Three Reasons This Stock Market Rally Is False

Chris,

Below is a re-post of what I recently discovered regarding the murkiness of continuing claims.  The good news is the data becomes much less murky when we simply add three numbers together. 

The Bottom line:  Continuing Claims only includes claims under Regular State programs (approx. 6 months of coverage).  Continuing Claims (as reported by the media) excludes all claims filed under Federal Programs and extended state programs.

After Regular State claims expire, the jobless then roll into the federal program (EUC 2008 passed in July 2008 by GW Bush and expanded in February by the Obama stimulus package).  The federal coverage now lasts for approximately another 6 months.  After the federal benefits expire, individuals may be available for additional weeks of extended state benefits.  Neither of these categories are included in the 6.2 million continuing claims reported last week.

How many claims are excluded from the data?

Federal EUC:  2,632,361

Extended State Programs: 359,986

These categories are both reported weekly by the Department of Labor in the same report as the Regular State program, however, the DOL didn't take the next step of adding them all up!

Well, this week a member of the AP took that step.

The AP reported last week  that the total claims (NSA) is 9.1MM

http://www.philly.com/philly/wires/ap/business/economic_figures/20090723_ap_weakrecoverytoprovidelittlereliefforjobless.html

I've been tracking claims data each week, but had made an assumption that these programs were included in the report, not additive to it.  After all, an elephant this large couldn't be sitting right there in front of me?  Is it even possible???

Well, since there were ZERO claims under federal programs until July 2008 (it didn't exist prior) and ZERO extended state benefits until June 2008, it is possible.

I did a quick chart of total claims vs regular state-funded claims using the Department of Labor reports.  

Of course, while the "green shoot" reported claims have leveled off, total claims, as it turns out, are steadily rising.

Hello DavidC:

Yes it was. I agreed with about all of it save for the inflation/deflation part. I think we could end up with a dollar collapse which would lead to the proverbial inflation outcome. Take care

Hello EGP:

Do health care, cap and trade remind you of the person who had his/her first meeting with the bankruptcy attorney and then realized: Hey, time (before I file) for new furniture and a new car?

Take care

Davos - YES!!!  You hit that one the head!!   ROL

CNBC www.cnbc.com/id/32174786

Federal regulators on Monday made permanent an emergency rule aimed at reducing abusive short-selling, put in at the height of last fall's market turmoil.

The Securities and Exchange Commission announced that it took the action on the rule targeting so-called "naked" short-selling, which was due to expire Friday.
Short-sellers bet against a stock. They generally borrow a company's shares, sell them, and then buy them when the stock falls and return them to the lender—pocketing the difference in price.

"Naked" short-selling occurs when sellers don't even borrow the shares before selling them, and then look to cover positions sometime after the sale.

The SEC rule includes a requirement that brokers must promptly buy or borrow securities to deliver on a short sale.

At the same time, the SEC has been considering several new approaches to reining in rushes of regular short-selling that also can cause dramatic plunges in stock prices.

Investors and lawmakers have been clamoring for the SEC to put new brakes on trading moves they say worsened the market's downturn starting last fall. SEC Chairman Mary Schapiro has said she is making the issue a priority.

The five SEC commissioners voted in April to put forward for public comment five alternative short-selling plans.

One option is restoring a Depression-era rule that prohibits short sellers from making their trades until a stock ticks at least one penny above its previous trading price.

The goal of the so-called uptick rule is to prevent selling sprees that feed upon themselves—actions that battered the stocks of banks and other companies over the last year.

Another approach would ban short-selling for the rest of the trading session in a stock that declines by 10 percent or more.

In addition to making the "naked" short-selling rule permanent, the SEC and its staff are working with major stock exchanges to make data on short-sale transactions and volumes publicly available through the exchanges' Web sites, the SEC announcement said.

It will result in "a substantial increase" over the amount of information currently required, the agency said.

"Today's actions demonstrate the (SEC's) determination to address short-selling abuses while at the same time increasing public disclosure of short-selling activities that affect our markets," Schapiro said in a statement.
 

DavidC,

As long as buying and selling of... Put, call, naked put, and naked call options exist ...I am happy.

Cat

cat233,

You made me smile there! Right on!

DavidC

CFTC review of position limits began today; tone of commission suggest tighter regulation ahead

It has been over a year since oil peaked above $147 per barrel last July, which generated frenzy of speculation about the role speculators played in the run-up of oil prices. Since that time the price of oil has fallen by more than 50% to its current price of ~$66.50 per barrel (oil fell as much as 80% peak to trough), but the push for greater regulatory oversight has continued at a strong pace and will likely result in new rules for the futures markets in the near future.

Today the CFTC held the first of a series of hearings on Energy Position Limits and Hedge Exemptions. The CFTC currently sets and ensures adherence to federal position limits for certain agriculture products, but it does not do the same for energy markets, so it is now exploring the impact that such regulation will have in order to apply it in an effective manner. While the focus of today's hearing was on position limits in energy markets, the commission has indicated it also intends to further review other commodities of finite supply in future hearings. After last year's commodities bubble (which affected both regulated ag commodities and unregulated energy commodities alike), the role of speculators in the market has been hotly debated, with some recognizing the need for such transactional players in an efficient market and others simply equating speculation to manipulation.

Today's hearing and the information released leading up to the hearing makes it clear that there will be greater regulation on the commodities futures markets in one form or another. There are many stakeholders involved in the ongoing debate about the ideal solution, ranging from commercial end users (such as airlines, freight companies and farmers); suppliers (such as energy companies and utilities); financial institutions that hedge and take risk; traders/speculators that seek profits and facilitate the market through the price discovery process; and retail consumers that purchase gas and heating oil. While all are important, the financial exchanges, CME and ICE, which offer the trading and clearing platforms for the futures in question, are the most directly affected publicly traded companies. Since their businesses are at the center of the debate, the CEOs of both CME and ICE each testified at today's hearing.

Given the topics discussed in the hearing, it is fair to expect there will be federal position limits set on energy contracts in order to ensure that no single entity can influence the market. The exchanges already impose their own limits, but it is likely that the CFTC's limits will be more restrictive than what is currently in place, or there would be no need for these hearings. Additionally, the CFTC may require further measures to be taken place by the exchanges to ensure they align with the commission's agenda.

The regulation is seen as a negative for the exchanges because it could limit trading and clearing volumes, and may send business to outside unregulated markets. The CEOs of the exchanges warned that the CFTC needs to be aware of the potential unintended consequences that a hasty or misguided regulatory decision could have, such as driving volume away from the transparent exchange-traded markets and into unregulated and opaque markets. This would not only hurt the exchanges businesses, but would also counteract the idea of greater oversight on the markets.

Although a regulatory decision isn't imminent, the exchanges are likely to be volatile in the near term as the hearings continue (next hearing is tomorrow at 9:00 ET) and political opinions get aired in the press. The ICE has lost 17% and CME has lost 10% since the hearings were first announced in early July, while the broader market has gained 9%. In addition to the exchanges, financial institutions with big commodities trading operations like MS and GS could also be impacted.

Source:  Briefing.com