Factchecking the Democratic Leadership on Jobs

Original Article from Fox Business EMac’s Stock Watch

 

Time to fact check the Democratic leadership’s claims on job growth, given the smoke bombs being set off in this debate as the midterm elections loom.

 

First, the data. The Bureau of Labor Statistics issued a press release on the new unemployment numbers showing U.S. employers cut 54,000 jobs in August.

The unemployment rate, calculated using a separate household survey, edged up to 9.6% from 9.5% as more job seekers entered the labor force, versus the peak of 10.1% in October 2009. July payrolls were revised to a loss of 54,000 from an original estimate of a 131,000 drop.

Private-sector companies added 67,000 jobs, following an upwardly revised 107,000 gain in July. Manufacturers shed 27,000 jobs, after adding 34,000 the previous month.

Economists now attribute a chunk of the decline in the jobless rate to 9.6% versus 10.1% in October ’09 to the 1.4 million people who left labor force since May. Add in 1.4 million people, and the jobless rate zooms higher to 10.3%, says Miller Tabak strategist Dan Greenhaus.

Deutsche Bank also says the private sector created a net total of 689,000 jobs since November 2009, the point when the jobs picture turned positive. That 689,000 is anemic compared to the 8.5 million private jobs lost in the downturn, Deutsche says, noting too that monthly private sector job creation is trending down.

Now to fact checking the claims—Fox News analyst James Farrell has a go at it:

“We will have job growth of 250,000 to 500,000 a month.”

- Claim: In an April 23, 2010 fundraiser, Vice President Joseph Biden stated “Well, I’m here to tell you some time in the next couple of months we’re going to be creating between 250,000 jobs a month and 500,000 jobs a month.” 

FBN Fact check: What today’s BLS employment release stated: “Total nonfarm payroll employment was little changed (-54,000) in August.” <span style="color:

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Is America Becoming Too European?

Original Article from Fox Business Brian Sullivan

If you read one thing today, make it this opinion piece by a German economics professor.    He argues that the President’s policies are misguided and that we are at risk of losing what’s made America great.  

In sum, he says we are becoming “too European”

The piece was published in English in the German publication Der Spiegel and you can read it here.

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Does The Higher Minimum Wage Hurt New Job Growth?

Original Article from Fox Business Brian Sullivan

Enough has already been written about the overall August payroll number for me to avoid the crowded commentary.

That said, the one aspect to the report that few seem to be focusing on is the impact of higher minimum wages on the job market.

The Bureau of Labor Statistics release shows that unemployment among those most likely to take a minimum wage job – high school dropouts and teenagers – continues to be dramatically high and is on the rise for both groups from last month.

One year ago the unemployment rate among teens 16 to 19 years was 25.7%.  It’s now 26.3%.

And although the unemployment rate for those lacking a high school degree fell from 15.5% in August 2009 to ‘just’ 14% last month, it rose from July’s rate of 13.8%.  

The Federal minimum wage has risen three times in three years (from $5.85 per hour in 2007 to $7.25 today) after not seeing an increase in the previous ten years.

We can agree that those jobless numbers are staggeringly and unacceptably high.   We all also know how difficult it can be to live on minimum wage.  But while the jump in minimum pay may have added a few dollars to working family wallets, one wonders if its coming at the expense of adding new jobs by simply working current employees more per week.   It certainly seems that way from the data.

Compassion for a living wage is an important consideration, but so too should be making sure everyone who wants to work has the opportunity to find a job.

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Tuesday Stories: Obamanomics Means No Jobs; Ireland’s Small Bank Means Big Trouble; 10 Must-Listen Albums

Original Article from Fox Business Brian Sullivan

Trying to shake off the vacation dust and get back into the blog rhythm.   Here’s what I’m reading today:

• Obamanomics fails to create jobs
• Keep the Bush tax cuts but shuffle the dollars
• Valley National Bank CEO i’view on why Dodd-Frank is awful for lower income borrowers
• Ireland tries to keep a bank from pulling it under
• Graphic on change in real home prices 1996-2010
• Another great graphic on how much student loan debt kids have
• Hedge fund manager Dan Loeb gets all historical on why DC is wrong
• Violence in Mexico now spreading to tourist-heavy Cancun
• The app that gets you to buy buy buy
• The 20 easiest ways to get rich
• More college football beatings for cash ahead
• 10 albums you need to listen to now
• The ultimate (and so true) Facebook alert

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How the President Can Show Economic Leadership Now

Original Article from Fox Business EMac’s Stock Watch

Before we get to what I think Americans want to hear from the President, here’s what I think they are tired of hearing.

 

I think the American people see through the “Blame Bush for the nation’s ills” routine as a stale old bumper sticker, given that President Barack Obama was elected to the US Senate in 2004, Vice President Joseph Biden has been in elected office since the Nixon era, and House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid have held elected office since the ‘80s.

 

I think Americans are done with elected officials such as Democratic Senator Max Baucus who admitted at a recent town hall meeting that he didn’t read the health reform bill he co-authored (“I don’t think you want me to waste my time to read every page of the health care bill. You know why? It’s statutory language..We hire experts.”)

 

I think Americans see through the Democrats’ push to tax earners making $250,000 or more, they know that taxing these small businesses and workers won’t cure the nation’s $13 trillion deficit, since the US government takes in just $2.4 trillion annually in tax revenues from individuals and companies and the fiscal dipsomaniacs now in control in DC have borrowed the rest.

 

I think the American people know that the Congressional Budget Office estimates that killing the tax cut on the $250K+ crowd (which is middle class in many cities) would bring in just $40 billion in annual federal tax revenues in 2011. And that just about covers the annual $27 billion in annual Congressional pork spending and many other subsidies given to buy votes, take your pick. And that the $40 billion would cover less than a quarter of the interest on the nation’s debt.

 

I think Americans see through the Democrats’ argumentative, otiose stance, that “just 3% of small businesses are in the upper bracket that will be hit with higher taxes,” when taxing them “just because” means taking their $40 billion to pay for votes gained from spending on pork and subsidies, which means those small businesses won’t be able to create private sector jobs that then create solid tax revenues–not the round-tripping of government workers paying taxes on taxpayer-paid-for wages.

 

And that one out of every four dollars spent comes from consumers in those brackets, says Moody’s economist Mark Zandi. And that when the upper brackets get taxed more, they shelter their income.

 

And that the President and Congress really are raising taxes on the middle class via health reform–a new 3.8% Medicare tax on investment income and an additional 0.9% Medicare tax on wages.

 

And that all that government spending will lead to inflation, pushing their income and capital gains into higher tax brackets, creating more tax bills because the AMT–which catches more of the middle class–and capital gains tax rates are not indexed to inflation.

 

I think Americans know that the full corporate tax rates when you count federal, state and local taxes are higher than many countries in Europe, including France, and that companies don’t pay those taxes, workers, shareholders and customers do.

 

Americans know that taxing anything that moves and anything that doesn’t (the estate tax) is the wrong way to go.

 

They know that the real problem instead is that credit ratings agencies are saying the US’s reckless spending may cause it to lose its Triple-A rating because more tax revenues are going to pay just interest on the federal debt.

 

And that the ratings agencies don’t want any government getting on the hamster wheel of borrowing, taxing, or printing money just to pay interest on the debt, interest now higher than 10% of annual tax revenues–fast approaching the breaking point for a downgrade.

 

Americans also know that President George W. Bush inherited a deficit, according to the CBO–not a surplus, as many erroneously suggest.

 

I think the American people know that fiscal stimulus quickly vanishes, that people won’t make long-term decisions to buy a house or a car knowing that the artificial starch of fiscal stimulus is temporary, and that following politicians’ logic on stimulus is like following someone down a highway who always has the right blinker on.

 

That instead the private sector delivers solid, lasting jobs that are cheaper than the

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Market Analysts Say: False Hindenburg Omen Signal

Original Article from Fox Business EMac’s Stock Watch

Way too much attention paid to the Hindenburg Omen, that this dreaded technical pattern flashed a negative signal recently in the markets, indicating a coming crash.

 

Supposedly two Omen signals flashed fire engine red recently.

 

But market analysts say that didn’t happen.

 

Hindenburg Omen Explained

A 50-year old financial newsletter writer, James Miekka built the Hindenburg Omen in 1995 using a calculus essentially based on Norman G. Fosback’s High Low Logic Index.

 

It essentially looks at stocks trading at 52-week highs and lows, and more moving parts that must miraculously line up in syzygy for the Hindenburg Omen to be set alight and then blow to smithereens over the markets.

 

Logic being that in a healthy market, stocks either set new yearly highs or annual lows, just not both at the same time. An unhealthy market with both new highs and lows portend a “to the lifeboats, stop the market I want to get off” moment.

 

As if we haven’t had enough of those already.

 

The Omen’s Criteria

Here are the five criteria for the Omen, named after the crash of the German zeppelin in May 1937, courtesy of my Wall Street traders:

 

1. The daily number of new 52 week highs in stock trading and the daily number of new 52 week lows on the Big Board are both, emphasis on both, greater than or equal to 2.8% of the sum of the NYSE stocks that climb higher or drop in trading on a given day (84 stocks, NOTE THAT, STOCKS).

 

2. That the NYSE index is greater in value that it was in trading 50 trading days prior. Initially a rising 10 week moving average was used, but it was ditched for 50 to be more current.

 

3. That the McClellan Oscillator is negative on that same day. The Oscillator is a market breadth signal used to ascertain the growth rate of money coming in or exiting the market—it indicates an overbought or oversold condition.

 

4. The new 52 week highs can’t be more than double the new 52 week lows (however, it is ok for the new lows to be more than twice the new Highs). This condition is absolutely mandatory.

 

The Omen Was Not Triggered

Never mind that the Omen is not right 10% of the time, only a quarter of the time.

 

The Omen wasn’t triggered, say my Wall Street quant sources.

 

When you look at the trades that supposedly hit the news highs and lows, they were not stocks.

 

Instead, “the vast majority of ‘stocks’ making new highs were interest sensitive closed-end funds, preferred stocks, or some other kind of fixed income product, which by my pencil are not stocks,” says Raymond James managing director Jeffrey Saut. “Therefore I’ll say the same thing I said two weeks ago, I don’t think a Hindenburg Omen has been registered; and even if it has, its track record is spotty.”

 

Bullish Signals?

Saut says instead that a bullish signal took place. If you really want to get technical, read this.

 

“What largely went unnoticed, however, was the Demark buy signal (see below) that was recorded by the SPX late last week. In addition to the Demark signal, there are some other potentially encouraging developments,” Saut says. “The McClellan Oscillator is approaching the oversold level of late June, ditto the Capitulation Index, the SPX closed at the low-end of the Bollinger Bands that have contained decline for over a year, the NFIB Hiring Plans Index just went into positive territory, and investors’ sentiment is bloody awful (read that as bullish),” Saut adds. “In fact, I have not seen retail investors so unwilling to talk about stocks since the fourth quarter of 1974!”

 

Saut concludes: “While in my view we have not had two Hindenburg Omen “sell signals,” we have indeed experienced two 90% downside days, without a single 90% upside day, over the past two weeks.”

 

He says: “I think it is a mistake to get too bearish here for the aforementioned reasons. I also think it is a mistake to get too bullish. Indeed, I believe the equity markets will remain mired in the envisioned wide-swinging trading range I spoke of following the first Dow Theory ‘sell signal’ of September 1999. In such an environment, stock selection, combined with the

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What’s Really Dragging Down Home Sales

Original Article from Fox Business EMac’s Stock Watch

The New York Federal Reserve recently put out a report on consumer credit that shows how underwater taxpayers still are even three years into the bursting of the credit bubble.

 

And in light of the negative news on existing home sales, the report’s new findings on home equity lines of credit should be of deep concern to policymakers in Washington, DC.

 

With HELOC lines of credit still stubbornly high, how can underwater homeowners ever sell?

 

The report shows that total consumer debt was $11.7 trillion as of June 30, the latest data available. That’s 6.5% lower from the third quarter of 2008, when the bubble started to blow up.

 

Two graphs on pages four and eight in this report may really pop out at you. “That’s because they highlight how people used their home equity lines as credit cards,” says Fox News analyst James Farrell. They “cannot find buyers to liquidate their primary asset to pay off (these home equity line balances), as well as the existing mortgage except at prices which represent a fraction of what they paid at the top of the market.”

 

Farrell adds: “Investors recognize this,” which is why they “continue to represent a significant share of existing home purchases.”

 

The New York Fed’s report shows home equity lines of credit (HELOC) fell just 4.4% to $700 billion in the first quarter of 2010 from their January 2009 peak. Meanwhile, consumers had $800 billion in credit card balances outstanding, down just 6% from their peak in 2008.

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The Deflation Debate

Original Article from Fox Business EMac’s Stock Watch

 

Is the US economy facing disinflation in extremis?

 

Or is deflation really upon us?

 

And how would the Federal Reserve react if it believes we face rampant deflation?

 

Deflation is a downward spiral of falling wages and prices and a consensus that declines will persist. And because overregulation is effectively deflationary, any such downturn can be aggravated by government rules and regulations written in pencil not pen.

 

Yes, low sub 3% ten-year Treasury note yields should be considered a warning shot that the bond markets are pricing in deflation. But this is more a flight to safety, a safe haven issue in the world markets.

 

We might instead be in disinflationary times, as prices for goods and services are still rising. Wages grew again year on year in March, consumer inflation expectations rose in May, and commodity prices are still robust.

 

In 2008 key indices of commodity prices dropped about 60% and have retraced only a third of that decline. That retracement stopped in and around January.

 

Housing costs, too, specifically rental costs are still inflationary. Rent costs have a heavy hand in the CPI, that cost makes up 40% of core CPI. The Labor Dept. uses what homeowners would pay to rent their homes instead of mortgage costs. As homeownership has fallen out of favor in the US, rent prices could be set for a longer term rally, says Barclays Capital.

 

It says CPI shelter costs could post year on year gains of nearly 2% by year end. That would put significant upward pressure on both the core and overall CPI.

 

But haven’t prices for retail goods dropped? Yes, but that’s because for years the United States has been importing deflation in the form of cheap China goods, which has kept the overall inflation rate low. That’s a dollar-yuan currency peg issue, however.

 

So what will happen if the Fed believes deflation is upon us?

 

A big kahuna of quantitative easing that will make the Fed’s recent moves look like a piker, and will create hyperinflation. Meaning: deflation tautologies at the Fed will hasten frenetic, panicked monetary intervention, increasing the odds of hyperinflation.

 

That deflation/more QE scenario is now being encouraged by inflation hawk James Bullard, president of the Federal Reserve Bank of St. Louis, who surprisingly said recently that because the US faces Japan-style deflation, quantitative easing needs to be ramped up, meaning much more Fed purchases of Treasury securities.

 

By how much? Moody’s Analytics Mark Zandi says that, because he sees a one in three chance that deflation will be accompanied by a recessionary double dip, the Fed may be forced to resume QE on the order of central bank purchases of maybe $2 trillion or more of securities, doubling its balance sheet from the current $2.3 trillion.

 

And Fed chairman Ben Bernanke has already said in a 2002 speech: “The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost.”

 

Societe Generale’s perma-bear Albert Edwards said the “the coming deflationary maelstrom will be additional money printing that will make the recent QE seem insignificant.”

 

Meanwhile, despite the central bank’s monetization of about $1.7 T of government and Fannie and Freddie debt, imputed M3–which is a key measure of money meaning credit supply–has drifted south. Once that money, on top of the expected extra round of QE, is unleashed in the markets, you will see too much money chasing too few goods, which is inflation.

 

Peter Boockvar, equity strategist at Miller Tabak also not only says deflation is not upon us, he dismantles the current monetary policy towards battling what the US central bank sees as incipient deflation:

 

“With Treasury bond yields at, or near historically low levels on one hand, but with commodity prices near eight month highs; and, with the personal feeling that outside of a home, a computer and a flat screen TV, the cost of living seems to only go higher on the other hand, here is another perspective on the inflation/deflation debate.”

 

“Since June 1981, when [former Federal Reserve chairman Paul] Volcker started to lower interest rates from 20%, as high inflation rates started to fall, the absolute level of

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Curb Your Enthusiasm on Fan/Fred Reform

Original Article from Fox Business EMac’s Stock Watch

Treasury Secretary Tim Geithner is now leading committees upon symposiums upon commissions to concoct some kind of reform by January 2011 of the Thelma and Louise of housing, Fannie Mae and Freddie Mac, who are already driving the US taxpayer off the cliff, to paraphrase conservative pundit Pat Buchanan.

 

But as government committees are, in reality, animals with four hind legs that only move in reverse, and given the legislative history on reform here, there’s a good chance ‘Frannie’ reform will remain entombed in Congress along with Social Security, Medicare and tax reform for years to come, leaving taxpayers stuck with dead money in these two politically captive hedge funds. Freddie Mac has already drawn down $64 billion from its unlimited pipeline into the Treasury, meaning taxpayers’ pockets; Fannie has taken $86.1 billion.

 

Fannie and Freddie will likely get more direct cash injections than what was spent on the TARP bailouts of US banks and the automakers combined, analysts’ estimates show. Frannie’s recklessness also will likely cost taxpayers more than the collapse of the savings and loans in the 1980s.

 

If Geithner Were Serious, He’d Stress Test Frannie

 

If Treasury Secretary Geithner and the government were truly serious about reforming Frannie, they would have stress tested both before giving each of them an unlimited pipeline into the Treasury’s vaults in the dead of night last Christmas eve.

 

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Buffalo Pays $2 Million in Health Coverage–For Dead Workers

Original Article from Fox Business EMac’s Stock Watch

 

The City of Buffalo paid almost $2 million in health insurance premiums for dead workers.

 

According to an audit released yesterday by the Buffalo (New York) City Comptroller, the city of Buffalo spent $1.998 million in taxpayer funds on health insurance premiums for 152 deceased employees – “some [of whom] had deceased as long ago as 1998.” Fox News analyst James Farrell caught this one.

   

How did the Comptroller’s office determine that the employees were dead?  By comparing the list of employees on the city’s medical insurance rolls against the Social Security Death Index, which the audit report noted was “available without charge over the Internet” (emphasis original), Farrell notes.

  

Audit report here: http://www.buffalonews.com/incoming/article100290.ece/BINARY/compbenefits.pdf

 

News report here: http://www.buffalonews.com/city/communities/buffalo/article100281.ece

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