October surprises: Gold down, unemployment claims up?

Wall Street continues to wander down roads not taken. Photo: Branco/LegalInsurrection.com

WASHINGTON, October 18, 2012 – The market opened mixed this morning as the thrashing continues—a hallmark of options expiration week. We backed out, once again, from a tiny long position in the double-short gold ETF (DGP), although we still hold an even tinier position in one of the “normal” gold ETFs (IAU) as a minor hedge. Clearly, the precious metals markets are being seriously gamed by a trader or traders a whole lot bigger than we, so it’s best to get out.

This might be a classic “bear raid” that’s going on here, as gold should be going up as the dollar goes down. It’s reminiscent in size, scale, and violence, to the “short clubs” that used to bang the market down on small investors back in the good old unregulated days in 1929. That this kind of action is back again today and continuing unabated makes us wonder anew just why taxpayers are paying SEC employees the big bucks to help assure us that the gaming tables aren’t rigged.

In any event, we’re virtually gone from this market for now, at least until it’s clear the bears have cleaned all the little guys’ clocks, maybe in time to spend the holidays closing the deal on that yacht they’d always wanted to buy. This is trickle-down economics, all right, but not played the way that Uncle Ronnie would have liked.

Speaking of trickle down…the market appears to be unhappy this morning because the latest week’s initial jobless claims are way up from last week’s “record making” drop. Who knew? This was unexpected—a word that should be banned forever from the lexicon of financial reporters because it’s always so much BS.

Anyway, as you may recall, that encouraging number everyone crowed about last week suddenly became discouraging during that afternoon when it was disclosed that a mysterious state—California, it was widely speculated—had reported incomplete numbers for whatever reason.

We turn things over to ZeroHedge for a wonkier, but more information-filled explanation:

“So much for last week’s aberration initial claims print of 339K (revised higher of course to 342K). With expectations of an increase to 365K, the DOL just came out with a whopper of a miss, the largest in three months, at 388K, an increase of 46K in one week, which was also the highest print in three months. Remember: this number will be revised to 391K next week. So much for single print indicative of a recovery. As the chart below shows, the rate of change was a 13.45% from last week: the highest in five years! So far, there has been no explanation from the BLS or DOL for last week’s outlier print. And no, last week’s print was not due to California, which the DOL reported just decreased by 4,979 in the week ended Oct 6, not the required 49K. What is however worse, is that it is becoming increasingly clear that nobody at the DOL knows what is actually going on following a statement by the Labor Dept that ‘it appeared that state-level administrative issues were distorting the data,’ and numbers are simply picked out of thin air. Finally, in truly amusing news, those on Extended Benefits have once again started to rise, after dropping to virtually 0 following expiration of state benefits.” 

Bold text is from ZeroHedge.

We still think California’s numbers are funny, but, re: ZeroHedge, perhaps another state really was to blame for last week’s Obama-helping report. Illinois, anyone? Both states are in a quiet contest to be the first ones to go Greece on America’s taxpayers, perhaps counting on Obama II to bail their public employee unions and their pension plans out with our dollars. But what’ll happen in Romney “unexpectedly” wins, hmmm?

Anyhow, it’s bearish out there today, at least for now.

Given how lousy the trading has been lately—whether it’s due to HFTs, algos, bear raids, or, most likely, all of the above—plus our anemic excuse for a “recovery, we have been doing a little experiment lately and are working on a daring new investment theory. Perhaps buy and hold, particularly involving stocks with decent, secure dividends, may ultimately be the solution to the Ivy League whiz kids who, keyboards or even iPads in hand, have been reducing the investing world down to a simple-minded Playstation game.

Buy and hold. An ancient idea, a benevolent, but familiar beast that, its hour come ‘round at last, may be slouching toward Bethlehem to be reborn. Stay tuned.

Cartoon by Branco, courtesy of LegalInsurrection.

Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate. He disposed of a positions today in DGP, but continues to own a position in IAU.

Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.

Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.

References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.

Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.

Follow Terry on Twitter @terryp17



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Terry Ponick

Now writing on investing, politics, music, movies and theater for the Washington Times Communities, Terry was formerly the longtime music and culture critic for the Washington Times print edition (1994-2009) before moving online with Communities in 2010.  



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