Guess what: We just got another “Rorschach”-style jobs report. It had a little something for everyone, just like February’s report, muddying the already muddied market waters.
Market Roundup
On the plus side? The U.S. economy added 242,000 jobs last month. That topped estimates for a reading in the 190,000s. The figures for December and January were also revised higher by a combined 30,000.
Sectors like retail (+55,000), health care (+57,000), food and beverage (+40,000) and construction (+19,000) showed healthy gains. The unemployment rate also held at an eight-year low of 4.9%.
So what were the negatives? Well, let’s start with average hourly earnings. This key gauge of wage growth actually fell 0.1%, the first monthly decline since December 2014. The average workweek also dropped by 0.2 hours to 34.4.
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| The unemployment lines got shorter, but wages continued to stagnate. |
We continued to see pressure in sectors that have been hemorrhaging jobs for a long time. Mining lost another 19,000 workers, while manufacturing lost 16,000. The ISM services sector index wasn’t very inspiring either. It dropped to 53.4 in February from 53.5 a month earlier, leaving it at a two-year low.
The markets haven’t cared much in the last two weeks about the U.S. data. Hopes for a big Chinese stimulus program this weekend, and for a European Central Bank policy program next week, have clearly been in the driver’s seat. But once those shorter-term influences sort themselves out, we should see investors focus more on the mixed picture here at home — and the important shifts we’ve seen in the credit cycle since 2015.
So what do you see in these latest jobs figures? Reason for optimism? Pessimism? Something in between? Any thoughts on the market action of late? Is this the start of a new bull market? Another bear market bounce? What actions are you taking in your own portfolio here in light of the latest trading activity? Share your thoughts below.
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What’s wrong with the economy? And what’s right with gold and higher-yielding stocks? Those were a couple of the topics you discussed online in the past 24 hours.
Reader Howard weighed in on the economy, offering the following batch of extensive comments: “Why are the rich getting richer and the poor getting poorer? It could be useful to look at Washington as a business and this presidential election based upon all Washington’s previous results. The leaders should have been sacked long ago for complete incompetence.
“With many years of increasing debt, there are no dividends, due to heavy losses recorded over past decades. Our workers are in desperate need of a minimum wage increase to $15-an-hour. But with a succession of free trade agreements since WW II, most of our manufacturing has been transferred overseas. We also run the world’s largest dependency and entitlement programs with massive support for food stamp distributions.
“The hidden side of our poor performance is the high number of insiders, lobbyists and special-interest groups. Huge numbers of bureaucrats with copious amounts of red tape stand in the way of real progress.”
As for how to invest in an environment where Washington is hurting, rather than helping, the economy, Reader Jim offered this take: “My uncle has always relied on me for investment advice. Because he is very conservative, I have never recommended anything but telecom and utilities. He thinks I’m a genius!”
Reader Lifestudent 38 weighed in on gold, saying: “Gold has always stood the test of time since civilizations ascribed value to it, and it will continue to maintain that perceived value as long as civilizations keep ascribing that value. In this tumultuous environment, the only true logical investment is in gold! As for traders, many opportunities are abounding in this volatile season.”
Reader Chuck B. also shared his take on the yellow metal: “Gold moved significantly above the upper line of its 2-½-year down channel yesterday, ending the channel. It could go higher before coming back to retest that line.
“Gold and gold stocks could be ready to boom, as they likely would in a time of financial trouble such as Mike is talking about. After the recent run-up, though, a bit of retracement wouldn’t be out of the question first.”
Thanks for sharing. Gold definitely looks like it is pulling out of its multi-year funk, while higher-yielding (but SAFE) stocks are continuing to deliver a nice combination of yield and stability. Both do look like they could pull back to consolidate their gains, though, as Reader Chuck B. noted.
Meanwhile, in stocks, it’ll be very interesting to see what happens once all the hype about new Chinese and European stimulus dies down. That’s when investors will have to refocus on the fundamentals, which still don’t look all that encouraging to me. If you want to comment further on my outlook, please feel free to do so in the discussion section below.
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That flood of money into high-risk technology startups and so-called “unicorns?” Yeah, it’s over. The Wall Street Journal reports that mutual fund firms like BlackRock (BLK) and Fidelity Investments are slashing the value of their stakes in private companies, and adding far fewer new positions.
This comes after those firms all dog-piled into these kinds of tough-to-value, illiquid positions during the easy-money boom. Expect layoffs, firm closings, rising vacancies, and other problems to spread in Silicon Valley over the next year or two as liquidity drains out.
The political scandal in Brazil tied to corruption at national energy company Petrobras (PBR) keeps getting more sordid. Brazilian police just raided the house of the country’s former president, Luiz Inacio Lula da Silva, bringing the once-popular politician in for questioning. Dozens of searches and detentions have been carried out amid widespread allegations of bribery, money laundering, and other forms of corruption in the country.
The intrigue surrounding international currency markets and central bank policy is ratcheting up. The Wall Street Journal reports that top officials from the eurozone warned Japan to stop trying to drive down the value of the yen, a cornerstone of that country’s efforts to revive domestic inflation. That’s pretty rich when you think about it, considering the European Central Bank launched an all-out de facto war on the euro’s value in 2014 through quantitative easing. But the U.S. and Europe say that indirect devaluation tactic is okay; it’s only direct devaluation moves that are frowned upon. Ha!
Elsewhere in Asia, China’s National People’s Congress meets this weekend. Stocks, commodities, and other “risk on” assets have been rallying this week amid expectations Chinese policymakers will unveil new stimulus measures at the event. State-backed funds intervened in the Chinese stock market to artificially prop up large-capitalization stocks on Friday ahead of the gathering, even as smaller-capitalization names tanked.
So we have currency manipulation in Japan, stock manipulation in China, and a massive bribery and corruption scandal in Brazil. Any thoughts on all of that? What about the draining of liquidity in tech-land? Will that help put downward pressure on publicly traded technology shares? Let me hear any thoughts you have on these topics when you have a minute.
Until next time,
Mike Larson
P.S. Our membership rolls for Global Currency Investor are filling up fast! The good news is that there is still time to get on board so you don’t miss Boris and Kathy’s next recos, and STILL receive a $2,100 discount on your risk-free membership.
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Recommended Articles by 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.
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International currency markets are grasping for straws regarding rates and currency manipulation. … Although international currency posturing may be out of control, there may be a plus side for the market since driving the value down of a currency or indirectly devaluating a currency may lead to individuals investing. Certainly, negative interest rates would provide little alternative but to invest in stocks, mutual funds, and ETF’s. Also, corporate bonds and preferred stock may also be appealing under negative rate scenarios.
Cash is a defensive protection measure. After the rout in January, it appears to me that some may feel that the market bounce is just a timely correction. Don’t know the future direction, however you can’t make money at the moment out of cash.
I’ve been out of steady, good paying work for over 1 year (leap year). I’m presently underemployed and cannot get more than 32 hrs per week. Some of these numbers support my situation. The overall picture seem to ignore the fact that nearly 40% of the total workforce is in my situation.
Lots of companies are advertising jobs in all kind of places, like the supermarket at the bottom of my receipt, home improvement store. Starting twenty hours a week at, being generous, up to a dollar above minimum wage. Jobs report doesn’t tell us the type of wages and hours, just the job numbers.
It’s amazing how many people who claim to be intelligent buy into the rhetoric and outright lies they are fed by the corrupt, oligarchy run government. Why would any sane person believe ANYTHING they say or present as “facts”?? Just more evidence that no matter how hard you try, you just can’t fix “stupid”.
I absolutely agree with your amazement. I would like to believe these reasonably intelligent people will look beyond the Obama fixated media but I’m frequently disappointed. I believe way too many otherwise savvy people get their news and facts from the biased media and simply accept it as truth. Until something drastic happens they will continue to be deceived.
Arthur and Alan: While I’m certainly not as smart as you guys, I’ve noticed that the media are currently fixated on Trump, not Obama. All the oxygen appears to be sucked up by discussions of ACA repeal, tax cuts, anti-pharmaceutical rhetoric, illegal immigration, etc. Reports on employment have come from ADP and the Labor Department, and are consistent. The Labor Department reports are put together by career economists, such as my nephew. These people stay the same as politicians change, and are just doing their jobs. Everyone knows which sectors pay well, and which don’t. No one hid the overall decline in hourly wages. So where’s your beef, other than the howling at the moon variety?
There are a lot of guesstimated and assumed jobs in these figures using formulas only they comprehend. To me the key number is still withholding receipts. Only real employees pay withholding and these numbers are down. Jim
We have rallied back to resistence area of 17000 on the dow. Look for selling to commence at this level as top is in on a technical basis.
Why do I get that uncomfortable feeling that I may have missed the boat on both gold and oil? I placed a GTC order to buy GDX but more than 25% below its current price, just as you suggested. As for oil, is XLE attractive on a substantial pullback too?
GDX may retreat somewhat after possibly a bit more run-up. It needs to consolidate it’s gains before going much higher, and could do that with as much as a 50% drop, though likely not so much. Actually, even buying at the present price would be an advantage, IF the gold bull is ready to rage again.
I don’t think you have missed the boat on oil. The debt treadmill these companies are on is keeping production high. Better to lose money than file for bankruptcy. Demand is lackluster at best. Inventories are at record levels. I think we have a long way to go to bottom on oil. Jim
i see it the same way, jim. here’s something for you to think about. weak countries like libya, nigeria, venesualia, etc., are in such desperate need of revenues that cap ex spending is out of the question, so there’s no way these countries can keep up with the depletion rate on their wells. these countries will basically be out of the oil business as their wells run dry. now you know what the saudis are up to.
very good point on the depletion rate, gold.
Mike,I have pretty much agreed with your prognostications over the last year or so and sold most of my non-energy related stuff at a nice profit last summer but I think you need to be very careful about being too totally negative on where we are headed this year.Most of the normal data is backing you up but I think it is important to remember that we are still the safest place in the world to put money and apparently it continues to pour in here and very few people mention that fact.Dr. Weiss mentioned a while ago but not lately. It is hard to know exactly the effect on the market but I am guessing it might be considerable and more than most people think.They always say to beware when everybody is happy with things and I notice now that a lot of people are sounding like you so it might just be the reverse situation now taking place.
Sell when most people are buying – buy when most people are selling. There has been a lot of selling recently, but an awful lot of people seem to still be buying; having taken the recent sells as a signal. There hasn’t been a real flood of sales yet, though.
What I meant to imply is that the bottom is a long way from being in yet. We could be close to the real crash. See my exercise with the tops arch, below.
Something I notice about the employment figures: more layoffs in generally high paying mining and manufacturing. Hiring in service fields, which often do not pay as well. Health care is an exception, of course. So are the skilled construction jobs, but they are playing catch-up, after some slow years. Laborers don’t get so much, nor do many retail people.
Am I the only one that noticed while being bearish we just missed a 8 day 1200 point Dow surge upward???
Yes your right See good. Circa 2007 the same happened.
The drop in wage growth is concerning; decreasing earnings leads to decreasing spending leads to decreasing headline profits, the perfect recipe for a bearish environment.
As a retiree,it makes my blood boil when I hear these Admin. mouthpieces wax rosy and optimistic about the current economy they are so proud of ruining—very few young people will ever have the pay and benefits I had,much less the fixed-income pension we live on.It breaks my heart to see intelligent young people struggling to survive on low-wage,less than full time hours,because current govt. policy is anti-productive,anti-business,anti-capital-accumulation-you name it…
Thanks to them,many young people will never have it as good as I did,and is way past time all their lies were exposed.
Your right Dan
To many people are clipping out that newspaper coupon to mail away for a free pair of Rose colored glasses. Yes the young people will never enjoy the great life we had. Great material for a movie called “The Way Things Were” oops maybe that one has already been made. It breaks my heart as well but my heart and body are both close to their expiry date for which I am truly happy here in Thailand. My pension suffices and I even manage to save a bit for my young g/f after I am gone. The next couple years should be interesting and we you and I Dan have a front row seat.
The jobs report has just confirmed that the Fed will inch rates UP at the middle of this month, as projected by Jim Rickards; and I do expect this to happen.
The futures imply there is a sixty per cent chance you are right. Jim
Will, that was my thought but Gold would normally have declined if that was the expectation and it didn’t, so I am even more confused.
The USA will NEVER be great again. The debt is too big and the unfunded liabilities are too big. A balanced budget is out of the question because the GOV”T leaders have to invest trillions into improving the military. The infrastructure needs trillions. Also America has changed into a left of center country. The country has been split by the corrupt leaders from both sides of the isle. Furthermore the American people refuse to take the tough medicine. Just what is that? 40-50 % devaluation immediately of the US dollar. If this policy is NOT implemented now the country will be forced into default within 5 years. That is what the math says.
I agree the Federal Government’s Empire will fail. Every Empire does. It couldn’t happen to a nicer bunch of sociopaths. I think the idea that a free people will rule themselves will prevail. I don’t want to be taken care of. I want to be free, and I think I have a lot of company. Don’t despair, Graham. Prepare! Jim
Markets now seem to be in Voodoo mode forsaking any business news to propel it forward or backward. It is now treading water waiting to see what the Fed will do and as we all know the Fed closely watches the employment numbers when making decisions and in their eyes the so called “strong” numbers may sway them to bump up rates as options further down the 2016 path look rather limited. The markets are also watching to see what “Miracle Man Draghi” will do as Mr. Bluff and Bluster says he has many more options left in his failing bag of tricks. Mostly the junkies are looking for more stimulus from the Bank of China and this is pretty well is a given as the Communist part is known to move hell and high water to hit their targets to show the world what a wonderful system they have. I also understand that one of the powers that be has warned Japan to stop trying to depreciate their currency. This procedure also seems doomed to fail. Japanese safe sales have increased dramatically looks like people no longer trust banks who want to charge them to store their money. Next week should be interesting. With a little luck the sun will rise on Monday.
Gordon, How did you manage to get a long term visa to park in Thailand? Please edify. I am looking to migrate to Bangkok though I hold probably the best passport. Thanks.
Well folks we are experiencing in my humble opinion Voodoo markets. They are all marking time waiting to see if the Chinese will goose their stimulus program yet again which they obviously will and they are waiting to see if Draghi pulls some more tricks out of his waning tool bag. Lets see what Mr. Bluff and Bluster will do. Also they are waiting to see if the Fed is inclined to raise rates again after the so called “promising” employment numbers. The Fed places a lot of their decision making on the these numbers.
The Fed says they are going to raise rates again. Raising rates is something the Fed does to control INFLATION. So there is a bit of price inflation still happening, but the general economy has been deflating. Of course, doing the opposite hasn’t helped much either. Could be, the Fed-masters only have two tactics available – if one doesn’t work, try the other. Next, I suppose they will stop issuing debt, and begin paying off what they have already issued.
If you take a chart of the S&P500, and draw a line touching all the tops, it forms an almost perfect arch, that stands currently between 2040 and 2050. It is also currently declining a little more slowly than the long term rise into it’s arch. If the current rise continues, it should reach the arch somewhere between 2020 and 2040. A short correction of a week or more from here, followed by a rise, would touch the arch possibly below 2020. A small violation of the arch, followed by a retreat below it might tend to establish a new longer term decline line. It would need to be verified on the next rising cycle. There are other possibilities also, including a huge breakout, or a catastrophic collapse. Nothing is certain in the markets. I give you this observation for your entertainment, at least.
I copied the chart from stockcharts.com, and found a 7 inch diam. pan that let me draw an arch that comes within an 1/8 inch of 8 peaks since Nov. 2014, when the S&P retouched the bottom of the up channel from 2009 that it firmly broke in Sep. 2014.
y the way, the fact that Canada recently sold all of it’s gold holdings, except 77 ounces that slipped through the cracks, should be a real bull prod for the metal.
Unfortunately I believe that most information from Washington is suspect, but a point to consider is the trend of hospitality, retail, etc. is to hire mostly part time personnel to minimize benefit costs, especially health insurance. . I know from personal experience that this is the direction being taken. Hiring two part time to replace one full-time will skew statistics.
The Health care and the doctors are breaking our backs along with the college executive professor group,The groups mentioned never have and never will take a cut and the band plays on until we get a constitutional convention and then regroup.It will not happen and the future USA empire is finished decaying.WILLIAM
The one advantage that private individuals have over the professional stock and bond traders is that we don’t have to be in the market. We know that there are big bubbles in the stock and bond markets – keeping the air in those bubbles is central bank policy. When we see a bubble developing, it’s time to start averaging OUT of the market. Remember, the goal is “buy low, sell high,” not vice versa.
I have sold out almost all of my financial assets, and am keeping little other than a stash of cash in my one remaining brokerage account. If I start to see bargains everywhere, I’ll get out of cash, but for now, I’m not investing in financial assets.
King Solomon told us to divide our portion into seven or eight parts, because we don’t know what’s going to go wrong. Have some of your assets in land, some in a business you operate yourself, some in precious metals … and maybe an eighth of your assets in financial assets like stocks and bonds.
Are you really buying into this? Japanese GDP did not fall as much as expected. China. Trade surplus falls 43% Exports drop 23% the recent speech by Mr. Xu states “ABSOLUTELY” no hard landing for economy ABSOLUTELY? Target of 6.5 to 7% set? It amazes me when then these people talk to the press using the same language/lies that they use when talking to the general populous. Who on earth do they think they are kidding. They never know exactly when to switch from Party speak to dumb down Chinese to making a statement to people that really question their outdated dogma.