July jobs report bigger than Mueller’s motions

Friday’s job number of 209K beat the Street’s 180K estimate with hourly earnings ticking up 0.3% as mid-year raises kick in.

Equity futures markets are up 60 points on Dow unchanged from prior, despite the news out of Washington of a special grand jury being impaneled.

The dollar also strengthen on the job news.

The fact that the markets shrugged off Special Counsel Robert Mueller’s actions, speaks more to the continued DC gridlock, which the equity markets see as a buying opportunity.

I would like to acknowledge the passing of a great newspaperman and researcher Jim Marrs.

Marrs was a prolific writer with 14 published tomes and his book, “Crossfire” was used by Oliver Stone for his film, “JFK”.

Marrs was a cub reporter in Dallas on the day of the assassination and worked tirelessly for many years talking to sources within the Dallas police department and Secret Service to construct an alternative narrative to the events on Nov. 22, 1963.

Marrs taught a course on the Kennedy assassination at the University of Texas at Arlington.

Marrs was 74 years old at the time of his death.


One day inside the bifurcated America we have today

Apologies for the late post. Still trying to get better from my dental accident.

On Friday we get the July employment picture from the Labor Department. If you look at the labor situation against the stock market record-breaking run up this summer, then you get the picture of a bifurcated America.

As the retail sector sheds stores and thousands of part-time workers these numbers don’t hit the headline number, since they are not full-time jobs. However, as some of these companies while paring down their headcount, their stocks have price support as expenses are slashed with the closings and firings.

Yes there are pockets of the US doing very well as stock charts move up from the left axis toward the right. New York, Los Angeles and selected hubs of the 1 percenters have been having a field day over the last 10 months since the election. This despite the fact that many of these despise the president.

But look at most of America, there’s a bleak outlook for the future. They put Trump into the White House, but little has changed for the better in their lives. Congress has been stonewalling the administration on any initiatives to help most Americans who have been suffering since 2008.

So Friday we will get 180,000 jobs created, which is not true because it’s based on guesstimates, and the unemployment rate will probably remain around 4.3%. But none of those numbers will affect most Americans, but the top-echelon Americans will make plenty of cash when the market moves higher on the news.

That’s the example of one day inside the bifurcated America we have today.

Now the Fed joins the Pols on the sidelines in DC, stocks will soar

Fed chief Janet Yellen slammed on the brakes Wednesday when announcing a pause in rate hikes.

The move sent markets into a spasm for a brief moment as the VIX (or fear index) fell to its all-time lowest level and bond yields jerked higher before leveling off. Stocks had the most muted reaction moving slowly higher.

So now we have all of Washington on stand still as stocks will move higher. Nothing coming from Congress to worry equities and the Fed will not be able to raise rates again this year.

As far as paring back its balance sheet, we will see what happens there on Friday.

The feds will release the first look at Q2 GDP, which by most estimates will come in at 2% plus or minus a tenth of a point. This is not the growth Trump is looking for, but since none of his economic initiatives have been implemented or really discussed it’s just more of the same for the last eight years.

Since I’m a betting man, I believe the Q2 GDP will come in at 1.7% and be revised down in the coming months. There’s just no reason to believe that Americans are spending their meager salaries on anything but the essentials.

But let’s look at the latest White House/Russia/Election news story, which will be covered by the NY Times or Washington Post, and let the Dow, S&P and Nasdaq hit a new all-time high. Keep Trump on the defensive, bottle him up in a Cabinet pissing match, so the rest of America can continue to suffer from neglect.

No need for stimulus or middle class tax cut or infrastructure spending. No, keep Washington on the sidelines and Wall Street will reward the 1 percenters with higher returns.

Bitcoin replacing gold as the perfect dollar hedge

What does gold, silver and cryptocurrencies have to do with the US dollar? They are all a flight from the greenback. A hedge against the falling dollar.

At the beginning of the year the dollar was trading at 93.6 on the currency markets. This morning it’s at 86.4. It is no coincidence that bitcoin was trading at $1,000 in early January and this morning — despite its recent $1,000 pullback — is at $2,780. Gold was $1,178 an ounce at the start of 2017, this morning is $1,262, but has posted recent highs over the $1,300 an ounce mark, despite the paper ETF market whipsawing prices.

These movements along with a flattening of the US bond yields are all anti-dollar moves.

Some will point to the Fed raising rates as the impetus for the moves, however that is the opposite move in the current environment. Raising rates should bring more confidence — no matter how misplaced that confidence may be — not the other way around.

According to the CFTC, short bets on the dollar by traders is the highest since early 2013, with hedge funds piling into 279,100 futures contract favoring the euro and Aussie dollar.

So these moves need to looked at far more closely than equities setting all-time highs, since the dollar weakness is a tool used by the Fed secretly to spur the inflation they so desperately need.

Bond vigilantes are not going to wait until Labor Day to act

It’s a Friday in July and the commuter parking lots I share with Wall Street and banking executives are pretty much empty.

What this means is I get a front row spot, but it also means the black boxes take on a larger role in today’s trading.

Stocks are down in pre-market slightly as volatility index has a 9 handle, meaning all is quiet, go ahead and take the day off, nothing to see here.

The bond market however, is squeezing even tighter as the 30-year note moves to 2.7 percent handle. This is a more important move for the markets, as Fed chief Janet Yellen and ECB’s Mario Draghi talk about paring down their holdings in US debt securities.

The moves in bonds is negative for all the markets since yields will collapse as prices rise and it will spill over to equities whether through reduced confidence and/or reallocation to cover bond losses.

This is the reason Yellen & Co. fear the bond vigilantes, which want to force the Fed to curtail selling off its balance sheet and continue to roll over profits into buying new issuance.

The timing of this move in the bond markets coincides with the slow season of late July through Labor Day, when everyone comes back from vacation. So to have these moves now, tells us this Fall could be messy in the bond pits.

Just look at the three-month T-bill auctions, which its maturity coincides with the debt-ceiling deadline went upside down this week, suggesting there is growing fear Washington is not getting how shaky these markets are.