The bond market (TLT) thinks so.
The commodities markets (CU) think so.
The oil market (USO) absolutely thinks so.
Who am I to argue?
The disappointing August nonfarm payroll certainly took the wind out of the sales of stock market bulls and bond bears.
It also totally vindicates the decision by the Federal Reserve not to raise interest rates on September 17.
It all becomes so clear now, like when the morning fog lifts here in San Francisco. The things they were seeing and we weren?t were both important, and dangerous.
Who needs more expensive money anyway when wage growth is zero and the rate of hiring is falling?
Now that my former professor and friend, Janet Yellen, has Beijing, Tokyo, and Berlin on her speed dial, global economic turmoil is looming larger than ever.
And what did former Treasury secretary Larry Summers say about the whites of inflation?s eyes? I ain?t seeing no white eyes here.
And he?s not my friend. I doubt he has any.
Fed funds futures are now indicating that the Fed will not raise interest rates until March, 2016.
Wasn?t there a newsletter out there somewhere in the void that predicted all the way back in January that there would be no interest rate hike in 2015 (click here)?
It was certainly a challenge to put lipstick on this pig.
Headline unemployment stayed nailed at 5.1%. But private sector employment plunged to only 118,000.
Health care added a robust +34,000 jobs, but we knew that was coming. Professional and business services contributed +31,000, and retail +21,000.
But mining really took it in the shorts with a loss of -10,000. No wonder the stocks are in the dump. The labor participation rate hit the lowest level since October, 1977 at a basement 62.4%.
One bright spot was that the broader U6 measure of ?discouraged workers? dropped to an even 10%, the lowest since May, 2008.
Which all raises a frightening prospect. What if we go into the next recession with interest rates at zero? Janet will then have to reduce interest rates to negative numbers to stimulate the economy.
If the Fed doesn?t raise interest rates soon, it will have no other choice than to do the unimaginable, once we hit the next rough patch.
But then, there have been a lot of unimaginables lately.
Japan and Europe have had negative interest rates until recently, so why not us?
In fact, friends of mine at the Fed tell me that one voting member was already pushing for negative overnight rates at their September 17 meeting.
And we were expecting them to raise rates?
I don?t think it will get to that because of what I call ?The Great Contradiction?, or better yet, ?The Great Conundrum?.
Yesterday?s red-hot sales figures indicate that the US auto industry is headed for a blistering 18 million annual production rate.
The housing market is on fire. I just went to some open houses in the neighborhood today, and the listing agents tell me they are blown away by the incredible number of 30 something tech workers buying $2 million houses for cash!
Early signs of wage hikes are popping up everywhere. There is a shortage of 50,000 truck drivers. Fulfillment centers, such as at Amazon (AMZN), in nearby Nevada are having difficulty finding minimum wage workers.
It had to happen eventually.
And guess who got a job offer the other day?
A local charter air service called and asked if I wanted to go back to work as a pilot!
It seems my name still appears on a list of local commercial pilots. The pilot shortage has become so severe airlines have taken to cold calling lists to find them. It was about flying around someone ?important.?
Well HELLOOOO!
I?m told that the pilot situation in China is far worse, now that they have a staggering 1,000 wide body jets on order.
The last time I said ?Yes? to an offer like that was to the United States Marine Corps. in 1990. My back still hurts from that one (semper fi).
But wait! There?s more!
Driving back from Lake Tahoe in August, I was struck by the number of out-of-state plates pulling U-Haul trailers over historic Donner Pass.
Some 350,000 are moving to the Golden State this year, chasing our newest gold rush, the much-desired high paying technology jobs of the San Francisco Bay area.
It is a migration of epic proportions, much like the influx of Oakies we saw arriving here during the Great Depression (think Grapes of Wrath).
I know of a dozen structures under construction in the San Francisco Bay area that will employee more than 10,000 each (the new Apple headquarters is a big one)!
I?m sorry, but none of this squares with a 2% GDP growth rate, and an August nonfarm payroll of 142,000.
Has the American economy really become that bifurcated?
Is the robust strength in California being horribly offset by weakness in Kentucky (coal), North Dakota (oil), Iowa (agriculture), Wyoming (mining), and Texas (more oil)?
Do we have one good economy and one bad economy all mixed up together in the data, obscuring the true picture?
The problem for we traders is that the government numbers usually reflect actual business conditions three to six months late. Yet, that?s all we have to go by, beyond what we witness with our own two eyes.
So what are these anecdotes telling us that the government data isn?t?
That a summer slowdown inspired by international economic turmoil is already in the rear view mirror, and that the next round of business data will be positive.
That means up for stocks for the rest of the year, and down for bonds, for the rest of 2015.
Gee, that short position in Treasury bonds I strapped on during Friday?s chaos is suddenly feeling pretty good.
Maybe I should pile on more?
