WASHINGTON, June 6, 2013 — Wall Street appears to take a pause in its June Swoon this morning at least, appearing to take heart, momentarily, by a drop in unemployment claims. According to CNBC, “the number of Americans filing new claims for unemployment benefits fell last week, pointing to moderate job growth despite slowing economic activity,” with initial unemployment claims at the state level dropping “11,000 to a seasonally adjusted 346,000,” according to Labor Dept. statistics.
Of course, “claims for the prior week were revised to show 3,000 more applications received than previously reported,” and this week’s figures, no doubt, will be adjust upward somewhat next week, continuing the little charade the Feds have been playing with these numbers for what seems like ages. And these numbers, of course, don’t take into account the systemic unemployment rate, aka, those who’ve exhausted benefits and can no longer apply again. In other words, stasis really is the constant here.
As to the market itself, it popped a bit at the open and is currently up around 20 Dow points at 10 a.m. EDT. The S&P 500 is up roughly 4.60 and the NASDAQ seems relatively happy, up 6.60. But if the tables turn today, the Dow, at least, is at risk of posting its first three-day losing streak of the year.
Yesterday’s huge drop in the averages was also related to jobs numbers according to a number of sources. Payroll provider ADP said Wednesday that U.S. businesses added just 135,000 jobs in May, a rather weak number. Then on Thursday, consultants Challenger, Gray & Christmas said that job cuts fell 4.5 percent in April, leaving sentiment fragments about the jobs landscape.
Economists believe employers added 170,000 jobs last month, “after posting a very strong 165,000 additional jobs in April,” according to the AP wire, whose “very strong” observation is rather funny considering that only employment improvements in a range closer to 300,00-350,000 will actually make a dent in systemic unemployment.
Weighing on the market later today: comparable store sales from retailers. Wobbly numbers here could more clearly indicate an economic slowdown is in place.
Weak numbers last month are being blamed in the financial press alternately on the January “payroll tax increase,” which was merely a restoration of the previous payroll tax which funds the already underfunded Social Security and Medicare kitty; or on the vaunted sequester cuts which merely amount to a slowdown in the rate of increase of Federal spending.
In point of fact, unemployment has remained stubbornly high for years now largely due to the fear on the part of employers of hiring permanent employees who then might prove a massive drain when Obamacare eventually kicks in, which will officially happen in January 2014. This is the real elephant in the room for practically everything that’s bad in employment these days, and is the primary cause for the incredibly slow faux recovery we’ve been experiencing.
—AP contributed to this report.
We took a pass last night on the latest batch of secondary shares being offered by KAR Auctions (KAR). The underwriting syndicate had shaved a couple points off its original offering price, which made the deal somewhat more attractive, given that we’ve made money on KAR offerings before.
But this market is just too dicey. Two remaining IPOs in our large portfolio are quickly eroding in price, given that our broker’s “rules” make us hold this stuff for 30 days before selling, and could go negative. So why put ourselves in that situation again?
Otherwise, advice today is the same as we’ve been holding to lately: take profits and stay in cash as much as possible until this storm clears. The market is amazingly oversold right now, short term at least. And a temporary and possibly big rally might be in order to clear this condition. But the conviction just isn’t there.
On other fronts, we thought the following video from CNBC’s enfant terrible, Jim Cramer, might be of interest. Due to his hyperbole and on-screen volatility, Cramer is trashed by many analysts, and we’ve grown somewhat tired of his manic personality as well. That said, this guy was a veteran trader and hedge fund manager for years and has done a better job than most in exposing many of the shady skeletons hiding in financial closets. It’s a sleazy story and not many insiders are willing to talk.
In the clip below, Cramer alerts investors—and the Feds, who, apparently, are looking the other way—to the quiet return of the zombie investment that brought the 2007-2009 debacle to a banking establishment near you and destroyed housing as a result. Take a look.
Have a good one.
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