Non-Farm Friday – Back to Work Edition
by phil - June 5th, 2020 8:33 am
We're waiting on Payroll Data.
Last month, in the April Report, the US Economy lost 20.5M jobs and, though "experts" are expecting another loss of jobs – we re-opened much of America in the middle of May, so it's very possible we show a net gain for April as people got back to work. Expectations for this report are for around 8.5M additional job losses but the Futures are antiipating a positive number and are already up 1%.
Keep in mind, of course, that's AFTER the Government created a $700Bn Paycheck Protection Program that handed out money to employers in exchange for not laying off their employees during the crisis. Figure the average worker makes $5,000/month including wage deductions and that's 2 months so $700Bn/$10,000 = 70 MILLION JOBS that the Government paid to salvage – otherwise this could have been, by miles, the greatest loss of jobs in American history.
Maybe now you understand why the Republicans were suddenly cooperating with the Democrats and supporting that stimulus package. It's very hard to be re-elected when 50% of the voters don't have jobs!
8:30 Update: Wow, we did get a gain of 2.5M jobs – that's great and miles better than the low expectations set by leading Economorons. That puts our Unemployment Rate at 13.3%, MUCH better than 20% expected though Average Hourly Earnings fell 1% and that's not good for the workers but GREAT FOR WALL STREET (isn't everything?).
Doesn't matter why, the Futures are up like a rocket though, in keeping with the theme of the last two weeks – unemployment for Black people still rose 2% - which makes sense since we've already reported that very little of the PPP money made it into the hands…
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The PhilStockWorld.com Weekly Webinar – 06-03-2020
by clarisezoleta - June 4th, 2020 5:04 pm
For LIVE access on Wednesday afternoons, join us at PSW!
Major Topics:
00:01:26 – Checking on the Market
00:5:00 – Petroleum Status Report
00:15:09 – Chatroom
00:16:45 – REIT
00:22:36 – Trading Techniques | New Trades
00:54:18 – S&P 500
01:01:12 – The Great Depression
01:14:31 – COVID-19 Update
01:25:22 – Cinemark
01:28:40 – IMAX
01:31:35 – Tiffany
Phil's Weekly Trading Webinars provide a great opportunity to learn what we do at PSW. For LIVE access to PSW's Weekly Webinars – demonstrating trading strategies in real time – join us at PSW!
You can also subscribe to our YouTube channel and view past webinars here.
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3,100 Thursday – S&P 500 Tests Our 10% Line
by phil - June 4th, 2020 8:34 am
3,135.
That's the 10% line above our Must Hold Level of 2,850 on the S&P 500. If we can get over that and hold it, then we will have secured the rising 50-day moving average which will "Life Cross" over the 200-day moving average around June 19th and THAT would be a very bullish set-up into the summer – assuming the re-opening is getting into full swing by then.
So TECHNICALLY, the markets are in good shape but let's keep in mind that it cost us $6.7Tn to buy this technical rally and it's likely to cost another $2.3Tn to keep it going and that will put the National Debt around $28Tn more than 3 TIMES the $9Tn of debt we had in 2007 – before the Financial Crisis. $10Tn was added during Obama's 8 years in office and now another $10Tn is being added during just 4 years of Trump (so far) – that's a much faster pace than Covid was spreading back when Trump said we shouldn't worry because we only had 5 cases in the US!
That's a huge discrepancy – usually they are off by no more than 1% but it will take until July 30th before we get our first official estimate of Q2 GDP so, until then – let the speculators have their fun.
Tomorrow we get the actual Non-Farm Payroll Report for May and it will be very hard to top April's loss of over 20M jobs, which wiped out all the jobs gained by Trump and all of the jobs gained by Obama so we're right back to the level of employment we had during the Bush crisis – which cost us $10Tn to get out of.
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ADP Employment Data Massively Beats Expectations
by Zero Hedge - June 3rd, 2020 12:20 pm
Courtesy of ZeroHedge
Ahead of what will likely be another disastrous non-farm payrolls print this Friday, ADP was expected to show a slowing in the surge in joblessness (from 20.236mm in April to 9mm in May), but ADP massively beat expectations with a 'mere' 2.76mm jobs lost.
“The impact of the COVID-19 crisis continues to weigh on businesses of all sizes,” said Ahu Yildirmaz, cohead of the ADP Research Institute.
“While the labor market is still reeling from the effects of the pandemic, job loss likely peaked in April, as many states have begun a phased reopening of businesses.”
Source: Bloomberg
The Services sector continues to bleed jobs faster than manufacturing…
…with large businesses dominating the lost jobs…
The Education sector somehow managed to gain 166k jobs in May?
We don't have an explanation for this massive beat but it seems like there is some outlier adjustment here give the massive spike in jobless claims during this period.
And even ADP admits it has no idea:
The report utilizes data through the 12th of the month. The NER uses the same time period the Bureau of Labor and Statistics uses for their survey. As such, the May NER does not reflect the full impact of COVID-19 on the overall employment situation.
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Which Way Wednesday? Just Kidding – Markets only go Up!
by phil - June 3rd, 2020 8:31 am
Yawn!
This is getting boring. Every day the stock market goes up and up while we read about the Protests and the Riots and the Cold War with China and the Unemployment and the Virus and the Debt and the Economic Slowdown…. None of that matters on Wall Street because the World's Central Banks printed $20,000,000,000,000 of new money this year and almost all of that money went into the stock market. So much so that the Fed now directly buys ETFs.
The five largest purchases by the Fed, in order, were iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD), Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT), Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH), iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and SPDR (JNK).
That's right, the Fed now buys junk bonds and the majority of these ETFs are managed by Blackrock (BLK), who also runs the Fed's debt-buying programs (once again, the Fed is NOT a Government Agency – it is a Banking Cartel made up of Bankers to protect the interests of Bankers). Still, even for bankers, this seems a little fishy.
Buying Junk Bonds is a round-about way of giving CASH!!! to Corporations but in a way that the average American does not understand. The companies issue bonds that normally would not get purchased at low interest rates but the Fed steps in and buys them all at the issue price so they are effectively giving the companies ($148Bn in Q1) loans far below the fair market value and ignoring the risks involved. Since the only people that can be hurt by this are the taxpayers – why the F not?
That $148Bn will be dwarfed by the Q2 lending, which is still underway and you can see what a party this is for Blackrock, whose stock jumped 20% on massive volume as the Fed started buying everything they had to sell. This is simply a long-term game-changer for BLK and other Junk Peddlers – ALL bonds get sold – no one goes Bankrupt.
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Momentum Monday – Rioting, Looting and Froth
by ilene - June 2nd, 2020 4:53 pm
Momentum Monday – Rioting, Looting and Froth
Courtesy of Howard Lindzon
[Originally published on June 1.]
I joked on Saturday on Twitter that ‘The FED would do an emergency rate cut on Sunday to stoop the riots'.
Combine riots and looting with some of the frothy sentiment signals I am seeing in the streams I would not be surprised at a strong pullback.
This weekend there were hundreds of peaceful protests and too many scenes of violence. It was heartbreaking to see videos and pictures including the Coronado bridge being closed down for the day as police stood guard. [Below.]
As always, Ivanhoff and I did our Momentum Monday and we went a little longer and covered a lot of ground because of the sentiment I mentioned above and the wide range of stocks breaking out and doing well. I also ate some bacon and smoked a cigar to celebrate the $VIX dropping below 30.
You can watch/lesten to the video here.
We could not get my screenshare working so here are some other links and charts I wanted to share.
All Star Charts monthly recap is always great.
I loved this chart from Strategas – maybe it means something bad, but good luck timing it. I sense as a country we have never been as overdiversifed and underdiversified at the same time. [Below]
In the private markets ‘the Doordash pizza arbitrage‘ is both genius and stupid. On the heels of the Softbank debacles, it seems like we are pushing our luck.
We have had a ‘V’ recovery in the indexes and you have to squint to see the ‘V’ recovery in consumer confidence. Makes me nervous. [Below.]
If you find yourself bearish this week have a look at the data compiled by Ryan Detrick on the breadth surge in stocks since April and what it means for the markets one year out. I have bookmarked it under ‘buy the dips’.
Finally – last month on this blog I mentioned…
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Tuesday Turmoil – Trump Threatens More Violence
by phil - June 2nd, 2020 8:36 am
This is how we now treat Freedom of Speech and Assembly in America.
Day 7 of the protests and the President is ratcheting up the rhetoric, telling the Governors they have to "DOMINATE" the streets and, yesterday afternoon, in a scene you would think was from a movie where they want to establish that the Leader is an evil man who could not care less about his people, a PEACEFUL crowd was violently cleared from the President's path so he could walk to a church, hold up a prop Bible and make a speech threatening to use the US military to put an end to the protests.
This is the point in the movie where you cut away to the heroes working from their basements with a plan to overthrow the monstrous tyrant, right? Well, here's two such heroes who are willing to speak up – one from an attic and one from a garage:
And how are the markets reacting to the violence and the chaos all across America? Well the Dow Futures are up 170 points (0.666%) this morning at 25,630 and if that's not a sign to short /YM, I don't know what is! There is now a total disconnect between the markets and reality as many stocks are now making all-time highs on the premise that the pandemic is ending – which it clearly is not.
On Friday morning, we had 1,734,586 infections in the US and just over 100,000 deaths in Trumpland. This morning we have 1,811,277 infections and 105,147 deaths so, in 4 days, we have 76,619 NEW infections – almost as many as China had TOTAL – and we've had 1,200 American's per day DIE of the virus. 1,200 per day is a rate of 438,000 per year and, of course, those people are disproportionately black so at what point would you take to the streets to fight for your people and your children's right to life, liberty and the pursuit of happiness – the principles this country were once founded upon?
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The COVID Comeback
by ilene - June 1st, 2020 5:18 pm
The COVID Comeback
Courtesy of Wade Slome, Investing Caffeine
Rocky Balboa (“The Italian Stallion”) the underdog boxer from the movie, Rocky, was down and out until he was given the opportunity to fight World Heavyweight Champion, Apollo Creed. Like the stock market during early 2020, Rocky was up against the ropes and got knocked down, but eventually he picked himself up and rebounded to victory in his rematch with Creed.
The stock market comeback also persisted last month as the COVID-19 pandemic health situation continued to stabilize and the broader economy accelerated business re-openings. For the month, the Dow Jones Industrial Average increased +4.3% (+1,037 points to 25,383), while the S&P 500 index bounced+5.3%, and the NASDAQ catapulted the most by +6.8%.
How can the stock market (i.e., the Dow) rebound +39%, or more than 7,100 points, from the March 2020 lows? The large move is even more surprising once you consider 41 million people have lost their jobs since the epidemic hit American soil (see chart below), and COVID-19 related deaths have climbed to over 100,000 people.
Source: PBS
Getting Back to Fighting Shape
By the time we reached Rocky VI, Rocky Balboa was retired and recovered from brain damage. But Rocky is no quitter, and he trained himself into championship fighting condition and got back into the boxing ring. With unemployment rates approaching Great Depression levels, the U.S. economy has been experiencing challenging circumstances as well – a self-induced coma (shutdown). Fortunately, our country has been slowly recovering day-by-day, and week-by-week. The economy may not be back to peak fighting shape, but activity is slowly and consistently getting better.
There are many different perspectives in looking at this extremely complex, unprecedented coronavirus pandemic. The speed and pace of selling stocks during February and March reached radically-high panic levels, as…
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Monday Marching Madness
by phil - June 1st, 2020 8:33 am
The First Amendment is getting a workout this weekend!
Usually the Second Amendment gets all the attention as it's backed by the gun lobby but the First Amendment needs a lobbyist it seems as the President is attacking the Freedom of the Press and Speech – which used to be a big one in this country that we cared deeply about – and now "the right of the people peaceably to assemble, and to petition the government for a redress of grievances" is under attack as well.
And what is the grievance? Well, the sign below says it all. While killing black people is a daily event in the US with 7,666 of "them" killed by the police in the past 6 years for an average of actually 3.5 each and every day in America. It's one of those things we know is happening but we accept. We were upset about it for a while (body cams) but then WE forgot (and WE is, of course, white people because I don't think it's the kind of thing you forget if you are black) but then George Floyd was tortured and murdered right on camera for using a counterfeit $20 bill that he may have had no idea was counterfeit.
Floyd was a bouncer in a club, he ended up with a fake $20 bill and spent it. He was also a truck driver (because everyone needs 2 jobs in Trumpland) to support his wife (widow) and daugter (now fatherless). Living in Minnesota is always risky for black men, who are 4 times more likely to be killed by the police than white men – despite making up just 5% of the population.
I want to be able to go in a White neighborhood and feel safe. I want to be able, when the cops are driving behind me, not to clench and be tense. I want to be able just to be free and not have to think about every step I take. – Protester
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Dying to Work
by ilene - May 31st, 2020 8:37 pm
Dying to Work
Courtesy of Robert Reich
Most of Europe and all fifty states of the US are in various stages of “reopening.” But why, exactly?
The pandemic is still with us. After the first tentative steps to ease the lockdown in Germany – the most successful large European country to halt the spread of the virus thanks to massive testing – the disease has shown signs of spreading faster.
At least Germany is opening slowly and waiting until almost no new cases are occurring there, as is the rest of the EU.
By contrast, the United States – with the highest death rate and most haphazard response to Covid-19 of any advanced nation – is opening chaotically, each state on its own. Some states are lifting restrictions overnight, although relatively few tests for the virus have been conducted.
Researchers expect the reopenings to cause thousands of additional deaths.
?Two weeks after Texas Governor Greg Abbott began reopening the state’s economy, Texas experienced the single-highest rise in cases since the beginning of the pandemic. Since Nebraska reopened May 4, Covid-19 cases in Colfax County alone have surged 1,390 percent
Experts warn that Dallas, Houston, Southeast Florida’s Gold Coast, the entire state of Alabama and several other places in the South that have rapidly reopened their economies are in danger of a second wave of coronavirus infections over the next four weeks.
Last week, Ford Motor reopened its large North American assembly plants. The following day Ford closed and then reopened its Chicago Assembly plant twice in less than 24 hours after two workers tested positive for Covid-19. On Then Ford temporarily shut its Dearborn, Michigan Truck plant after an employee tested positive, then promptly resumed operations.
So why “reopen” so abruptly, when Covid-19 continues to claim lives?
The main reason given is to get the economy moving again. But this begs the question of why an economy exists in the first place, other than to promote the wellbeing of people within it.
Both Ford plants are vital to its profitability, and Ford’s profitability is important to jobs in the Midwest. But surely the…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.