NFPayroll Day

20070104_nfp
A couple of things to keep an eye on when the NFP numbers come out at 8:30am this morning:

1) Consensus is 115,000 for new jobs in December; 

2) ADP and Monster.com job postings pointed to an actual contraction in jobs last month. That’s something we haven’t seen since mid 2003 (see chart below)
Note: I used to mock the ADP data as being so awful, but since the big BLS revision, ADP turned out to be more accurate than originally appeared. While the jury is still out, I am trying to remain open-minded about their analysis;

3) Look for job losses in Manufacturing and quite possibly Construction. The shrinking manufacturing base is a trend that has been in place for decades, but the slowing Construction hiring is more recent. The question is whether the strength in commercial building will offset weakness in residential. Given the unusually warm weather in December, construction crews might have kept on working. ( (Retail job losses will likely be seasonal).

4) The Key to the number will be how the market interprets that the Fed will view it:

• An (unlikely) upside surprise will be the last nail in the coffin for any immediate rate cut hopes;

• A weak number reignites expectations for a Fed cut sooner than later, eventually leading someone to pen a piece titled "The Greenspan Put Lives!";

• A consensus number would be the real surprise.

5) Actual Job losses — a contraction — hasn’t happened for quite some time:

Total NFP Employment, with  Month-to-Month % change (annual rates)
click for larger chart
Nfp_changes_monthtomonth

Total NFP Employment, with Year-over-Year % change
click for larger chart
Nfp_change_yeartoyear

 

6) As the chart below shows, this remains the weakest job creation recovery in the post WWII era. And if this turns out to be the peak of the cycle, it increases the likelihood of a recession over the next 12-24 months. I remain in the camp that a recession is an increasing possibility, but not a sure thing.   

Employment Post Recession

Payroll_employment

Chart Courtesy Spencer England Equity Review (SEER)

Sources:

Payroll Number Is Going to End Guessing Game
JUSTIN LAHART
January 5, 2007; Page C1
http://online.wsj.com/article/SB116796347598967795.html

Economagic:

NFP: Total Employment Period-to-period percentage change at annual rates

NFP: Total Employment  Percentage change from same period last year

 

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What's been said:

Discussions found on the web:
  1. blam commented on Jan 5

    I have reached the point of view that the Fed has created so much havoc and damage with their bubble policies it is hard to decide what they will do.

    For the past three years, they, and speculative FCB’s, have pandered to the wishes of big money speculators and trans-national corporations. In the process, destroying the US national savings rate, creating inflation, and inducing a bubble mentality in housing, commodities, equities, bonds, and credit.

    How any good can come out of this, we shall see. Relying on the Fed to do the right thing has been a clear path to investment and savings losses. I have a feeling that will continue. Wall street is driving this boat.

    It will continue to be more correct to try to guess what phase of the game the market masters are currently enforcing.

  2. Eclectic commented on Jan 5

    There’s absolutely no question in my mind that a dramatically weak employment number gets received by the market as a Greenspan/Bernanke/Milton Friedman put.

    After the ad-hoc apologia Bernanke delivered to his idols, Friedman and Schwartz, is there any doubt he’d be internally predisposed to cut rates if employment worsened?

    …Hardly.

    The question is: Afterward, is the Fed capable of coming to the realization that monetary policy in the present macroeconomic dilemma would likely be sterile? (for reasons I’ve demonstrated)

    …Like I’ve said, I doubt they read Eclectic.

    Therefore, would it ever be possible for the Fed to understand that their next cuts just might likely begin to extend the macro into a condition of almost certain stagflation?

    …Don’t hold your breath.

    Now, I realize this is all putting the cart before the horse, since even a quite weak BLS today will, by the end of the day, get blown off by pundits as being spurious.

    Still, the bond market will launch if BLS is a way low surprise.

    If Bernanke didn’t then begin to evidence a rate cut, he’d have to unpublish his writings on The Great Depression.

    Just purely for fun (I have no faith in my guess), I’ll stab at the number. Let’s just for the moment assume that ADP will prove over time to be a worthy advance indicator of what BLS will eventually tell us about employment (after revisions), and if we further assume that BLS’s advance number today is beginning to catch the negative ‘delta’ that a weakening economy must ultimately demonstrate, then BLS today might show us a number that could initially indicate something worse for Dec jobs than it eventually proves to be after final revisions are completed. In other words, it might be a bigger drop in jobs today than even BLS will eventually log for Dec, after final revisions.

    Since ADP has already said “-40k” and they’ve asserted that their number that is not revised (to my knowledge) anticipates BLS revisions, then what I’ve just written is in keeping with what they might view as a possible course of events.

    Having said all of that… I’ll stab at a guess…… BLS for Dec: “100k Loss”

  3. Neal commented on Jan 5

    You nattering nabobs of negativism, when will you learn to trust your Uncle Sam that everyting is OK. Nothing to see here, just move on. Go out and shop. Please.

  4. Neal commented on Jan 5

    Seriously, how else can the inflation flag be waved if there is falling employment? If contraction is shown, rates must be cut and the dollar will tumble.

  5. anon commented on Jan 5

    ADP: -40,000 jobs
    BLS: +167,000 jobs

    So one of these reports is trash. Or maybe both.

  6. Eclectic commented on Jan 5

    This report of +167k possibly indicates a need for rational people to re-think almost everything about the economy. Is that the message?

    Still, BLS only claims an accuracy of plus or minus 430k in any given month.

    If ADP’s report is to be considered accurate, then we’d have to assume that their report of -40k would not be excluded from a BLS range of -263k to +597k (+167k plus or minus 430k).

    My view is still unchanged. The fact that an economy is in transition (either way) is less likely to be discovered until the delta produced by the transition exceeds the statistical significance of the indicators that measure it.

    There is no question that cumulative BLS reports have more than significantly indicated job growth… however, we can not know at present but that this +167k figure is simply failing to demonstrate an unseen delta that ADP may have more accurately discovered.

    The ADP/BLS debate will only continue to rage now. But any attack on ADP after this BLS report has to occur on emotion, not rational science.

  7. jmf commented on Jan 5

    really a strong number.

    but once again. the manufacturing segment has lost 12k and even retail lost 9k.

    the construction number has to come down and i think that the mild weather and the rush to finish has dampen the real effect. here is really potential for a massive decline that will hit at a very fast pace!

    another sector that will be hit hard are the financials. with all the trouble in housing these kind of numbers are not sustainable. we have seen lots of massive layoffs from all the mortgage related companies

    In financial activities, commercial banking added 5,000 jobs in December.
    Employment in financial activities was up by 153,000 over the year; job gains
    occurred in insurance (46,000) and in credit intermediation (62,000), which
    includes commercial banking.

    the birth death model accounts for only a “third” of the gain.

    fun to see how the markets will judge this kind of data. the potential for a “falling of a cliff” are growing in my opinion

  8. Philippe commented on Jan 5

    Welcome to the new federal reserve bank authorities.
    They just are reminding that when you think of a Central Bank think inflation, and remember that it cannot be deprived of its monetary policy by skimmers.

  9. Fred commented on Jan 5

    I eagerly await Barry’s spin.

  10. sam commented on Jan 5

    barry doesn’t follow the dictum: strong conviction loosely held!

  11. Teddy commented on Jan 5

    Give me a break! As I’ve said in previous posts, reviewing this data in a RATIONAL way is like asking a child with undiagnosed dyslexia to read.

  12. BDG123 commented on Jan 5

    It’s 1995! LOL! NOT! So, with small caps underperforming, and they are regardless of the pablum I read, and the R2K sitting at May highs along with every other broad index, what oh swami will a correction bring? Lower lows? A rounding top? Or, are we headed for another 30% gain on the S&P from here? The bulls better mount a charge early in the year IMO. Otherwise, I won’t have to wait until the second half of the year to take their money.

    Oops, I’m sorry, we have web 2.0 or Youtube. Btw, Myspace and Youtube aren’t web 2.0. It’s more like 1.01

  13. Anonymous commented on Jan 5

    1) The jobs data are too consistent to ignore.
    2) The bears are going to argue that this is a lagging indicator.
    3) The inflationary aspects are nevertheless going to test this dovish Fed. The costs of keeping rates low for too long will come back to haunt them as the economy slows.

  14. super-anon commented on Jan 5

    really a strong number.

    but once again. the manufacturing segment…

    Haha… people’s expectations have really been ruined by this business cycle.

    Ten years ago a “strong number” was something in the 300,000-500,000 range.

    No more I guess.

  15. super-anon commented on Jan 5

    1) The jobs data are too consistent to ignore.

    Jobs numbers and unemployment data frequently remain healthy right up to a recession, and then suddenly deteriorate.

    The fact that payroll data looks good (by today’s standards anyhow) in no way precludes a recession later this year.

  16. Teddy commented on Jan 5

    The monthly data follows the principles of Quantum Physics.

  17. Anonymous commented on Jan 5

    super-anon,
    You are looking at the wrong survey. The HH is reporting consistently above 300k per month. And some months are > 600k. Jokes aside, labor market is strong.

    BDG123,
    In 1995, there was a lot of room to grow with unemployment high and consumers with savings. Not 1995. But it might be 1999. Can we get a blow off in the equity market like then? Sure. Are we near the end of the cycle rather than the middle. I think so. Where is the growth in consumption going to come from? The only thing comanies seem to be interested in buying is their own stocks or other companies.

  18. super-anon commented on Jan 5

    super-anon,
    You are looking at the wrong survey.

    I am looking at past BLS payroll data.

    Numbers from 1997:

    506,000
    339,000
    307,000
    298,000
    268,000
    185,000
    148,000
    278,000
    401,000

    And from the same survey in 2006:

    154,000
    200,000
    175,000
    112,000
    100,000
    134,000
    123,000
    230,000

  19. zell commented on Jan 5

    Mega-bubbles have to lose alot of energy before there is softness, slowdown, and

    then contraction. Only then do you see your
    quantum moves.

  20. Anonymous commented on Jan 5

    super-anon,
    You are right about the payroll survey. However, in this cycle, the more accurate one seems to be the Household survey. The HH survey numbers are comparable to its own 90s numbers. Why the payroll might be understating job growth is open to specualation but the numbers in the payroll survey keep getting revised up.

  21. Jdamon commented on Jan 5

    So, based on the BLS numbers, is the economy softening or is it taking off? Seems to me that Goldilocks is alive and well……

    Folks, get over 1999/2000, that was a major, massive bubble in TECHNOLOGY stocks only!. look guys, the NAZ was over 5,100. It is now sitting in the 2,400 range some 55% lower than its all-time high. It probably won’t reach that number again in my lifetime (I’m 39). THAT my friends was a bubble. What we are seeing now is a healthy market digesting economic numbers. Nothing special, no 40% parabolic rise in a years time, just a slow, upwardly moving market. What is so wrong with this picture? Impending doom and gloom, bombshelters, end of days, etc. Come on guys, get a bit more optimistic if only to make a little bit of money for a change.

  22. me commented on Jan 5

    Right, everyone hires in December during budget cuts to make the end of the year look good. Or maybe we can believe 43,000 teachers and bus drivers were hired mid term, when school is closed in December.

    Maybe the 178,000 are at AT&T, oh sorry they are firing 10,000. Anyone that believes this number or doesn’t think it will be revised hugely down is mistaken.

  23. Fred commented on Jan 5

    BDG:

    Better lay off the java, (or red bull I imagine).

  24. Repoman commented on Jan 5

    This job number was probably the worst outcome for the bulls. Stock market has been going up because they were hoping for the Fed to start cutting rates. Strong number has the Fed fighting inflation that does NOT exist.

    Since the job numbers are a lagging indicator, the Fed will only cut after we are already in a recession and the cuts will come too late to save the economy.

  25. Chief Tomahawk commented on Jan 5

    Today’s NFP is a real body blow to the precious metals||dollar short trade.

  26. Gary commented on Jan 5

    The S&P was trading at a P/E of over 40. Higher than any other time in history. I’d have to say the bubble extended to the entire market. Interesting point the Nasdaq is still 50% under it’s all time high, the S&P down almost 10% , pretty much all of Europe is still underwater, only a few emerging markets that are heavily reliant on natural resources are above the 2000 highs. Doesn’t sound like a bull market to me. It does sound like a commodity bull market though. I’ve looked at quite a few secular bull markets and they all have some kind of large correction that seperates phase one from phase two about five years into the bull move. If you take a look at a long term chart of the CRB you’ll notice this correction has been much longer and larger than any other correction so far. This bull started from a supply/demand imbalance. It’s still way to early for supply to catch up with demand so I have to believe that the sharp drop in prices is due to a severe drop in demand. What does this say about the global economy? Commodity bulls run in rather long cycles because it takes a long time to bring new supply online. During these cycles you usually get inflation as politicians turn to the printing press to try and cure societies woes and stay in office. Sound familar. You also have wars over shrinking commodites. Does anyone still believe we went into Iraq because of WMD. Hey come to think of it they do have a lot of oil there!!! This latest rally looks to me like it is a momentum fueled last hurrah from a bull with 6 uplegs and no fear left. Momentum moves can be rather dangerous when the momentum finally fails as it invariably always does. I suspect Greenspan and Bernanke are ultimately going to make things much worse than they had to be by tring to print our way out of a bear market. Unless somehow this time is different (historically very dangerous words) using the same cure as the 70’s will probably deliver the same results as the 70’s stagflation. It’s kind of like watching a mouse caught in a maze running the same track over and over. Maybe it’s just imposible for humans to learn from anothers mistakes.

  27. donna commented on Jan 5

    My 21 and 17 year old still don’t have jobs, and if they did, they would be paying minimum wage at a food place.

    Strong job market my ass.

  28. Bill aka NO DooDahs! commented on Jan 5

    Commodities were dead in May. Now they’re buried. Funerals are for the living and not for the dead.

    During the current and upcoming churn, look for relative strength, and when the churn ends, BUY THAT STRENGTH.

    What happens in the economy and, to a large extent, in the indices is irrelevant to YOUR PORTFOLIO. Unless of course, you bought shares of “the economy” or “the indices.” You’d have never known it by looking at the indices, but there were bull markets in many places during the crash. Case in point: when the Naz and the over-weighted-with-tech SPX and DJI were topping out in 2000, the XOI was making a double bottom.

    Your mission, should your portfolio choose to accept it, is to think outside the box and find what works today, rather than look at the big picture – because you don’t buy the big picture, you buy individual stocks, funds, and bonds. Just as you can’t invest in “housing” but CAN invest in “housing stocks” – and you must arbitrage the difference in what has already happened to the stocks and what is yet to happen to housing.

    Already the market is sorting out areas of relative strength and weakness in the new year – are you? The next two weeks will make more of a difference to your portfolio than you think.

  29. Larry Nusbaum commented on Jan 5

    Bill: “Just as you can’t invest in “housing” ”
    Maybe you can’t, Bill, but that’s where the real money has been made since 2000 and not in XOI. But, thanks for the admission.

  30. Teddy commented on Jan 5

    So many great comments today, so little time to decide. But everyone to their seats on the PLATFORM AND BE PREPARED FOR LIFTOFF. We will be leaving the solar system for a distant star, which one I DUNNO.

  31. Fred commented on Jan 5

    Donna,

    Suggest to your kids to start their own business (eg. painting, lawn mowing, etc).

    I started one in high school, and hired all my friends….paid my room and board at college.

    There are always opportunities.

  32. Gary commented on Jan 5

    Actually TOL, CTX, BZH are showing about the same gains as HOC, MRO, FTO.

  33. dryfly commented on Jan 5

    As for chances of a near term FFR cut…

    “Liquidity, MORE liquidity!! We don’t need no stinking LIQUIDITY!!!”

    Heard coming out of BB’s office during today’s fed governor’s conference call…

  34. Bill aka NO DooDahs! commented on Jan 5

    Not sure what you mean by “admission,” Larry. Did you mean “addition?”

    I just picked one “bull during the bear” out of the air, so to speak. I suppose I could have spent a lot of time trying to find which stock sector did best in relative performance over that time period, but I thought one example, even if not the best example, would be enough for any intelligent person to deduce that there were others … possibly better … the key is to open your mind to the IDEA that the index is not monolithic and to stop paying incredible amounts of attention to averages, indices, and summations.

    One can’t buy “housing.” Housing is an abstraction. One can buy individual houses, either the stupid way, by simply living in one, or by buying distressed houses and rehabbing – which is best done over the course of two years while living in them, for the capital gains exemption – or buy buying rental units, etc. And each individual prospective house should be looked at on its own merits, without regard to the overall housing market, as one can ALWAYS find counterexample “good buys” be they houses or stocks, regardless of the trend in the average or index. There are doubtless good buys even in the stretched markets, and many markets in “flyover country” aren’t feeling any pain from the “housing bubble burst.”

    Similarly, one can’t buy “the economy.” One can’t even accurately MEASURE the economy, the measurements commonly accepted have as many, if not more, flaws than the stock indices do. One can only buy what is traded, and last time I looked, GDP wasn’t the ticker symbol for “the economy” but rather for Goodrich Pete Corp.

  35. Gary commented on Jan 5

    Thought I might add the gains in housing stocks came at the end of the largest real estate bubble ever. While the gains in oil stocks came during the first phase of the bull market. We still have at least 2 more to go. When the public is running around buying every oil company they can get their hands on, just like they were buying RE last year, then I’ll be ready to unload my commodities. Needless to say we’re a long way from that now. We’re getting the shakeout that will clear the way for the 2nd leg up.

  36. BDG123 commented on Jan 5

    Super-anon is clearly correct and Anon is cleary incorrect on the labor data. I’m tired of reading all of this bullshit that the employment scene is grand. For some it truly is good. But…. In addition, employment data is so lagging that if you were to buy the biggest major market correction in the last forty years, you would have done so the month the employment figures were the worst and sold when they were near the best. Know your facts or don’t. Pretending isn’t an option. Neither is being influenced by the Orwellian plants. The labor participation rate is a JOKE. It’s THE SAME AS EUROPE. Where did I get that? One of the biggest global investment firms and smartest SOB’s in the investing market: Jeremy Grantham. Now, I’m a long term bull on the American economy but let’s get real. The economy is not stocks. Oh, and the economy is going to perform subtrend for some time. If that’s -3% or 1.5%, it is all guessing.

    I can’t wait to come back and chide these deer in the headlights who think stocks are cheap. You had your PE expansion. It was in small caps, energy, metals, emerging markets, etc. The E has filled. Now what? Give me 20 S&P stocks with a price to book of 1.5, an enterprise value to fcf of less than 10, a dividend of 5% and a growth rate of greater than 15%. Give me 2. Give me 1. If you are an equity bull right now, you are a delusional 1990s dimwit and a gambler. You know nothing of investing and your prior genius has been confused with the greatest bull market in history where throwing darts was profitable. Now, I’m not saying the market can’t go higher because it has before. That doesn’t mean it’s going to stay there. Nor does it mean you are going to make money in the long run. A trader? Sure, you can make money in any market. How many people on here want to trade their retirment dollars at age 50? Christ! Save me from the idiots! It’s java not Red Bull. LOL!

  37. HerbieS commented on Jan 5

    BDG, buddy, you sound angry. what’s wrong?

  38. BDG123 commented on Jan 5

    I’m not angry. I’m laughing as I type. It’s my sardonic style…which seems angry or cynical in print. I want to be Lewis Black when I grow up.

  39. MarkM commented on Jan 5

    An early audition by “B” for the Tony Montana Trader of the Year Award! And he did it all without an f-bomb! Way to go “B”!

  40. Fred commented on Jan 5

    Try some lavender….or Zanex

  41. BDG123 commented on Jan 5

    Fred, maybe you ought to try a smart pill. Your bloviating bullshit shows you are a sheep dependent on Don Hays “expert” analysis. I prefer shrooms and pot. Maybe you could try it once. You might loosen your sphincter up enough to pull that broom stick out.

    Now, seriously, I’m only kidding. I just couldn’t resist. I’m sure you are a near genius.

  42. MM commented on Jan 5

    Letting BDG123 near this site is similar to giving a machine gun to a monkey

  43. Bill aka NO DooDahs! commented on Jan 5

    I would think anyone with a brain and a plan would want to be trading their retirement dollars at age 50 – after all, if you’ve got a brain and a plan, it’s the best way to grow your nest egg, and it beats working for a living.

  44. Teddy commented on Jan 5

    Actually, I found BDG’s attack simply marvelous, maybe even heelarryous. Good for him! But let’s keep those sphincters tight, there are no toilets on this PLATFORM. And does he mean nearly a genius or adjacent to a genius?

  45. BDG123 commented on Jan 5

    Did you know Monkey’s and darts outperformed most money managers in the 1990s? That is a true story. So, what is a Monkey and a machine gun capable of? Don’t be so close minded. Monkeys are smarter than most bloggers.

  46. Bill aka NO DooDahs! commented on Jan 5

    Yourself included, I suppose.

    Actually, the monkey has a point. He picks stocks at random, rather than picking them based on market capitalization. That is part of his “edge” and part of the “edge” of the retail trader/investor – playing on the size anomaly and the mismatch of information available when there aren’t 52 ANALists covering the company.

    The annualized return on all exchange listed stocks since 1998 (first year I have their data for) is more than double that of the major indices.

    So, you’re right. The monkey IS smarter than MOST bloggers.

  47. someguy commented on Jan 5

    I’m watching oils/energy and metals really closely.

    The problem with thinking we are on leg 1 of a 3 leg run is that the supply/demand equation is already balanced. Oil inventory is at record highs, non OPEC and probably OPEC production is increasing dramatically, ethanol is coming on line like crazy and we have enough copper, especially with residential construction falling. There is no fundamental shortage of anything.

    I think the commodity boom is done. It was great while it lasted, but its done. The difference between the 70s and now is that there never was a physical shortage this time. It was all based on fear of shortages, that never materialized.

    To me what happens next all boils down the the strength of the consumer. Sure, corporations have money and record profits, but they don’t really seem to be reinvesting it. They seem to want to buy back a lot of stock.

    So how strong is the consumer ? Will the housing market kill him ? If so, its depression time. Yeah, with a D. Will it just hurt him ? Then its recession time. Will he get along just fine without the house ATM ? Then so will the economy.

    I think Bernanke is going to raise rates in 2007 to combat any hint of a further rise in inflation. Everyone is focusing on the jobs number in the report, but if you read further, wages rose ! That is an absolute Go signal for Bernanke.

    I’m sitting on the sidelines in cash right now. I don’t know what to do.

    I’ve got an inkling though. I think the next big thing is going to be hybrids and battery electric vehicles. http://www.teslaroadster.com will start it off. Silicon Valley is going to kick Detroits butt in designing the next wave of vehicles.

    This makes sense from a number of points of view. 1) Gets consumers away from the threat of high gasoline costs. 2) Energy independence. 3) Environmental impact. 4) The consumers want of a neat, cool high performance vehicle.

    Am I on the right track ?

  48. Gary commented on Jan 5

    Hmm I don’t see how we have cured any supply imbalances. Has anybody heard of any giant oil fields that have come on line in the last 20 years. Have we brought any large copper mines on line in that time. I don’t believe we have built a refinery in 20+ years or a lead smelter or increased the acreage in coffee or sugar or wheat or soybeans. Not to mention I don’t think China and India are going to be willing to go back to subsistence living now that they have had a taste of the western life. Every commodity bull market in history has lasted a minumum of 15 years. It takes time to recognize the need for expansion, prices have to move up high enough and long enough to overcome the relutance to expand brought on by a 20 year bear market. Permits have to be filed and infrastructure put in place. If that’s been done in the last 2 years I sure missed it. Like I said when I see the public buying gold coins like they were buying real estate last year or oil wells off the CA coast then it will be time to sell. I guess some can keep hoping for the tech stock heydays to come back again (Cramer apparently is) but I doubt that they will.

  49. Eclectic commented on Jan 5

    Eclectic entertains
    ….Eclectic provokes
    …….Eclectic s-e-r-v-e-s

  50. Eclectic commented on Jan 5

    Forgive me for this correction***

    I meant to write:

    “In my opinion this is what is being demonstrated at least historically with the ADP/BLS correlation from Jan 2000 clearly until approximately Aug [2000]*.”

    *not 2005 which I erroneously wrote, which must’ve made that statement seem absurd in reference to other things I said.

    Damn BR!… I hate not being able to edit comments after posting.

  51. Eclectic commented on Jan 5

    BTW, BLD123

    …except for needin’ some high dose ritalin, your pontification beginning as:

    “I can’t wait to come back and chide these deer in the headlights who think stocks are cheap. You had your PE expansion……”

    issa work’a po-ettic an suh-blime purr-fec-shun.

  52. Clark Kent commented on Jan 5

    Wow Eclitcic…………deep

  53. someguy commented on Jan 6

    “Hmm I don’t see how we have cured any supply imbalances. Has anybody heard of any giant oil fields that have come on line in the last 20 years.”

    When was the last time you went to a service station and found they didn’t have fuel for your car ? Inventories are climbing, production is climbing. Major find ? How about Ethanol ! How about oilsands ?

    Devon was involved with a huge find in the Gulf of Mexico as was AEN. Both big finds. But nobody remembers those because the trader hype about we are running out of oil.

    “Have we brought any large copper mines on line in that time.”

    No, but mines have increased capacity collectively. We had enough copper for 40 or more years and now that the housing boom is over, we have enough again. Look at the fundamentals. Inventories are building, even in China.

    “I don’t believe we have built a refinery in 20+ years or a lead smelter or increased the acreage in coffee or sugar or wheat or soybeans.”

    We haven’t, but Canada and lots of other places have built them for us. There is enough refining capacity now and more is coming on line. If there was a lack of refining capacity, crude would be cheap and gasoline would be expensive.

    “Not to mention I don’t think China and India are going to be willing to go back to subsistence living now that they have had a taste of the western life.”

    They are a far way from being anything like us.

    “Every commodity bull market in history has lasted a minumum of 15 years.”

    So how many bulls was that ? What if I told you that the world can now react faster to commodity demands ? We have better equipment, smarter engineers, better transportation systems, etc. Ethanol production went from nothing to 350K barrels a day in no time flat. 2008 production is forcast to be 800K barrels a day !

    “It takes time to recognize the need for expansion, prices have to move up high enough and long enough to overcome the relutance to expand brought on by a 20 year bear market. Permits have to be filed and infrastructure put in place. If that’s been done in the last 2 years I sure missed it.”

    I think you have. Check out a place called Alberta.

    “Like I said when I see the public buying gold coins like they were buying real estate last year or oil wells off the CA coast then it will be time to sell. I guess some can keep hoping for the tech stock heydays to come back again (Cramer apparently is) but I doubt that they will.”

    You and I are polar opposites on the whole situation. I have done a ton of reading on it. Let me know if you want urls.

  54. Barry Ritholtz commented on Jan 6

    Its not monkeys and darts, its mechanical indexing versus human foibles.

    I’ll take a good quant program over a monkey with a dart (or most humans for that matter) anyday.

  55. Eclectic commented on Jan 6

    About the ADP/BLS charting from my prior comments:

    I confused some of my remarks in those comments because I’d gotten them out of sequence with my own thoughts at the time, and couldn’t edit them after posting. Maybe this will clear it up (for those incredibly rare individuals who might’ve actually endured to read them!…ha!).

    You can use that interactive chart to select any range of data from the inception point of the graphing, Jan 2000, all the way to the present, Jan 2007.

    The high correlation between BLS and ADP can best be seen over the longest time, the entire range, Jan 2000 to Jan 2007.

    However, the longest period still shows some considerable divergence, both early on from Jan 2000 until about Aug or Sep of 2001 (Sorry, I’d earlier said to print that chart only until Aug 2000), and from about Aug 2005 until the present.

    My question was: Why do we see that divergence?

    Too, I made the observation that it seems that ADP’s measures appeared not to be as sensitive as BLS measures during periods (prior to recently) when we know without doubt that employment was shifting to a worsening trend, but that the two measures again returned to high correlation when the trend was fully in place.

    Finally, in the recent period we are again seeing a widening divergence (widening most beginning in about Aug or Sep in 2005) in which BLS measures indicate more slowing (a worsening) in the ‘still increasing’ growth of employment than ADP measures show for the same time.

    As has apparently happened in prior periods (easily seen on the longest chart), it seems likely that this data divergence will also eventually ‘narrow’ into a higher correlation between the two independent techniques that produced the data points.

    When they do narrow again, historically we’ll know which of the two produced the most sensitivity during the period we’re in now, because we’ll eventually know what the ‘trend’ history of our currently evolving employment situation was.

    Then we’ll have the best historical data to determine which of the two measures is the more sensitive to changes in trend.

  56. Teddy commented on Jan 6

    Since the payroll numbers can be changed by a couple of standard deviations later, identifying a trend from 1 or 2 months numbers is similar to finding the position of subatomic entities at any instant in time according to Heisenberg’s uncertainty principle. Anyone taking this economic data seriously OVER THE SHORT TERM for LONG TERM INVESTMENT is engaging in a form of self mutilation. I think Barry’s focus on the manufacturing employment is the crux of the matter because it is the only gift that keeps on giving in the economy. This voodoo about the platform companies should have shown up in the economy vis a vis astonishing gains in cap ex spending, awesome gains in productivity, not just increased corporate profits, but also increased savings rate of the country and of the individual because of incredible increase in MEDIAN wages, and a reduction in the US trade and current account deficits. No, I feel like John P Hussman has stated that our productivity gains were made in China. And IMHO, any increases in assets of this country vs. the increase in debt levels recently were due to NEGATIVE REAL INTEREST RATES FOR THE LAST 3 YEARS. And as far as the money supplies going up drastically in countries around the world and oil, copper, and gold going down recently, this could be due to Hank and Ben’s talk with the Chinese requesting that they stop hoarding these over leveraged commodities and increase their hoardings of the super leveraged US stocks. And this plea by corporations to ask not what they can do for you, but what the CEO’s and their benefiting cronies can do to screw you the employee, the investor, and their country has got to stop. Let’s see what Congress does.

  57. MarkM commented on Jan 7

    “And IMHO, any increases in assets of this country vs. the increase in debt levels recently were due to NEGATIVE REAL INTEREST RATES FOR THE LAST 3 YEARS.”

    Truth to Power.

    Why, let’s leverage up those balance sheets (for those who can). For those who can’t (safely)why we’ll design a financial product for you to slowly drain you of your ability to pay and whatever assets you have left at the end. It’s the Vampire Economy nightfeeding on the smallest, weakest in the food chain.

  58. JoeyB commented on Jan 8

    Teddy and Mark M:

    Is Lou Dobbs your hero?

Read this next.

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