| MARKET ROUNDUP | |
| Dow | +208.64 17,009.69 |
| S&P 500 | +21.73 to 1,967.90 |
| Nasdaq | +45.43 to 4,475.62 |
| 10-YR Yield | +0.009 to 2.447% |
| Gold | -$22.70 to $1,192.40 |
| Crude Oil | -$1.32 to $87.76 |
What did I write in these cyber-pages a couple months ago? You remember, don’t you? I said, “The Fed is nuts for not RAISING rates!”
I’ve also been citing the plunge in jobless claims, the general improvement in hiring, and the relative strength of OUR economy versus economies in Europe, Asia and elsewhere. And I said the Fed would ultimately prove to be just as dead wrong in keeping policy too easy now as it was in the early 2000s, when they did the same damn thing and fueled the biggest housing bubble in world history.
So with that in mind, did you get a load of today’s September jobs report? It showed the U.S. economy created 248,000 jobs last month, far above the average prediction of 210,000. August’s reading was revised up to 180,000 from 142,000, and July’s number was also revised higher to 243,000 from 212,000.
Not only that, but the unemployment rate dropped again to 5.9 percent from 6.1 percent. Economists predicted no change, but instead, this reading is now at its lowest level since July 2008. Job growth was widespread across industries, from business services to retail to health care to construction.
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| The unemployment rate dropped again, to 5.9 percent from 6.1 percent, the lowest level since July 2008. |
The only fly in the ointment was average hourly earnings. They were unchanged rather than up 0.2 percent as predicted. But August’s reading was revised up to 0.3 percent so that eases the sting a bit.
Look, I’ve said it before and I’ll say it again. This economic recovery has NOT translated down to Main Street as much as it could have. I blame stupid fiscal policy that stifles innovation and stunts small business growth, and bad monetary policy that favors the rich over the less well off. That’s why we’re not doing as well as we were in the 1980s and 1990s.
But these figures are a heck of a lot better than they were in the depths of the Great Recession. They show that zero percent interest rates make absolutely NO SENSE any more. None.
Unlike the Wall Street suck up economists who tiptoe around discussions on how offsides the Fed is, I have no problem calling it like it is. Their policy choices looks as bad as my New England Patriots do!
| “This economic recovery has NOT translated down to Main Street as much as it could have.” |
What’s the downside of keeping rates at insanely low, crisis-era levels when the worst of the crisis is behind us? Simple. It leads to stupid investor behavior and massive asset bubbles.
You never know exactly where those bubbles will manifest. In the late 1990s, it was dot bombs. In the early 2000s, it was housing. This time around, I’ve argued the worst asset bubbles are in the bond market. But mark my words: If the Fed doesn’t play catch up with reality soon, and not only kill QE next month, but start raising rates early in 2015, we’re going to have HUGE problems down the road.
I’ll be keeping my eye on the Eurodollar futures market to see what investors think about all of this. As I’ve mentioned, most contracts have generally been declining in price. They’re getting closer and closer to potentially significant downside breaks, a sure sign that the market is coming around to my point of view – that the days of 0 percent interest rates are numbered!
So what do you think? Is the job market improving the way the numbers suggest? Or do you think significant weakness remains? How many relatively strong and/or improving numbers would you need to see to change your mind?
And what does that mean for interest rate policy? Will we have a 1 percent fed funds rate this time next year, rather than the current 0 percent? Sound off in the Money and Market’s comment section.
| Our Readers Speak |
Cars and the Ebola crisis. Those are the two big topics of the day at the website, and for good reason. The auto industry will be an important determinant for the strength of the U.S. economy … while a burgeoning Ebola pandemic could be the kiss of death.
Reader Tony weighed in on the pessimistic side, expressing serious concern about the spread of the virus. His comments: “Both Obama and the CDC try to minimize Ebola’s ability to spread. It’s almost as though the CDC has become another politically oriented organization like NASA. I know the elections in November are coming up but this is not the time for political correctness.
“We should try and stop any contact with the infected countries and scrutinize international passengers. The CDC plans on using questionnaires to determine the travel and if infected, rather than looking at passports. We already have an infected person that didn’t reveal where he was. Now we find out there may be 100 or more Americans exposed to this deadly disease.
“The U.S. has not had a serious pandemic for nearly 100 years. If Ebola spreads like in Africa it will devastate our economy and overwhelm our health system.”
But Reader John took the opposite tack, saying he thinks the epidemic will peter out eventually, even as it causes plenty of heartache in the meantime. His complete comments: “Ebola when and if it really spreads will mutate over time and burn itself out or grow less deadly. The collective affect of our own immune systems will eventually win over Ebola.
“Yes, that could mean many tens of thousands of deaths, but it won’t be the end of the world. The 1918 Influenza virus ended the same way. I certainly don’t mean to be dismissive of the deaths and suffering that are happening now – and will likely happen in the months and years ahead. I hope that a readily available and mass producible effective treatment can be found.”
Put me in the relatively optimistic camp as well. With the proper policies in place, and the full weight of the government and medical research industry bearing down, I think we can beat this thing. But it will wreak havoc in the meantime just like SARS and other epidemics have in the past.
As for the auto industry and Warren Buffett’s move to buy into the dealership business, opinions were mixed.
Reader Robert B. said: “Buffett has lost his fastball. Unless he is going to visit these dealers every day and clean up the mess, he has no chance. If there ever was a industry needing a oil change this is it. I would rather have a root canal every day for a year than spend a minute in a dealership.”
But Reader John T. said: “Mr. Buffett is on track. Autos are pretty affordable and stylish these days. Automotive dealers are making it easy to buy cars.
“Jobs are still being produced, so people need transport to work. Banks are issuing credit to only those who are eligible unlike the housing crisis. In closing, the auto industry is going to welcome his confidence, and will strive to underpromise and overdeliver, to keep sales going.”
You can put me in the “cautiously optimistic” category here, too. The generally improving U.S. economy is supportive of the auto sector. But I that in the longer term, too much easy auto lending will ultimately cause problems for subprime car lenders. The question is timing – and right now, I don’t think we’re in the auto industry equivalent of summer 2005 for housing (that market’s peak).
Remember: You can jump in on this discussion – or any other – by clicking here!
| Other Developments of the Day |
Looks like yet another European company is stepping up to the plate to “Buy American.” This time the acquirer is metals firm Constellium (CSTM, Weiss Ratings: C+) of the Netherlands, the target is the privately held U.S. aluminum producer Wise Metals, and the price tag is $1.4 billion including debt.
• I’ve talked recently about how the metals industry is increasingly looking to produce steel, aluminum, and other products in America. Why? It’s a side effect of the domestic energy boom. Cheap, abundant, reliable oil, natural gas, and natural gas liquids are making it much more profitable to produce metals here than elsewhere in the world.
• Shocker! The New York Fed – one that’s full of ex-bankers and workers who want to eventually land cushier, better-paying jobs on Wall Street — is reportedly going easy on the banks it regulates. So much so that Congress may hold hearings. Boy am I surprised (cough, cough)
• Now it’s a freelance cameraman that has contracted Ebola while working in Liberia, and was hired recently to work with an NBC team. The 33-year-old will be evacuated to the U.S. along with the remainder of his colleagues – all of whom will be quarantined in the U.S. for a three-week period.
• Greece’s economy has crumbled in the last few years amid a broader “PIIGS” crisis in Europe. Will the Parthenon follow? That’s what engineers are worried about, citing instability in the rock beneath the 2,500 symbol of Athenian glory.
Best wishes,
Mike Larson
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
{ 29 comments }
Hi Mike
A result of this perceived economic improvement has seen gold weaken further to below the sensitive $1200 area. It’s a good time to be cashed up isn’t it
Mike
If I could ask? Do you have any figures to show the exposure of the banks to risky derivative plays? e.g. Credit default swaps in foreign bond markets. That might give a clue as to when things may really change.
Bring back the Glass-Steagall Act (which allowed the Bankers, Brokers and Insurance people to go wild with speculative bets just like before 1929)(which the Republican majority removed in 1999 (Gramm/Leach/Blyley)). That removal set the groundwork for the Crash of October 2007 under Cheney/bush… Then throw out the Republicans for removing that important financial safeguard and life will improve…..
As a 63 year old retiree with a balanced 60/40 stock/ bond portfolio it is time for the FED to allow the market to raise interest rates. End the QE as planned to sop up the excess liquidity and allow the market to seek its own level.
It may go up, it may go down, it may stay the same. I would prefer that borrowing rates rise, as it would also tend to raise interest rates on the borrowed money. It is a supply demand thing. I do not plan to borrow money, I plan to lend some, at free market rates to well qualified borrowers. Sub-prime need not apply. Money will remain cheap enough.
Look, demand for autos has provided the economy with much needed “Wind in its sails”. Pent up demand, easy credit and creative leases have made replacement decisions much easier. But the party won’t last much longer. Foreign markets are under significant pressure and Ford’s report out this weak foreshadowed the global slowdown. The US consumers ability to keep the music playing can’t go on much longer and sentiment is fragile to say the least. When rates begin to turn, watch out. Things could get ugly fast with both domestic and foreign brands fighting for an ever shrinking market.
Hi Mike
A further query if I could.
When interest rates do go up, will the average Joe in the street be on hook for the increasing interest bill on the $17 trillion plus debt that has been accumulated under our various governments? Could be a good time for the banks.
Hi Mike great article as always.
I believe the fed is hiding more information than it leaks out. Something is holding them back. And with elections around the corner, keep the peace. As far as gold and silver, they are shaking the tree. This market goes up and down on the stupidest graphs and headlines. As far as Ebola, I read the complete volumn of The Great Influenza (the swine flu of 1918 on ) and reading CDC reports and hearing the mainstream media, only. Confirms that history repeats itself. Back then all rallied and said exactly the same thing at the outbreak. Did you know that our troops spread the disease in the war travel? Scenario complete.
Mike,
Here’s a sentence from your update today: “Now it’s an NBC News freelance cameraman that has contracted work in Liberia, and was hired recently to work with an NBC team.” I believe that you are missing a couple of words. Did you mean to say, “Now it’s an NBC News freelance cameraman that has contracted Ebola while working in Liberia, and was hired recently to work with an NBC team”?
Funny thing how one month before the elections, employment goes way up, while gasoline prices go way down.
Hi Mike,
This raise in employment is not bad for an economy. It depends if the jobs are in production or services. It looks that most of the job are in services, not in sectors that implies creation, inventivity, etc.
Low rates are not necessarily bad, they could attract entreptreneurs to develop new tecnologies, etc.
Unfortunatelly, the inflation is present (look at the food prices, one bread in 2000 was below $0.99. Now, the same one is $1.99. The list include every food.
Second we cannot know if the numbers are real.
Third, the savings at the population looks not so good. Basically I do not have anymore the savings from 2000. Then look at the education cost, the tution increased at least 50% since 2010. Then the housing rent is double compared to 2000. A.S.O. The only question is how we can take advantage and make money in this economy.
Employment. Whats missing is that we have more people not working today than ever in our history. They can play with the numbers to make it look rosy as the elections come closer. The jobs that were created are low income jobs not what middle americas need to grow. Family income is lower for middle americans as well.
Hi Mike,
“Is the job market improving the way the numbers suggest?” No, it’s basically still a net loss. And look at the quality of the positions themselves. Part time, biggest gains in the over 55 set (and the illegals in my field – construction – even as the industry crumbles) who see no chance of retirement. Real stats are retail, middle class housing and manufacturing losing ground, but for blips in recent aerospace and weaponry orders. Oil and commodities falling for lack of demand. No money for wage hikes but plenty for war!
Interest rates over 1% gains? Doubtful. More like QE to the moon in due time.
As a Electronic Engineer, there is always money in electronics if you pick the right one!
It is a complete shame that the present government jumped right in to alternative fuel change. A carbon Tax…the EPA has stepped way over their head..and we have millions of
people on the public dole..which they don’t enjoy. We cannot go from one type of fuel to
another overnight. We have more oil and natural gas under the US that we don’t need
to be buying oil or natural gas from any country. Where is it? The government does not want you to know. I can’t say where except it is a recent fined and on the shore line. We will always need gas and oil. I haven’t seen to many nuclear aircraft!
Hi Mike,
it seems to me there is a conflict of interest between the Fed and the government budget deficit. According to the Federal Budget, interest cost on Government Debt is a substantial percentage of the deficit. If interest costs were to rise substantially, the deficit would also rise substantially. Please see the website at http://www.usgovernmentspending.com/federal_budget_interest to see the estimated effect of higher interest rates..
Hi Mike!
I can sum up all the governments statistics and their true meaning in one word: BULLSHIT!!!
The Fed won’t be raising interest rates substantially anytime soon. The underlying data of the jobs report sucks.
Labor participation rate drops to the lowest in 36 years
4 out of 5 jobs created are minimum or low wage
230k jobs created were for 55 to 69 year-old grandparents
No job growth for 25 to 54 year-olds
wage growth flat.
lower hours worked
Unfortunately, the CNBC talking heads drooling over the headline numbers as usual really does not change the fact that the US has significant structural problems.
Moreover neither is consumer spending driving the economy. The US Census Bureau’s 2013 Income and Poverty Report concludes that in 2013 real median household income was 8 percent below the amount in 2007, the year prior to the 2008 recession and has declined to the level in 1994, two decades ago! http://www.census.gov/content/dam/Census/library/publications/2014/demo/p60-249.pdf Even though real household income has not regained the pre-recession level and has declined to the level 20 years ago, the government and financial press claim that the economy has been in recovery since June 2009.
the notion that the US is in a recovery is a mirage as Larry Edleson says
What jobs? Where i’m at there are very few if any jobs. There was one store in town with one part time job opening, and at least 100 people trying to get it.
Oh boy , here we go again, Job participation rates for men & women rates are at 40 year +- lows & unemployed who collect no benefits are not even counted?? Because its been so many years since they have worked & they collectively just dropped out of the equation,
Isnt it more like 12% U6 unemployment rates?
factor that into the headlines. Dont worry Mike your not up for re election. I still like your stock picks despite of your in obama cheer leading for his failure to employ working people
other than those in the epa & other bureaucrats who get real businesses/people hung up in red tape or fired
I do not take this as being true at all. WE ARE FORGETTING: 1) feds don’t count the people that have quit trying to get work; 2) the number of people that are in crap jobs, not full time jobs to support their kids, etc. and 3) they certainly don’t make a habit of including the people who are disabled now or off on some kind of leave. Hmmm…. I put the unemployment rate in double digits still, say 11% plus! cheers, A.
1. Too coincidental, job reports good, market goes crazy, month before elections
2. what will a rate increase do to bond funds?
3. The NATIONAL DEBT is THE issue. Sets the stage for a massive fall
4. Gas war. Russia vs OPEC vs US. – Results of who wins??
5. Geopolitical issues. Fighting resumes in Ukraine today, ISIS about to takeover a major city.
THEREFORE::: Too many unknowns to predict, study, know much. Going down a road NEVER traveled.
Written by Dr. Jack Wheeler
Thursday, 02 October 2014
It’s too soon to answer the question the IBD is asking this morning: “Is
Ebola Obama’s Katrina?”
Yet the Zero Administration’s
malfeasance makes the question already worth asking.
Thomas Eric Duncan
is a
Liberian citizen with a Liberian passport, living in the capital city of
Monrovia. On Monday, Sept. 15, he helped carry (was in physical contact
with) a family friend sick with Ebola to her home, who died early the next
morning. With him at the time was the lady’s brother, who then died of
Ebola the day after his sister, Wednesday the 17th.
On Friday the 19th, knowing that he had been doubly exposed to Ebola, he
left for the United States. It is hard not to conclude that he came here
for the medical treatment that he would die without if he remained in
Monrovia, and could care less who he infected along the way.
He flew to Brussels, Belgium on Brussels Air, then on United to Washington
Dulles, had a layover in the terminal of several hours, then continued on a
United flight to Dallas, exposing the lethal disease he was sure he carried
to hordes of people. He arrived on the 20th, and got sick on Thursday the
25th, going to Texas Health Presbyterian hospital.
He told them he was from Liberia but not that he had been exposed to Ebola.
He is currently (10/02) at the hospital in critical condition from the
disease.
Thanks to this, people are freaking out everywhere, especially in Dallas
with parents pulling their kids out of schools, as five of their schoolmates
were exposed to Duncan after he reached Dallas. The London Daily Mail
reports that
over 100 people were in contact in Dallas with Duncan, many of whom are now
quarantined.
So – how does all of this make Zero “Obola Obama”?
Try this on. Yesterday (10/01), Josh Earnest, the pathetic dweeb who
recently replaced the pathetic dweeb who’s name I can’t bother to remember
as White House Spokesman, announced that the Zero Government has no
intention of preventing Ebola carriers from entering the United States
. Obola Obama.
There are right now 13,500 citizens of the Ebola-stricken countries of
Liberia, Sierra Leone, and Guinea holding US visas
, anyone of whom are free to arrive
in the US carrying Ebola tomorrow.
Immigration and public health experts are, then, fully justified in holding
Zero, along with HHS head Sylvia Burwell, DHS head Jeh Johnson, and State
Dept. head Lurch personally responsible for Ebola in America
.
After all, the very first step in preventing Ebola in America is, as NRO’s
Mark Krikorian says, a travel ban to the US from the Ebola-stricken
countries
. Say this to any normal sane person and
they’ll respond, “Well, duh.” Yet the Obamunists refuse.
This on top on their refusal to protect our southern borders from the recent
flood of illegals, whom doctors strongly suspect are responsible for the
mysterious respiratory illness sickening children all over the country
. Tens of
thousands of illegal alien children have been covertly distributed to all 50
states
.
Obola Obama.
Now let’s add, to the refusal to protect America from Ebola and diseases
spread by illegals, the ruination of America’s healthcare system by
Obamacare. As Jack Kelly explained ereyesterday (9/30), Obamacare is the
Dems’ sleeper disaster
on Nov.4.
There are few things people care more about than their health and that of
their loved ones. There are thus few things that would more estrange them
from a president and his party defenders than the realization that he has no
intention of protecting public health and is actively damaging it.
The Enemedia, as always, is doing its best to protect Zero. When Sen. Rand
Paul
, a medical doctor, explains that
Zero is “foolishly letting political correctness influence his Ebola
decisions,” the libtard newssite Politico
‘s
headline was “Rand Paul Stokes Ebola Fears.”
And every Enemedia outlet in the country is frantically suppressing any hint
that the sudden spread of Enterovirus-68 infections of children in dozens of
states or the “mysterious neurological illness”
starting to spread as well could possibly be the result of Zero’s opening
the border to illegals.
Such news suppression may succeed. Ebola may be contained and not become
epidemic – we should certainly pray that it will be.
However, once voters put one and one together – illegal invasion + spread of
mysterious infections – then Kelly’s predicted Obamacare electoral disaster
is magnified.
They are already primed for this – so alienated by the alien invasion that
71% of voters, including a majority of Democrats (!), do not want these
illegals to receive any taxpayer-funded benefits
. Almost as many
voters say illegals “should not have the same legal rights and protections
that U.S. citizens have.”
Ebola seems to have been successfully contained in the West African nations
of Senegal and Nigeria , and
you’d think that if they can do it, so can the US. If it is not – or we
suffer outbreaks of it over the next month and it is not contained until
after Nov. 4 – then we have the Obamacare electoral disaster for Dems on
steroids.
Thus the appellation of “Obola Obama” can be quite useful at this moment, to
help people focus on Zero’s refusal to protect America’s public health and
safety.
For the reality is that Zero worship and his political ideology – Obamunism
– is an infectious disease lethal to America. It’s an epidemic that has
infected and caused serious brain damage to millions of our fellow
Americans. We can’t even begin to cure the epidemic without winning the
Senate and dominating elections on Nov. 4.
Feel free to spread the Obola Obama meme far and wide. Sure gets the
message across in two short words.
Obola Obama.
The dear doctor has spent far too much time listening to Rush and has obviously drank too much coffee….. What wholesale crap!
Lets get realistic on Ebola for a minute. Millions of people worldwide are dying of TREATABLE diseases like TB, Malaria, etc yet we concentrate on AIDS, Ebola simply because they are new and could maybe affect the affluent population that can afford treatment.
Is the job market really improving? Mike, the labor force participation rate is at an all-time low. The great employment numbers just released reflect low or minimum wage jobs that went mostly to those in the 55-64 age group. Folks in their 20s, 30s and 40s actually lost about 10,000 jobs. Recovery? I don’t know about that.
I no longer trust government reports. Inflation reports are not accurate because they keep changing what they cover. Employment figures no good because of seasonal & life death calculations. Total employment does not agree with gov job creation numbers that even leave out those no longer looking for work. Of course employment numbers look good as we have a Nov. 4 election coming
Is the job market really improving? Of course it is. Why, with an ever increasing number of Americans becoming permanently unemployed, jobs numbers will just keep looking better and better all the time, provided that the total population keeps increasing.
John williams of shadowstats.com says what I see out here over 20%.
Mike, please stop spoutig those “STATE” properganda numbers as if they have ANY
truth in them. This criminal cartel has no intension of telling the truth.
I don’t believe for a second that the unemployment rate is under 6%. The gov’t always fudges the numbers to make it look better than it really is. It is usually 2-3 times higher than reported. Probably a ploy to make the dumbocrats and Obama to look better tan they really are, since they’re down in the polls.
It all comes down to political dominance and what happened during those periods…..
Republican dominance:
1920-1932
1982-2009
Democratic dominance:
1932-1982
2009-Present
Can it be more obvious which way is better? It really IS that simple….. Regardless of what Karl, Rush, Glen and Shaun say