Stocks are falling today after employers cut 467,000 jobs in June, higher than the 363,000 expected by economists. Unemployment rose to 9.5%, a bit below forecasts but still the highest level since Ronald Reagan’s first term in office.

According to the government, 14.7 million Americans were unemployed in June; add in “discouraged workers” who’ve fallen out of the official survey and the figure rises to 19.6 million, according to T.J. Marta, chief strategist at MartaontheMarkets.com. What really troubles Marta is the rising number of unemployed who have little or no hope of finding a job. “Your ‘Wall Streeters’, your autos workers and your housing workers – those jobs are not coming back,” he says.

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When Wall Street imploded last year, the Fed and Treasury took "some of the right moves" in order to revive the financial system, says William Cohan, author of House of Cards. But the government blew at least one crucial act of the saga, Cohan says: The backdoor bailout of AIG’s counterparties, notably Goldman Sachs, which received $13 billion of TARP funds via the AIG conduit last fall.

Adding insult to taxpayer injury, Goldman Sachs is primed to benefit should AIG ultimately file for bankruptcy and default on its debt, Cohan reports, having invested about $200 million in related credit default swaps.

Goldman spokesman Michael DuVally confirms the firm spent “over $100 million” on credit default swaps to hedge a $2.5 billion difference between the amount of collateral AIG had posted on certain trades and the amount Goldman thought it was due.

But DuVally says the trades were “wound down because we received the collateral owed,” a reference to the $13 billion the firm received via the AIG conduit last fall.

“They’re gone,” he says. “There will not be a credit event because the government decided to bail AIG out.”To be sure, there's no evidence an AIG default is imminent - or even likely given the government's seemingly endless support.

Still, Cohan disputes DuVally's characterization and AIG's 1-for-20 reverse stock split Wednesday did little to instill confidence in the firm.

Goldman “paid for credit default swaps from third parties to ensure them against a default in AIG debt,” he says in a phone conversation subsequent to the accompanying video. “ If AIG debt does [go into] default they get paid off.”

Furthermore, “it makes no sense to unwind” the trade, Cohan says...

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From The Business Insider, July 2, 2009:

The rate of crash for real-estate prices nationwide has finally begun to moderate.  Specifically, it dropped from -19% a year in March to -18% a year in April.

No, that's not much to celebrate.  But it's a step in the right direction.

Of course, as your ever-optimistic neighborhood realtor will tell you, real-estate is a local business: Each market is different.

What does that mean? 

Well, in this case, it means that some markets are falling slowly, and other markets are falling like rocks. 

It also means that some markets are falling more slowly than they used to be (a good sign) and some are still accelerating into the depths (bad).*  The rate of collapse in some of the hardest-hit markets, in fact, is beginning to improve.  In more sheltered markets like New York, meanwhile, the decline is accelerating.

How's your market doing?  Here's a run-through of the trends in the 20 cities in the Case-Shiller index, ordered by current peak-to-trough collapse.

Click here to see how individual states are faring.

*Your realtor's implication here--that YOUR market is about to start SOARING--is almost certainly a hallucination.  What is remarkable about this real-estate crash is how synchronized it is: almost every market in the country rolled over at almost the same time. But if you're lucky enough to live in Denver, Dallas, or Charlotte, the collapse is indeed much less severe than it is in, say, Phoenix and Las Vegas.  But then you didn't have the bubble boom, either.

From The Business Insider, July 2, 2009:

Update: The market is tanking. Dow futures are off over 100. In addition to the top-line numbers, the internals are horrible. The work week is now down to 33 hours, the shortest its ever been since the data's been collected.

Original post: Analysts were looking for about 350,000 job losses, so this is definitely a miss.

On CNBC they're now talking about the "two-month" average, to justify how things are still improving.

Unemployment for June has hit 9.5%, compares to 9.4% last month. That subtle gain is the "good news" in the report.

Here's the release from the BLS:...

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More coverage from The Business Insider:

• The Manhattan real estate crashes
• Real estate crash: How's your city doing

Updated from 7:00 a.m. EDT

Update: "Big Pay Packages Return to Wall Street," The Wall Street Journal reports. Among the highlights of the story:

• Goldman is on track to pay out as much as $20 billion this year, or about $700,000 per employee. That would be nearly double the firm's $363,000 average last year, and slightly higher than the $661,000 for the average Goldman employee in fiscal 2007.
• Morgan Stanley set aside $2.08 billion for compensation in the first quarter, an unusually high 68% of its revenue. The firm will likely pay out $11 billion to $14 billion in compensation and benefits this year. Credit Suisse analyst Howard Chen projects the company's average pay will approach the $340,000 paid out in fiscal 2007 and up from last year's average of $262,000.

While a weak second-half could diminish those year-end bonuses, "the comeback in compensation so far this year shows how hard it is for Wall Street to break its old habits," The Journal reports.

Earlier: There's been a lot of talk from the Obama administration about reforming Wall Street, but little or no action where it matters most -- compensation, says author and former investment banker William Cohan.

"There's a lot of nice words in the 85-page re-regulation proposal...[about] making sure compensation is tied to behavior and accountability," says the House of Cards author. "But there's not much action going on."

And where there has been action, Cohan notes, its been by Wall Street firms raising salaries to get around new restrictions on bonuses, and paying off TARP so they're less beholden to government oversight.

Cohan believes there must be significant change to the industry's compensation structure in order for any Wall Street reform to be successful. Specifically, the personal fortunes of senior executives must be tied directly to the fate of their firms, he says, echoing the views expressed here by Nouriel Roubini.

Cohan recommends...

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It’s been more than a year since Bear Stearns imploded.  At the time, many Wall Street insiders thought that WAS the crisis.  Obviously, they were wrong.  So, what caused the crisis and what’s changed as a result?  That’s the basis of this segment with author and former investment banker, William Cohan.

Cohan argues the global financial system was brought to its knees by the people at the top.  The ‘House of Cards’ author says, “the decisions made by the executives at Bear Stearns over a long period of time” resulted in the firm’s collapse.  The same holds true for Lehman Brothers, Citigroup and the other financial firms that have either folded or needed government assistance to survive.

Cohan points out Wall street firms took great risk they would never advise their own clients to take.  Cohan’s book illustrates that point in great detail. And, just how fragile confidence and trust can be on Wall Street. In the days before its demise, Bear Stearns was borrowing $75 billion a day in the ‘repo’ market in order to fund its operations.  In return for that cash, Bear would use their assets and securities – largely, exotic mortgage-backed securities - as collateral.  Bear’s fate was sealed when their lenders lost confidence in the value of that collateral.  Within days the jig was up and the 5th-largest securities firm was forced to sell to JPMorgan Chase for $10 a share, a mere fraction of what it as worth just a few months before.

While that kind of risk and leverage may have faded for now, Cohan is confident this won’t be the last crisis on Wall Street.  “There’s not a whole lot of financial innovation going on right now... but I’m sure the seeds of the next great financial innovation are being sown already...and that means we’re well on our way to inflating the next bubble.”

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Despite a lousy finish, the Standard & Poor's 500 index rose 15% in the second quarter, its best quarter in a decade. For sure, Fed Chairman Ben Bernanke’s now famous 'green shoots' phrase helped fuel that rally. But "the economy is about to take back seat to corporate earnings and guidance," according to Dan Greenhaus, analyst with Miller Tabak’s Strategy Group. "You can only rally so much on 'less bad'."

While the economy may be getting less bad it’s time for corporate America to put up or shut up. "Some portion of the rally was based, not just on economic stabilization, but the idea growth will follow," Greenhaus says. "If you don’t get that second half of the story it’s going to be very hard to continue to rally equity prices."

Even if earnings and guidance do surprise investors, Greenhaus believes the days of 3% growth are gone; “that’s a fairly ambitious goal going forward,” he says, predicting..."

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From The Business Insider, July 1, 2009:

Six months into the Obama presidency and the New York Times is already running an autopsy analyzing how he could have been so wrong about the economy.

David Leonhardt's bottom line?  The administration was deluded by hope.

We doubt it.  We suspect Obama, Summers, Geithner & Co. just decided that they had to issue rose-colored projections about the unemployment rate and recovery or they would never have a hope in hell of ramming such huge spending increases through.  And if the forecasts proved optimistic?  Well, by then, maybe everyone would have forgotten.

They haven't.

At the time, we noted that Obama was taking a huge risk here: The collapse of the economy certainly wasn't his fault, and, no matter what, recovery was likely going to take years.  If nothing else, we thought, Obama should preserve his own credibility.

And now he has already blown it.

David Leonhardt: There are two possible explanations that the administration was so wrong. And sorting through them matters a great deal, because they point in opposite policy directions.

The first explanation is that the economy has deteriorated because the stimulus package failed. Some critics say that stimulus just doesn’t work, while others argue that this particular package was too small or too badly constructed to make a difference...

See also from The Business Insider:

• Obama's Economic Forecast Threatens To Destroy His Credibility
• Venture capitalists have their worst quarter since 1999 

PPIP, the Public-Private Investment Program, is the government's controversial plan to spur buying of banks' toxic debt. Since Geithner first floated the scheme in late March, bank stocks have rallied sharply and most big financial services firms have raised capital via equity sales - thanks, in part, to optimism about the PPIP.

The irony, of course, is the plan hasn't gotten off the ground and is hamstrung, most notably, by banks' reluctance to sell their "assets" at what they consider rock-bottom prices.

There's a strong case to be made we don't need the PPIP anymore, says Dan Greenhaus, an analyst in Miller Tabak's strategy group. At the same time, banks are going to be even less willing to participate now, since they've raised capital and the economy has shown signs of stabilizing.

If Geithner's goal was simply to inject confidence into the system so banks could raise capital, then PPIP really was "the greatest program that never occurred," as Goldman managing director Scott Romanoff described it, according to The WSJ. Viewed in this light, Geithner might be wise to kill the program altogether.

But if Geithner's goal was really to get toxic assets off the banks' balance sheets...

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Providing an update on the market keys discussed here on April 2, Roque gives his insight on these six bellwethers in the accompanying video:

• Copper and Freeport McMoRan Copper & Gold: Roque is focused on commodities because of their sensitivity to economic activity and inflation; "if the market's going to have some leadership we believe it will come from that sector," he says. Roque prefers copper to oil because it's "not as emotional" and sentiment driven. After the big rally from the lows, copper is likely to move sideways at best and "needs to base if it's going to rally again," he says. The same is true of Freeport McMoRan and Roque recommends reducing positions for those long the mining giant.
• Mosaic and Monsanto: The ag stocks are the "weakest link" among Roque's bellwethers which, he notes, all bottomed before the S&P and have outperformed the index since the March lows. If Mosaic and Monsanto continue to deteriorate, "assume the others will weaken as well," which will have negative implications for the broader market, he says.
• Goldman Sachs and Morgan Stanley: Financials are still 13% of the S&P 500 and Goldman and Morgan are likely leaders if Wall Street is going to return to "some semblance of its former glory," Roque says. Goldman, in particularly, is the bellwether of the bellwethers, the technician says, suggesting Goldman at $150 is the market's "Maginot line"; which side of $150 Goldman is on will signal the S&P 500's general strength or weakness.

As detailed here, Roque says the market deserves the "benefit of the doubt" but he sees limited upside for the foreseeable future...

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