Monthly Archives: October 2015

02-Oct (BusinessInsider) — The September jobs report was broadly disappointing, with very few points of optimism.

Along with non-farm payrolls and wage growth missing expectations, the civilian labor force participation rate — the percentage of the US population that is either working or looking for a job — fell by 0.2 percentage points to 62.4%.

This is the lowest reading since October 1977.

“Last time the participation rate was this low Rod Stewart’s “Tonight’s the Night” led the charts, “Hotel California” was in the top 20,” tweeted Bloomberg chief economist Michael McDonough.

[source]

02-Oct (FT) — Buy gold.

That’s been the market’s reaction to the ugliest US non-farm payrolls report in many months, which some commentators say lowers the likelihood of any Federal Reserve interest rate hike in 2015, reports David Sheppard, deputy commodities editor.

The precious metal, which moves inversely to the dollar and sometimes gets a lift from bad economic news, rose 1.6 per cent to $1,133 an ounce in London. It recovered post the disappointing NFP data after earlier threatening to dip below the $1,100 level for the first time since Sept. 9.

Gold remains down 13 per cent so far in 2015, but has stabilised since threatening to crash towards $1,000 an ounce back in August.

[source]

PG View: That last sentence is patently false. Gold ended 2014 at 1183.81 and is presently trading 1134.00, so gold is only down 4% so far in 2015. Fairing better than stocks I might add . . .

02-Oct (Reuters) — U.S. employers slammed the brakes on hiring over the last two months and wages fell in September, raising new doubts the economy is strong enough for the Federal Reserve to raise interest rates by the end of this year.

Payrolls outside of farming rose by 142,000 last month and August figures were revised sharply lower to show only 136,000 jobs added in August, the Labor Department said on Friday.

That marked the smallest two-month gain in employment in over a year and could fuel fears that the China-led global economic slowdown is sapping America’s strength.

U.S. factories are feeling the global chill and shed 9,000 jobs in September after losing 18,000 in August, according to the Labor Department’s survey of employers.

[source]

Now can we please put the 2015 rate hike talk to rest?

01-Oct (CNBC) — Data-dependent Federal Reserve officials suddenly are finding the data turning against them.

A year that was supposed to provide the Fed with plenty of ammunition to justify a rate increase has fallen considerably short. Economic growth remains mired, inflation increasingly has become a bygone remnant of years past and industrial activity is nearing contraction levels.

Moreover, the stock market is tumbling, investors’ nerves are frayed and a government shutdown, narrowly averted for October, looks increasingly probable in December, right around the time the U.S. central bank gets its final opportunity to start normalizing interest rates.

…This is the environment into which the Fed is looking to raise rates.

Market participants are growing increasingly skeptical that a hike is coming anytime soon.

“What’s really convinced me the Fed is going to stay lower for longer is the evidence would have to be overwhelmingly clear in one direction,” said Michael Arone, chief investment strategist for State Street Global Advisors’ U.S. intermediary business. “In this environment, the Fed is incredibly fearful of making a policy mistake, moving too soon and undermining economic growth.”

[source]

01-Dec (KitcoNews) — Despite gold’s weakness as markets kick off the fourth quarter, the World Gold Council (WGC) says there is still a case to hold the yellow metal and investors shouldn’t be so focused on the potential of U.S. interest rate hikes. According to Will Rhind, CEO of World Gold Trust Services, a wholly-owned subsidiary of WGC, rate hikes are not a ‘defining factor’ for gold prices ‘mainly for the simple reason that the majority of gold demand doesn’t come from the U.S. or U.S. investors, it comes from China and India.’ ‘It is certainly a factor in the overall pricing construct of the gold market but it is not the defining factor,’ he added. Rhind noted that the market is actually at a critical point and investors should still consider the metal for portfolio diversification. ‘We’re at an inflection point where gold prices are down year-to-date but they’re down less than the S&P500 YTD,’ he said. ‘Therefore, gold has outperformed on a relative basis the U.S. equities market.’ December Comex gold futures were last quoted down 0.2% at $1,113 an ounce. Rhind also said more market volatility lies ahead and investors should think about ‘increasing a position in gold.’ He argued that the yellow metal is different from the majority of other commodities, which have been in a downtrend since last year when oil prices tumbled. ‘The amount of demand for gold is not just focused from investors, it’s focused from consumers around the world,’ he said. ‘So, over a longer term, gold is actually correlated with economic growth and while that may be counterintuitive to some who look at it purely from an investment lens, it’s actually straightforward from the global demand perspective,’ he explained. Kitco News, October 1, 2015.

[video]

If you’ve ever found yourself wondering what the heck the Fed is doing, Salient Partners’ Ben Hunt sums it up succinctly in these paragraphs from his latest Epsilon Theory newsletter.

by W. Ben Hunt, Ph.D.
…Central Bankers have intentionally sown confusion in our ranks. Like the barkers on CNBC and the sell-side, the Fed and the ECB and the BOJ and the PBOC are determined to force us into riskier investment decisions than we would otherwise choose to make. This is the entire point of extraordinary monetary policy over the past 6 years! All of it. All of the LSAPs, all of the TLTROs, all of the exercises in “Communication Policy” … all of it has been designed with one single purpose in mind: to punish investors who choose to sit on their hands and reward investors who make a bet, all for the laudable goal of preventing a deflationary equilibrium. And as a result we have the most mistrusted bull market in history, a bull market where traditional investment discipline was punished rather than rewarded, and where any investor who hasn’t been totally hornswoggled by Fed communication policy is now rightly worried about having the policy rug pulled out from underneath his feet.

Or to make this point from a slightly different perspective, while there is confusion between the concepts of investing and allocation in the best of times, there is an intentional conflation of the two notions here in the Golden Age of the Central Banker. The Fed wants to turn investors into allocators, and they’ve largely succeeded. That is, the Fed doesn’t care about your picking one stock over another stock or one sector over another sector or one company over another company. They just want to push you out on the risk curve, which for the vast majority of investors just means buying stocks. Any stock. All stocks.

[source]

PG View: Spending is good too. Buy a car. Buy some electronics. But heaven forbid you should simply save some of your money. In fact, the Fed has conveniently driven interest rates to near-0% to make your decision making process easier.

01-Oct (BusinessInsider) — Here’s a bad thing: American manufacturing is in a recession.

On Wednesday, we got the latest data on manufacturing activity in the Midwest from the Chicago purchasing manager’s index reading, which unexpectedly showed that activity contracted in September. The Institute for Supply Management’s Milwaukee report on business also indicated a contraction in activity.

And Thursday’s data didn’t exactly help, with ISM’s national manufacturing index coming in at 50.2, still indicating expansion but the lowest reading for this measure since May 2013. Additionally, Markit’s manufacturing PMI remained near August’s 22-month low.

So, overall discouraging data.

But these were merely the latest in a series of indications that, broadly, the US manufacturing sector stinks right now.

[source]

PG View: Again, not exactly the ideal timing for a rate hike . . .

01-Oct (MarketWatch) — Gold futures headed higher on Thursday, after settling at a more than two week low a day earlier, finding some modest support as the U.S. dollar weakened in the wake of the latest economic data.

Gold for December delivery tacked on $1.50, or 0.1%, to $1,116.70 an ounce on Comex. Gold lost 1.5% of its value in September, and nearly 5% in the third quarter. December silver meanwhile, added 12.7 cents, or 0.9%, to trade at $14.645 an ounce.

Gold prices had wavered between losses and gains early in the session, with the key economic report of the week—the jobs report—due Friday.

[source]