Out To Lunch

by Larry Levin

I'm not sure if everyone was out to lunch today or is simply on vacation? Today's latest barrage of bad news (LEI, Philly Fed, Russia and oil) was completely ignored. Apparently investors are giddy over the prospects of a government takeover of FNM and FRE. The heretofore flag wavers of free market capitalism, Wall Street money mangers etc, are now clamoring for socialism. How disgusting! The Conference Board reported today that the leading economic indicators (LEI) fell 0.7% in July, pointing to slow growth the rest of the year, and possibly an economy grinding to a halt. Five of the 10 indicators declined in July, led by building permits, stock prices and jobless claims. Three of the indicators rose, led by the interest-rate spread and consumer expectations. In another report, the Philly Fed survey said its manufacturing index stands at a rotten -12.7, which shows industrial contraction, and was the ninth consecutive month of worsening factory activity in the region. Oil was a real doozy today; it exploded over $6.00-barrel and the reaction was a collective YAWN. The reason given for today's oil gusher was also ignored by the market. Tensions intensified between Russia and the U.S. after the U.S. signed a deal with Poland to position missile interceptors on Polish soil. Russia warned that this could fuel an arms race and said its response will go beyond diplomacy. With Russia 's oil & gas wealth, it looks like it wants to flex its muscles a little, which doesn't sound too good to me. Let's take a break from the bad news for a moment and reflect on today's good news: weekly unemployment claims. The number of new claims for state benefits fell by 13,000 to 432,000 last week. Unfortunately, that's where the good news ends. The four-week average of new state filings rose by 7,250 to 445,750, the highest since the recession of 2001. Compared with the same time last year, initial claims are up about 39%, while continuing claims are up about 30%. Continuing claims have never risen by 20% or more without the economy falling into recession. The government has also extended unemployment benefits. The number of claims under this new extended program rose by 714,000 to 1.28 million in the week ending Aug. 2. After reading many comments on this, the conclusion of the apologists is that the new program is a nuisance: it doesn't allow them to calculate the current weekly unemployment claims correctly. They don't want these people counted at all. OK, that may be true, but what are they really advocating? That once one losses his 26-weeks of benefits, he should no longer be counted as unemployed. Ah yes, this brings us back to the detailed email highlighting how different administrations distorted unemployment, GDP, and inflation figures for their own political benefits. It was the John F. Kennedy administration that didn't like all of those unemployed folks sitting in the statistics too long - so he used his eraser to make them disappear. It was his administration that labeled the unemployed discouraged workers and excluded them from the ranks of the unemployed once their benefits ran out. The point is these people don't disappear. In fact, they are increasing at an alarming rate. An increase of 714,000 to 1.28-million is a 127% increase - in one week. There is no erasure that makes them irrelevant except to a politician that needs to improve his legacy - even the anointed one - John F. Kennedy.

Real Time Trading Signals*for

Trade Date: 8/18/08

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

1) 80% sell @ 11:30am at 1271.50 = +1.00 & b/e

2) VA buy @ 12:55pm at 1272.25 = +3.00 (1 filled)

3) Algorithm positions (8)...combined total...+10.50


ZB (30 Year Bond) Trades*
(before fees and commissions):

1) Buy @ 8:32am at 118.025 = -3.0*3

2) Sell @ 10:53am at 117.215 = b/e*3...combined total...-9.0


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