Friday, May 4, 2012

Jobs report: Latest NFP misses expectations with a gain of only 115,000 jobs/Poor PMI numbers from Europe/Elections in Greece and France on Sunday

Good morning Ladies and Gentlemen:

Gold closed up today to the tune of $10.50 to $1644.70 Silver followed suit rising by 42 cents to $30.38.
Europe started the day off with terrible service PMI numbers which basically confirmed that all of Europe is in recession. Most of Europe had bourses down close to 2%.  The Dow followed suit falling 168 points.
We are now marking time ready to receive the results of those two big elections in Greece and in France.

Let us now head over to the comex and see how trading effected the price of silver and gold.

The total gold comex OI fell appreciably to the tune of 5,252 contracts from 415,844 to 410,592 as gold and silver were raided yesterday.  The newbie longs as I promised you were washed away as they succumbed to the antics of our criminal bankers.  The non official delivery month of May saw its OI fall 5 contracts from 78 to 73.  We had 5 delivery notices on Thursday so we neither gained nor lost any additional gold ounces standing.  The next big delivery month for gold is June and here the OI lost a rather large 7,029 contracts as the OI fell from 213,202 down to 206,173.  It was here that saw the greatest damage to our newbie longs.  The estimated volume Friday was back to lacklustre performances coming in at 136,610 compared to the raid day on Thursday with a volume of 176,421.  It seems the raid days comes attached with higher volumes due to the enticement trading of our high frequency traders.

The total silver comex OI completely baffles our bankers.  No matter what criminal activity they do they cannot entice our committed silver longs to leave  the silver tree.  On Friday the total OI came in at 111,680 a rise of 237 contracts from Thursday despite the massive raid and the flight southbound of our silver metal below the 30 dollar level.  As I mentioned to you on previous occasions, the price of silver seems impervious to our longs.  They are steadfast in their convictions and are quite ready to withstand the  pain of a lower price.  They just wait and patiently stand for delivery.  The estimated volume on Friday was a bit on a low side coming in at 40,672.  The confirmed volume on Thursday was considerably higher at 47,049 as the bankers supplied much of the non backed paper together with their friends, the HFT  (high frequency traders).  These guys refused to budge. The bankers were successful in lowering the price which served as a launching pad on Friday for silver's gain.

May 5.2012


Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
96.45 (Manfra)
Deposits to the Dealer Inventory in oz

Deposits to the Customer Inventory, in
49,566.514 (HSBC)
No of oz served (contracts) today
(7)  700oz
No of oz to be served (notices)
  67  (6,700)
Total monthly oz gold served (contracts) so far this month
(320) 32,000
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month


The CME notified us that we had only 7 notices filed for 700 oz of gold.  The total number of notices filed so far this month total 320 for 32,000 oz.  To obtain what is left to be served upon, I take the OI standing for May (73) and subtract out today's delivery notices (7) which leaves us with 67 notices or 6700 oz left to be served upon.

Thus the total number of gold ounces standing in this non official delivery month of May is as follows;

32,000 oz (served)  +  6700 oz (to be served upon)  =  38,700 oz or 1.203 tonnes, the same as Thursday.


May 5.2012:

Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory15,001.11 (Brinks)
Deposits to the Dealer Inventorynil
Deposits to the Customer Inventory523,121.54 (Brinks,Scotia)
No of oz served (contracts)252 (1,260,000)
No of oz to be served (notices) 411  (1,055,000)
Total monthly oz silver served (contracts)1999 (9,995,000)
Total accumulative withdrawal of silver from the Dealers inventory this monthnil
Total accumulative withdrawal of silver from the Customer inventory this month 1,905,681.1

The CME notified us that we had a chunky delivery notice on Friday to the tune of 252 contracts for a total of 1,260,000 oz.  The total number of delivery notices filed so far this month total 1999 for 9,995,000 oz of silver. To obtain what is left to be served upon, I take the OI standing for May (663) and subtract out Friday delivery notices (252) which leaves us with 411 notices or 2,055,000 oz left to be served upon.

Thus the total number of silver ounces standing in this delivery month of May is as follows:

9,995,000 oz (served)  +  2,055,000 oz (to be served upon)  =  12,055,000 oz
we gained another 55,000 oz of additional silver standing.

Please note that the cash settlements have stopped.
Also note that the quantity of silver standing has increased 50% from March and March is a better delivery month than May.  This is bothering our banker friends to no end.


Let us now proceed to our ETF's SLV and GLD and then our physical gold and silver funds:

Sprott and Central Fund of Canada.

The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.

Thus a default at either of the LBMA, or Comex will trigger a catastrophic event.

May 5. 2012:

Total Gold in Trust



Value US$:67,351,030,957.97

May 3.2012:




Value US$:67,058,107,664.50

May 2.2012




Value US$:67,478,712,966.93

we neither gained nor lost any gold at the GLD.


And now for silver May 5.2012:

Ounces of Silver in Trust308,191,672.700
Tonnes of Silver in Trust Tonnes of Silver in Trust9,585.83

May 3.2012:

unces of Silver in Trust306,638,645.500
Tonnes of Silver in Trust Tonnes of Silver in Trust9,537.53

May 2.2012:

Ounces of Silver in Trust307,108,488.100
Tonnes of Silver in Trust Tonnes of Silver in Trust9,552.14

May 1.2012:

Ounces of Silver in Trust307,108,488.100
Tonnes of Silver in Trust Tonnes of Silver in Trust9,552.14

we gained 1.553 million oz of silver added to the SLV vaults.

And now for our premiums to NAV for the funds I follow:

1. Central Fund of Canada: traded to a positive 2.7percent to NAV in usa funds and a positive 2.89% to NAV for Cdn funds. ( May 5,.2012)

2. Sprott silver fund (PSLV): Premium to NAV  fell slightly   to  5.74% to NAV  May 5.2012 :
3. Sprott gold fund (PHYS): premium to NAV rose to  2.55% positive to NAV May 5 2012). 


Friday night saw the release of the COT report.  Let us see how these positions will effect trading next week: (the report is from Tuesday to Tuesday/week ending May 1.2012)

First the Gold COT:

Gold COT Report - Futures
Large Speculators
Change from Prior Reporting Period
Small Speculators
Open Interest
non reportable positions
Change from the previous reporting period
COT Gold Report - Positions as of
Tuesday, May 01, 2012

Our large speculators:

Those large specs that are long in gold saw the deteriorating conditions throughout the globe and thought it best to add a rather large 4565 contracts to their long side.

Those large specs that have been short in gold covered 834 contracts from their short side.

Our commercials:

Those commercials who are long in gold added a rather large 4590 contracts to their long side.

But...and it is a big but...

Those commercials who have been short defied all logic and added a super humongous 15,356 contracts to their short side and this is done in broad daylight with all of the regulators cheering them on..

no wonder that the CME needed a big margin increase so as to bail out our bums.

Our small specs:

Those small specs that have been long in gold added a rather large 3156 contracts to their long side.

and those small specs that have been short in gold saw the light and covered a rather large 2237 contracts 

Conclusion:  as far as I am concerned we have a crime scene as the shorts have massively increased their shortfall and on Sunday after the two elections, the world financial scene will probably go haywire!  In a nutshell the huge increase in the banker shorts is very bearish and will signal another huge raid.


And now for our silver COT:

Silver COT Report - Futures
Large Speculators
Small Speculators
Open Interest
non reportable positions
Change from the previous reporting period
COT Silver Report - Positions as of
Tuesday, May 01, 2012

Our large speculators:

Those large speculators that are long in silver, decided to lighten up a bit on their longs to the tune of 2058 contracts.

Those large speculators that were short in silver, covered 1171 contracts from their short side.

Our commercials;

Those commercials who were long in silver and are close to the physical scene
pitched a rather large 5894 contracts from their long side.

Those commercials who have been perennially short in silver from the beginning of time covered a large 4504 contracts from their short side.

Our small specs:

Those small specs who have been long in silver added a tiny 946 contracts to their long side

Those small specs who have been short in silver covered 1331 contracts from their short side.

conclusion; neutral. The commercials went net short a tiny 1360 contracts.


And now for our premiums to NAV for the funds I follow:

1. Central Fund of Canada: traded to a positive 2.6percent to NAV in usa funds and a positive 2.4% to NAV for Cdn funds. ( May 3,.2012)

2. Sprott silver fund (PSLV): Premium to NAV  rose slightly   to  6.26% to NAV  May 3.2012 :
3. Sprott gold fund (PHYS): premium to NAV rose to  2.39% positive to NAV May 3 2012). 

lately the premiums have been rising on both the Sprott physical gold trust and the silver trust.


Here are some physical stories that will certainly shape our day.
Somehow the little guys won a small victory on Friday as a planned margin increase was given a 90 day reprieve:

(courtesy Bix Weir)

Looks like there really is power in numbers!
As a preemptive strike against the Big Guys on the CRIMEX the small speculators have successfully turned around the Margin Requirement scam planned for Monday.
CME Members Win 90-day Reprieve From Higher Margin Rules
"The CME Group was granted a 90-day reprieve from imposing new rules that will hike margins for some exchange members by as much as a third, one day after news of the increase riled locals and roiled markets"
"They probably got a bunch of heat from the members," said J. Mark Kinoff, president of Ceres Hedge, who owns a CBOT membership."
"From the Chicago trading pits to the New York oil and metals markets, "locals" who typically trade with their own money were aghast at the change in policy. Few had anticipated the changes, although they are part of the financial reforms that regulators have been working to implement for two years."
"You have regulations coming into algos (algorithms), into banks' prop (proprietary) trading and now we're having issues with locals having to put up more liquidity. It's got to hurt liquidity," said a senior executive at a large futures commission merchant."
"An official at the CME's clearing operation said his department had been inundated by calls from traders seeking clarification, some of whom mistakenly believed the new margins applied only to financial contracts, not commodities. The official confirmed that it applied to all products."
This is the first time I've seen those little speculators stand up in numbers and protest the market rigging maneuvers. If you ever saw the movie "Antz" you can relate that plot to what just happened on the COMEX...
All of a sudden the little guy realize there is POWER IN NUMBERS!
Tough week for the CRIMEX and as Bob Dylan says...
"The times they are a changin'!"
May the Road you choose be the Right Road.
Bix Weir


You must see this video of being interviewed by Deidre Bolton of Bloomberg where Grant states that the Fed is manipulating everything:

(courtesy Bloomberg/GATA)

Jim Grant tells Bloomberg TV that Fed now manipulates everything

10:35a ET Friday, May 4, 2012
Dear Friend of GATA and Gold:
Zero Hedge today calls attention to the interview done yesterday by Bloomberg Television's Deirdre Bolton on her "Money Moves" program with James Grant, editor of Grant's Interest Rate Observer, in which Grant practically sputters with indignation as he denounces the Federal Reserve for manipulating all markets. Today's markets, Grant says, are just "a hall of mirrors" and he doubts that the Fed can hold the illusion together forever. He now sounds exactly like GATA except that he can't quite mention gold, only gold stocks, which, he says, being so despised at the moment, are a good contrarian investment.
Complete video of the "Money Moves" program is posted at the Bloomberg Internet site here:
But it's 42 minutes long and Zero Hedge has conveniently excerpted Grant's part of it, bringing it down to 9 minutes, along with some excellent text introduction, here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Overnight sentiment from Europe was not good as traders were horrified as they released the service PMI numbers for all European nations.

Spain's service PMI  (purchasers Management Index) fell badly from 46.3 the previous month to 42.1
(anything below 50 in the index means contraction of the economy with respect to the service side of things.  The Manufacturing PMI which we reported to you was also dramatically weak for most European nations)

Italy saw its service PMI come in at 42.3 from last month's 44.3.
France had its service PMI register 45.2 from last month's 46.4
Even Germany saw a contraction:

where its service PMI came it at 52.2 from last months 52.6

overall Europe:  46.9 from last months 47.9 which seems to confirm that Europe is in one big recession.

The European bourses did not like what they saw:

The Dax fell 2.%.
The Paris CAC  1.9%
The FTSE London 1.93%

and the Dow was down 1.25% down 168 points.
Surprisingly gold and silver rose.

Overnight Sentiment: Traders Look Past Latest European Disappointment, Toward US Jobs

Tyler Durden's picture

Here is what happened in Europe overnight, and why the market sentiment is already negative in advance of an NFP number which many are watching closely as a miss of expectations will cement the thesis that the US economy has now rolled over and will likely need more nominally dilutive aid from central planners to regain its upward slope:
  • Spain Services PMI for April 42.1 – lower than expected. Consensus 45.4. Previous 46.3.
  • Italian Services PMI for April 42.3 – lower than expected. Consensus 43.7. Previous 44.3.
  • France Services PMI for April 45.2 – lower than expected. Consensus 46.4. Previous 46.4.
  • Germany Service PMI for April 52.2 – lower than expected. Consensus 52.6. Previous 52.6.
  • Euro-area Service PMI for April 46.9 – lower than expected. Consensus 47.9. Previous 47.9.
And while the data was bad enough to send European stocks and US stock futures lower, the latest meme spreading as the first US traders walk in, is one of reNEWed QE expectations already, if a very weak one for now.
More from BofA:
Market action
Asian equity markets were mixed today with the Shanghai Composite inching up 0.5%. The rest of the region's markets finished lower as investors worried about global growth prospects. The Hang Seng fell 0.8% while Korean Kospi markets dropped 0.3% to close below the psychologically important 2000 level. The worst performing market was the Indian Sensex down 1.9%. In Japan, the Nikkei was closed for holiday.
European equities are trading lower ahead of this weekend's elections in France, Greece, Germany and Italy. The most important elections will be the French Presidential elections and the Greek parliamentary elections. In the aggregate Europe equities are trading 0.7% lower. The region's blue chips are falling less the broader market down 0.6%. At home, futures are pointing to a 0.2% lower opening as investors temper there expectations before today's April employment report.
The dollar is stronger against the rest of the major currencies which has led to weakness in commodities leading to almost a 1% fall in WTI crude while gold is down 0.4% with the absolute price falling to $1629.53.
Treasuries are trading flat across the curve ahead of this morning's payroll report. The 10-year yield is currently trading at 1.93%. In Europe, UK gilts are flat while yields on the Italian and Spanish 10-year notes are 3bps lower.
Overseas data wrap-up
The ECB yesterday left its benchmark interest rate unchanged at 1% and refrained from hinting at any forthcoming LTRO but rather tried to dampen expectations for such a move, confirming our view there will likely be no such move before the summer. ECB President Mario Draghi insisted credit could only slowly revive with a turn around in confidence and improved demand. A final and particularly strong message from the ECB was that the Bank had done its job, but national governments still had some homework to do whether on banking, fiscal or structural reforms.
The euro area composite PMI for April was revised down to 46.7 from the flash estimate of 47.4: now showing an even larger fall from 49.1 in March. Moreover, having climbed to a touch above the 50 "no change" mark at the start of 2012, the composite PMI has now fallen all the way back to its Autumn lows.
Today's events
The only thing on the economic calendar today is the release of the April employment report.
Payroll preview
We expect nonfarm payrolls to expand by 155,000 in April after a 120,000 increase in March. Over the past few months, job losses across state and local government have moderated and so, we expect private employment to match the increase in the headline. Under our forecast, the three-month trend in headline employment runs 172,000 per month from 212,000 in March. This slowing momentum is consistent with the tone in most labor market indicators; most notably, the four-week moving average on initial jobless claims is running at its highest level since January.
Recall that the payroll report is noisy. The monthly change needed for a statistically significant move in payroll employment is +/- 100,000. In our view, part of the weakness in March was a function of noise and part of the weakness was a function of weather. Our forecast assumes the weather payback grows in April, but that the 'noise' to abates somewhat. Put differently, our forecast of 155,000 is somewhat lower than the average over February and March of 180,000.
With softer employment growth, we see the unemployment rate rising to 8.3% from a cycle low of 8.2%. Getting the unemployment rate right requires a view on employment and on the rate of labor force participation. We expect labor force participation to rise slightly after falling 0.1ppt last month to 63.8%. The last Conference Board confidence survey showed more respondents reporting that jobs were "not so plentiful", implying a desire to look for but an inability to find work. We are not looking for any surprises in hours worked or earnings. The workweek will likely remain flat at 34.5 while hourly earnings are expected to rise 0.2% MoM, consistent with relatively soft wage growth.
Before discussing the big jobs report, let's review things from Europe as this Sunday, we will witness two big elections:  one in Greece and one in France.

In this review Graham Summers discusses the 4 reasons why he feels that Germany will leave the Euro:

1. France will abandon Germany with the socialist Hollande as President and a socialist country not willing to go the austere route.
2. Spain on the verge of collapse
3. The huge interventions on the part of the ECB
4. The USA will end its operation twist.

Thus with no new funding for the USA and no new LTRO European stock markets will probably tank.

On top of this the author is starting to see labour unions in Germany demand for money for its members
as they see German wages if behind other European nations.

A whole bunch of negative factors hitting all at once:

(courtesy Graham Summers/Phoenix Research Capital)

The Fed and the ECB's Hands Are Politically Tied... Bye Bye Market Props

As many of you know, my primary forecast regarding Europe is that the EU will be broken up and/or collapse within the coming months.
The reasons for this are political, financial, and monetary in nature. In bullet form they are:
1)   France is about to elect a hard core Socialist. This will greatly alter political dynamics in the EU and will weaken Germany's push for austerity.
2)   Spain's stock market and banking system are on the verge of collapse. The markets are flashing major warning signs here both in terms of technical developments in the markets as well as Spanish sovereign bond market yields.
3)   The ECB's interventions in the European banking system are now politically toxic (the markets punish those banks relying on the ECB for aid) as well as monetarily impotent (the positive effects of spending hundreds of billions of Euros are only lasting a month at most).
4)   The US Federal Reserve's Operation Twist 2 Program ends in June. Currently there are not new monetary programs planned at the Fed and it is unlikely they will launch anything before the US Presidential election in November (unless forced to by a Crisis).
In simple terms, we have a confluence of negative factors hitting this month and the next. Now, nothing in the political or financial worlds is static and we could see any number of changes made to the above items (for instance, France's soon to be President Francois Hollande might backtrack on some of his more aggressive socialist policies).
Having said that, while individual changes to the above items might temporarily delay the collapse I've forecast, said collapse is coming and will hit before the year-end.
The reason for this is that we have reached the End Game for Central Bank intervention: the time during which Central Bank interventions either result in negative consequences that far outweigh their positive benefits (inflation/ increases in the cost of living vs. a rise in "good" asset prices such as stocks) or have negligible impacts.
We've already assessed the first one of these items in numerous past issues of articles. The most obvious example of this was the Fed's QE 2 program which spent $600 billion, resulted in at most three months of upturned economic data for the US, but also sent food prices to all time highs inciting revolutions and riots around the globe.
Indeed, as noted previously on these pages, as far back as May 2011, Fed Chairman Ben Bernanke explicitly stated that QE was less "attractive" as a monetary option:
Q. Since both housing and unemployment have not recovered sufficiently, why are you not instantly embarking on QE3? -- Michael A. Kamperman, Waco, Tex.
Mr. Bernanke: "Going forward, we'll have to continue to make judgments about whether additional steps are warranted, but as we do so, we have to keep in mind that we do have a dual mandate, that we do have to worry about both the rate of growth but also the inflation rate...
"The trade-offs are getting -- are getting less attractive at this point. Inflation has gotten higher. Inflation expectations are a bit higher. It's not clear that we can get substantial improvements in payrolls without some additional inflation risk. And in my view, if we're going to have success in creating a long-run, sustainable recovery with lots of job growth, we've got to keep inflation under control. So we've got to look at both of those -- both parts of the mandate as we -- as we choose policy"

This is critical as it indicates that the Fed, despite all of its verbal interventions and posturing, is aware that itsmonetary interventions are having negative consequences that outweigh their benefits.
The same is occurring in Europe where the relationship between Germany and the ECB is deteriorating as the former finds its push for austerity counteracted by the latter's monetary profligacy. Indeed, Germany is now facing its most dreaded consequence of the ECB's money printing: inflation.

German unions turn up volume on pay rise demands

German labor leaders urged May Day demonstrators on Tuesday to fight for big pay rises after a decade of restraint that had seen wages in crisis-hit southern Euro zone nations soar.
The head of the powerful IG-Metall union, demanding a 6.5 percent rise, described an offer of 3 percent over 14 months as a farce...
"If we don't have a result (from talks) by Pentecost, then there will be a strike ballot and strike," said Berthold Huber, referring to the May 27/28 holiday...
IG Metall, with a membership of 3.6 million,(Graham's note: about 4% of German population) held warning strikes at the weekend and is planning more for Wednesday in Germany's industrial heartland of North Rhine-Westphalia...
There are signs German policymakers are already starting to worry about inflation, although it continues anchored around two percent. Last week, Economy Minister Philipp Roesler said the European Central Bank should refocus on price stability.

Remember, the core driving force in European policy-making is politics. Angela Merkel faces re-election in 2013. If inflation is already becoming a political issue in Germany now (though data shows that inflation actually slowed in April) Merkel is going to be highly incentivized to get it under control by appearing even more pro-austerity/ anti-monetization (more on this later). And if things get truly ugly she could even publicly threaten to pull out the Euro.
With that in mind, I'm already positioning subscribers of Private Wealth Advisory for the upcoming EU collapse. Already we've seen gains of 6%, 9%, 10%, even 12% in less than two weeks by placing well-targeted shorts on a number of European financials.

Best Regards,
Graham Summers


In this review Peter Schiff of Euro Pacific Precious Metals discusses how the Italian banking system has (according to ECB figures) more host sovereign debt than any other country in Europe.  The Italian banks hold 324 billion euros of shaky sovereign bonds of Italy.  The Spanish banks hold 263 billion euros worth of Spain's sovereign debt.  These banks, of course acquired the bulk of these assets through the back store QE financing called the LTRO. These banks could borrow at will any amounts they chose for a cost of 1% and buy sovereigns at a yield of 5.5% for a gain of 4.4%.  The problem now is that their balance sheets are overloaded and they are all under water as yields rise to 6%.  Margin calls have been issued against these banks and thus collateral is rapidly deteriorating from the balance sheet of these banks. This is a catastrophe waiting to happen!!

Peter's advice:  stick with gold.

(courtesy Peter Schiff/Euro Pacific Precious Metals)

France May Be Losing Its Head... Europe Soon To Follow?

-- Posted Friday, 4 May 2012 | Share this article | Source:

By Peter Schiff, CEO of Euro Pacific Precious Metals
According to the European Central Bank, the Italian banking industry now holds more government debt than the banks of any of the major European economies: nearly €324 billions worth of shaky bonds. The Spanish banking sector is also heavily overweight in government paper, at a new record high of €263 billion.

This bond-buying spree was caused by the "Sarkozy Trade," or the wild printing of euros by the ECB, which French President Nicolas Sarkozy hoped would relieve France's own public debt problem. As a result of his campaigning, any European bank can get all the euros it wants at the low, low price of 1% interest for 3-year loans - and instantly convert it into its own government's bonds. Italian and Spanish 10-year bonds pay above 5.5%, yielding a 4.5 percentage point return for doing nothing (though whether this is a winning trade in the long-term depends on what happens after the first three years).

Just as in the US, private investors can no longer be counted on to purchase all the bonds that European governments would like to issue. So, the ECB is printing the euros to buy them - and thinly disguising the process by funneling it through the banking sector.  

Sarkozy vs. Hollande 

The "Sarkozy Trade" is actually considered a conservative policy in France, so investors certainly should not expect any improvement if Socialist candidate François Hollande wins the presidential election on Sunday. Hollande has promised to ease up on austerity and push the ECB even harder to devalue. This is just like here in the US, where Obama hasn't offered an alternative to Bush's policies so much as a doubling down on them.

Though Spain recently elected a center-right government, most of Europe is expected to follow France in this leftward shift - if for no other reason than most of the incumbents are moderately pro-austerity rightists and the electorates are running out of patience for reform. The lion's share of the resulting new government spending will surely be financed by bonds purchased by the ECB or banks using ECB money. This is a recipe for instability and inflation.

The Euro Plague

Greece caused the eurozone to catch the flu, but its economy is relatively tiny, smaller than 14 US states and 11 EU states. The national debt of Greece is around €347 billion, which is 159% of its GDP but still smaller in absolute value than its neighbors in Club Med. Italy, for instance, is over €1.88 trillion in the red (120% of GDP); the recently downgraded Spanish debt is over €706 billion (66% of GDP). These figures dwarf the €440 billion remaining in the European Financial Stability Facility after the Irish and Portuguese bailouts. So, if Greece gave the euro the flu, Spain and Italy are going to give it something like Ebola.

There are countries that have inoculated themselves against the euro plague by budgeting responsibly, forming overseas trade relationships, and, most importantly, staying out of the common currency. Switzerland's national debt is US$224 billion, 36% of its GDP. Norway comes in at US$97.4 billion, 49% of GDP. These aren't impressive figures compared to, say, Hong Kong (debt level: 10% of GDP), but at least they don't threaten failure of their monetary systems.

Europe on Thin Ice 

The future of France and the rest of eurozone depends not on the outcome of this election, but on the outcome of the battle of ideas. Will Europeans be able to stomach the painful reforms needed to return to sustainable growth? Will healthier member-states like Germany defend the independence of the ECB? It will be a hard sell. Many Europeans wonder why they should endure the harsh reality of economic recovery - through the process of recession, saving, and the ultimate unpleasantness of hard work - when they can simply print more money.

The problem is that eventually you run out of suckers willing to bankroll this game. The Chinese aren't going to bailout Europe to the tune of trillions. Many Chinese are shocked at their government's overexposure to depreciating US bonds, and they won't make the same mistake twice. Japan has its own deep debt problems. And other creditor nations are too small to offer significant support. Europe is heading farther out onto thin ice without a lifeline in sight.

Strategy for a Declining Euro 

Putting on our investor's cap, the way to take advantage of the hastening decline of the world's second currency is to gain exposure to its oldest form of money - precious metals. Major European banks are reporting increasing outflows from euros into gold. With no paper reserve currency to depend on, the IMF reports that last year central banks purchased over 430 metric tons of gold. The IMF itself currently holds 2,814 tonnes of the "barbaric relic."

Given the overall austerity exhaustion in Europe, there is now yet another rush of capital to buoy the medium-term price of the precious metals. Unfortunately, short-term, some European institutions are no doubt foolishly buying dollars in their flight to safety. Once it becomes clear to these holdouts that the age of paper money is setting on both sides of the Atlantic, the precious metals should resume their rise.

It's a good bet that gold will be around a lot longer than the euro, no matter what the name of the President of France. But if the Socialist candidate wins the office and pushes his radical Keynesian agenda, I won't be surprised when selling euros for gold becomes known as the "Hollande Trade."

Peter Schiff is CEO of Euro Pacific Precious Metals, a gold and silver dealer selling reputable, well-known bullion coins and bars at competitive prices. 
For the latest gold market news and analysis, sign up for Peter Schiff's Gold Report, a monthly newsletter featuring contributions from Peter Schiff, Casey Research, and other leading experts. Click here to learn more. 


Mark Grant of Out of the Box and Onto Wall Street discusses the isolation of Germany in the new wave sweeping Europe.  The new buzz word is "growth" which is euphemism for printing euros of which Germany abhors as they have good memories of 1923-1924 Weimar. Instead of the "ugly
American" it is the "Ugly Germans".  We are witnessing nationalism and protection of borders.
The backbone of the Euro was the freedom from border crossings.  Now we see protection of borders.

This is what we should expect come Monday morning the day after the elections:

(courtesy Mark Grant/Out of the Box and Onto Wall Street)

The Mightiest Of Weapons

Via Mark J. Grant, Author of Out of the Box,
“Arbitrary power is most easily established on the ruins of liberty abused to licentiousness.”

                                                             -George Washington, 1753

Sunday marks the day in Greece, France, parts of Italy and Spain. May 6 will stand out perhaps as the day when the fortunes of Europe were reversed and if not reversed; re-programmed. There has been a lot of talk about this of course and a lot of speculation in the Press and, one would think, that it had all been discounted by the markets but not so fast. The discount will only go as far as the political implications are generally understood and I would submit that the particularities of the European elections are not well understood at all. I think the markets’ reaction is a first blush notion which does not get close to the more pressing questions of what some of the potential changes in power will mean past the revelry of the election night parties.

In France the markets have perhaps priced in the fact the Mr. Hollande is a Socialist and that term, perhaps well understood in France, rambles about in American minds somewhere between Eugene Debs and the American Labor Movement and Lenin’s view that Communism would overtake Capitalism in the end. The concentration has been placed upon the Socialist nametag and, in my mind, that is not the most important of attributes. Mr. Hollande represents a defiance of Germany, a desire to renegotiate the Fiscal Pact, a return to exerting power on the basis of the greatness of France and a significant lessening of some grand European vision concerning “Liberty, Equality and Fraternity.” Mr. Hollande, in fact, represents the wave that is sweeping all across Europe which is a return to Nationalism, to tribal pride, to economic self-protection as the European Recession, as driven by the “austerity measures” and fiscal restrictions imposed by Berlin deepen both the economic travails and the reaction to finding your nation under the economic jack boots of Berlin. I suspect that when we look back, some years from now, that we will find that the imposition of German ideals and practices upon peoples with different social and cultural histories will be one of the main reasons why the grand adventure failed. The traditions of two thousand years do not wilt because it is demanded by Germany and no country, no people, wants to have an imposition of power, whether wielded on the streets with tanks and guns or wielded in boardrooms with bushels of Euros scattered about, mandated of them. It may be, in France, that May 6 is only day one of a transformation of power as June marks the Parliamentary elections and the voice of the Right, as led by Marine Le Pen, may well control a significant amount of the elected officials. In any event it appears that we will have a very different France, a Germany and France not locked-stepped but locked out-of-step and two distinct visions that may mark a European governance that is someplace between difficult and impossible.

What is also becoming clearer, with the passage of days, is that Germany is finding itself in an ever more isolated position and that regardless of her economic prowess that she is shunned because of her aristocratic attitude in trying to tell everyone else how to behave and how they must live. I was recently in Europe and there is real anger and the venom spewed by the citizens in other countries was not lost upon me. It is no longer the “Ugly Americans” but the “Ugly Germans” that bear the brunt of the Nationalistic push-back. In my opinion the days of Germany ruling Europe by fiat will be a short-lived affair and the end is now nigh and in sight.

In Greece it may only be Hades and Poseidon and a few of the old gods that know how things may go this Sunday. What seems certain, however, is that a significant amount of Parliamentary seats will be won by splinter groups so that it is impossible to effect real structural changes and that governance may be so difficult that chaos prevails. I have long asserted that Greece will remain in the Eurozone as long as the monetary spigot is left open but that the moment that it is closed; “goodbye, thanks for all the fish and have a nice life” as Europe reels from the default both economically and socially. In both Spain and Greece the math just does not work. You can live in the charade or you can pull the covers up over your head and pretend but, in the end, the arithmetic will prove that neither country can continue to pay their debts as their economies and banks cannot support them. The IMF, as pressured by the countries outside of Europe, may well be the first to fold as they inform Europe that no more money is forthcoming as the odds of getting paid back equate to winning at Three Card Monty.

Now all of my musings this morning is not just political commentary. All of the changes of guard in Europe are going to have a profound effect upon the marketplace in my view. There will be a widening of credit/risk spreads, a decline in the equity markets, a decline of the Euro against the Dollar as Fear climbs back in the driver’s seat and as uncertainty is the prevalent theme of each day. There will also be a sustained widening between bonds denominated in Euros and bonds denominated in Dollars as U.S. Treasuries continue on with their safe haven status and may possibly sink to yields that no one ever thought was possible as a consequence of all of the political changes on the Continent.

The mightiest of weapons is the truth and everyone in Europe knows that you are not allowed to enter Parliament with a weapon.


Here is the weekend close of the 10 yr Spanish bond yield and the Italian 10 yr bond as we some tiny movement into these bonds as their stock markets collapsed today:


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5.734000.05100 0.88%
As of 11:59:00 ET on 05/04/2012.


Italy Govt Bonds 10 Year Gross Yield

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5.434000.06600 1.20%
As of 11:59:00 ET on 05/04/2012.


Wolf Richter discusses the Greek elections:

(courtesy Wolf Richter/

Greece: “We Are Their Greatest Fear”

testosteronepit's picture

Wolf Richter
Stelios Bozikis, recently elected Mayor of Zakynthos Town on the island of Zakynthos, discovered that there were 650 blind people on the island—2% of the population, 10 times the rate of blindness in Europe. But only 40 were actually vision impaired. The rest had succeeded in getting themselves declared blind to receive €350 or more in monthly payments. When he stopped payments to the faux blind, they—in another sign of how ingrained corruption is—revolted and threw eggs and yogurt at him. Apparently, the head ophthalmologist at the hospital diagnosed people as blind in exchange for cash. The claims were approved by the governor of the island, Dionysios Gasparos—his way of buying votes. And he is running for election as candidate for the New Democracy party. Read..... Even Corruption Is In A Deep Recession.
So on Sunday, outraged Greeks get to vent their anger at the political elite. After decades of mismanagement and corruption, the two leading parties, the conservative New Democracy and the socialist Pasok, which had been taking turns divvying up the spoils, will take a licking, and neither might get enough votes to govern. In 2009, Pasok had won by landslide. But its support crumbled as troika-imposed reform measures cut into wages and benefits of its power base, public sector employees. New Democracy, according to the latest polls, will likely emerge as the strongest party, but not strong enough. And a record six or maybe even eight other parties that are vigorously campaigning against the reform measures might clear the 3% threshold and enter parliament.
“There are certain misconceptions that worry me: for instance, the misconception that whatever happens, we are not going to leave the euro,” said Evangelos Venizelos, president of Pasok and former Finance Minister. But frustrated voters are searching for alternatives, and they’re finding the Golden Dawn party whose emblem is reminiscent of a swastika—in a country brutalized by the Nazis. And so the neo-Nazis will likely make it into Parliament for the first time in Greek history. While few Greeks sympathize with their neo-Nazi principles, enough like their anti-immigrant stance—and in a desperate effort to hang on to votes, the government hastily opened retention camps for illegal immigrants.
Even the traditional pre-election jump in economic sentiment by households and businesses—a result of the equally traditional vote-buying racket—practically disappeared, according to the Foundation for Economic and Industrial Research (IOBE). Theindex rose only a tiny bit, to 77.3 from 75.7 in March (with 100 being the average 1996-2006). Racked by record unemployment, lower wages, gruesome suicide reports in the media, and higher taxes, consumers were the most pessimistic in Europe; and 80% expected the economic situation to get evenworse. “This time there appears to be no margin for particular optimism,” the IOBE reported dryly.
In a sign of just how gummed up the system has become, another “temporary” pre-election bailout saw the light of the day: €250 million for Public Power Corp, Greece’s exclusive electricity retailer and largest power producer. Hurt by higher fuel costs and wilting demand, it had lost €148.9 million in 2011. And it ran out of money.
The reason: a Greek irony. Last year, as part of the bailout requirements, the government implemented a reviled tax collection method that billed homeowners for property taxes on their electricity bills. If the taxes didn’t get paid, PPC would cut off the juice. In protest, homeowners stopped paying their bills altogether. Due to popular unrest, the juice wasn’t cut off, but PPC’s cash flow collapsed. It stopped paying natural gas suppliers and small power producers that had sprung up following the EU-imposed liberalization of the electricity market in 2007. Producing 23% of the country’s electricity, they threatened to shut down their generators if they weren’t paid. Faced with pre-election power chaos, the government agreed to let PPC hang on to €250 million in property taxes it had already collected and was supposed to transfer to the government.
“Change everything,” was the rallying cry of Antonis Samaras, the leader of New Democracy, at a rally in Thessaloniki, though his party had entered into a coalition with Pasok to advance the reform measures far enough to where the bailout money would flow again. He exhorted his listeners to give New Democracy an absolute majority. And Greek election math might help him: the party with the most votes gets an additional 50 seats in the 300-seat parliament, a big step toward obtaining the 151 seats needed to form a government. It probably won’t be enough. So the party has three days to form a coalition with another party. But....
“We do not want to rule jointly,” Samaras said at the rally. “Those speaking of joint governance do not want anything to change. And we are their greatest fear because we want to change everything.”
However, “solidarity of the union has its limits,” said even soft-spoken Jens Weidmann, President of the Bundesbank. “That’s why we linked the aid to conditions.” And so, Greek voters are facing a dilemma, but new contracts are already reflecting the outcome. Read..... “Drachma Clauses” For Greece’s Exit from the Eurozone.


This is amazing:  The Norway Sovereign Wealth Fund has purged itself of all insolvent Eurozone debt holdings:

(courtesy zero hedge)

Norway Sovereign Wealth Fund Purges All Insolvent Eurozone Debt Holdings, US Hedge Funds Buying

Tyler Durden's picture

Over the years, our friends at the Norway Sovereign Wealth Fund have gone from jeered to cheered. To wit from March 30: "Remember this from September 2010? "Norway, which has amassed the world’s second-biggest sovereign wealth fund, says Greece won’t default on its debts. “The point is, do you expect these guys to default?” said Harvinder Sian, senior fixed-income strategist at Royal Bank of Scotland Group Plc, in an interview. “Norway has taken the view that they will not. The Greek holdings are particularly interesting because the consensus in the market is that they will at some point restructure or default.” Norway says its long-term perspective will protect it from losses. “One could say we are investing for infinity."... Uhm, Big Oops. Needless to say, this stupidity was roundly mocked by Zero Hedge at the time. Yet we can only applaud the fact that unlike other European investors (read primarily Italian banks) which are merely sinking ever deeper into the quicksand by dodecatupling down on pyramid scheme assets, the Norwegian SWF finally "plans to sharply reduce its European exposure while raising investments in emerging markets and Asia-Pacific, the finance ministry said on Friday." While we ridiculed their stupidity in 2010, we applaud Norway's prudence in this case, as unlike other insolvent European entities, the crude-rich country is not falling for the latest round of central planning bullshit, and is finally acting as a fiduciary agent. "We're reducing our European exposure because we see that economic development in the global economy is changing and this should also be reflected in our investment strategy," Johnsen said. "Most likely we'll have to sell some assets in Europe." Remember: in game theory he who defects first, defects best. We expect to see many more funds openly declaring they will commence dumping European assets, all of which are buoyed 100% artificially by the ECB, and US taxpayers, shortly."
One month later the purge is over: "Norway’s sovereign wealth fund sold all its Irish and Portuguese government bonds after rejecting the Greek debt swap and warned that Europe faces considerable challenges." Wait, what's that? The Eurozone's political strongarming (think Steve Rattner and GM) was unable to force the world's most powerful sovereign wealth fund into agreeing to what was essentially extortion when bank after bank noted how delighted they are to be bent over and take an 80% writedown on their Greek holdings. Stunning. But at least we now know who will be suing Greece shortly in an attempt to recoup par value of their strong law bonds: grab the popcorn - Norway vs Greece will be quite a spectacle. As for their dump of Irish and Portuguese bonds, no surprise there: fool me once (in perpetuity) shame on me, fool me twice, shame on Dan Loeb... who was buying everything Norway was selling. We wonder who ends up right.
The $610 billion Government Pension Fund Global returned 7.1 percent, or 234 billion kroner ($41 billion), as measured by a basket of currencies, in the first quarter, the Oslo-based investor said today. Its equity holdings gained 11 percent while its fixed-income investments rose 1.6 percent.

The fund, which voted against Greece’s debt swap this year because it disagreed with being subordinated to the European Central Bank, also said it reduced debt holdings in Italy and Spain amid a broader strategy to cut investments in Europe. The fund added government bonds from emerging markets such as Brazil, Mexico and India.

“Predictability is important for a long-term investor and the euro-area faces considerable structural and monetary challenges,” Yngve Slyngstad, chief executive officer of Norges Bank Investment Management, said in a statement.

Stocks jumped globally in the quarter after the European Central Bank stepped in with more than $1 trillion in three-year loans to the region’s banks. The rally was tempered toward the end after Spain announced in March it would miss a deficit target and as austerity measures dragged euro-region economies into a recession and boosted unemployment to a 15-year high.
Wait, so precisely the two things we noted in our Subordination 101 post: namely priming subordination nd lack of visibility in a world in which any investor can be crammed down at any moment, are being amplified by the world's biggest sov wealth fund? Good to know. Sadly, to everyone else who has been buying worthless bonds in an ECB-subsidized, furious and futile attempt to dodecatuple down on the worst of the worst in European paper we have one message: enjoy your transitory gains why you can. With SPIs coming to all the other PIIS countries shortly, those who bought first (in 2012) will promptly be last.



Its official, Argentina has voted to nationalize the Oil holdings in Argentina of Repsol.
They have also decided that they will not pay the 10 billion euros demanded by Spain.
Yesterday we heard that Bolivia will also confiscate one of Spain's electrical distribution companies in Bolivia
Red Electrica.  It has not been a good week for Spain:

(courtesy Hugh Bronstein/Reuters)

Argentina nationalizes oil company YPF

BUENOS AIRES | Fri May 4, 2012 2:51am EDT

(Reuters) - Argentina's Congress nationalized the country's biggest oil company, YPF, by an overwhelming lower house vote on Thursday that underscored broad popular support for a measure that threatens to scare off foreign investment.

The Chamber of Deputies voted 207-32 in favor of expropriating YPF, clearing the way for President Cristina Fernandez to sign the bill into law. The Senate last week approved the measure by a similarly overwhelming margin.

Fernandez, who has tightened state control of the economy, unveiled the plan to seize a majority stake in YPF from Spain's Repsol six months after her landslide re-election.

The move drew a swift reprisal from Spain, which curtailed Argentine biodiesel shipments. Wall Street warns that Argentina risks scaring off investment needed to bolster growth against fallout from Europe's debt crisis and slower demand from key trade partner Brazil.

Business groups have long been put off by Fernandez's policies, such as her government's takeover of Argentina's private pension system in 2008 and, more recently, import and foreign exchange controls that have hurt confidence.

Fernandez justifies the renationalization of YPF - which was privatized in the 1990s after decades as a state-owned company - on the grounds that it failed to boost oil and natural gas production needed to keep up with local demand.

Energy import bills have shot higher, putting Argentina's prized trade surplus at risk.

Repsol denies under-investing, but the government's message has struck a chord with Argentines, many of whom are suspicious of foreign companies and blame the free-market policies of the 1990s for setting the country up for its 2001/02 sovereign debt default and shock currency devaluation.

"All oil companies that operate in Argentina, Repsol and the rest, have to work in the public interest, which in this case means energy self sufficiency for Argentina," Agustin Rossi, leader of the official bloc in the lower house, shouted during a speech to the chamber just before the vote.

"Repsol invested little in Argentina," Rossi said. "But it was YPF and Argentine oil that financed Repsol's growth around the world."

With the private sector worried more nationalizations may be on the way, attention now turns to how much Argentina will pay Repsol for control of YPF. Officials have said it will be a lot less than the $9.3 billion the Spanish company wants.

Relieved of much of its debt burden after the 2001/02 default and bolstered by high international soy prices, the grains-exporting powerhouse fared better than many countries in weathering fallout from the 2008 world financial crises.

The government budget predicts 2012 gross domestic product growth of 5.1 percent, down from 8.9 percent last year.

"The goal is for YPF to be aligned with the interests of the country," Fernandez said in a speech on Thursday.

"When corporate interests are not aligned with national interests, when companies are concerned only with profits, that's when economies fail, which is what happened globally in 2008 and what happened to Argentina in 2001," she said.

Citing similar arguments, Bolivian President Evo Morales this week nationalized the local unit of Spain's Red Electrica Espanola, adding to the former colonial power's concerns about investments in the region.


While most of Fernandez's local critics agree that YPF should be in state hands, some say her confrontational approach could harm the country's already tarnished reputation abroad.

"It's a good move for the country because if the government does not control strategic resources such as oil, it loses power," said financial analyst Leonardo Rodriguez, 32, as he sipped a latté in the well-heeled Buenos Aires neighborhood of Puerto Madero.

"But the approach used in taking over the company, without negotiating, was too jarring and authoritarian," Rodriguez said. "There could be serious consequences. I mean, who wants to invest in a country where the government expropriates private property from one day to the next?"

A gifted public speaker who never appears in public without her trademark mascara and high heels, Fernandez has billed the YPF renationalization as central to her election pledges to deepen the interventionist policies began by her late husband and predecessor as president, Nestor Kirchner.

"The real custodians of his legacy are you," she told supporters at a rally last week in Kirchner's honor. "I know you will never permit a step backward."

(Additional reporting by Helen Popper; Editing by David Gregorio and Ed Davies)


At 8:30 am Friday morning, the BLS released the jobs report and it was a huge miss as only 115,000 jobs were added instead of the projected 165,000 or so.  The unemployment went down to 8.1% but we will explain how this magic happened.

First the official news story from Bloomberg:

(courtesy Bloomberg/S. Chandra and special thanks for Jim Sinclair for hosting)

Employers in U.S. Added Fewer Jobs Than Forecast in AprilBy Shobhana Chandra – May 4, 2012 5:43 AM MT
Employers in the U.S. added fewer workers than forecast in April and the jobless rate unexpectedly declined as people left the labor force, underscoring concern the world’s largest economy may be losing speed.
Payrolls climbed 115,000, the smallest gain in six months, after a revised 154,000 rise in March that was more than initially estimated, Labor Department figures showed today in Washington. The median estimate of 85 economists surveyed by Bloomberg News called for a 160,000 advance. The jobless rate fell to a three-year low of 8.1 percent and earnings stagnated.
A slowdown in hiring as corporate optimism cools may restrain the wage growth needed to fuel consumer spending, which accounts for about 70 percent of the economy. Federal Reserve policy makers view unemployment as “elevated” and plan to hold borrowing costs low through late 2014.
“The labor market isn’t improving all that much,” Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before the report. “Layoffs have slowed but hiring hasn’t really picked up. The next couple of months are going to be challenging. The Fed’s caution is well-placed.”


and now zero hedge discusses the big miss;

(courtesy zero hedge)

US Added 115,000 Jobs In April, Huge Miss Of Expectations; Unemployment Rate 8.1%

Tyler Durden's picture

Expectations were for an increase in non farm payrolls of 160,000, and a 8.2% unemployment rate. We got +115,000, and 130,000 privates. Unemployment rate at 8.1%, lowest since January 2009. Schrodinger is alive and well.
From the release:
Both the number of unemployed persons (12.5 million) and the unemployment rate (8.1 percent) changed little in April. (See table A-1.)
Among the major worker groups, the unemployment rates for adult men (7.5 percent), adult women (7.4 percent), teenagers (24.9 percent), whites (7.4 percent), and Hispanics (10.3 percent) showed little or no change in April, while the rate for blacks (13.0 percent) declined over the month. The jobless rate for Asians was 5.2 percent in April (not seasonally adjusted), little changed from a year earlier. (See tables A-1, A-2, and A-3.)
The number of long-term unemployed (those jobless for 27 weeks and over) was little changed at 5.1 million in April. These individuals made up 41.3 percent of the unemployed. Over the year, the number of long-term unemployed has fallen by 759,000. (See table A-12.)
The civilian labor force participation rate declined in April to 63.6 percent, while the employment-population ratio, at 58.4 percent, changed little. (See table A-1.)


Low and behold, the number of people not in the labour force got chopped by a huge 522,000.
The labour force participation rate is simply the rate of workers who have a job against the entire working force.  This is the Labour Force Participation Rate and it dropped to a level last seen in 1981,
namely 64.3% as over 88.4 million souls do not have a job and yet consider themselves part of the labour pool.  The other big number is the percentage of the employed  labour force against the whole population of working age ( employment-population ratio) and that dropped to a low of 58.4%. The reason for the fall in unemployment rate of 8.1% is because 522,000 souls either gave up looking for a job or they retired:

(courtesy zero hedge)

People Not In Labor Force Soar By 522,000, Labor Force Participation Rate Lowest Since 1981

Tyler Durden's picture

it is just getting sad now. In April the number of people not in the labor force rose by a whopping 522,000 from 87,897,000 to 88,419,000.  This is the highest on record. The flip side, and the reason why the unemployment dropped to 8.1% is that the labor force participation rate just dipped to a new 30 year low of 64.3%.
Labor force participation Rate:

People not in labor force:


Rick Santelli on the jobs report:

(courtesy CNBC)


And now the details on the job report:

we got a biggy B/D plug of 206,000 jobs. If you remove the seasonal adjustments the governments real U3 is really 11.6%:

(courtesy zero hedge)

The Addbacks: +22K From Seasonal; +206K From Birth Death

Tyler Durden's picture

The seasonally adjusted non-farm payroll number rose by 115K in April. That's great: it was a miss but such is life. Here is what the unadjusted data that led to this number says. The seasonal addback in April was +22K, a rapid break from the last 3 years when April saw a negative seasonal adjustment following the traditional huge positive adjustments in the January-March period, which in turn means that the record warm winter give back has not even started! As a result, the seasonal addbacks in 2012 are now a massive 4,499,000 jobs: jobs that have not been added but are expected to materialize based on historical seasonal patterns. And just as importantly, in April the Birth-Death addition was a whopping 206K, far greater than the comparable addition in 2010 and 2011, and much bigger than expected, which brings the year total now to a +20K cumulative total. It means, that by rough estimation, the reality is that in April the unadjusted, unbirth/deathed number was a decline of -111,000, and likely far worse once the true weather adjustments start taking place. This number is corroborated by the Household Survey which dropped by 169,000. So much for the recovery.
Below are the seasonal addbacks to the adjusted number (vs the non-seasonally adjusted monthly number).

This is how this trend looks historically:

And the birth-death adjustment:


Using the governments own figures, the U3 is really 11.6%.

Real U-3 Unemployment Rate: 11.6%

Tyler Durden's picture

Propaganda unemployment rate: 8.1%; Real unemployment rate: 11.6%. Reason for difference: organic growth of labor force which grows alongside the broader population. Don't be confused by cheap explanations on TV why the labor force should be declining (especially with ZIRP meaning pre-retirement workers have to stay in the labor force ever longer to supplant their meager fixed income): the widely accepted definition of the labor pool, that used by the CBO and all other government forecasting agencies, assumes a 90,000 growth in the labor force every month as it has to keep in line with the growth of the US population! The implication is simple: using a real labor force participation rate long-term average of 65.8%, the real unemployment rate in April was 11.6%, based on the 5.4 million additional workers that should be counted as part of the U-3 which then means that the real number of unemployed is not 12.5 million but 17.9 million, which in turn implies a 11.6% unemployment rate in the US. This also means that the spread between the propaganda, and the real number is now 3.5%: the most it has been since the early 1980s.


On closer examination of the report, the full timers got massacred and we also got a huge increase in the part timers.  We also got an increase in the leisure category or health workers which are basically minimum wage.  We are not seeing a rise in high quality jobs:

(courtesy zero hedge)

The Two Scariest Charts From Today's NFP Report, Or The Real "New Part-Time Normal"

Tyler Durden's picture

Back in February Zero Hedge was first to point out that while jobs may be growing (modestly) and the unemployment rate declining (rapidly, on the back of all those leaving the labor force), it was the quality of jobs that was troubling. Indeed, as today's NFP report once again showed, the average hourly earnings barely budged at $23.38 from $23.37 last month, and in fact declined on an inflation-adjusted basis. Why? Because as we predicted both in February (and in 2010) the US is increasingly becoming a population of part-time workers, as full time jobs disappear for good, and are offshored abroad at best. April confirmed everything we had been warning about: in the month, full time jobs dropped to 114,478 from 115,290, an epic drop of 812,000 in full time jobs which was the biggest since... March 2009! The offset? Why a surge in part-time jobs of course, which increased by 508,000 in the month of April. So while seasonally adjusted, birth/death recasted jobs may have increased by 115,000, the real quality jobs, imploded, which unfortunately is merely a part of a longer-term secular trend as part of the new part-time normal.
Full-time jobs and sequential change (full time):

Part-time jobs and sequential change (source):

And a longer-term view:

P.S. this is the last post on today's abysmal NFP report. We promise.


And finally John Williams with his headlines.  Note that his U6 is 14.5% and his total
underemployment is a huge 22.3%:

(courtesy Jim Sinclair/John Williams)

Jim Sinclair’s Commentary
John Williams’ latest report guarantees QE to infinity. They will even deny what they are doing when they announce they are doing it.
- For Second Month, Household-Survey Employment Fell as Payroll Growth Faltered
- April Unemployment: 8.1% (U.3), 14.5% (U.6), 22.3% (SGS)
- Annual M3 Growth Weakened in April as Velocity Rose
- New Indicator Shows Intensifying Systemic Stress
- Impaired Construction Spending Continued

We have another MF Global situation on our hands;

(courtesy Ann Barnhardt)

MF Global 2.0 May Be Unfolding Now

Posted by Ann Barnhardt - May 2, AD 2012 11:41 PM MST
If you are foolish enough to still be in the markets and you are doing business with anyone who clears through Penson Worldwide, you need to get out of there.
The stock symbol is PNSN. Just google that and look at the chart. $31.50 high, now trading at $0.49, making new lows daily.
In case you didn't know, I was clearing through Penson when I closed my firm last November. I was blessed in that all of my back office stuff was handled by a lovely little boutique office in Wisconsin that handled IBs like me, that had just been acquired by Penson before I came on board. I never spoke to Chicago or New York, just a merry band of Wisconsinites who were always wonderful to work with. I was truly blessed in that. (The cattle and feeder futures paper that I did in the pit, as opposed to the electronic, which was less and less over the years as the electronic markets grew and grew, was actually all done as give-ups by the FC Stone meat desk. Shout out to Larry and the Stooges, who still call to chat every so often, and have a photo of me with my pink AR-15 hanging in their desk. Good people.) But, the Penson ship is going down, it appears.
They were in trouble last year when MF Global happened and were looking to dump their European divisions, and they did bounce a bit after MF Global when they unloaded their Aussie holdings, but it looks like it is all but over for them. The stock is cratering, and there is chatter on the net that they are taking forever to get cash withdrawls out, posted and cleared. That's a very bad sign. MF global was the same way in the weeks before the end.
The extreme danger is that the CME is going to do with Penson what they did with MF Global and NOT backstop and keep customers liquid when the end comes. MF Global proved that the CME is no longer going to fulfill its fiduciary duty and will screw clients twelve ways from Sunday without hesitation. DO NOT get caught up in that crap. Just get out of the whole, stinking, festering, putrefied mess. Get out of the markets ENTIRELY.

Well that about does it for today.

I hope you all have a grand weekend

and I will see you Monday night.


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