This blog post originally appeared on RealMoney Silver on Dec. 7 at 7:24 a.m. EST.
While we all anticipate "the most important" economic release of the month -- the November jobs report -- run, don't walk, to read Barry Ritholtz's
of the BLS' (Bureau of Labor Statistics) birth/death adjustments.
Barry quantifies how reliant the BLS has become on modeling, as nearly 80% of the output is imagined or modeled. (Two years ago, it was closer to 65%.) Moreover, in periods of economic contraction (as we are in currently), the modeling process tends to overstate job growth.
As such, the data are unreliable, and the overstatement factor has probably "gone from moderate to very strong."
From my perch, it's a dead heat between how bogus the BLS' inflation and job data are.
Don't let the BLS BS you.
7:35 a.m. EST
Two Downgrades That Signal a Weakening Consumer
The reality of a weakening consumer was manifested in two research downgrades this morning:
- 1. Merrill on
American Express (AXP) - Get Report2. Morgan Stanley on
Capital One (COF) - Get Report.
8:02 a.m. EST
Thomas Weisel Partners Lowers Estimates on Danaher
Thomas Weisel Partners slightly lowers
estimates this morning. The concern stems from "the ongoing turmoil in the credit markets" potentially affecting the company's organic growth and slowing its acquisition pace.
8:44 a.m. EST
Media Mesmerized by Jobs Data
The media (and permabulls), who never met an economic statistic they didn't like, are giddy about today's jobs report -- as irrelevant as it might be.
The cynic would say the number is weak on the basis of the three-month revision. Adjusting today's report for the revision produces a 46,000 figure, which supports a 50-basis-point cut and provides a more realistic view of the economy (poor).
As most recognize, I rarely make a forecast for an individual day of trading.
It's nuts to try to predict daily price changes.
I will today -- down -- despite the futures strength indicating a robust opening.
Happy Talk, Keep Talking Happy Talk
- The credit markets are still seized up around the world.
- U.S. financial institutions are writing off more money than ever in history.
- Consumer confidence is at the lowest level since February 1992.
- The BLS revises the latest jobs reports downward.
- And an administration official goes on CNBC with a smile on his face, saying all is well in the U.S. economy.
What Caused Strength in Homebuilders?
The commentators will tell us that the homebuilders were up yesterday because of the administration's mortgage proposal.
I will tell you that rumors of an imminent acquisition of
by a group in Dubai and high short interest were responsible for the strength.
Just look at the activity in Pulte options over the last two days.
Bulls Charge Ahead on Price Momentum Alone
Steve Liesman just mentioned that
tracks GDP on the basis of the input of numbers such as this morning's jobs number.
Its calculations suggest that the GDP is experiencing
growth for fourth quarter 2007.
I have to contend that the overwhelming amount of bullish investors are bullish on the basis of price, as their views on the economy and on credit have been hollow.
The mortgage proposal will likely have only a trivial impact on the subprime mess, the credit markets are
, and the economy is recession-bound.
Anti-implosion my eye!
Consumer Confidence a Leading Indicator of Economic Weakness?
Over the past 50 years, the current low level of consumer confidence has preceded a recession almost every time, with the exception of the Iraq invasion (2003) and Hurricane Katrina (2005).
At time of publication, Kass and/or his funds were short DHR, although holdings can change at any time.
Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Short Offshore Fund, Ltd.