Market crash: are we there yet ?

[TropicCat]

Originally Posted by Cruisingdad

Hey Rick,

I understand that you can make numbers and stats say anything you want. But if what you are suggesting is true, that is flat out fraud and manipulation. Now I understand the whole U3 and U6 thing... but what you are talking about is a whole other level.

You sure about that? Who controls that?

- CD

Sure? Ummm.... you know I'm sure or I wouldn't have posted. Here is the esteemed BLS describing the birth death model.

CES Net Birth/Death Model

However noble the original idea, what's happened is that it's being utilized to twist the numbers. As Windy says, these numbers are entirely fiction. So much so there are now two reported unemployment numbers to choose from.

For instance, the June and July reports were quietly revised downward long after the original optimistic reports ( optimistic in that they were not so bad) were released. To keep them in their original state in the face of reality would completely uncover the farce.

A better yard stick is the ADP monthly report. (Which is dismal.) At least it is now before someone begins arm twisting.

[chris_gee]

The birth death adjustment has nothing to do with births or deaths of people. As the reference says it is to take account of the start and termination of primarily small businesses. The business survey does not include new businesses or those that fail before they are part of the survey. The catch is that the adjustment tends to add more jobs during a downturn, that is it lags the change.
As to the other point while job losses were 216000 it seems that the number employed dropped by 981,000, according to the household survey, while the unemployed dropped by 387,000. The last would be due to discouraged workers no longer seeking work so not being counted, and if my memory is correct there is a time limit on the period one is considered unemployed.
The numbers don't match well. Part of the problem is that the employed includes those working part time who want full time work, and those who have had to take much lower paid jobs. However both have diminished spending power which is not fully reflected in the unemployment rate. See The Market Ticker

[Cruisingdad]

Originally Posted by chris_gee

The birth death adjustment has nothing to do with births or deaths of people. As the reference says it is to take account of the start and termination of primarily small businesses. The business survey does not include new businesses or those that fail before they are part of the survey. The catch is that the adjustment tends to add more jobs during a downturn, that is it lags the change.
As to the other point while job losses were 216000 it seems that the number employed dropped by 981,000, according to the household survey, while the unemployed dropped by 387,000. The last would be due to discouraged workers no longer seeking work so not being counted, and if my memory is correct there is a time limit on the period one is considered unemployed.
The numbers don't match well. Part of the problem is that the employed includes those working part time who want full time work, and those who have had to take much lower paid jobs. However both have diminished spending power which is not fully reflected in the unemployment rate. See The Market Ticker

Read the Market Ticker. WOw! That is pretty much what we have been saying here. I bet Rick and Windy will like it. I will say, it scares the crap out of me. I also simply cannot understand how people are so blind to it.

But the bottom line is that somewhere, somehow, someone is terribly wrong. Maybe it is us (I shouldhope so), maybe it is the government (I hope not), but there is a considerable disconnect between the two. It seems the longer the two stay disconnected, the further they will seperate. And when reality sets in, it will not be pretty.

- CD

[wind_magic]

Originally Posted by wind_magic

Sorry I was late posting the numbers this month!

1929 - 3.2% / 2007 - 4.7% (u3) / 2007 - 8.3 (u6)
1930 - 8.7% / 2008 - 7.2% (u3) / 2008 - 13.5% (u6)
1931 - 15.9% / 2009 - 9.4% (u3) / 2009 - 16.3% (u6)
1932 - 23.6% / 2010 - ?? (u3) / 2010 - ?? (u6)
1933 - 24.9% / 2011 - ?? (u3) / 2011 - ?? (u6)
1934 - 21.7% / 2012 - ?? (u3) / 2012 - ?? (u6)

Source: Bureau of Labor Statistics

U3 ticked down 0.1% and U6 0.2%, wow! I wonder what they would look like if we took out the summertime seasonal adjustments due to home building, farming, walking people's dogs, and all the other stuff human beings do during the summer ? Look out autumn, here we come ...

"October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February." - Mark Twain (this is now sometimes referred to as the Mark Twain effect)

That didn't last long ...

1929 - 3.2% / 2007 - 4.7% (u3) / 2007 - 8.3 (u6)
1930 - 8.7% / 2008 - 7.2% (u3) / 2008 - 13.5% (u6)
1931 - 15.9% / 2009 - 9.7% (u3) / 2009 - 16.8% (u6)
1932 - 23.6% / 2010 - ?? (u3) / 2010 - ?? (u6)
1933 - 24.9% / 2011 - ?? (u3) / 2011 - ?? (u6)
1934 - 21.7% / 2012 - ?? (u3) / 2012 - ?? (u6)

Source: Bureau of Labor Statistics

[wind_magic]

Geithner: Confidence has returned to markets

That has to be an unmistakable sell signal, right ?

[TropicCat]

LOL..... lets see. 50% of all trades is Goldman Sachs running their 50 millisecond High frequency trading progam and that is supposed to inspire confidence in a market rally?

From JS Kim on Seeking Alpha:

".......If the mission of this current manufactured leg-up in Western stock markets was to fool the world into believing that global economies are recovering, then clearly, up until this point, the mission has been a resounding success......"

"......As of September 4, 2009, shadowstats.com reported that unemployment in the US is now near 21% and is showing no signs of improving any time soon (when factoring in discouraged workers, part-time workers that can’t find full-time work, unemployed workers that have fallen off the unemployment roll, etc.). In fact, yesterday, Manpower’s Employment Outlook Survey reported that US employers’ hiring plans for the upcoming fourth quarter dropped to the lowest level in the history of its survey which dates back to 1962....."

Yet another trader looking at our reality and wondering aloud how we come out of recession when 1/5 of the country is out of work. How do we show legitimate positive GDP under these circumstances? ....We can't and we don't....

It's worth reading as the guy has nailed it.

The Coming Consequences of Banking Fraud -- Seeking Alpha

[wind_magic]

Originally Posted by TropicCat

LOL..... lets see. 50% of all trades is Goldman Sachs running their 50 millisecond High frequency trading progam and that is supposed to inspire confidence in a market rally?

What are you talking about here, Trop - I assume you mean they are a market maker and that their computers are working the spread. On the ECN's, etc, by the rules of the exchanges there are market makers who post a bid/ask spread, and they have to accept trades, most of that is done by computer and it does result in an incredible number of trades.

[TropicCat]

Originally Posted by wind_magic

....by the rules of the exchanges there are market makers who post a bid/ask spread, and they have to accept trades, most of that is done by computer and it does result in an incredible number of trades.

No windy. Market analysts estimate that upwards of 70% of equity trading these days is driven by high frequency traders who represent just 2% of market participants. They buy and sell equities and attempt to collect liquidity rebates from the exchanges.They trade for no apparent reason and are apparently in partnership with the exchanges they trade on.

Is Uncle Sam Manipulating the Equity Markets? | Sense on Cents

(the 4:20 mark)

On the week ending June 19, Goldman Sachs was ranked first on the NYSE program trading list. But on the week of June 22, Goldman mysteriously didn’t appear on the list of the top 15 firms at all. It simply vanished without any explanation. Then the NYSE announced it would change some of the data for calculating the trading report. The Zerohedge blog was all over this controversy a week ago.

ZeroHedge uncovered that program trading accounted for 49% of all NYSE trading in June, and Goldman Sachs represented about 60% of all principal program trading. this was widely reported all over internet trading blogs.

I think this comment by Andrew M. Brooks states the problem best. He's head of United States equity trading at T. Rowe Price, a mutual fund and investment company that often competes with and uses high-frequency techniques. and I quote...

“But we’re moving toward a two-tiered marketplace of the high-frequency arbitrage guys, and everyone else. People want to know they have a legitimate shot at getting a fair deal. Otherwise, the markets lose their integrity.”

He has a point as the way I understand the market, when someone makes money on a stock, some other person is losing money. If Goldman Sachs machines are making $ billions per day, just who are the losers in their trades?

High-frequency traders often confound other investors by issuing and then canceling orders almost simultaneously. This is a loophole in market rules which gives high-speed investors an early glance at how others are trading. Their computers can then essentially bully slower investors into giving up profits — and then disappear before anyone even knows they were there. Also there have been rumors of front running, which as you know is a felony.

Main St. America is the loser. If people can no longer make money in the market, will they continue to invest in it?

[kootenay]

He has a point as the way I understand the market, when someone makes money on a stock, some other person is losing money.

In most cases that just isn't true. Most people do not sell stocks at a loss. If they do they will not be doing it for long. In most cases sales are made by people taking profits or selling an asset to raise money for another purpose. i would argue that the folks selling generally got into that equity at a lower price and as such are not losing money but rather "using" the money or taking profits. In many cases this program trading is executing a trade ordered by an individual. I log on to my brokers website and order a purchase or a sale and it isnt some individual that executes it but rather a computer. More and more trades are done this way simply because its more efficient and cost effective. At 9 bucks or less per trade you simply are not going to have people do it. When I post limit orders or buy orders on my holding like I have on most positions it isnt a person keeping track of them but a computer at my brokers. It isnt some computer make a decision but rather executing an action I have requested. i really havent seen much analysis of the source of these instructions in the "sky is falling" expose's Americans seem to be fond of. But the key fact is its hundreds of thousands of customers making decisions that lead to the electronic trading.

[Cruisingdad]

Wow! Can you imagine the fallout of this? Maybe a good thing in disguise.

Why Financial Markets Worry About US-China Trade Dispute - Yahoo! Finance

- CD