Jobs Report: Heads I Win, Tails You Lose!

By Todd Harrison  SEP 07, 2012 9:55 AM

QE3 embers are stoked; the labor force is not.



Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

Freaky Friday arrived and on cue with the release of the payroll data.  It was somewhat anti-climactic after world peace broke out yesterday, but every data point counts — or at least it used to!

The headline number — or the one the incumbents will trumpet — is the unemployment rate, which dipped from 8.3% to 8.1%. This, of course, was due to shrinkage in the labor force as folks left the labor force.  And not only did the change in non-farm payrolls miss estimates (96K vs. 130K), last month was also revised lower, from 163K to 141K.

Reports like this are a reminder that there's a massive difference between a stock market rally and an economic recovery.

Be that as it may, the bulls continue to shrug and say, "What, me worry?" The more putrid the numbers, they'll argue, the more likely we'll see QE3 (which is pretty much a given anyway after Big Ben expressed "grave concern" over the US employment situation).

Heads I win, tails you lose? Perhaps — but I will tell you, after 21 years of running (after) money, this sorta sentiment scrunches my nose.

Intel (INTC), oh-by-the-way, slashed its third-quarter guidance (to $13.2 billion, plus or minus $300 million, from the previously projected range of $13.8 billion to $14.8 billion). Hey, what's a billion dollars between friends, anyway?  I remember when that was actually considered to be a lot of money.  Either way and as always, the reaction to news is always more important than the news itself.

As it stands and as I write, S&P and Nasdaq  futures, despite Intel and the non-farm payroll miss, are flattish — and in fact, gold and silver futures rallied hard on the report (on expectations that Mr. Bernanke will again spur the herd with an infusion of liquidity). Call it a shell game, a game of chicken, or a FUBAR market, but please respect the psychological power of performance anxiety.

Case in point: My high-water mark on a YTD trading basis pretty much top-ticked when I mentioned it in an impromptu Twitter-fest two months ago(that was a first for me; I never talk about performance while a trade — or a year — is still open).

I am now well off my highs and while I still have a healthy lead on the market averages, I've been pretty anxious about the relative dip — and I don't have to answer to anyone!  Put yourself in the shoes of a fund manager who is trailing the proxies, those whose job is on the line and, well, you get it.  It’s Schvitz City, USA.

In terms of forward catalysts, above and beyond the next FOMC (Goldman pegs QE3 at 50-50), please circle September 12 on your calendar. As per this excellent Bloomberg article:

In the morning, the German supreme court will rule on the constitutionality of the planned permanent rescue fund, potentially upsetting Germany’s more than half-century pursuit of European unity; at lunchtime, the EU commission will lay out its proposals to put the ECB at the heart of continent-wide banking supervision, already questioned in Germany; and at sundown, polls close in an election in the Netherlands after a campaign marked by calls for more spending at home and less on fiscally irresponsible neighbors.

Minyanville Professor and T3 Maven Scott Redler, whose trading vibe I respect tremendously, recently called the upside trend our friend and the short side "cute." That has proved prescient as fund managers returned from the beach to find themselves fending for a job and chasing performance (with a perceived Bernanke backstop).

I will only add that the only thing more dangerous than "cute" is being "comfortable" — and when a direction appears obvious, the path of maximum frustration typically isn't far behind.

I enter today with a right-sized put position in the QQQ (I raised my stop from NDX 2800 to NDX 2850 to allow for a pop-and-drop). Whether I'm early or wrong will depend entirely on where the averages are when I close out the position. I'm underwater and truth be told, I feel pretty silly to be on this side of the market.  While the best trades are usually the hardest fades, this jury remains out on this particular try.

Separately, and at the risk of blurring the lines between church and state, some of you might have seen the eSignal media campaign that (officially) launched yesterday. (This is one of the spots; filmed in 105 degree heat no less!) Those who know me understand that I wouldn't put my name to something that I didn't believe in. We're stoked by this alliance. And while we don't "do" advice in the 'Ville, I would suggest taking advantage of the free 30-day trial
Chart of the Day

Please keep this chart in front of you.  If history rhymes, commodities must rally, the S&P must fall, or there will be a combination thereof as we regress to the historical meaning of the modern-day coupling.

Click to enlarge


Twitter: @todd_harrison

Position in QQQ.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at

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