◄ back to all posts

The King Report – Markets & Jobs

Written by Bill King | Apr, 9, 2012
kingreport-1-040912THE KING REPORT
9 April 2012
By: Bill King

Since August 2011, the DJIA has been tracking its pattern from August 1986 to April 1987. Since November the two charts have tracked even more closely.

DJIA 8/5/11 to 4/4/2012 vs. DJIA 8/5/1986 to 4/5/1987

Earlier this year, pundits and the media heralded the fact that January 2012 experienced the best rally since 1987. As the rally progressed, it became the best surge since 1998.

‘Superdot’ appeared in 1986. Brokerage firms and traders could now execute10,000+ shares of stock via computer. Program trading became the rage. Now it’s HFT… Volcker started hiking interest rates in Q2 1986. Now, the QE prop has been removed…Rumors about takeovers were at an all-time frenzy. Retail investors sold the 1986-1987 rally.

Ivan Boesky’s indictment for insider trading pushed stocks lower in Q4 1986. This depression in stocks created the January and Q1 rally in 1987. Interest rates surged in early spring. At first stocks ignored rates, but in April 1987 a decline appeared.

From January 1, 1986 to April 7, 1987, the DJIA soared from 1900 to 2422 (+27%). It then retreated 10.5% to 2167 on May 20, 1987. The summer surge put the DJIA to 2736 (+21%) on August 25, 1987.

From the November 28, 2012 low, the DJIA has rallied about 20%. Months ago, we forecast that stocks should retreat in April to May and then stage a summer rally. The blueprint is very clear. Be prepared!

kingreport-2-040912What to see a chart of an even tighter correlation? Here you go: The S&P 500 last year vs. this year.

S&P 500 current year (3/14/2011 to 4/4/2012) vs. 12/14/2009 to 1/6/2011

Here is the DJIA for the past two years versus 1985-1987 :

DJIA 04/05/2010 to 04/05/2012 vs. DJIA 05/22/1985 to 05/22/1987 (2012 lagging 1987 by 47 days)

What are we to make of the above charts? Are we in the Twilight Zone?

For years, we have moaned that jobless claims are constantly revised higher but few mention the scam. Zero Hedge illustrates the depth of this deception in the ensuing chart.

kingreport-4-040912http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/03/bls%20revised.png

Now we know why the BLS released the March Employment Report on a market holiday instead of the previous day as is the custom. Only 120k NFP appeared in March; 205k was expected. The Birth/Death Model added 90k jobs; last year it added 117k.

The Household Survey shows 31k jobs were lost and 164k people left the civilian labor force. ‘Not in the labor force’ increased 333k, to a record 87.897m people! During Obama’s reign, about 7.3m people have left the labor force…43k full-time workers took a second job.

kingreport-5-040912For 2012, 955k NFP jobs have been lost (NSA). By April, NFP should recapture all the jobs that were actually lost in January. (Someone show this to Art Cashin; he didn’t know how we got NSA Jan NFP.)

Here’s the big problem for bulls and Obama: April historically has the largest increases in NFP.  Last April, 1.179m jobs were created NSA. So that’s the hurdle that models will expect for the April NFP.

http://www.bls.gov/web/empsit/cesbd.htm

kingreport-6-040912Retailers lost 34,000 jobs in March after cutting 29,000 in February. Temporary employed declined almost 8,000…Manufacturers added 37,000 jobs, and hotels and restaurants added 39,000…Hourly wages rose .01 to an average $23.39 (wage inflation?). The workweek declined a tad to 34.5 hours.

The usual suspects, led by Keynesians, started braying for QE 3.0 after the March NFP was released.

We’ve warned for months that seasonal adjusting and record warm weather were producing the ‘great’ economic data and jobs gains, which were bland but much hyped for political and street self-interest.

Economists: Mild winter may have artificially inflated jobs data [A few months late to the party]

http://www.washingtonpost.com/business/economy/mild-winter-may-have-artificially-inflated-jobs-data-economists-fear/2012/04/06/gIQAb8clzS_story.html

Articles are proliferating on the Fed’s ‘new thinking’ on employment and the output gap (Okun’s Law). Academics, economists and Fed functionaries are perplexed that the old correlations are no longer valid.

How about this? Maybe GDP is overstated, as we have maintained for over a decade. And other economic data, including jobs, is bogus.

Still Crawling Out of a Very Deep Hole

The economy has regained 3.6 million jobs since employment hit bottom in February 2010, but it is still missing nearly 10 million jobs — 5.2 million lost in the recession and 4.7 million needed to employ new entrants to the labor market…it would take until the end of 2017to return to the prerecession jobless rate of 5 percent…Analysis of government data by Moody’s Analytics shows that median household income, in 2011 dollars, peaked at $56,000 in 2000…When the Great Recession hit, income fell again…median income, now at $52,000, is about where it was in 1997. [The real GDP, a lost decade and a half already]

At the same time, home equity…has been devastated by the housing bust, with $7.4 trillion wiped out since home prices peaked in 2006…Even at that, many of the nearly 12 million homeowners who owe more on their mortgages than the homes are worth will never get above water… [The solution? Keep buying Apple!] http://www.nytimes.com/2012/04/08/opinion/sunday/still-crawling-out-of-a-very-deep-hole.html?_r=1

The Association of American Railroads (AAR): U.S. rail carloads originated in March 2012 totaled 1,123,298, down 69,190 carloads or 5.8 percent, compared with March 2011.

As we noted last week, a preponderance of March economic data was disappointing or negative. It was crystal clear to anyone that paid attention or was objective.

Once again ugly news was withheld until after the NYSE close. After the NYSE close on Thursday,

Egan Jones downgraded US debt to AA from AA+ with a negative outlook.

◄ back to all posts