03 June 2009

ADP: Department of Records Revision



"April’s reading was revised to show a reduction of 545,000 workers, up from a previous estimate of 491,000."

Is an 11% month over month change in an employment number a revision or a rewrite?


The ADP report is supposed to be based on actual reports from private industry.

This pervasive pattern of 'good numbers' that result in stock market rallies and the massaging of public opinion, only to be replaced by downward revisions thirty days later, with little notice or quote, is cynical manipulation of the media at best, and a dangerous slide into social engineering by an increasing distortion of 'reality' at worst.

If you have not read the novel or seen the movie lately, 1984 is worth a look.


Bloomberg
ADP Estimates U.S. Companies Cut Payrolls by 532,000
By Courtney Schlisserman

June 3 (Bloomberg) -- Companies in the U.S. cut an estimated 532,000 workers from payrolls in May as the labor market showed little sign of improving even as the recession abated, a private report showed today.

The drop in the ADP Employer Services gauge was bigger than economists forecast. April’s reading was revised to show a reduction of 545,000 workers, up from a previous estimate of 491,000.

Companies from General Motors Corp. and Chrysler LLC to American Express Co. continue to cut jobs to control costs even as the economy shows signs of stabilizing. Mounting unemployment will restrain consumer spending, muting any recovery.

“Still losing over half a million jobs a month is hard to get excited about,” Derek Holt, an economist at Scotia Capital Inc. in Toronto, said in a note to clients. “Steep job losses still signal a deeply troubled economy.”

...Economists forecast the ADP report would show a decline of 525,000 jobs, according to the median of 28 estimates in a Bloomberg News survey. Projections ranged from decreases of 425,000 to 580,000.

Economists’ Forecasts

A government report on June 5 may show payrolls at companies and government agencies shrank by 520,000 in May and unemployment rose to a 25-year high of 9.2 percent, according to a Bloomberg survey of economists.

Job-cut announcements last month showed the smallest increase in more than a year, Chicago-based placement firm Challenger, Gray & Christmas Inc. also said today. Planned firings rose to 111,182, up 7.4 percent from May 2008. The rise was the smallest since firings last dropped in February 2008.

Today’s ADP report showed a reduction of 267,000 workers in goods-producing industries including manufacturers and construction companies. Employment in manufacturing dropped by 149,000. Service providers cut 265,000 workers.

Companies employing more than 499 workers shrank their workforces by 100,000 jobs. Medium-sized businesses, with 50 to 499 employees, cut 223,000 jobs and small companies decreased payrolls by 209,000.



02 June 2009

German Chancellor Strenuously Objects to Central Bank Monetization


This is important in its own right, but even moreso because it suggests that some rumours that have been going around the trading desks over the past two weeks might be true.

We will keep you informed as things progress.


Financial Times
Merkel mauls central banks

By Bertrand Benoit in Berlin and Ralph Atkins in Frankfurt
June 2 2009 17:25

Unconventional monetary policies being pursued by the world’s main central banks could aggravate rather than ease the economic crisis, Angela Merkel, Germany’s chancellor, suggested on Tuesday.

Her surprisingly strong attack on the US Federal Reserve, the Bank of England and the European Central Bank was remarkable coming from a leader who had so far scrupulously adhered to her country’s tradition of never commenting on monetary policy.

What other central banks have been doing must be reversed. I am very sceptical about the extent of the Fed’s actions and the way the Bank of England has carved its own little line in Europe,” she told a conference in Berlin.

“Even the European Central Bank has somewhat bowed to international pressure with its purchase of covered bonds.”

She added: “We must return to independent and sensible monetary policies, otherwise we will be back to where we are now in 10 years’ time.”

Ms Merkel’s decision to ignore one of the cardinal rules of German politics – an unwritten ban on commenting on monetary policy out of respect for central bank independence – suggested Berlin is far more concerned about the ECB’s approach than has so far been apparent.

Meanwhile, Berlin is anxious that central banks will struggle to re-absorb the vast amount of liquidity they are pouring into the markets and fears the long-term inflationary potential of hyper-loose monetary policies.

The ECB’s efforts have been focused on pumping unlimited liquidity into the eurozone banking system for increasingly long periods. But last month, it followed the US Federal Reserve and Bank of England in announcing an an asset purchase programme to help a return to more normal market conditions.

The ECB announced it had agreed in principle to buy €60bn in “covered bonds”, which are issued by banks and backed by public-sector loans or mortgages. The purchases were only agreed after extensive discussions within the 22-strong ECB governing council. According to one version of May’s meeting, the council had discussed a €125bn asset purchase programme that would also have included other private sector assets, but only the purchase of covered bonds was agreed....



Palotta's Raptor Hedge Fund Halts Redemptions - To Close


No doubt overwhelmed by the heady perfume of green shoots wafting from the Fed's printing presses.

WSJ
Pallotta, Noble to Close Funds
By JENNY STRASBURG and PETER LATTMAN

Two prominent Boston money managers are winding down their biggest funds, another sign of the relentless shakeout in the hedge fund industry.

James Pallotta, who runs the $800 million Raptor fund, has decided to return money to outside clients, people familiar with the matter said.

George Noble, a former mutual-fund manager who controls some $550 million across two funds named Gyrfalcon, intends to refund clients this month. He describes his 2009 performance in a letter to investors Tuesday as "the most professionally disappointing and personally frustrating of my entire career."

Their simultaneous exits show how veteran investors still regard these markets with caution, despite stocks' recent ascent. The decisions could portend similar moves by other fund managers who, burned by losses and facing pressure from clients, opt to shutter, even as the hedge fund industry's returns have improved.

Mr. Pallotta less than a year ago split off from hedge-fund pioneer Paul Tudor Jones, his investment partner for 15 years. Mr. Pallotta ran Tudor Investment Corp.'s Raptor fund, a stock-picking vehicle that at its peak had $9 billion in assets and some of the best returns in the industry but that hit a money-losing skid starting in mid-2007.

Mr. Pallotta, 51 years old, grew up in Boston's working-class North End neighborhood and became one of the city's richest men and a minority owner of its beloved Celtics professional basketball team. This year, he opened a New York office in addition to his Boston location. Yet amid the market tumult, he kept most of his assets in cash and for now has put fundraising and major organizational decisions on hold, people familiar with the matter said.