The Great Depression? No, the Great Deception. The Great Moderation? No, the Great Modification.

(It was Friday afternoon and was making my way through Times Square. Had not been on the island since they turned Broadway into a pedestrian mall. Sauntering around the tourists in chairs I spied a crawl : ABC News -America back to work, unemployment rate unexpectedly drops to 10%. The thought froze me as the panorama of human pinballs receded ... its' like the Matrix.

The Great Depression?

No, the Great Deception.

Thank god for my red pills ...

Mr. King? -AM)

Monday December 7, 2009 – Issue 3650
'Independent View of the News'
The King Report

The ridiculously good November NFP is beyond comprehension. It is not supported by ADP data, other private data, ISM data, tax receipts, which still show large declines, retail sales or consumer confidence.

Plus the BLS revised September and October NFP 159k higher!!! Thank you, Ministry of Truth!

Until they become conscious they will never rebel, and until after they have rebelled they cannot become conscious. -George Orwell

Despite tax data that shows hefty declines, the past three months have shown enormous jobs gains NSA versus 2008. According to the BLS, 1.177 million jobs NSA were created over the past three months versus a loss of 120,000 jobs for the same period in 2008, a job gain of ~1.3 million jobs y/y!?!?!

ADP, which actually counts jobs, shows a loss of 169k for November. There is now about a 4.6m job discrepancy since January 2008 between ADP’s job count, which shows ~2.8m losses and the BLS, which shows about 1.8 million jobs created…PS - NSA jobs are supposed to pay real taxes; SA jobs do not.

(Mr. King is not including the ~1m announced benchmark revision. -AM)

While the NFP is absurd, what is even more troubling is the number of Street pundits and gurus that proclaim it as ‘real’ or a sign of recovery…

Sanity is not statistical. -George Orwell

The U6 fell to 17.2 from 17.5. Few analysts noted or commented on these factoids from BLS: The number of long-term unemployed (those jobless for 27 weeks and over) rose by 293,000 to 5.9 million. The percentage of unemployed persons jobless for 27 weeks or more increased by 2.7 percentage points to 38.3 percent. Among the marginally attached, there were 861,000 discouraged workers in November, up from 608,000 a year earlier.

So 253,000 workers dropped out of the work force in November.

(Where did you go Joe? A nation bids its unemployed adieu. -AM)

Job losses in the construction, manufacturing, and information industries were offset by job gains in temporary help services and health care. Since the recession began, payroll employment has decreased by 7.2 million…Temporary help services accounted for the majority of the increase, adding 52,000 jobs.

Follow the money. -Deep Throat/Mark Felt

November 2009 (FY 2010) withheld income & employment taxes are: $271,591 million (FY to date)minus $19,186 (Dec.) minus $135, 328 (Oct) or $117,077 million.

November 2008 (FY 2009) withheld income & employment taxes are $144,782 (million); November 2009 (FY 2010) taxes are down 19.14% or $27.7B!!! Do you still believe the NFP number?

When you have eliminated the impossible, whatever remains, however improbable, must be the truth. -Arthur Conan Doyle

For the past three months, which BLS has job growth of 1.177m, withheld income & employment taxes are $471,307. For the same period last year, with job losses of 120k, taxes are $581,857. How can the past three months show job growth of about 1.3 million y/y when withheld income & employment taxes declined from $581,857 to $471,307 ($101.5B), for a decline of 19% y/y!!! September 2008 withheld & income taxes: $272,228 (Sept 2009 is $218,902)

Figures don't lie, but liars figure. - Mark Twain

Let’s look at the dilemma of sharply lower income taxes and higher jobs data another way. If the average income in the US is $50k, and the tax rate is 17.38%, each new job should create $8690 of income taxes. If the BLS is correct and 1.17 million more jobs were created the past three months (versus than the same period of 2008), income taxes should be up over $101.6B; but taxes are DOWN $101.5B!!!

The Lord gave, and the Lord hath taken away; blessed be the name of the Lord. -The Book of Job

Trim Tabs: TrimTabs employment analysis, which uses real-time daily income tax deposits from all U.S. taxpayers to compute employment growth, estimated that the U.S. economy shed 255,000 jobs in November. This past month’s results were an improvement of only 10.2% from the 284,000 jobs lost in October…In November, the BLS revised their September and October job losses down a surprising 44.5%, or 203,000 job…

Discover Card: Economic Confidence Plunges; Low Expectations for the Holidays Economic confidence among America's small business owners plummeted in November, as more owners cited serious concerns about cash flow and saw economic conditions for their own businesses getting worse. The Discover Small Business Watch index fell 12 points in November to 76.5 from 88.5 in October.

62 percent of small business owners rate the economy as poor, an increase from 55 percent in October; 30 percent rate it as fair, and 8 percent say it is good or excellent.

Small business generates an estimated 70% of job growth. With small biz owners overwhelmingly gloomy, there won’t be much job growth from them. That is why the IRS data is so gloomy.

In a speech on Friday, Obama called the jobs reports a ‘hopeful sign. We call it ‘fraud’.

Is the unfathomably good NFP report and Obama’s job summit with all the hoopla and hype just a coincidence?

Once is happenstance, twice is coincidence, three times is enemy action. -Ian Fleming

The late Al Sindlinger used to warn that GDP, jobs reports and other economic indicators are manipulated and the best indicator of economic health is consumer income and ‘household liquidity’. And Al asserted that taxes are the best indicator of income, which also correlates tightly to consumer sentiment – on both the economy and politicians.

(Pay the man Shirley. -AM)

Administrative note

Travelling sans computer.
Fare thee well.

Mr. Hand's Wild Ride

'Here on this mountaintop
I got some wild, wild life
Here comes the doctor in charge
{he's} got some wild, wild life
Check out Mr. Businessman
He bought some wild, wild life
On the way to the stock exchange
He got some wild, wild life
Thought control!
You get on board anytime you like!'
-Talking Heads

'Gonna break loose
Gonna keep a movin' wild
Gonna keep a swingin'
Baby
I'm a real wild child.'
-Iggy Pop

'The distribution of price changes in a financial market scales.
Given that event X has happened, what are the odds that Y will happen next?
With financial prices, scaling means that the odds of a massive price movement given a large one are akin to those of a large movement given a merely sizable one. Such is the confusion of scaling. It makes decisions difficult, prediction perilous, and bubbles a certainty.'
-Benoit Mandelbrot

'This subtle but extremely consequential property of scalable randomness is unusually counter intuitive. It is often said that "is wise he who can see things coming." Perhaps the wise one is the one who knows he cannot see things far away. Newspapers are excellent at predicting movie and theater schedules.'
-Nassim Taleb

As a youngster always read comic books, now its' the Wall Street Journal and the Financial Times. Both fluffy, with an occasional interesting tidbit and sometimes cool art; each medium presents fiction as fact. The latter though specializes in the prognostication of unknowns that through their presentation become knowns. The former usually throws an unknown unknown plot twist at ya.

Recently posted here:

'But there are unknown unknowns.

What we do not know we don't know is what the long finger of instability from the Hand will ultimately do to the markets and the economy that are still the home of the brave but alas are now a different land.

What we do not know that we don't know is how the continuing liquidation of Main Street and bifurcation of America will interact with the bankrupt ideology of the rich that had greatly succeeded in drafting the inner monologue of regular folks so that they would vote against their self interests and are trying to do it again.'

Would like to make the correction that these are known unknowns. Presumptuous and fictional to suggest otherwise.

Easy enough for an anonymous blogger to offer a correction, experts can't. For if they did how could they be experts?

Speaking of expert opinion, here are two examples straight from today's 'funny pages.'

First. Iraq and Afghanistan 'unsettled' about our announced withdrawal date.

Second, the financial industry 'unsettled' about an amendment that would require secured creditors under certain circumstances to take losses up to 20% should a financial firm fail.

Both show the conundrum of the government being 'all in' : they just can't ever 'pull out' lest the fragile system collapses. Of course the pablum narrative fails to consider that the only reason the system is so flippin' fragile is because 'we're there' in the first place.

I bet you one rentenmark Mortimer that by the time my newborn goes to college we will still have boots on the ground in Iraq and Afghanistan and the Hand will still be up the back of the 'markets'.

The first 'prediction' based on the imagining of Rahm telling Barry that if we are not over there and something happens over here he won't be able to cut his f%#$@&g legacy out of a wet paper bag with a steak knife and the second 'prediction' based on the Amerikantura knowing the game is so rigged that nostalgia for the good old days of the 'free markets' is for dreamers not schemers. 'Tis the rich man's burden it tis.

We speak of a mild outcome to all this, a new normal, as we stuff the pig on the scale of fate. We are so far down the rabbit hole Alice, so arse over tit, that it is quite plausible that the power law being applied here is masquerading mild as wild as well as its' converse.

What if the mild prognostication is deflation or hyperinflation with either A cascading to B or B cascading to A?

What if the Black Swan is just, hope upon hope, muddling through?

Never fast enough with the mute button after Santelli comes on CNBC, I caught one of the canuckleheads on Hee-Haw muse that golly gee willikers maybe we have to destroy the currency in order to create jobs! Destroy your standard of living to improve it? Nancy Capitalists in a Sovereign Democracy that are hell bent to seek rent.

And the Blacker Swan? Teleportation, room temperature superconductors, fusion ... something 'game changing'. that allows the game to go on?

Damn dirty apes.

Its' a madhouse!

Yes Virginia there is no collateral.

That'll be all, Senator Sanders

SANDERS
You had Geithner sign a phony asset transfer
order--

GREGG
Senator--

SANDERS
You doctored the repos.

JOHNSON
Damnit Sanders!!

SANDERS
I'll ask for the fourth time. You ordered--

BERNANKE
You want answers?

SANDERS
I think I'm entitled to them.

BERNANKE
You want answers?!

SANDERS
I want the truth.

BERNANKE
You can't handle the truth!

(And nobody moves.)

BERNANKE
(continuing)
Son, we live in a world that has markets.
And those markets have to be guarded by banksters
with money. Who's gonna do it? You? You,
Senator Bunning? I have a greater
responsibility than you can possibly
fathom. You weep for capitalism and you
curse the banksters. You have that luxury.
You have the luxury of not knowing what I
know: That capitalism's death, while tragic,
probably saved jobs. And my existence,
while grotesque and incomprehensible to
you, saves jobs.

You don't want the truth. Because deep
down, in places you don't talk about at
parties, you want me at the wheel.
You need me there ...
We use words like 'growth','stability',
'profits'...we use these words as the
backbone to a life spent defending
something. You use 'em as a punchline.

I have neither the time nor the
inclination to audit myself for a man who
rises and sleeps under the blanket of the
very guarantees I provide, then questions the
manner in which I provide it. I'd prefer
you just said thank you and went on your
way. Otherwise, I suggest you pick up a
private sector job and stand a post. Either way, I
don't give a damn what you think you're
entitled to.

SANDERS
(quietly)
Did you doctor the repos?

BERNANKE
I did the job you sent me to do.

SANDERS
Did you doctor the repos?

BERNANKE
(pause)
You're goddamn right I did.

Today's secret word ... uh ... pablum narrative... is bubbles

(Thank you, thank you, and welcome to "You Bet Your Life." Say the secret word...uh...pablum narrative... and a swan will come down and debase your standard of living. Tonight's contestant is making a return engagement. -AM)

Wall Street Journal
March 19, 2009
By Michael M. Phillips

WASHINGTON -- Lawmakers really want the American people to know that they, too, are "outraged" about the $165 million in bonuses paid to American International Group executives.

They were so outraged, in fact, that they turned Wedndesday's congressional hearing on AIG into a daylong expression of outrage. Members of the House Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises mentioned their outrage at the big insurer 18 times. And that was during 45 minutes of opening remarks, even before the immediate target of their outrage, AIG Chief Executive Edward M. Liddy, entered the room.

"I certainly join my constituents in their outrage," offered Rep. Ron Klein, a Florida Democrat.

The subcommittee chairman, Rep. Paul Kanjorski, gave Rep. Randy Neugebauer, a Texas Republican, only one minute to speak, so he didn't waste any time. "I'm going to go ahead and say I'm outraged as well," he began.

Some Republicans wanted credit for their earlier outrage, saying they aimed it at those who supported bailouts of AIG and others in the first place -- presumably Democrats. None mentioned the role of former President George W. Bush, who was in the White House when the rescue money started flowing to AIG.

Rep. Jeb Hensarling (R., Texas) forecast more anger to come. The furor over AIG bonuses is "simply the outrage of the week, and the week isn't half over yet.

(Today's pablum narrative is bubbles. -AM)

Wall Street Journal
December 2, 2009
By JON HILSENRATH

Not so long ago, Federal Reserve officials were confident they knew what to do when they saw bubbles building in prices of stocks, houses or other assets: Nothing.

Now, as Fed Chairman Ben Bernanke faces a confirmation hearing Thursday on a second four-year term, he and others at the central bank are rethinking the hands-off approach they've followed over the past decade. On the heels of a burst housing-and-credit bubble, Mr. Bernanke now calls financial booms "perhaps the most difficult problem for monetary policy this decade."

With Asian property prices soaring and gold prices busting records almost daily, the debate comes at a critical time. Mr. Bernanke wants to use his powers as a bank regulator to stamp out bubbles, but the Senate Banking Committee, which will grill him later this week, is considering stripping the Fed of its regulatory power.

At the same time, pending legislation in the House could leave Mr. Bernanke running a less independent institution. The House Financial Services Committee has passed a measure that would subject the Fed's interest-rate decisions to scrutiny by the Government Accountability Office, an investigative arm of Congress. Mr. Bernanke and others at the Fed fear that with Congress looking over their shoulders, any decision they make about interest rates would be subjected to the winds of politics -- making it harder to control inflation or financial bubbles.

Fed officials used to think there was little they could or should do to prevent bubbles from inflating. For one thing, identifying bubbles with any certainty was deemed to be too difficult. And even if they could be accurately pinpointed, pricking them might do more harm than good. Raising interest rates to stop a bubble, for instance, could slow growth in other parts of the economy that were otherwise healthy.

The Fed's main strategy instead was to mop up after a bubble burst with lower interest rates to cushion the blow to the economy and restart growth. That strategy was a key conclusion of Mr. Bernanke's writings on the subject of bubbles when he was a Princeton professor, and again when he first came to the Fed as a governor in 2002. It was an approach embraced by his predecessor Alan Greenspan.

One of the few doubters was William Dudley, then chief economist at Goldman Sachs and now president of the New York Fed. He is one of the Fed's more outspoken proponents of preventing bubbles, and has said it's not as hard to spot them as many economists believe. "I can identify at least five bubbles that one could reasonably have identified in real time," including the tech boom, Mr. Dudley said in 2006 speech. He knew, he said, because he had speculated against three of them himself when he was at Goldman.

Now, Fed officials admit the stance didn't work. They're groping for alternatives. Of the two methods to prevent bubbles -- using regulations to protect the financial system from excess and changing monetary policy by raising interest rates -- Mr. Bernanke falls on the side of greater regulation, an idea he has advocated in the past.

"The best approach here if at all possible is to use supervisory and regulatory methods to restrain undue risk-taking and to make sure the system is resilient in case an asset price bubble bursts in the future," Mr. Bernanke said in answer to a question after a speech in New York last month.

Playing the interest-rate card, in contrast, is considered by many to be a more aggressive and risky move. On Tuesday, Philadelphia Fed President Charles Plosser said interest rates were "a very blunt instrument" to thwart a possible bubble. He said raising rates could "affect all other asset prices at the same time."

But some on the Fed's research staff are pushing senior officials to include interest rates in their plans -- and some officials say they can no longer rule that out. Kevin Warsh, a Fed governor who spent seven years on Wall Street before moving to Washington in 2002, says he's keeping close track of commodities prices, the dollar and movements in credit markets. The Fed, he says, has to be open-minded in its search for solutions to bubbles, including whether interest rates should be used to squash them.

Yet the question of whether and how to tackle bubbles before they burst is becoming a growing concern amid fears of new bubbles developing in commodities markets and in emerging economies. Gold prices are up more than 50% in a year's time. China's Shanghai Composite stock index is up more than 75% this year. Stocks in Brazil are up even more. Oil prices have rebounded. They remain far below last year's peaks but a return to those highs could fuel inflation in goods and services more directly than tech stocks or housing did.

"This is a very dangerous period," says Frederic Mishkin, a Columbia University economist and former Fed governor. If a new bubble threatens to emerge and the Fed decides to fight it more aggressively, he says, it could damage an already weak economy. "You don't want to be fighting the last war," he says.

The debate extends far beyond the Fed. Researchers at the Bank for International Settlements, a Basel, Switzerland-based group that coordinates central-bank activities around the world, are pushing to address bubbles more aggressively. On a recent trip to Asia, the Fed's Mr. Warsh and San Francisco Fed President Janet Yellen got an earful from finance officials in China and Hong Kong, who worry that low U.S. interest rates are prompting investors to borrow in the U.S. and drive up asset prices in Asia.

Fed officials are now debating the differences between bubbles as a way to understand them better and come up with the right solutions.

The most dangerous part of a bubble may not be the rise in asset prices, but the level of debt that builds up at financial institutions in the process, fueling even higher prices. That means keeping these debt levels down might be one way to prevent busts.

No one at the Fed has yet come out in favor of raising interest rates to stop the next bubble, but the idea is being discussed more seriously among Fed officials.

Donald Kohn, the Fed's vice chairman, was one of the strongest proponents of the old don't-pop-bubbles view. Today, he says, he has much less conviction about that strategy. Still, he worries that using higher interest rates to tame an asset boom would be like using a sledgehammer to drive a tack -- it might stamp out the boom but it would do a lot of peripheral damage in the process.

"You raise interest rates [to fight a bubble] and you damp all kinds of capital spending and consumer durable spending," said Mr. Kohn in an interview.

Mr. Bernanke is leaving himself hedged. If he felt stamping out a bubble with higher rates would forestall a rise in inflation or stabilize the economy, "We'd have to think about that very seriously," he told the New York Economic Club recently. "We can never say never."

(Hahahahahahahahaha ... oh my ...gasping for breath... heh heh heh ...dabbing eyes... that was great just great. Waiter another round for my friends please. Let's see what is next on the playbill ... adjusting glasses ...hmmm... Geithner discussing the strong dollar... and then...squinting.. it looks like a Congressional panel on deficit reduction. My oh my, what a show.-AM)

Groundhog Day, Slaughterhouse Fine

'Some pigs are more equal than others.'
-George Orwell

'hey pig
yeah you
hey pig piggy pig pig pig
all of my fears came true'
-Nine Inch Nails

'If you didn't care what happened to me,
And I didn't care for you
We would zig zag our way through the boredom and pain
Occasionally glancing up through the rain
Wondering which of the buggers to blame
And watching for pigs on the wing.'
-Pink Floyd

'When brokers get on a plane it proves that pigs can fly.'
-Anonymous Monetarist

By Henny Sender in New York
Published: December 1 2009 22:00
Financial Times

Some of the most controversial financing practices of the credit-bubble years – from cov lite loans to Pik toggle notes and dividend recap exercises – have returned to Wall Street, stoking fears that debt markets are growing overheated.

The techniques fell into disrepute during the financial crisis because they were based to varying degrees on the same rosy expectations that encouraged companies and consumers to assume what proved to be crippling levels of debt.

In a cov light – short for covenant light – loan, borrowers are granted credit with few, if any, conditions.

Pik toggle transactions make it possible for debt to be repaid with more debt – payment-in-kind notes. In a dividend recap, companies take on additional debt to pay dividends to their owners.

The reappearance of such instruments in recent weeks has stirred concerns that government efforts to stimulate lending are having unintended consequences, encouraging lenders to take positions based on “best-of-all-possible-worlds” assumptions.

Fed policymakers have signalled their concerns about the impact of low rates on market practices.

In the minutes of its November meeting, the Federal Open Market Committee noted “the possibility that some negative side effects might result from the maintenance of very low short-term interest rates including the possibility of excessive risk-taking”.

(And in a related comment the Oracle at Eccles proclaims with guarded confidence that the fiery ball of yellow gas in the sky may be the sun. -AM)

We're on a mission from POTUS

By RUTH SIMON
WSJ
12/1/09

The Treasury Department announced plans Monday to beef up its foreclosure-prevention effort by pressuring mortgage companies to complete more loan modifications.

But the new initiatives don't address significant shortcomings of the program, which often provides little relief to borrowers who have lost their jobs or who owe far more than their homes are worth.

The program provides financial incentives for mortgage companies and investors to reduce loan payments to affordable levels for financially troubled borrowers. The Treasury said Monday that it would send "SWAT teams" to the largest mortgage servicing companies.

(The sound of one Hand hamping.-AM)