Notes From Underground: Wrigley Field and the Unemployment Data = 38,000 Filled Seats

Being a life-long CUBS fan it is with a sense of irony to note that the nonfarm payroll number almost equaled Friday’s attendance at Wrigley Field. I will venture to guess though that the cheers from the FOMC were louder than all of the voices cheering the CUBS onto victory. Janet Yellen and her insider clique on the FOMC cheered as the softness in the JOBS data provided the rationale for the FOMC not to raise interest rate before the BREXIT vote. Everyone in the financial world knows that the FED is “data dependent” … at least when it fits their needs. Yes, the unemployment rate dropped to 4.7% from 5.0% but this substantial fall calls into question the credibility of the Fed models. The drop in the rate was due to participants leaving the job force, and, more importantly, those departing the labor market are not at the retirement age level but more in the middle of the age timeline, which makes investors challenge the idea of the economy gaining strength.

Many of the nonfarm payroll reports for the past few years have noted how the over 55-year-old employees have benefited the most from the recent bout of job growth. Importantly, the previous two jobs data reports were revised downward and for our purposes the tepid increase in average hourly earnings was another sign that Art Cashin and the no more rate hikes for 2016 gained ascendance. The post unemployment trade saw interest yields drop and the U.S. dollar decline by almost 2%. The GOLD rallied as those betting on a June rate hike were disappointed and had to cover short positions or repurchase previous exited longs. There is no question that Chair Yellen was dancing in the streets and cheering on the soft data. The FOMC doesn’t want to raise rates in the period of great political uncertainty around the world. The Chinese were also pleased for the YUAN while stronger against the dollar was softer against the euro and the YEN as the yuan basket barely moved. The world is torn asunder when a labor economist CHEERS A SOFT UNEMPLOYMENT NUMBER.

***An interesting data point that the market digested: The Financial Times ran an article titled, “Negative-yield debt breaks $10 tn Level For The First Time.” In a chart from Pension Partners it shows that Swiss bond yields are negative through 20 years. Japan sovereign debt is negative through 10 years. German paper is negative through nine years. Even French sovereign debt is negative through SEVEN years. It is not the massive amount yielding less than ZERO that should disturb all market participants, but, more importantly, the TYPES OF RISK THAT PENSION FUNDS, INSURANCE COMPANIES and all types of private investors are having to pursue in order to compensate for the lacked of yield on high-grade sovereign debt. THE BOND BUBBLE IS SETTING UP INVESTORS FOR A RISK PROFILE THAT WILL CAUSE GREAT LOSSES. The central banks have made all investors Keynesians for we have to respect one of John Meynard’s great dictums: Markets can remain irrational for longer than you can remain solvent. Trade with fervor but invest with fear.

***A major concern as we approach BREXIT. In Wednesday’s FT the lead front page article should raise concerns in Britain about the EU and free trade. The story, titled, “Europe and U.S. In Battle to Keep Trade Pact on Track,” raises the issue about the recent hardening of anti-TTIP positions within France and Germany by influential groups opposed to several of the covenants agreed to in the treaty. Yes, both Donald Trump and Hillary Clinton have raised objections to the TTIP but that is deemed to be electioneering noise. As the article notes, “France is the most vocal TTIP sceptic, largely because of fears that the deal could harm its farming sector and lessen the value of geographical  indications that protect French wines, cheeses and meats.” The French and Germans are raising concerns over ISDS covenants in the TTIP. The ISDS is the issue of  investor-state dispute settlement.I t was “originally envisaged as a way to protect investors from arbitrary state abuse.”

The environmentalists in Germany are very worried that investors will sue foreign governments in courts and claim that government legislation is capricious and harms investors. Many have claimed that Britain would severely suffer being outside the EU trade zone but with all the conflict within the EU over the TTIP and the roadblocks being built to hamper the treaty’s implementation, we are left to wonder if Britain, with its strong history of the rule of law, would fare better outside the clutches of the Brussels bureaucracy. Brexit has to keep us all very cautious as the European elite is doing all it can to cause voters to not support Brexit. Our motto for JUNE: Trade with fervor, invest with fear. And don’t listen to the cheers of 38,000 when one voice can drown out all the others.


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20 Responses to “Notes From Underground: Wrigley Field and the Unemployment Data = 38,000 Filled Seats”

  1. yra Says:

    to all readers the last two sentences should NOT SUPPORT BREXIT and our motto is trade with fervor ,invest with fear

  2. kevinwaspi Says:

    My guess is the 38,000 Friday Cubs fans were happier than the 38,000 new bartenders and waitresses added to the jobs roll!

  3. Paul Shust Says:

    Yra, you nailed it! The elephant in the room is the returns required of defined benefit plans. Not only do they have to take more risk for the same returns but the liabilities are greater at the zero bound! These funds will be have to eat into more and more of the corpus to meet their obligations. The only viable solutions are cutting benefits and, eventually, bail-ins for banks.

    • yra Says:

      Paul–this is just the beginning and as you say the elephant in the room that no one wishes to turn into a major campaign issue.Wall Street has lived off the pension funds for the last 35 years see rental prices in Hamptons—and it is amazing how nobody questions the fact that wall street has ravaged the pensions for fees and supporting the vast,overpaid wall street infrastructure

  4. Alex Says:

    Yra, if you had a vote re Brexit which way would it go?

    And a quick reason for your decision if you could, thanks.

    • yra Says:

      Alex –if i could vote in the U.K. referendum mu vote would be to leave—I don’t trust Brussels and its anti-democracy views.Plus ,the Brits will be forced into the Euro and thus be forced to be a creditor for the massive EU debt which Germany will cram down the U.K’s throat and the possibility of a eurobond will be a massive disaster for the Brits—losing the pound will put british right into the Maastricht straight jacket I could go on and on

      • Alex Says:

        Thanks, nice reasoning. I’m voting out. Hadn’t thought about being forced into the Euro, scary thought.

  5. Donna Lasater (@DLasater_99362) Says:

    I watched the interview of Boris Johnson re BREXIT and thought it was interesting how he went after Jamie Dimon’s lobbying AGAINST.

    • yra Says:

      Donna—the need for the Davos crowd to come to the rescue of one of their own is fraught with danger as they look ridiculous.John Major who went down as one of the worst Prime Minister’s in English history feels compelled to support Cameron’s remain effort—bloody pathetic

  6. Frank C. Says:

    Re: Brexit and european establishment plotting

  7. Chicken Says:

    “We’re here from the FED and we’re here to help” (Taking advantage by enabling our own self-conflicted interests in every time horizon).

    Brussels – Why any euro country should agree to surrender control is beyond absurd, it’s criminal.

    • GreenAB Says:

      “Brussels – Why any euro country should agree to surrender control is beyond absurd, it’s criminal.”

      because it´s the only way, the Union might ever work. in a globalized world the EU was meant to strengthen a fragmented Europe against the powerhouses of the USA and China.

      in order to compete globally you have to have unity and solidarity within the Union. and a central body that gives direction on major issues. just look at the United States of Amercia.

      what is wrong with the system is, that the European parliament doesn´t have a say in important decisions, though it has been leigitimized by millions of voters throughout Europe. meanwhile the unelected commission has a lot of power.

      as for the Brits: natonalism is on the rise everywhere you look. but i doubt that it will do any good. the reason for inequality or social issues isn´t the European Union. it´s globalisation that put´s pressure on the working class in every developed country.

      • yra Says:

        Green AB–nice to hear your “voice” you have been a really good source on Europe going back to the beginning of the blog—a good book for you by Geoffrey Faux—The Global Class War—much of what you say has merit but the European elite put the proverbial cart before the horse and the EU has been severely out of balance because of that

  8. david cooper Says:

    calls getting bid in the treasuries complex especially september. skew is getting bid too. i think it is a sign of fear of improving chances of a brexit. treasuries would rally huge on it i think.

    • yra Says:

      David–so many polls to wade thru but trade accordingly and don’t get folled by every head fake

  9. Chicken Says:

    I for one, am avoiding grain products intentionally contaminated with glyphosate by growers for their own gain, they spray this chemical directly onto their crop to increase yield. This unfortunately includes, my favorite German hefeweizen.

  10. david cooper Says:

    brexit contagion spreads through europe:

  11. david cooper Says:

    i hope the british people realize how much sovereignty they give up in eu as aep does. Is this problem with court widely known? thanks for the article

  12. kevinwaspi Says:

    The dominos are beginning to show signs of falling. Today’s AEP piece is a brilliant build on yesterday’s revelation of “French resistance”

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