Interdum stultus opportuna loquitur...

Wednesday, December 07, 2005

USRant: Bombs Are Non-Productive...

Note - from June 24th 2009, this blog has migrated from Blogger to a self-hosted version. Click here to go straight there.

First cab off the rank in the economic data was Productivity and Costs, and it was a case study in what happens when the government decides it doesn't even need to bother to approximate the truth anymore. You don't need to listen to Condoleeza Rice's fabrications about how the US government upholds the Constitution and doesn't advocate torture; you can get a sense of the contempt that the Administration has for the truth by looking at the economic statisitcs they produce, which are taking on a Stalinesque quality.

The Productivity number for example. The claim is that output per worker-hour rose 4.7% (consensus was for 4.6%). That is simply ridiculous; anyone with the slightest understanding of how to measure productivity properly will tell you that in order to get that sot of number, you require labour to be combined with a great deal more capital - and yet non-defence capex ex aircraft is flat for the quarter (i.e., there's no net new capital stock being formed).

And in this world of supposed massive productivity growth, real labour compensation per hour fell 1.4% (annualised) and is down 1.2% for the year; so let's get this straight - the US government expects us to believe that there is a 6 percentage point real differential between the marginal product of labour and its real compensation.

There is a new branch in linguistics which concerns what is now technically known as 'bullshit' (I'm not kidding here - there's been a book written about it); the difference between 'lying' and 'bullshitting' is that a liar knows that what he is sayng is not true, but a bullshitter doesn't care whether what he's saying is true or not. In otehr words, bullshitting is 'talking for effect' with absolutely no regard for facts... which fits Bush, Cheney, Rice, Wurmser, Rumsfeld, Wolfowitz, Perle, and the rest of the crowd who got infatuated with a man whose work I have read (and it is shit) - Leo Strauss.

Apart from the Productivity and Costs data, there was also Factory Orders, which were in-line with expectations at 2.2%. The key number within the report - you know it by now, since I always mention it - is  

Non-defence CapEx excluding aicraft

That was up 1.4% after falling 1.8% the previous month.

And here's the secret as to why 'productivity' as measured is so high; the (deficit funded) expenditure on military hardware is up a staggering 54% (annualised) ; half of the measured productivity gains stem from the mililtary spending of the US government - spending which is a simple intertemporal transfer (since current deficit-funded spending must be financed by future taxes).

Try this experiment at home: go out and extract your home equity and spend it on the ingredients for an ammonium nitrate bomb. Use the bomb to blow up a street in a poor beighbourhood. Compare your spending for the week with the spending of the prior week. Call the result 'productivity growth'.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation.

  • a $6.75billion, 2-day repurchase with $0.98billion in T-backed collateral undertaken at a 0.7 basis point discount to the Fed Funds Rate (FFR).

Major US Indices

The Dow Jones Industrial Average advanced 21.85 points (0.2%), closing out the day at 10856.86 points. The index hit an intraday high of 10936.2 at just before 12:30 NY time, after opening at its low (10835.41). There was a big intraday reversal which began at 3 p.m.; the Dow had re-tested its 12:30 high and failed to breach it. There was not caalyst whatsoever fpr the selloff (well, none that has ben amde public yet).

Within the blue-chip index, 19 stocks rose, the biggest gainers being Walt Disney (DIS, +2.04% to $25.52) and Mcdonalds (MCD, +1.71% to $35.16), which accounted for 4 Dow points between them. Losers in the Dow numbered 9 and were led by Pfizer (PFE, -0.98% to $21.14) and Johnson & Johnson (JNJ, -0.95% to $60.47), with these two stocks contributing -6 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 210.5m shares to 172.5m.

The broader S&P500 rose 1.61 points (0.13%), ending the day at 1263.7. Within the index, gainers numbered 260, while 217 S&P500 stocks fell for the day. Volume was tilted 1.6:1 in favour of the winners with 1163.30 million units traded in the winners as compared with 721.05 million traded in the losers .

Over at Times Square, the Nasdaq Composite posted a rise of 3.12 points (0.14%), to close at 2260.76, while larger-cap technology issues fared better with the Nasdaq100 adding 6.58 points (0.39%), to end at 1701.35 points. Within the tech benchmark, gainers numbered 54, while 40 Nasdaq100 stocks fell for the day. Volume was tilted 2.0:1 in favour of the winners with 523.54 million traded in the winners compared to 261.69 million in the losers .

NYSE Volume was super-chunky, with 2.14 billion shares changing hands, while Nasdaq Volume was chunky, with 1.86 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Dow Jones Industrial Average10856.8621.850.2%
Nasdaq Composite2260.763.120.14%
NYSE Volume2.14bn--
Nasdaq Volume1.86bn--


My 9-stock "bellwethers" group rose by an average of 0.11%

  • General Electric (GE) +$0.03 (0.08%) to $35.80;
  • Citigroup (C) +$0.04 (0.08%) to $48.89;
  • Wal Mart (WMT) +$0.48 (1.02%) to $47.62;
  • I.B.M. (IBM) +$0.71 (0.8%) to $89.14;
  • Intel (INTC) -$0.23 (0.86%) to $26.67;
  • Cisco Systems (CSCO) +$0.06 (0.34%) to $17.56;
  • eBay (EBAY) -$0.51 (1.13%) to $44.69;
  • Fannie Mae (FNM) -$0.06 (0.13%) to $47.60; and
  • Freddie Mac (FRE) +$0.48 (0.76%) to $63.86.

Market Breadth & Internals

NYSE advancing Issues exceeded decliners by 1803 to 1492 for a single-day A/D reading of 311; Nasdaq gainers trumped losers by 1625 to 1398. The 10-day moving average of the A/D line rose to 78.6 on the NYSE, while the 10dma of the Nasdaq A/D rose to -13.2.

NYSE advancing volume exceeded volume in decliners by 1265.3 to 830.7 million shares; Nasdaq advancing volume was greater than volume in decliners by 1094.6 to 706.2 million shares.

221 NYSE-listed stocks rose to new 52-week highs, and 63 posted fresh 52-week lows, while on the Nasdaq there were 206 stocks that hit new 52-week highs, and 41 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)1265.261094.61
Declining Volume (m)830.72706.18
New Highs221206
New Lows6341

Market Sentiment Statistics
CBOE Volatility Index11.52-0.08-0.69%
CBOE Nasdaq Volatility Index14.36-0.24-1.64%
Equity Put-Call Ratio0.67-0.09-11.84%
10-day PCR0.5800%
SPX-VIX Ratio109.70.90.82%

Bond Market Analysis

Bonds rose sharply at the long end, with the yield on the benchmark 30-year Treasury bond shedding 6.9 bps to 4.694%.

The middle of the yield curve was broadly higher in price: five year yields fell to 4.421%, and ten-year yields fell to 4.494%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 1.0 bps wider at 14.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 65.0 bps for 10-year AAA, and 93.0 bps for 20-years.

Credit spreads (spreads between corporate bonds of the same maturity profile but different creditworthiness) were broadly wider with the AAA-A spread on 20-years widening 8.0 bps to 19.0 basis points and the 10-year AAA-A spread 5.0 bps wider at 3.0 bps.

Treasury Yields
UST 13wk (yld)3.9320.0220.56%
UST 2Y (yld)4.4100%
UST 5Y (yld)4.421-0.071-1.58%
UST 10Y (yld)4.494-0.073-1.6%
UST 30Y (yld)4.694-0.069-1.45%

The Banks Index lost 0.01 points (0.01%), closing at 104.42; within the index,

  • Zions Bancorp (ZION) -$0.66 (0.87%) to $75.20;
  • M&T Bank Corp (MTB) -$0.67 (0.61%) to $109.33;
  • Wachovia (WB) -$0.32 (0.6%) to $53.32;
  • US Bancorp (USB) -$0.17 (0.55%) to $30.54; and
  • Mellon Financial (MEL) -$0.16 (0.47%) to $33.66.

The Broker-dealer Index lost 1.24 points (0.63%), to end the session at 196.11; the ticket clippers lined up as follows -

  • Raymond James (RJF) -$0.90 (2.37%) to $37.10;
  • Morgan Stanley (MWD) -$0.86 (1.5%) to $56.60;
  • Goldman Sachs (GS) -$1.74 (1.31%) to $131.31;
  • Lehman Brothers (LEH) -$1.52 (1.18%) to $127.25; and
  • Charles Schwab (SCH) -$0.16 (1.03%) to $15.41.

The Philadelphia SOX (Semiconductor) index posted a rise of 5.19 points (1.04%), closing at 502.86

  • Altera (ALTR) +$1.10 (6.01%) to $19.40;
  • Maxim Integrated (MXIM) +$1.56 (4.16%) to $39.06;
  • Applied Materials (AMAT) +$0.41 (2.21%) to $18.95;
  • Xilinx (XLNX) +$0.52 (1.97%) to $26.98; and
  • Broadcom (BRCM) +$0.93 (1.95%) to $48.68.

Gold & Silver Markets

Gold rose $1.20 (0.23%) to close at $513.80 per ounce.

The Gold Bugs Index added 6.84 points (2.75%), closing at 255.82

  • Glamis Gold (GLG) +$1.50 (6.6%) to $24.23;
  • Agnico Eagle (AEM) +$0.80 (5.09%) to $16.53;
  • Newmont Mining (NEM) +$1.91 (4.08%) to $48.75;
  • Meridian Gold (MDG) +$0.71 (3.59%) to $20.49; and
  • Kinross Gold (KGC) +$0.25 (3.23%) to $7.98.

Silver rose $0.06 (0.65%) to close at $8.79 per ounce. 

The Gold and Silver Index (XAU) gained 3.26 points (2.8%), to 119.69 points.

  • Agnico Eagle (AEM) +$0.80 (5.09%) to $16.53;
  • Newmont Mining (NEM) +$1.91 (4.08%) to $48.75;
  • Meridian Gold (MDG) +$0.71 (3.59%) to $20.49; and
  • Anglogold Ashanti (AU) +$1.48 (3.42%) to $44.81.
Precious Metals and Indices
PHLX Gold and Silver Index119.693.262.8%
AMEX Gold BUGS Index255.826.842.75%

Oil Market

Oil rose just $0.03 per barrel, closing at $59.94 per barrel after spending much of the session above $60. 

The Oil and Gas Index (XOI) added 2.23 points (0.22%), to end the session at 1018.68

  • ConocoPhillips (COP) +$0.77 (1.22%) to $63.73;
  • Kerr Mcgee (KMG) +$0.90 (1%) to $91.33; and
  • Occidental Petroleum (OXY) +$0.80 (0.96%) to $84.14.

The Oil service stocks (OSX) Index added 0.11 points (0.06%), to end the session at 183.42

  • GlobalSantaFe (GSF) +$0.48 (1.02%) to $47.67;
  • Transocean (RIG) +$0.60 (0.91%) to $66.75; and
  • National Oilwells/Varco (NOV) +$0.47 (0.75%) to $63.02.
Energy Complex
Reuters CRB339.24-1.68-0.49%
Crude Oil Light Sweet59.940.030.05%
Heating Oil1.772-0.02-0.98%
Natural Gas13.489-0.17-1.25%
Unleaded Gas1.5835-0.01-0.4%
AMEX Oil Index1018.682.230.22%
Oil Service Index183.420.110.06%

Currency Markets

USD Exchange Rates
US Dollar Index91.44-0.09-0.1%
Australian Dollar0.7530.00170.23%
Swiss Franc1.3045-0.0029-0.22%
Canadian Dollar0.8639-0.0003-0.03%