Saturday, August 13, 2016

MAD Weekly Review

"What am I going to do with you? You simply won't die" - Commodus(Gladiator)

With how the markets have climbed the proverbial wall of worry I'd agree with Commodus. Despite all the gloom and doom at the beginning of the year we still can't deny the fact stocks are up this year, and still trading near all time highs. In fact the market has been so calm the VIX is at record lows. Of course this doesn't mean you get complacent and throw the kitchen sink into the market. You stay disciplined to your plan designed to help reduce your risk. Need one? Then contact us, and did I mention free consultations and affordable prices?

We Have to Many Jobs

Ironically our strong job market just wont die either.  We have a major jobs problem in this country.  In fact our problem is so big we now have 5.6 million jobs available and it looks to keep growing.  The problem is it seems people are lacking the skill necessary to land these jobs.  I follow business devoutly and one of the overriding themes the last couple years is how hard it is to find qualified workers.

Just check out this labor market data I posted earlier this week. There are so many frickin' jobs available!!! It's up to you the individual to make yourself an attractive candidate. You don't rely on the government raising the minimum wage.  If that's your end game then I'm sorry for you, especially if you are capable. So don't be fooled by all the "jobs going to China" rhetoric that's still thrown around.  There's plenty to be had in America.

On the flip side there is not plenty to be had for retailers. Retail Sales came in flat and if we exclude auto they show a -0.3% slump. Under the surface we see some weakness in food and beverage sales, building and garden materials, and clothing.  However if you listen to the news you'd probably hear retailer Macy's stock is jumping higher. That's because they are closing 100 stores(ie reducing costs), but remember the stock is still down 44% since it's July 2015 high. So don't confuse that with great news, you must know the data and it's relativity to everything else. In reality this report is not much of a concern until we receive a few more bad reports.

BOE Admits Private Sector Better Allocator's of Capital

On the global front the Bank of New Zealand cut it's benchmark rate 0.25% to 2%. The market had been expecting a 0.5% cut and I think that's part of why the Kiwi rallied on the news. In bigger news The Bank of England has expanded their easing efforts, which is something not so easily afforded by other members of the EU. The Bank cut their benchmark rate by 0.25% to 0.25%.  They  will be purchasing 10 billion worth of corporate bonds, and are increasing their government bond purchases by 60 billion a month to 435 billion. Here is my favorite part of their statement(emphasis added)
Purchases of corporate bonds could provide somewhat more stimulus than the same amount of gilt purchases.  In particular, given that corporate bonds are higher-yielding instruments than government bonds, investors selling corporate debt to the Bank could be more likely to invest the money received in other corporate assets than those selling gilts.
Or in other words the private sector will do a better job of stimulating than we the government can.  So I guess they should continue letting the government blow their 435 billion each month. They must be better allocator's of capital than the private sector, but hey what do I know.

Market News

US Treasuries continue to trade near all-time lows.  In particular the 10-year is trading only about 12bps above it's all time low around 1.49% now. The Euro made some ground against the greenback as expectation's for a rate hike this year continue to drop by market participants. This one I don't get at all. You'd think since rates are already negative it'd be the opposite, but as the saying goes markets are never wrong, and sometimes irrational.  Yes those two don't go together.

Earnings season is pretty much wrapped up with over 90% of companies having reported the last 5 weeks. With an upcoming election, rate hike meetings, and the next earnings season I'd say you can expect some choppiness for the rest of the year.  I don't expect it to be as bad as last fall, but the market rarely goes up or down in a straight line.

IndexStarted WeekEnded WeekChange% ChangeYTD %
S&P 5002182.872184.
Russell 20001231.091227.50-3.59-0.38.1

That's all and have a great weekend. Plus don't forget to follow on Twitter. I promise it's funny, sometimes!

The MAD Consultant

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