Happy Independence Day!

by Larry Levin

Investors were greeted with an early 4th of July treat. No, it wasn't a mother load of illegal fireworks but a minor rally. This rally happened despite the news, which was bad once again. How did that happen? Well, the usual way of course; traders shrugged and said it could have been worse.

So the old saw of it could have been worse was used again this morning. Desperate times for desperate people (buy & holders) I guess.

1) June's employment rate was supposed to go down but it didn't - it stayed the same. Isn't that worse than expected?

2) June's employment fell for the sixth month in a row. How could that be better than expected unless employment increases and therefore stops the consecutive monthly drops? Is that really better than expected?

3) June's employment fell 62,000, but economists expected only a fall of 40,000. Ummm, isn't that worse than expected?

4) Payroll losses of April and May were revised LOWER to show that 52,000 more jobs had been lost than originally reported. Ummm, isn't that worse than expected?

5) What planet do these so-called experts live on - Planet Head-In-The-Clouds?

Government statisticians (Bureau of Labor & Statistics) surely live on Planet Head-In-The-Clouds with those gullible enough to read this report as good. The BLS should be embarrassed to report the following data. Its model suggests that there were 29,000 jobs coming from new construction businesses, 22,000 jobs coming from professional services, and a whopping 177,000 jobs in total coming from net new business creation. If you believe this, I'd like to sell you the Brooklyn Bridge . No really, I own it! The economy has slowed to a standstill and the BLS model still has the economy expanding quite rapidly.

For those unfamiliar with the birth/death model, monthly jobs adjustments are made by the BLS based on economic assumptions about the birth and death of businesses (not individuals). Those assumptions are made according to estimates of where the BLS thinks we are in the economic cycle.

With housing falling like a rock and commercial real estate now following suit, the BLS is assuming that 29,000 new jobs were added in construction. With lenders blowing up and countless self employed real estate professionals exiting the business, the BLS is still assuming 22,000 jobs were created from professional and business services. The total number of jobs added in May by these absurd assumptions was 177,000!

However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, etc., you get a closer picture of what the unemployment rate really is. Amazingly, the government actually tracks this, but doesn't really want anyone reporting it. The official government number remained 5.5% after May's jump, but U-6 (the most inclusive number) rose .2 to 9.9%. That's right, it's nearly 10%! To the average Joe on the street unemployment feels more like 10% than 5.5%. Expect both numbers to rise soon. This data can be found on Table A-12 of the government's report.

The number of people filing for unemployment benefits rose by 16,000 last week to 404,000, only the second time in this cycle that initial claims have been above 400,000, the Labor Department reported today.

So - does all of this sound BETTER THAN EXPECTED to you? If not, then you're not gullible enough to work on Wall Street - brains not required.

By now you must be wondering if I'm pulling your leg. The ISM Services data must have been better than expected - right? NOT! It was surprisingly worse than expected.

The ISM's non-manufacturing sentiment index fell sharply to 48.2% in June from 51.7% in May, making it the lowest level since January. Readings over 50% indicate growth, and the index dipped below 50% for three months early this year before recovering. Since then the economy has deteriorated and it was back then that I said every time the ISM Services reading fell below 50.0% for three consecutive months, it signaled a recession. Did your broker, portfolio manager, or investment advisor tell you that? Of course not, the shills never tell you to take precautionary measures until it's too late - like analysts.

In early electronic trade on Globex, crude oil surged to another record high, reaching $145.85 a barrel.

So there you have it folks - nothing has changed. The data is NOT better than expected, but Wall Street just isn't prepared to face the music.

Real Time Trading Signals*for

Trade Date: 7/3/08

E-Mini S&P Trades*
(before fees and commissions):

1) TP sell @ 9:55am at 1270.00 = +2.25 (1 lot)

2) Algorithm trades (4)...combined total...+5.50


E-Mini Russell Trades*
(before fees and commissions):


1) Buy @ 9:43am at 668.3 = -.6 (1 lot)...-$60


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