King Report: Monster Q2 Russell Rebalancing

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Despite an unexpected increase in both Initial Jobless Claims and Continuing Claims stocks, bonds and commodities soared on Thursday…Please note that Street shills and their fin media accomplices tout a single decline in either jobless claim component as a sign that the bottom is in and recovery has commenced. But when jobless claims decline, it’s immaterial…Last week’s claims were revised higher.

Incredibly some media outlets and pundits attributed the rally to relief that Bernanke’s testimony didn’t go badly. HUH!!! Where are the adult editors and managers?

The best explanation for Thursday’s ‘everything’ rally is Q2 performance gaming has commenced. Stocks rallied for, wise guys front ran, the monster Russell rebalancing for Q2…Bonds rallied, just as they have been doing, after the last Treasury auction tranche.

Initial jobless claims are 627,000; 600,000 was expected. Continuing Claims are 6.74m. The four-week moving average of initial claims, a less volatile metric, increased to 617,250 from 616,750.

Business Week: A Lost Decade for Jobs; Private sector job growth was almost non-existent over the past ten years. Take a look at this horrifying chart:

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But government [jobs] keeps growing. Over the past 10 years, the private sector has generated roughly 1.1 million additional jobs, or about 100K per year. The public sector created about 2.4 million jobs.

As we have harped for years, low-paying gigs and government are the main sectors of job growth.

Industry ———————————————– Change, May 1999-2009 (thousands of jobs)*
Private healthcare ———————————–2898
Food and drinking places ————————– 1567
Gov educ ——————————————— 1390

via Business Week

This is what Easy Al and Ben have been papering over – declining jobs, wages, US real living standards, the massive transfer of wealth to BRICs and OPEC. Q1 GDP was revised to -5.5% due to minor revisions in inventories and trade. The 37.3% decline in business investment and inventories is a record (data series began in 1947). The 38.8% decline in homebuilding is the largest contraction since 1980.

John Williams notes: On July 31st, the Bureau of Economic Analysis (BEA) will revamp GDP history going back to 1929…GDP reporting remains virtually worthless and is little more than political propaganda. John notes that income contracted more in Q1 than Q2. GDI is the income-side equivalent of the GDP’s consumption estimate. As estimated in last month’s reporting, reflecting a sharp reversal in “statistical discrepancy,” first-quarter GDI was reported showing an annualized real quarterly contraction of 3.64%, versus a fourth-quarter estimated contraction of 7.78%. Today’s reporting and revision reflected something of a reversal in other trends, showing a deeper 4.31% annualized quarterly contraction in the first quarter. Year-to-year, first-quarter GDI declined by 3.11% (previously down 2.94%), versus a 2.16% contraction in the fourth quarter.

Ben played the ‘I don’t recollect’ card yesterday when asked about an email that claimed Ben told a Fed employee that if BAC played the MAC (materially adverse clause) ‘management would be gone’.

Moments later Ben played the ‘I don’t remember’ gambit. Congressman Dan Burton rebuked Ben, saying his experience in investigations leads him to believe that people say ‘I don’t remember’ to avoid perjury.

The Fed’s balance sheet declined $58.5B due to a $53.758B decline in the ‘Term Auction Credit’ and a $28.692 decline in ‘liquidity swaps’. The Fed monetized $30B of securities. It appears the Fed is curtailing credit facilities but is increasing its monetization of Treasuries & MBS.