01 June 2012

Gold, Silver, and the May Jobs Report

"Through a set of economic policies designed to bail out and subsidize failed and often fraudulent corporate enterprises, while actively promoting a false sense of confidence to support those policies, the public has become exposed, by those very people entrusted to protect them, to dangerously high levels of hidden counterparty risks.

The cautionary functions of the media, the political class, and the regulatory bodies have been routinely directed, distorted, and even silenced for the benefit of a highly compromised and increasingly self-serving elite. And this corruption has begun feeding on its own momentum, resulting in increasingly blatant examples of deception, distortion, and outright theft.

This is crony capitalism, and its deadly credibility trap."


There was a disappointment in the US Jobs Report today, and a shocking (to some) divergence between stocks and the precious metals which are staging a big rally right up now to the intermediate trendline. Although as one can see the premiums are hardly euphoric.

How come?

I looked over the Jobs numbers earlier this morning, and checked the usual suspects. Imaginary additions were 204,000 which are right 'in the groove' for the normal pattern we see for May each year.

If anything the seasonal adjustment was shaded to the downside, meaning that it would have not taken much or been out of the norm to have taken away LESS jobs in the seasonal adjustment, and brought in a report that was in line with expectations.

As an aside you remember how I feel about the histrionics around the highly volatile and revisable monthly changes versus trends.  And additionally while the number of jobs is important, the median numbers and especially the median wage are the thing to watch in addition to the longer term trends.

So why put out a weak number when one could have statistically justified a stronger number?  Besides 'sand-bagging' now with an eye to the second half of the year?

There are an important set of central bank decisions coming up, including the FOMC meeting shortly after the Greek elections at mid month. This weak Jobs number gives Bernanke the cards he needs to play in responding to the evolving crisis.

And you know what that means.

And this is why gold and silver diverged so hard this morning to the upside. They had been artificially pressed down for the May-June contract expirations, and some might say to lessen the impact of their rally when the inevitability of QE became evident. It also gave some of the wiseguys a great opportunity to pick up the means of production, the mining stocks, on the cheap if one is thinking longer term.

Anyone who cannot see manipulation in the precious metals markets is willfully purblind, in every sense of the word.

I am just wondering how the Feds will try and spin it. An extension of Operation Twist? The long end of the curve is approaching the ridiculous along with German and Swiss bonds. More likely there will be a swap line spun bailout of Europe, and more quietly behind the scenes, with the Jobs report for domestic cover. Perhaps the Fed will continue to expand their Balance Sheet, but not so noisily as to jawbone the economy, yet.

As I said the other day, US and Greek bonds are heading in roughly the same direction, just on different trajectories and timelines.

Gentlemen, start your presses. But try not to be too obvious about it.