The Mighty Saudi Army

Charts: The S&P 500 closed at 1069, up .25%. The correction has morphed into a rally attempt, not a technical uptrend.

Fundamentals: The monthly employment report was out today. It has two components, Payroll and Household. The Payroll survey was good, it said that in October companies shed 190,000 jobs (15,000 worse than expected) but it revised the two previous months favorably by 91,000 (much better than expected). Payroll also said that temp hiring picked up and factory hours increased, positive indicators. The Household survey includes self-employed people and small firms as well as big firms, so it covers the entire labor force. The Household survey said that 589,000 jobs were lost and unemployment jumped from 9.8% to 10.2%, very bad. The Household survey said that 324,000 workers have stopped looking for jobs, a phenomenon associated with an ongoing recession. If these discouraged workers had kept looking for jobs unemployment would have risen to almost 11% (horrendous). The two surveys gave opposite views of the labor market. Investors are trained to focus on the Payroll survey. The voting public is trained to focus on the Household survey’s unemployment rate. Headlines will be screaming tomorrow: Over 10% Unemployment! The danger here is that Congress will start working on a second “jobs only” stimulus package and blow the deficit even higher. One of the bad side effects of (maybe) the healthcare bill going down in flames is immediate pressure for more spending elsewhere.

Geopolitics: The Pak Army is pushing into the Taliban capital city of Makeen, steadily killing about 30 bad guys a day. Despite the Taliban’s pompous announcement that it is engaging in a fighting retreat, resistance is heavy in this strategic city and the other Taliban towns that the Army is smashing into. The bad guys are fighting back as hard as they can because they don’t really want to become a homeless guerilla army. The Taliban is simply getting beaten by the Pak Army as opposed to executing a clever tactical retreat.
We have a better picture of the fighting between the Saudi Army and the northern rebels from Yemen. The bad guys seem to have actually captured a couple of Saudi towns along the border earlier in the week. The Saudi Army has retaken those towns and pushed the bad guys back into Yemen. The Saudi Army remains massed on the border. It is pounding the bad guys with artillery and flying bombing runs with F-15s. The Saudi Army is not yet moving regular troops into Yemen but continues helping the Yemeni Army in a myriad of ways including Special Forces operations. The rebels in northern Yemen are Shiites and Saudi Arabia has a restive Shiite population near the border region. These Saudi Shiites are always on a low boil, keeping the Saudi Army out of Yemen for now. The Saudis will take ground action in Yemen if they can clamp down on security on their side of the border. Hospitals in the Saudi border region have been ordered to get ready for Army casualties.