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Friday, August 8, 2008

Jobs Jobs Jobs, It's All About Jobs

"Yippee. Oil went down... now we can party party party. Who cares we have no jobs, who cares we lost our houses, who cares we don't have cars left to put gas into."

I lifted that off a comment thread somewhere, but it pretty much captures current sentiment. Equities have ripped higher as hedgies furiously unwind the 'equity crack trade' (short financials, long energy).

Oil is done and that is NOT nearly as GOOD as you'd think. You have to ask yourself, WHY is oil down? The answer of course is that global economic growth has completely stalled out. Japan is now officially in a recession and the U.S. will be shortly. Europe is diving right in and China is down shifting from super hyper growth.

For example:

Canada hit by biggest monthly job loss in 17 years: "A surprisingly large 55,000 jobs were lost in Canada in July, the biggest monthly job loss since the 1991 recession.

The Canadian dollar dropped immediately and bonds rose in reaction to release of the Statistics Canada employment report on Friday morning. Economists called the figures "extremely ugly" and "stunningly bad."

Most of the losses, 48,000, were in part-time work and overall employment remained 227,000 higher than it was a year earlier. The jobless rate dropped to 6.1 percent from 6.2 percent as youth and some older people left the work force."

It would appear that in Canada the 'powers that be' don't fudge the numbers the way they do in the U.S.. Job losses in Canada, a much stronger economy, were the same 55 000 that were lost in the U.S. on the last non-farm payroll report. One thing, Canada has 10% of the population of the U.S., never had as massive a housing bubble, exports commodities and has a budget surplus.

Use this oil inspired bounce in equities to exit longs and reposition short. In the end, this is a global consumer lead recession and the single most important variable will be JOBS JOBS JOBS.