“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)

"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

Friday, January 10, 2014

Surprising Weak Payrolls number - What will the Fed do?

That is the question on traders' mind this AM as the jobs report detailing the December numbers shocked the market by coming in so low. The ADP numbers earlier this week had stoked expectations for a strong number above 200K. Many were looking for something closer to 250K, What they got instead was 74K.

Keep in mind that ADP ( a private firm) had given us a 235,000 number on Wednesday. Also, the November payrolls number was upwardly revised from the previous 203K to 241K. That is what makes the December number so shocking.

The labor participation rate continues to shrink and this is something that runs the very real risk of becoming systemic. Sure that tends to shrink the overall unemployment number but at what cost to the rest of society?

The reaction in gold was as dramatic as was the reaction in the US Dollar. As a matter of fact, there seemed to be a bit of a resurgence in the "let's buy commodities" trade across the sector based on the weakness in the Dollar.

Crude oil moved up $1.70 a barrel at one point. Most folks would scratch their head and say, "Duh?" on something like that but we have come to expect the goofy reactions we get based off of these numbers. The market, instead of reacting with concern over the poor numbers and the resultant lower demand for energy, instead looks over at the Fed and thinks, " NO way they are going to taper right now". No immediate reduction in funny money and thus no immediate drop in liquidity being provided. Weakness in the economy means lower interest rates - lower interest rates means weaker Dollar and "Voila!", let's buy commodities today.

The problem is that nothing has therefore changed on the perceived inflation front. I maintain that wages must increase and hiring must pick up if we are to see any signs of serious inflation arise. What today does is just refuel the fears of deflation.

Perhaps some in the market are thinking along the same line and coming to the conclusion that the Fed must also be worried about deflation reasserting itself and thus will ease back on the Tapering.

Who knows but if the last two years of bond buying by the Fed, and certainly the $85 billion/month coming out of the most recent QE4 program has not resulted in any serious inflation issues, why should we expect another 2 years, 2 months, etc of bond buying to produce any at all?

Given that backdrop, gold is still going to face headwinds as it needs to see confidence in the US Dollar eroding to mount a sustained move higher in price. Thus I see two drivers - one -the US Dollar drops sharply or - two- the economic data shows more rapid growth heating up inflationary pressures. Either way the result is the same as far as the inflation issue goes.

The metal is pressing up against the downtrending 50 day moving average, a key technical point that most traders watch closely. It has not been above this level since late October of last year and then it only managed to hold above this level for 5 days before succumbing to another bout of selling. My guess is that we can expect the same as we move ahead. I remain skeptical therefore about gold's fortunes but will respect what the chart action tells me. Right now, the jury is still out as the ADX shows a directionless market on the daily time frame.

Bulls are close to getting control of the market but are not there yet.


  1. Dan,
    I went to bed last night reading your comments on inflation and the idea that those who want to see gold higher should hope for it. It made sense after I read it and you write so articulately I came away more at peace with the non-sensical markets.
    Today's jobs report though reminded that the current system of tracking jobs and the unemployment rate is so corrupt we have to wonder from and Orwellian standpoint if we have already reached 1984. How could an a Wed. ADP number of 238,000 be off by 165,000 jobs when compared to the NFP. Further a drop to 6.7% says how we keep track of these important indicators is so morally and ethically bankrupt we have already passed the point of no return. This is not political, Obama is as bad as Bush and Clinton before him. The system will not allow anyone to make real changes that help the people who need it the most. Dan I know you know all this better than I, but it sickens to me see this. We are on our own in trying to find the truth in our country and the rest of the world. It is that bad.

    1. There's nothing "ethically bankrupt" about the way the government and ADP do their numbers, you just need to understand their methodologies, and understand that statistics like this have lots of noise. Learn something about statistics and sampling methodologies, for crying out loud.

    2. Unknown,
      Please elaborate on how the these methodologies are not corrupted. I understand labor participation and am saying how can anyone trust these numbers. They do household polling like a gallup poll. They depend on businesses to be straightforward and then they skew it to suit whatever their agenda is.

      Do you work do the ADP of NFP? How can you possibly defend such a compromised system. How could you possibly speak for them and say they are not ethically bankrupt. That is how I feel and you feel differently unless you have some facts you are just like them unreliable. Would you also defend how they measure inflation? I mean the systems used are not accurate in terms of the realities. You must know that.

    3. Concord you need to study statistics and learn about margins of error, anomalous results, etc. You're using your ignorance on statistical issues as an excuse to claim someone is immoral, when any statistician would tell you you can expect such weird results now and then, and that they're perfectly normal.

      If they were skewing something to suit their agenda, why did they come up with such a disappointing payroll jobs number? If anything, the fact that they come up with such a disappointing number tells me they're being honest, not that they're deliberately biasing something.

      I do not work for ADP or the BLS, but I deal with a lot of data in my job and I know that stuff like this happens. It's not just labor data, you find stuff like this in all kinds of data.

    4. You bring up a good point regarding why would they skew the numbers toward 74,000. I think what I am saying is not about individuals but how the people in charge change their ways of coming up with inflation numbers or changing how the figure GDP numbers. Jobs seems just as vulnerable to finding ways to come up with a say 6.7 unemployment while people leave the workforce each month in droves,

      I did not mean to attack the people gathering and processing the numbers but the system which craves figures that support their agendas.

    5. Politicians pretty much never devise the methodologies for how government statistics are calculated - in large part because 99.9% of them know little or nothing about them. If the BLS or some other agency makes a change to a methodology, it will usually be because some issue with the way something has been calculated has been noticeable for years (and sometimes decades), and economists, researchers and other number-crunchers spent considerable amounts of time debating it, writing research papers, etc etc. At some point the agency in charge of the statistic in question will decide to make the change - and no, they don't need the approval of any politician to make the change. It's actually a pretty academic (as opposed to political) process.

      Your criticisms don't even make any sense. You can't accuse someone of fudging data to fit their agenda while simultaneously reading a data point (such as today's paltry 74K payroll print, not to mention the falling LFPR) which are directly in opposition to that agenda.

    6. We are not hearing what each other is saying? I respect your knowledge. You just don't seem to understand why it us obvious to many that inflation and jobs are tallied are imperfectly and unreliably. They do not reflect the real picture in either area where so much weight is put on them.

    7. How do you know they aren't tallied reliably? Your intuition? I'm sorry, but your intuition is a less reliable economic data source than any government statistic.

      There are numerous data sources one can use to corroborate anyone else's statistics. The ADP is a good counter-source for the BLS, for example. And not being a government agency, you can't accuse ADP of pushing some agenda.

      As for inflation, there is always MIT's Billion Prices Project, which largely corroborates what the CPI tells us.

      In a nation of over 300 million people, and millions and millions of businesses, government agencies and other employing entities, there is no other way to get statistical information on the state of the economy than through sample surveys. The nation and the economy is simply too large to get a "perfect" reading on anything. If this were Lichtenstein it might be possible, but we're not Lichtenstein. That being the case, you have to understand the methodologies and limitations of sample surveys, and take it for what it is. There's no other way to do it.

    8. "In a nation of over 300 million people, and millions and millions of businesses, government agencies and other employing entities, there is no other way to get statistical information on the state of the economy than through sample surveys. "

      LOL. Have you ever heard about computers or the NSA?
      You may have learned about statistics someday, but that didn't make you any wiser than a stone.

  2. In the previous post Dean and Elijah spoke of misleading crowd from the gold community who repeatedly disregarded the reality and caused unnecessary pain and loss among our own kind. People who wanted to sell, because their gut feeling and their brains told them to, didn't, because these individuals kept talking about immediate SHOCKING AND ABSOLUTELY STUNNING moves in the gold market, and the imminent SPECTACULAR collapse in the stock markets. This has gone on for years now and caused devastating results to the gold investors. I will not name any names except for one of them, who I found the most arrogant, the least apologetic and UTTERLY SHOCKINGLY SPECTACULARLY WRONG: Mr. John Embry.
    In 2010 and 2011 John championed two specific junior miners LSG and WDO (both listed on TSX) on KWN. When LSG lost 75% of its value in a short period of time, he then quietly dropped it and continued to favor WDO until this stock too declined. The results to this date are UTTERLY SHOCKINGLY DEVASTATING; both shares plummeted over 90% of the value they had when he endorsed them. Instead of publicly admitting that he was TERRIFYINGLY WRONG and apologize to people who might have listened to him and his dismal predictions, he continues pretending he's this savvy investor with a spotless record and continues to deliver his STUNNING AND SHOCKING predictions as if he was right all of the time and not MISERABLY HUMILIATINGLY AND DISMALLY WRONG.
    It is one thing to be wrong in our opinions and prognosis, but completely another to disregard your painstakingly obvious blunders and pretend you were right all of the time.
    I apologize for the long post, but I thought it was important to call spade a spade from time to time. My intention is not to whine about other people's misgivings, but to warn others who might listen to them.
    We should perhaps maintain a list of ten MOST SHOCKINGLY INCORRECT individuals to avoid at all times.

    1. Great post! It took me quite some time to take most headlines at least at KWN with a grain of salt. Articles and interviews are generally decent, of course in general pro gold. The use of SHOCKING and STUNNING, etc adjectives in titles is a bit overdone!

    2. Cartopassi,
      I also still enjoy occasional good interviews at KWN, namely with Yamada, Rickards and Jeffrey Saut, and of course Dan's weekly reports. Many others seem more like something Dr. Goebbels would conjure up.

  3. Hi Dan, thank you for your Blog. I've only just started reading it and I very much enjoy your clear interpretation of what's going on in the market.

    My question relates to your ADX indicator...Specifically, what setting do you use?

    Thank you in advance,

  4. Dan , sorry to keep at it , lets forget what caused or who the sell off on monday or who bought back for that matter … the fact is , its come in handy for the shorts , you must agree . Again , I don't give a rats ass about why this things happen or who is behind … my beef is with the regulators , who for some reason , whatever that may be , and I also don't care , decide to turn a blind eye on this . Best

  5. I haven't read KWN in over a month… I am much happier

  6. Abraxas you took the words out of my own mouth.


    Let these shysters hang in public square

  7. Id like to nominate the one that sold 23% of the float of his company while proclaiming that "I have invested 30 million of my personal money in the company" and "everything I have is in the ground in my company" and "this is it!" and "Everything I see reminds me of 1978" and "Take certificates" not to mention promising dividends in kind and production in 2013 as late as during the March 2013 London Q and A. Now it supposed to be production by 2014. Well, lets see about that.

  8. shame … this blog starting to look like a group therapy for bulls converted into bears … please guys just tell it to your hair dressers … could we please focus on the matter in hand , being gold trading ? before you post crap , just think that we all know that , we all read news papers , and most of us have been doing this for a while . We know most gold miners CEOs are evil especially the ones we all know as well , we all know the broad market is having a fantastic year , and also that the precious metals have been crushed . We all know that all of you got crushed , all we also know that al of you sold just before the crush … PLEASE , I now have to spend time figuring out what comments have anything to do with trading . Just talk about trading , don't be shy ! we can all learn from each other , even from the least experienced . Pretty please , make an effort would you ?

    1. Anon;

      I second your motion and do request the folks that post here to please give up the recriminations already. They are not serving any useful purpose. Look, a lot of people were taken in by lop-sided bullish talk because they failed to check the price charts to see IF THE CHARTS were confirming the talk. The charts were not; it is that simple.

      Remember, there is always a bull side to a market and there is always a bear side to a market. The chart tells you which side is currently winning the argument. Learn to listen to it and ignore everything else - including ME if I am contradicting a price chart with my own personal view.

      It is the market that is always right whether we like it or not. That is how traders survive...

      Let's keep the posts clean and free from recriminations, okay gang?

    2. Ill make that effort, Dan. AS a final comment, I do wish to empathetically state that I believe that if it is considered normal to not tell the truth in these markets, and abnormal to point out where CEO's have been promising things they were not able to deliver, which serves the usefull purpose of warning others, capitalism has no future even though experienced traders will do great in the short run.

    3. Some people like apples and some people like oranges, and why is it that some people (like Anon) who like, lets say, apples, want everybody to like apples and talk apples and sell apples and also buy apples. I myself am orange guy and I'm not the only one around, but I don't mind people praising apples. Actually, it's very interesting and educational to me.
      I agree with Jasper, but it's not my website. If you want strictly trading information to help you ride the markets in this millisecond, I don't think I can contribute much, if anything. We thought that exposing some individuals for speaking from the both sides of their mouth would be useful, so shoot us.

    4. don't know what you are talking about , you lost me in the second apple … in any case this is not group therapy mate , if you want to bitch , go elsewhere , last time I checked this was a blog for traders in commodities

    5. Heres a trading tip: dont buy miners run by people who do not care for truth.

    6. Jasper; Abraxas;

      It's not that I have any issues with folks calling out those who have made pubic predictions which have gone horribly wrong. That I believe is fair game. After all, if those who keep predicting things are going to get a pass every time they are proven to have been wrong, then there is no accountability to anyone.

      I don't want to provide a forum however where anyone's character might be attacked because of a bad call or a bad prediction. It is one thing to point out the glaringly bad call; it is another to attribute false motives or other ulterior motives to someone doing those things.

      I have maintained here at the site that this is the reason I am not into the prediction game. What purpose does it provide other than to boost the egos of all those who regularly engage in it? I think many who do this are basically insecure deep down and need constant stroking of their egos. Why else would they keep engaging in it? Trading/investing does not require predictions nor does it require claiming to have some esoteric knowledge that the rest of the peons do not have. It merely requires attempting to understand where value is and when the rest of the crowd will discover it. That discovery by the rest of the crowd results in money flows.

      It is not an easy task however but requires tremendous amounts of time and research which wear one down over the years. That is why so many traders finally give up. They grow tired of the labor necessary to produce consistently good returns and no longer can make that kind of effort.

      Guesses, hunches, hope, etc are not investment/trading tools. One needs to use their mind and think but they also need to be humble enough to realize that they can be wrong at times. Any trader who tells you that they have never lost money at any time on a trade is a damned liar. Good traders make some bad trades but what makes them good is that they learn to spot those bad trades quickly and get out of them before they get hurt too badly.

      in regards to some money managers who have picked some stocks that have done badly - that goes back to trading/investing discipline which involves cutting your losses on a loser quickly.

      Pointing out bad picks from someone is okay with me if they have gone public about those picks. After all, they are fair game at that point. Let's just make sure that we are not attacking their character because they made a poor investment choice.

      I think one thing that many who are reading this site and posting here have learned is to ignore the experts and to do your own thinking and research and learn to listen to the market and no on else. They are just mere men like yourself. One can respect them for their long years in the industry without putting them on the pedal of infallibility. They are not infallible. Only God is.

    7. Say no more, Dan. Your stance on this is 100% justified. I just resent when some people take upon themselves to bully others into their agendas. I am very careful not to insult, patronize or demean anybody here or outside this site as I don't like when it's done to me. I spoke my mind and don't mean to harp on it any longer. Thanks for the time.

    8. Abraxas;

      Absolutely my friend... do unto others as you would have them do unto you. It is a ethic that we would all do well to strive after.

      Sincere best to you,

  9. miners is good Jasper , you are not quite there yet , but I appreciate the effort , next time try silver , gold , copper , uranium , rare earths , you get the point , right ? miners are a different financial asset to commodities , but if you want me to comment on that , I usually never buy anything from some one I don't perceive as trustworthy . Nevertheless , thank you for the advice , you see though I also knew that . The only reason I visit this blog is to learn about trading , not about life . And I get tired of getting notified on my inbox by someone talking about life , trust , apples and ideologies that at the end of the day I don't care much . I am sure there are plenty of blogs in the internet to talk about that . Hope you understand .

    1. Oh, so sorry to waste your precious time, mate. I wasn't aware that there were strict rules on what and how and when we are to post here.

    2. Hes got a point too abrax. These are amoral markets anf the market has no memory. Dont worry truth always comes out and there is a form of justice in that the people that care so much about money that they are willing to do what you nd i are talking about never have enough money.

  10. Here is wahat i think. The bottom is not in and anyone who claims otherwise probably has a horse in the game. Do you own due diligence and trust noone especially not the ones that claim they are out to help or protect you. But you akready know that.