| MARKET ROUNDUP | |
| Dow | +20.17 to 16,976.24 |
| S&P 500 | +1.30 to 1,974.62 |
| Nasdaq | -0.917 to 4457.734 |
| 10-YR Yield | +.060 to 2.625% |
| Gold | +0.80 to 1,327.40 |
| Crude Oil | -1.10 to 104.24 |
Today, we continued to flirt with Dow 17,000. I haven’t seen any hats printed up on Wall Street, like when we broke Dow 10,000. But it’s still a heck of a milestone considering this bull market began all the way down around 6,470 in March 2009.
But there’s been one key, missing ingredient throughout this bull run. Jobs. Lots and lots of real, high-paying, healthy jobs. The kind of jobs that provide a lasting, strong economic recovery that benefits all of America, not just the 1%-ers.
That brings me to this morning’s data from ADP Employer Services. The private company releases its data on monthly job creation a day or two before the Labor Department, and the report that came out today wasn’t just strong. It was colossal! The details:
- According to ADP, the economy created a whopping 281,000 jobs last month. That blew away the average economist forecast of 205,000. It blew away the 179,000 increase in May. And it was the strongest number we’ve seen in any month since November 2012.
- In addition, every category of company – from big to small to in-between – added workers. So did both service-sector (230,000) and goods-producing (51,000) employers.
- Economists were expecting the official number to come in around 215,000 when it’s released tomorrow morning. We’ve already seen the longest stretch of 200,000+ monthly job creation since 1999-2000, and this ADP report suggests the string will continue (even though there is always some variation between the two reports)
If you’re a graphical person, by the way, here’s the 12-month history of ADP job creation figures. You can see just how much this latest reading stands out!
Could we be on the cusp of a 300,000-jobs month from the Labor Department? Could we finally see a meaningful pick up in wages? Could this signal that average Americans will participate more meaningfully in the recovery, rather than just the Dow? Heaven knows it would be a long-time coming!
Personally, I’ve been pretty optimistic about the U.S. economy for roughly two years now. I’ve said that many investors, economists, and policymakers are still stuck in crisis mode thinking … when the crisis of 2006-09 is years behind us!
That doesn’t mean it’s all puppy dogs and ice cream forever, or that the economy is going gangbusters. But it does mean you can profit from select sectors of the economy in their own bull markets (domestic energy, aerospace, health care, etc.). And it does mean that interest rates and Federal Reserve policy make absolutely, positively zero sense anymore!
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| This bull market still needs lots of real, high-paying, healthy jobs. |
I mean, do you know what the 10-year Treasury was yielding back in 1999-2000 when we last saw job creation like this? Try around 5.5-6.5 percent, depending on the month. Some sectors are showing their best job growth since the mid-2000s, too. That’s when 10s were yielding around 45 percent, depending on the month.
Look, Chairman Janet Yellen and her cronies have been hopelessly behind the times for several quarters now. They should have already started normalizing interest rates, given the fact we put the worst of the credit crisis behind us a half-decade ago.
They will now have to do so. All that claptrap about rates staying near zero through 2015 or 2016 just doesn’t hold water in the face of rising job growth, surging asset prices, and higher inflation. Heck, the only people aggressively peddling that line of thinking are the big bond fund managers who desperately want to keep you invested in their lousy products.
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“Chairman Janet Yellen and her cronies have been hopelessly behind the times for several quarters now.” |
I’ll be closely watching 3.5 percent on the 30-year Treasury bond and 2.67 percent on the 10-year. If we breach those levels to the upside, I believe it’ll be “Katy Bar the Door” time for interest rates.
So if you haven’t already A) dumped most of your bonds, except very short-term ones B) added more exposure to investments that benefit from a higher-inflation environment, like gold and C) shifted from rate-sensitive stocks to growth-sensitive ones in private bull markets, don’t wait any longer! We could finally be on the cusp of a broader economic recovery, and that means there’s a whole new list of potential winners and losers for you to invest in … or avoid.
| OUR READERS SPEAK |
In light of my article yesterday about U.S. economic prospects being better than those in Europe, opinions were all over the map.
Reader Mike S. credits the Obama administration with cleaning up the mess from the recession, setting the stage for years of growth just like FDR did in the 1930s. His take:
“We’ve been here before. It was 1932 and FDR had started the “New Deal” and the CCC camps were opening up … Soon foreclosures would drop as those young men sent their paychecks home and the economy began to improve. The stock market bottomed and then began to explode higher.
“Here we are 77 years later and another Democratic Administration has brought another bottom to the 1929-style Crash of October 2007-March 2009 … Obama brought the PIP program in coordination with the QE program by the Fed and soon after brought Obamacare, which finally offers medical insurance for everyone in the U.S.”
His conclusion: “We are going to have another 50 years of prosperity under Democratic Domination, just as we did from 1932-1982.”
On the other hand, Reader Frank doesn’t put much stock in the economic recovery story. His opinion: “All nonsense, America has 100 trillion in unfunded liabilities, 17 trillion and rising foreign debt, inflation compliments of the Fed that has merger and acquisition fever at full pitch.”
He added: “As long as America is practicing Imperialism we will be throwing our possibility away and history tells us there is a bad ending in store!”
The bottom line? Opinions on the economy vary widely, as do opinions on who is to blame or thank for the current state of affairs. I offered my view earlier, and would love to see even more of you weigh in on the comment section. After all, it will help your fellow investors make more informed decisions!
Finally, Reader Maria asked: “Mike, are you going to recommend any miners or gold ETFs? How about floating rate bonds?”
The answer: I have recommended several investments focused on precisely those parts of the market in my Safe Money Report. In fact, in the issue that went to press yesterday, I added more exposure in the gold mining sector for the first time in years!
If you want to get the details or kick the tires on the newsletter, all you have to do is click here or give us a call at 800-291-8545!
| OTHER DEVELOPMENTS OF THE DAY |
 Who doesn’t like CAMP in the summertime? Apparently investors in CalAmp (Weiss Ratings: CAMP, C+)! They dumped shares of the wireless networking firm after it warned of weaker-than-expected second-quarter results.
From a contrary perspective, that’s probably good news for gold bugs. It means plenty of investors haven’t been converted yet, and that there’s plenty of untapped buying potential as a result. For the record, as I mentioned earlier, I’m starting to add to gold positions for the first time in years.
That said, I really do believe soccer is a sport on the up here in the U.S. And if we can keep up the momentum in recruiting, coaching, and training, the U.S. could do even better in the 2018 Cup. In the meantime, my other team (Germany) is still in the hunt – so let’s see if they can go all the way!
Reminder: You can let me know what you think by putting your comments here.
Until next time,
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.
{ 25 comments }
Mike s. is probably “all in” for changing Reagan Nat’l Airport’s name to Tim Howard’s or even worse to Obama’s Obviously a smug elitist progressive idiot. johannes
You sure got that right about Mike S. What a loony tune fruit loop that guy is.
CONSERVATISM AND CONFIDENCE
I see that interest rates are poised to go up, probably back to 3% on a 10-year by year end. Jobs are being generated at sustainable numbers; things are looking up. As economic growth picks-up, inflation picks-up with it and we should soon see M2 Money Velocity soon pickup too after a lag. So far, it has not. So, our recovery remains inconclusive for now.
This has been the problem to some extent for the past 5 years. GDP growth rates have been fairly volatile and averaged a mere 2%/year, hardly “robust”. It the numbers pickup and continue upwards for say 6 months, then more people will gain greater confidence and possibly invest and hire more, adding much needed momentum to our middle-aged recovery. Question is: are we running out of time or credit with which to fund it ?
It all seems too tidy, too neat, and way too staid given the increasing dangers we see developing overseas with more wars and conflicts around us. There is a feeling, like the President of the Bank of International Settlements and the Deputy Chief of the Singapore (State) Banking Authority recently said about a kind of eery calm. Nobody fully accepts the current set-up as normal, so financial conservatism is in with just about everybody, except the U.S. Government.
Thus, we still have to some degree, as former President Jimmy Carter once said, a kind of “crisis of confidence”. Neither Janet Yellen or President Barack Obama are in positions to change this overall reticence either. That job remains for someone else (leader) to complete unless time runs out. Hint: Its won’t be Hillary who makes this change either. In fact, I can not imagine any single person or politician doing it alone.
It may take many more years to repair the psychological and economic damage caused by the 2008-2009 Financial Crisis. That’s why you see Bitcoins, gold, and more country specific currency swap agreements ( China, Russia, India, Iran) designed to completely bypass the U.S. Dollar entirely. We must first demonstrate real structural reform before the world is willing to go along with us again or for much longer, I am afraid. So far, no go.
Great insight my friend.
Mike,
I read some of the comments and not sure if people are ignorant, or just stupid. There is no democrat or republican heroes. Washington DC, BOTH PARTIES , are clueless. As Europe implodes, money is flooding to the USA market for safety, so,those investors believe. This accounts for the highs in the market. Unfortunately, after the massive run, however long it goes, and it does have legs, reality will set in that USA is bankrupt while it strives to implement Socialism by giving away the bank to freeloading Americans. End result. USA joins Europe in the bankruptcy line. Inflation really soars as the dollar and EURO are trashed, ( not talking about a mere 2 percent) and gold and silver become king thanks to China and India, and the likes . Best bet. Stick with the mines that weathered this dry period. Gold and silver, Newmont, Gold Corp , Barrick , three top picks for longevity in crisis. Do not get suckered into overnight mine investments that fall flat under pressure. Penny stock dream junk. Get mines with tangible reserves already. This rally is nothing about USA economy. It is all about Europe, and the market is always a year ahead.
Mike, sounds like a lot of rah-rah…….. where little tribute is due. We need something like 125,000 jobs per month just to keep up with population growth. So we basically added 155,000 jobs last month. Yes, it is better than the last few but that is like saying a D is better than a D-. In the past 6 years, the number of people actually working has decreased to 62% and change…..a horrible level not seen in 35 years. Economic growth is dead in the water due to high taxes and horrendous regulations. Our national debt is pushing thru the stratosphere at $18 trillion with no concern at all from Mr. Obama. It was $10.5 trillion just 6 short years ago. If interest rates rise as you predict (and I agree with that prediction), we will be in deep trouble as the money needed to pay the interest on those notes will explode any budget and crowd out other items. We desperately need leadership….new leadership.
Wonderful comment. Its great reading good insight for a change instead of mainstream lies and hype.
Mike..Just wanted to tell you I AM LOVING YOUR AFTERNOON MARKET ROUNDUP’S…I am a lifetime subscriber to Safe Money and these late day wrap-ups are a perfect addition to all of the other newsletter info I get. I really like the format and you are doing a great job of highlighting the day’s events. Thanks for all the extra effort. For at least this subscriber you are hitting the nail on the head every day.
Sincerely
Dan S
We will be paying for all this easy money.. Sooner than later,there is no free lunch. And again the shrinking middle class will be punished again. I am 68 and have seen this same act created by the Federal Reserve. But now we have all the debt and under funded liabilities.. I wish I could be more positive
I think that the Fed led artificial recovery will lead to more bad investments. The interest rate rates will have to be raised in a hurry. The skyscrapers will tumble in value all over the world.
I can’t like Mike S. and his praise of FDR go unanswered. The US economy hit bottom and turned up in the summer of 1932 before FDR was even elected. It was after Hoover signed the Smoot-Hawley Tariff bill and killed international trade that the bottom really fell out all over the world. FDR was a cynical politician whose relief programs were designed to buy votes, not repair the economy. The bulk of the “relief” money went to the western states, which were the political swing states of the time, and if you weren’t a registered Democrat you could forget about getting one of those wonderful government jobs. The amount of the relief money fluctuated according to a predictable cycle — lower in odd number years, higher in even number (election) years. The economy slogged along for 15 years, much as it has been doing the past five years, but real recovery didn’t happen until after 1944 when FDR couldn’t meddle with the economy anymore because he was dead. Obama is following FDR’s playbook pretty closely. He hates business just as FDR did. I stumbled across an interesting article from Forbes magazine in the February 2010 issue explaining how the economic recovery was proceeding in close parallel to the recoveries of 1975 and 1982. (Let’s not forget that, according to the National Bureau of Economic Research the recession officially ended in June 2009 before any of Obama’s massively wasteful spendulous bill entered the economy). It’s a striking parallel to FDR that the economy began recovering before Obama started fixing it. Unfortunately, just after the Forbes article was published Democrats dealt the death blow to the economy. In March 2010 they passed Obama-care, and suddenly no business wanted to hire anybody. FDR kept the country in the Great Depression for 15 years. Obama is on track to keep us in the Great Recession until 2017. And by the way, if you need to see the future of the healthcare system under Obama-care take a look at the VA. Ask not for whom the bell tolls.
Like Japan (in which debt is over 200% of GDP) we are rapidly approaching the point where we can’t raise rates. Every 1% increase in rates adds $180 Billion to the deficit because it increases interest payments on the debt. In addition, the increased borrowing costs for homes, credit cards and business and/or personal loans would kill the economy. Look for the Fed to talk about higher rates but keep them low as Japan has done for more than 25 years………………………….
SPEAK OF THE part time jobs THAT WERE FULL TIME ?
ONE FULL TME JOB TAKEN AWAY AND REPLACED WITH TWO PART TIME ( UNDER 29 HOURS) THA IS NOT MORE JOBS!!
Mike, The surging job report sounds great. I also read today a quote of Richard Russell wherein he forecasts 90% chance of hyperinflation before year end. Wow. What a swing in news.
Mike, I can’t believe that you believe anything coming from this Government. Michael Snyder has the truth about joblessness in this country. WE produce vary little and what jobs are ginned up are either part time or low wage. I’ve been out of work for 7 months and nobody has called me. The real unemployment % is hovering at 32%. according to Shadow Statistics.
The world is waking up! I’m shocked to hear this propaganda flowing from your lips. The Petro Dollar and its Reserve Currency Status is in its last days. I guess you believe in Global Warming also.
You are full of b.s. go back and read everything you have posted or wrote from 2007 to 2013
It seems that every other day the commentators/analysts of what’s going to happen seem to change their minds. Stansberry predicts doom and gloom for the economy, as does Oxford, yet they keep on recommending stocks that are going to rise.
Which of the analysts has it right? They shift with the wind, and if we are going to be honest about it, WHO is investing in stocks? The vast majority of the middle class is struggling to put food on the table every day, and the idea of investing $10,000. is so far from their reality that it is a joke. A bad joke, but none-the-less a joke. The ONLY thing that’s happening in this nation is a greater rift between the haves and have nots.
oh Mike, honey, maybe some day you will actually have an original thought. So far you are better than Klaus who bit the dust with his constant negativity but you should go reread all your gloom and doom things you wrote a couple of years ago before you have such a selective memory.
Mike, it wasn’t that long ago that Martin was issuing dire warnings about the impending virtual collapse of the market and US economy, that we were going bust (and in a real sense already are) and that we should all prepare for imminent disaster. Here we are a few years later and suddenly or maybe less suddenly, you are suggesting we can come out of our bunkers, the sun is peaking out behind the clouds and all will be rosy and well with the US economy and world again. Has the nation beaten the odds or are we just in the final stages of denial before dropping off the cliff? I’m painting a somewhat melodramatic set of options but I believe you understand the gist of the question very well. Are we out of harm’s way due to the immense amount of monetary stimulus applied? What could go wrong?
I’d be interested in a breakout of all these new jobs: skilled workers vice minimum wage, government vice private sector, etc..
It amazes me every day that Obama is still in office. He has violated the Constitution many times, breaks the law much – and no one seems to care. Just because he’s Black doesn’t give him any special Rights!
He should have been Impeached years ago.
But watch out! Hiliary C may be the next Pres – and I think that will be worse than Obama.
Gov’t Statics lie, the middle class is shrinking, debt is going up, the Poor are becoming Slaves that can no longer afford good food.
Gov’t steals, instead of protecting People, therefore must Controls them, The exact opposite of Oliver Cromwell when he felt forced to Reign, as Lord Protector of England. Not King nor Lord Controller of England, but Lord Protector.
It will take a while, but do your stretch exercises so when it becomes necessary to bend over and kiss your ass Goodbye, you will not have to pay a Chiropractor.
Mike.
Michael,
I agree that it is long past time for the Fed to raise short term interest rates, so that markets can then respond by “finding” appropriate levels for long(er) rates. However, with $17 trillion of foreign debt on our nation’s books, it is simply not going to happen, as the cost of servicing our foreign debt will skyrocket.
Thus, the Fed will do everything possible to keep short term rates at their present near zero level. Accordingly, at some future point, we can anticipate a two tier U.S. dollar with higher interest rates domestically and continued near zero rates internationally?
This will, of course, become an/another economic disaster, but by now we have all become quite accustomed to such, and will likely respond by happily pushing the equities indices ever higher.
Sincerely,
Don
Mike,
In light of the current, and near future outlook for the economy both here and abroad, which general categories of investments do you think will prosper. I have a 401K at work that offers several lage categories of investment “baskets” (ie. Laege Cap, Small Cap, Foreign, Bonds, etc.). Which category of investments will perform the best?
Thanks!