My Sweet Lord: Sven Needs To Meet Sven

Active rigs: 191

Job watch: on NPR this morning, I heard the unemployment rated dropped to 7%, lowest in 5 years. Of course. This might be a better analysis, at CNS. The main point of the article, as Drudge points out: 41% of the new jobs were government jobs. Who cares? In fact, government jobs are some of the best jobs available (East Coast pay scale; great benefits; no ObamaCare worries; great pensions). Congress did not authorize more money to be paid for government workers; this was already in the budget (somewhere) and the positions were always there, or they might be new positions put on the books over the past six months, but jobs are jobs.

The market appears not to care where the jobs are. Jobs are jobs.

[Later, this article was posted: it would have been nice for Drudge to post this also to be a bit more fair and balanced. The Los Angeles Times is reporting:

Big gains in factory and construction jobs last month have experts optimistic that the labor market is starting to produce enough higher-paying jobs to fuel stronger economic growth.

"It's not just the quantity of the jobs but the quality," Diane Swonk, chief economist at Mesirow Financial, said of Friday's Labor Department report of a surprisingly strong 203,000 net new jobs added in November.

Of those hires, manufacturers accounted for 27,000, the most since March 2012 and a sharp increase from October's 16,000 new jobs.]

I see the market is up big in early morning trading. What is oil doing? Approaching $98, up slightly today. Pretty incredible. I don't know about you, but I don't see a whole of difference between $98-oil and $100-oil but we will still get analysts writing stuff like this:

Growth-oriented exploration companies that have taken on excessive debt are more likely to be takeover candidates, because "outspending cash flow is unsustainable. The party will end with a pullback in commodity prices," says Sven Del Pozzo, an energy analyst at IHS Herold. U.S. oil prices, near $97 per barrel, have fallen almost $10 in recent months.

Sven at IHS Herold needs to meet Sven in the Bakken. 

For newbies, there was a report not too long ago that this is the longest stretch of sustained high prices for oil. Has anyone noticed: no sudden spikes from $150 to $70? The price of WTI has remained remarkable stable between $90 and $110. Do folks recall the money lost by operators through hedges/derivatives during those periods of severe volatility. Everyone -- mineral owners, operators, oil service companies, consumers, prefer stable prices over severe volatility. Even high sustained prices allow folks to plan. Albeit with a "sad" face (except for mineral owners and operators who hedged correctly).

For newbies, this is how I understand this works. An oil operator in the Bakken contracts with a refinery in Philadelphia to deliver 60,000 bbls a day of light, sweet oil. If an unexpected cold spell interrupts the Bakken flow, and the Bakken operator is unable to deliver 60,000 bbls/day to the refinery, the Bakken operator wil have to buy oil on the spot market. If the contract called for the refiner to pay the Bakken operator $75/bbl and the Bakken operator needs to buy $110 Brent oil on the open market, not a good picture.  Again, I could be way wrong on this but this simple model helps me understand how Bakken operators can lose money even if the price of oil is spiking to $150.

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read or anything you think you may have read here.

So, back to the market. Yes, everything I am interested in is green. Nice.

Here's the unemployment report:

U.S. employers hired more workers than expected in November and the jobless rate fell to a five-year low of 7.0 percent, which could fan speculation the Federal Reserve could start reducing its bond purchases this month.

Nonfarm payrolls increased by 203,000 new jobs last month, the Labor Department said on Friday.

The unemployment rate dropped three tenths of a percentage point to its lowest level since November 2008 as some federal workers who were counted as jobless in October returned to work after a 16-day partial shutdown of the government.

Economists polled by Reuters had forecast payrolls rising only 180,000 last month and the unemployment rate falling to 7.2 percent from 7.3 percent.

We all know the numbers are massaged, but as more supporting data comes in, the general trend becomes somewhat clearer. These are the tea leaves in my Snowbucks tea this morning:

• US net household worth hits an all-time record high; ninth consecutive quarter of rising household worth
• car sales up huge in November
• housing is back in California -- strong
• first time unemployment claims (yesterday) down significantly
• unemployment rate (today) down 0.3 points
• strength of dollar changes day-to-day, but price of WIT oil is trending up
• 3.6% 3Q13
• gasoline demand is up (but ...)
• Wal-Mart trading at all-time highs

I guess I am an eternal optimist. I can find all kinds of bad economic news, but the data points above are encouraging. 

The market has pulled back significantly (?) the last several days. I attribute the sell-off mostly to mutual funds locking in their 26% gains the past 12 - 24 months. Talking heads I assume attribute much of it to the likelihood of "tapering." "Tapering" will turn out to be a one-time buying opportunity for nimble traders (of which I am not). Once the news is out that "tapering" will start there will be a sell-off; the market will find a new floor; and the market will then respond to the data points noted above.

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read or anything you think you may have read here. 

Here's the gotcha. The nimble traders have already figured out that "tapering" will start sooner than later if the data points above are confirmed next month. The nimble traders figured that out; "tapering" is "old news." We saw the pullback this past week -- "tapering" is a given. The GS traders figured that out two months ago. In October they acted.

Here's a great example of one journalist who missed the gotcha: writing before the numbers came out, he/she said that a great jobs report could sink stocks. Great jobs report came out and the market is up 150 points, nearing its all-time high. 

If the "numbers" are strong in January and February, they will take precedent over the announcement that Ms Yellen will begin/has begun tapering. The trick is to figure out how many points in the market can be attributed to Mr Bernanke printing money. I think 500 points. But for argument's sake, let's say a thousand. We traded over 16,000 a few days ago; we dropped to 14,775 or thereabouts in early October.  The math is easy to do. [Yes, I know professionals follow the S&P, and not the DOW, but I grew up with the DOW, not the S&P -- old habits are hard to change.]

My sweet lord:

My Sweet Lord, George Harrison