Up and Down Wall Street
SATURDAY, SEPTEMBER 8, 2012
Mario's Magic Put
By ALAN ABELSON
Weak economic data offsets the works of central bankers.
Have you heard the one about the old country preacher who had a teenage son
he felt should begin to think seriously about choosing a profession? Well, if
you haven't heard it, you're about to, thanks to Edward McDermott, a reader
whose humorous snippets we've shared with you from time to time.
.
The preacher decided that while his son was at school he'd try to get an inkling of which way the boy was leaning by slipping into his room and placing on a table four objects: a Bible, a silver dollar, a bottle of whiskey, and a copy of Playboy. The idea being that he'd hide behind the door of the boy's bedroom when his son came home from school and furtively watch to see which object the lad would pick up.
If it's the Bible, he reasoned, the kid was going to be a preacher like me and what a blessing that would be! If he picked up the silver dollar, the preacher thought, he's going to be a businessman and that'd be fine, too. If he picks up the bottle, the preacher flushed, he's going to be a no-good drunken bum. And -- just to think about it made the preacher shiver with foreboding -- if the boy picks up that magazine, he's going to be a skirt-chasing womanizer.
When his son got home, he casually walked into his room and dropped his books on the bed. Then, he spotted the four objects on his bedside table and studied them a moment or two. He picked up the Bible and placed it under this arm. He picked up the silver dollar and dropped it into his pocket. He uncorked the bottle and took a large swallow, while he gazed admiringly at the magazine's centerfold.
.
"Lord have mercy," the old preacher fumed, "he's gonna run for Congress."
In like vein, another reader, John Hayden, a manifestly bright M.D. with a memory to match, reminded us of a reference in our March 1, 2010, column to Thomas Brackett Reed, a native of Maine who served many years as speaker of the House of Representatives in the late 19th century. Possessed of a sharp tongue and a dry humor, Reed famously remarked that any number of his fellow congressmen never "opened their mouths without subtracting from the sum of human knowledge."
We plead guilty of attempting to offer via the agency of our readers a bit of comic relief in an increasingly acidulous election venue. The campaigns being waged by the two parties more and more resemble a tag-team mud-wrestling match, rather than the grunting, groaning, and grappling that usually define political combat in our great nation. Now, don't get us wrong. We enjoy the swipes and swats and the elbows in the gut that are de rigueur in election clashes as much as the next man. But when everyone's going for the jugular 24/7, it becomes literally bloody boring.
Last week was the Dems' turn to strut their stuff, and a visitor from Mars tuning in their convention could be forgiven for thinking that the hoots and hollers from the assembled delegates touched off by his speech were celebrating Bill Clinton's nomination, rather than Barack Obama's. Bill showed he can still turn on that ol' Southern charm that seduced the populace but also darn near got him booted out of the presidency.
That even after a widely publicized scandal, his popularity rating towers above that of either the present occupant of the White House or Mitt Romney can be viewed as proof that this is, indeed, a forgiving nation. Or, perhaps Americans, for better or worse, have a high tolerance for testosterone-driven misbehavior.
More than likely, though -- and forgive us this uncharitable notion -- we suspect it tells you something about the ineptitude of Bill Clinton's successors. In any event, the preliminaries are over and the main event has begun. The applicable cliché, we guess, is may the best man win. But whoever coined that grammatically dubious but enduring phrase never imagined that determining who the best man is would be more chore than choice.
NO SOONER DID OBAMA & CO. wind up the noisy proceedings in Charlotte, N.C., and the delegates head for home abuzz with high hopes instilled by the serial speechifying than fortune dealt them a sobering hand: The August employment report, which showed a not-so-grand total of 96,000 new jobs added to nonfarm payrolls last month.
The tally proved a downer pretty much through and through and was all the more disappointing because recent weeks saw a dip in new claims for unemployment insurance and ADP had somehow conjured up a 200,000-plus increase in their survey of last month's private payrolls. As Gluskin Sheff's Dave Rosenberg quipped, "The ADP survey once again lived up to its reputation as being a reliable head-faker."
Street guesstimates had looked for gains of 120,000-140,000, when the Bureau of Labor Statistics issued Friday morning's report. The miss was even more egregious when you realize that the total includes a good chunk of the supposed 87,000 new jobs generously added by the birth/death computer model. Virtually the sole piece of ostensibly good news was the drop in the unemployment rate to 8.1% from July's 8.3%.
But as Philippa Dunne and Doug Henwood of the Liscio Report point out, that decline in no small way reflects the ugly shrinkage in the labor force. Our data-savvy pair note that there are now some seven million poor souls, or 2.9% of the population, who are not in the labor pool but want a job, a new high for the current cycle.
.
They say that the diffusion indexes, which tell how encompassing or restricted is the reach of the gains, if anything were worse than the headline figures. The one-month measure fell nearly four points to a fresh nadir since the employment trough of February 2010.
Last month's work week was flat, and so were average hourly earnings. The yearly gain in hourly earnings of 1.7%, they sigh, is less than half the rate of early 2009. They report we're still 4.7 million jobs below the pre-recession peak and the Liscio pair reckon at current rates of growth, it'll take four years to regain those levels -- and that's not allowing for population growth.
Citing the weak forward indicators like the dip in temp hiring, Doug and Philippa suggest you brace yourself for further tepid vibes from the jobs front.
.
NOT SURPRISINGLY, the dreary job numbers took a little of the gloss off the boomer of a rally that sent the markets bounding ahead on Thursday, fired up by the European Central Bank's ambitious plan to pump some life into the ailing euro-zone economy, keep the European Union from fracturing irrevocably, and prevent countries like Italy and Spain from permanent residency on the critical list.
The plan is the handiwork of Mario Draghi, the relatively new head of the ECB and it, temporarily at least, revived not only European bourses but global ones as well, on hopes Mario's inclination to ease would prove contagious when the Fed's Open Market Committee gathers this week. And indeed, although the Dow wavered after the bum employment report, advances outweighed declines by a healthy margin.
.
Well to keep in mind before you take the plunge is that a blueprint is not the same as a done deal and the history of rescue efforts by the powers that be in the euro zone have been exercises in futility. We fervently trust this is not yet more of the same. But under the most benign circumstances, Mario's proposals face some tough hurdles and will take months if not longer to put into play.
Another reason to make haste slowly before being swept up by the magnetic pull of a bullish surge is, as Dave Rosenbeg cautions, investors have come under the spell of central-bank magic -- where good news is good news and bad news is good news. This, he contends, is the new normal -- less than salutary turns in the economy will be met by more expansionary balance-sheet activity by the monetary authorities.
.
In the current environment, he grumbles, "weak economic data are no match for the Bernanke (or Draghi) put."
.
Dave, too, feels the employment report was devoid of any significant rewarding features and gives it a grade of D+. As to where we go from here, he also avers the forward-looking components in it, along with the Institute for Supply Management data released earlier last week, notably the sagging order/inventory ratio, foreshadows more jobs-market weakness. He cites the decline in the factory work week and the 41,000 downward revision in the payroll count for June and July, which, he exclaims, tend to be momentum drivers for future data releases.
.
If you think Dave is being too harshly negative in his assessment of the employment report, he asks that you "bear in mind that in the month of August, more people went on the food-stamp program (173,000) than those who managed to find a new job (96,000)." This, he goes on to say, "can scarcely be called a real recovery."
.
On that score, he asserts, last month's meager additions were about half the number typical of an economy heading into its fourth year of expansion.
.
.
Did we neglect to mention Dave's a dyed-in-the wool skeptic?
.
.
The preacher decided that while his son was at school he'd try to get an inkling of which way the boy was leaning by slipping into his room and placing on a table four objects: a Bible, a silver dollar, a bottle of whiskey, and a copy of Playboy. The idea being that he'd hide behind the door of the boy's bedroom when his son came home from school and furtively watch to see which object the lad would pick up.
If it's the Bible, he reasoned, the kid was going to be a preacher like me and what a blessing that would be! If he picked up the silver dollar, the preacher thought, he's going to be a businessman and that'd be fine, too. If he picks up the bottle, the preacher flushed, he's going to be a no-good drunken bum. And -- just to think about it made the preacher shiver with foreboding -- if the boy picks up that magazine, he's going to be a skirt-chasing womanizer.
When his son got home, he casually walked into his room and dropped his books on the bed. Then, he spotted the four objects on his bedside table and studied them a moment or two. He picked up the Bible and placed it under this arm. He picked up the silver dollar and dropped it into his pocket. He uncorked the bottle and took a large swallow, while he gazed admiringly at the magazine's centerfold.
.
"Lord have mercy," the old preacher fumed, "he's gonna run for Congress."
In like vein, another reader, John Hayden, a manifestly bright M.D. with a memory to match, reminded us of a reference in our March 1, 2010, column to Thomas Brackett Reed, a native of Maine who served many years as speaker of the House of Representatives in the late 19th century. Possessed of a sharp tongue and a dry humor, Reed famously remarked that any number of his fellow congressmen never "opened their mouths without subtracting from the sum of human knowledge."
We plead guilty of attempting to offer via the agency of our readers a bit of comic relief in an increasingly acidulous election venue. The campaigns being waged by the two parties more and more resemble a tag-team mud-wrestling match, rather than the grunting, groaning, and grappling that usually define political combat in our great nation. Now, don't get us wrong. We enjoy the swipes and swats and the elbows in the gut that are de rigueur in election clashes as much as the next man. But when everyone's going for the jugular 24/7, it becomes literally bloody boring.
Last week was the Dems' turn to strut their stuff, and a visitor from Mars tuning in their convention could be forgiven for thinking that the hoots and hollers from the assembled delegates touched off by his speech were celebrating Bill Clinton's nomination, rather than Barack Obama's. Bill showed he can still turn on that ol' Southern charm that seduced the populace but also darn near got him booted out of the presidency.
That even after a widely publicized scandal, his popularity rating towers above that of either the present occupant of the White House or Mitt Romney can be viewed as proof that this is, indeed, a forgiving nation. Or, perhaps Americans, for better or worse, have a high tolerance for testosterone-driven misbehavior.
More than likely, though -- and forgive us this uncharitable notion -- we suspect it tells you something about the ineptitude of Bill Clinton's successors. In any event, the preliminaries are over and the main event has begun. The applicable cliché, we guess, is may the best man win. But whoever coined that grammatically dubious but enduring phrase never imagined that determining who the best man is would be more chore than choice.
NO SOONER DID OBAMA & CO. wind up the noisy proceedings in Charlotte, N.C., and the delegates head for home abuzz with high hopes instilled by the serial speechifying than fortune dealt them a sobering hand: The August employment report, which showed a not-so-grand total of 96,000 new jobs added to nonfarm payrolls last month.
The tally proved a downer pretty much through and through and was all the more disappointing because recent weeks saw a dip in new claims for unemployment insurance and ADP had somehow conjured up a 200,000-plus increase in their survey of last month's private payrolls. As Gluskin Sheff's Dave Rosenberg quipped, "The ADP survey once again lived up to its reputation as being a reliable head-faker."
Street guesstimates had looked for gains of 120,000-140,000, when the Bureau of Labor Statistics issued Friday morning's report. The miss was even more egregious when you realize that the total includes a good chunk of the supposed 87,000 new jobs generously added by the birth/death computer model. Virtually the sole piece of ostensibly good news was the drop in the unemployment rate to 8.1% from July's 8.3%.
But as Philippa Dunne and Doug Henwood of the Liscio Report point out, that decline in no small way reflects the ugly shrinkage in the labor force. Our data-savvy pair note that there are now some seven million poor souls, or 2.9% of the population, who are not in the labor pool but want a job, a new high for the current cycle.
.
They say that the diffusion indexes, which tell how encompassing or restricted is the reach of the gains, if anything were worse than the headline figures. The one-month measure fell nearly four points to a fresh nadir since the employment trough of February 2010.
Last month's work week was flat, and so were average hourly earnings. The yearly gain in hourly earnings of 1.7%, they sigh, is less than half the rate of early 2009. They report we're still 4.7 million jobs below the pre-recession peak and the Liscio pair reckon at current rates of growth, it'll take four years to regain those levels -- and that's not allowing for population growth.
Citing the weak forward indicators like the dip in temp hiring, Doug and Philippa suggest you brace yourself for further tepid vibes from the jobs front.
.
NOT SURPRISINGLY, the dreary job numbers took a little of the gloss off the boomer of a rally that sent the markets bounding ahead on Thursday, fired up by the European Central Bank's ambitious plan to pump some life into the ailing euro-zone economy, keep the European Union from fracturing irrevocably, and prevent countries like Italy and Spain from permanent residency on the critical list.
The plan is the handiwork of Mario Draghi, the relatively new head of the ECB and it, temporarily at least, revived not only European bourses but global ones as well, on hopes Mario's inclination to ease would prove contagious when the Fed's Open Market Committee gathers this week. And indeed, although the Dow wavered after the bum employment report, advances outweighed declines by a healthy margin.
.
Well to keep in mind before you take the plunge is that a blueprint is not the same as a done deal and the history of rescue efforts by the powers that be in the euro zone have been exercises in futility. We fervently trust this is not yet more of the same. But under the most benign circumstances, Mario's proposals face some tough hurdles and will take months if not longer to put into play.
Another reason to make haste slowly before being swept up by the magnetic pull of a bullish surge is, as Dave Rosenbeg cautions, investors have come under the spell of central-bank magic -- where good news is good news and bad news is good news. This, he contends, is the new normal -- less than salutary turns in the economy will be met by more expansionary balance-sheet activity by the monetary authorities.
.
In the current environment, he grumbles, "weak economic data are no match for the Bernanke (or Draghi) put."
.
Dave, too, feels the employment report was devoid of any significant rewarding features and gives it a grade of D+. As to where we go from here, he also avers the forward-looking components in it, along with the Institute for Supply Management data released earlier last week, notably the sagging order/inventory ratio, foreshadows more jobs-market weakness. He cites the decline in the factory work week and the 41,000 downward revision in the payroll count for June and July, which, he exclaims, tend to be momentum drivers for future data releases.
.
If you think Dave is being too harshly negative in his assessment of the employment report, he asks that you "bear in mind that in the month of August, more people went on the food-stamp program (173,000) than those who managed to find a new job (96,000)." This, he goes on to say, "can scarcely be called a real recovery."
.
On that score, he asserts, last month's meager additions were about half the number typical of an economy heading into its fourth year of expansion.
.
.
Did we neglect to mention Dave's a dyed-in-the wool skeptic?
.
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