What?s On Your Plate for This Week?
Economic analysts were sent reeling in the wake of the May nonfarm payroll report released Friday, which showed only a feeble 38,000 in job gains.
It appears that the Great American Job Creating Engine has suddenly ground to a halt.
You know that big Fed rate rise that was coming in 9 days because the economy was so strong? You can kiss that baby goodbye, write it off, and confine it to the dustbin of history.
Personally, I never believed that rates were going to rise. I have been in the December camp all along, if ever.
What really sent researchers scurrying for their pocket calculators was the fact that the headline unemployment rate fell to a decade low of 4.7%. This occurred because 458,000 dropped out of the labor force.
Is this the beginning of a revival of productivity, or the start of the next Great Recession?
Assets classes behaved as you would expect. Stocks cratered 150 points, with interest rate plays, like the banks, taking the biggest hit. So did oil. Gold and bonds soared. The US dollar collapsed.
The payroll numbers got uglier the closer you looked at them.
Temporary help fell by -21,000, manufacturing by -18,000, construction by -10,000, and mining by -10,000. The gains were in health care, +40,000, food services, +22,000, and professional services, +10,000.
The long term U-6 unemployment rate stabilized at 9.7%.
I have been saying for weeks now that buying stocks at the top of a two-year range would only bring tears. The tears have arrived by the bucket full.
As for the coming week, you really have the ask the question, ?Other than that Mrs. Lincoln, how was the play??
The impact of the disastrous Department of Labor report far overshadows anything that will come out over the next five days.
Janet Yellen will be speaking again on Monday afternoon in Philadelphia, and no doubt will say absolutely nothing.
The JOLTS report on job openings this Wednesday at 10:00 AM EST will get more scrutiny than usual, as it will shed more light on the jobs situation. However, this is a one-month lagging indicator, so it will probably still show strength.
The US Energy Information Administration oil inventory number at 10:30 will continue to be a subject of great interest, giving a hint as to the health of the global economy.
We will get weekly Jobless Claims at 8:30 EST on Thursday, as usual. The Baker Hughes Rig Count then comes on Friday at 1:00 PM EST. With oil now at $48, look for hints of stabilization at the current 312 level (down from 1,600 in two years!).
Followers of the Mad Hedge Fund Trader trade alert service did alright this week. We took profits on our long Treasury position (TLT) and our short stock position (SPY).
I went into the May nonfarm payroll report with 90% cash because of the increasing randomness of the government report.
Unfortunately, the profit in the 10% weighting in the Japanese yen (FXY) vaporized overnight on the gap move down in the dollar.
However, I am going to hang on to my short position, as the beleaguered Japanese currency has risen 5% in four days. Moves like that in the currency market are as rare as hen?s teeth.
I assure you, the world hasn?t suddenly fallen in love with investment in Japan. If anything, economic conditions are worsening by the day, so the yen ?will fail again.
That said, if the (FXY) maintains a sustained close over the old high of $91.30, I am out of there. Iron discipline regarding stops is the only thing that will keep you alive in this kind of trading market.
This brought our final May return to an enviable 4.38%, and our average annualized return to 35.33%. The cream is still rising to the top.
What ever happens this week, don?t waste your time bothering. It?s still all about the June 14 Fed meeting.
You might as well hang out at the beach this week, save your powder for a better trading environment, and work on your tan.
In this environment, cash is king.
Better to Work on Your Tan in This Market
