Archive - Sep 2015

Copper prices are in free-fall this morning, slammed lower by the "good-enough" jobs data. But we suspect the real reason lies elsewhere...

According to the BLS, the main reason why the unemployment rate tumbled to the lowest since April 2008 is because another 261,000 Americans dropped out of the labor force, as a result pushing the total number of US potential workers who are not in the labor force, to a record 94 million, an increase of 1.8 million in the past year, and a whopping 14.9 million since the start of the second great depression in December 2007.

With the refugee crisis in Europe reaching epidemic levels and European leaders impotent, it appears an Egyptian Billionaire has a solution. As Al-Arabiya reports, Naguib Sawiris has offered to buy an island off Greece or Italy and develop it to help hundreds of thousands of people fleeing from Syria and other conflicts.

If wage growth for supervisory workers was indicative of the overall work force, the Fed could indeed claim mission accomplished and hike not 0.25% but 2.5%. There is a problem: supervisory workers only make up 17.5% of the US work force. As such, their wage gains are anything but indicative of the vast 140 or so million US workers. What about the wages for the remaining 82.5% of US workers: the non-supervisory one. Here is the answer...

"There is a general understanding that joint efforts in the fight against terrorism should go hand by hand with the political process in Syria. Assad agrees to this and has also agreed to early parliamentary elections and to include healthy opposition." 

Update - Equity market weakness is accelerating...

September rate hike probability jumped up to 34% (and December 62%) following the 'headline' positive payrolls print. The market is reacting very hawkishly to the data with USD surging, bonds and stocks selling off and commodities leaking lower.

The "most important and anticipated payrolls number ever", or at least since the last payroll number, is out and it is a doozy at only 173K, it is a huge miss to the 217K expected (and almost in line with LaVorgna's forecast). This was the worst monthly payrolls number since Marhc, and the second lowest number in 19 months. However, the curious twist is that the July and June NFPs were both revised higher to 245K, making the net revision up  The unemployment rate dropped to just 5.1%, below the 5.2% expected, and well below July's 5.3%, further boosting the Fed's case that labor slack is evaporating.

With just 20 minutes to go until the latest most important jobs report ever in the history of man, Richmond Fed Chief Lacker just explained why "the case for raising rates is still strong"...

LACKER: BOTH MANDATE CONDITIONS 'APPEAR TO HAVE BEEN MET', EXCEPTIONALLY LOW RATES NO LONGER WARRANTED BY JOB MKT
LACKER: AUG. JOBS REPORT UNLIKELY TO `MATERIALLY ALTER' PICTURE

But perhaps most crucially, Lacker explains "recent financial market volatility is unlikely to affect economic fundamentals in the United States and thus has limited implications for monetary policy," removing the one last leg for permabulls to rely on (that is if you velieve The Fed is not Dow-Data-Dependent).

Three words - retest the lows!

As WSJ reports, "Chinese navy ships off the coast of Alaska in recent days weren’t just operating in the area for the first time: They also came within 12 nautical miles of the U.S. coast, making a rare foray into U.S. territorial waters, according to the Pentagon."

Large pools of gold in indebted nations will be vulnerable. Pool accounts, digital gold bullion vaulting providers and depositories in the UK and the US might have their companies and assets nationalized and have their clients gold and silver bullion confiscated.

• Jobs Report Could Seal the Deal on Rates (WSJ)
• The Jobs Report and the August Curse: Jobs Day Guide (BBG)
• Migrants hold out on Hungarian 'freedom train'; Orban says millions coming (Reuters)
• Migrant Crisis Divides Europe (WSJ)
• German industry orders fall in July on weak foreign demand (Reuters)
• Alibaba’s Jack Ma, Joe Tsai to Borrow $2 Billion Against Shares (WSJ)
• U.K. Retailers Post Worst Sales Decline Since Financial Crisis (BBG)

Perhaps one of the most notable features of the upcoming nonfarm payrolls report - which those with a flair for the dramatic have once again dubbed the "most important ever" simply because it may greenlight (or not) a Fed rate hike (any NFP print at 230K and above likely assures a September move by the Fed - which Wall Street consensus sees rising by 217K in August (although with Goldman a far below consensus 190K, and Wall Street's biggest cheerleader Joe LaVorgna predicting only 170K one has to wonder) is just how hard the punditry is trying to talk it down, with everyone from Joe LaVorgna to Bloomberg explaining why it is very likely that - due to seasonals only, and nothing but seasonals - it will be a weak report, only to be revised higher.

Moments ago, US equity futures tumbled to their lowest level in the overnight session, down 22 points or 1.1% to 1924, following both Europe (Eurostoxx 600 -1.8%, giving up more than half of yesterday's gains, led by the banking sector) and Japan (Nikkei -2.2%), and pretty much across the board as DM bonds are bid, EM assets are all weaker, oil and commodities are lower in what is shaping up to be another EM driven "risk off" day. Only this time one can't blame the usual scapegoat China whose market is shut for the long weekend.

It can't continue indefinitely, and there has to be a terminal point, and I think obviously we're much closer to that.