excited about modest expansion?  Would we not figure that with years of ZIRP (zero interest rate policy) and $85 billion per month of bond buying that we would see something much better than “modest to moderate” expansion?  Now the GDP is in conflict here, that the new print is huge growth (for a multi-trillion dollar a year economy).  And it stems from “new math” of accounting where the calculation for GDP was changed.  The US could not get that 3% rate they were forecasting, so thy just added stuff to the calculation, and Walla Walla Washington Bugs, and GPD is printing just above 3%.  Hey, if you are not getting the numbers you want, change – which in programming we called hacking – even though the new numbers (such as the inventory calc) may not mean a stack of cow poop with actual economic growth.  Just Remember: The books were cooked.