Juggling Dynamite

No surprise, the jobs report was very weak this morning but it failed the consensus expectations significantly. As of the end of May, unemployment moved backed above 9%, May Non-farm payrolls came in at 54K, down from 244K, and not only below consensus of 165K, but below the lowest economist prediction of 65K. Private payrolls increased just 83K on expectations of 170K. Manufacturing payroll dropped 5K on expectations of a 10K gain. The more broadly measured U-6 unemployment rate sits at 15.8%. The absolute number of unemployed increased from 13.747 million to 13.914 million. For the third month in a row the Labor Force Participation rate remained flat 64.2%.

As blog zerohedge points out this morning when we take out the notional adjustment known as the birth-death number the real payrolls actually fell 150,000 in May.

US bonds and the US dollar are rallying, stock futures moved down triple digit. The Perma-bull crowd will be out in full force shortly, with “don’t worry, the Fed will step in and save us with more QE soon–the government won’t allow the markets to go down!” Save us indeed, government intervention in capital markets is apparently killing the economy with ‘kindness.’ More stimuli won’t be able to stop already hideously bloated risk markets from their normal violent adjustments during deleveraging climates.

Meanwhile the Chinese government is self-braking the economy there out of fear for run away inflation (nasty by-product of QE flowing into commodity speculation) and asset bubbles that are prompting growing civil unrest. Standard & Poor’s warns this morning that a “sudden” slowdown in China may lead commodity prices to fall as much as 75 percent from current levels. See Chinese Economic Slowdown may lead to 75% plunge in commodities, S&P says:

“Unexpected shifts in government policies or problems in the banking sector may trigger such a slowdown, S&P said in a report e-mailed today. The floor for aluminum is 65 cents to 70 cents a pound ($1,433 to $1,543 a metric ton), compared with about $1.20 a pound now and copper’s floor is $1.50 to $1.75 a pound, compared with $4.10 a pound currently, S&P said.
“Given the extent to which China has bolstered commodity prices, that’s something that we have to be concerned about,” S&P analyst Scott Sprinzen said by telephone from New York. “The efforts by the government in China to slow growth are having an effect on commodity prices. It’s been a pretty modest correction so far.”

Welcome to more shades of 2008.

Ms Park speaks with Stirling Faux for a weekly review of world markets and outlook. You can listen to the audio clip here.

In a financial world paid to sell risk products, there is a natural disdain for holding cash. Portfolio Managers or investors who hold cash (because they see unreasonable risk on their rule set or few attractive options at current prices) are commonly labelled chickens, outcasts or hopeless pessimists. In a world where too few people have amassed ‘enough’ cash, many are desperate to quickly part with what they do have in the hopes of winning more. They don’t want to wait for favourable timing or attractive prices, they want to buy things and they want to buy them now! This is precisely why most fail to retain and grow wealth over a full business cycle. Easy come, easy go.

In all the frenzy, herd following and childish impatience, it is often forgotten that having cash is supposed to be a dream come true, a store of security and liquidity to cover future needs—a fund for future opportunity.

In this interview Jeffrey Gundlach, legendary bond manager talks about the value of cash in volatile times, and especially if the financial system blows up. It is cash that Osama bin Laden and Saddam Hussein had in their bunkers in hiding. Not credit cards, not gold coins–but light, easy to carry, widely accepted cash.