Well the jobs numbers are in for September and they are miserable, as in 142,000 non-farm payrolls miserable. In context, the consensus range was 180,000-285,000, so this was a big miss. And to pour salt in this wound, the prior two months were revised down a collective 59,000.
http://www.calculatedriskblog.com/2015/10/september-employment-report-142000-jobs.html
I am thinking the tune she will likely sing is "I Can't Get No Satisfaction."
Friday, October 2, 2015
Thursday, October 1, 2015
That's Going To Leave A Bruise
Well, can't say I didn't tell you so. The ISM manufacturing index came in this morning at 50.2, below the consensus forecast of 50.4 and continuing a rather distinct downward direction. Couple that with the foreign trade numbers out earlier this week and the GDPNow Q3 "growth" forecast took a rather noticeable turn for the worse, dropping from 1.8% to .9% in one fell swoop. Ouch!
https://www.frbatlanta.org/cqer/research/gdpnow.aspx?panel=1
Markets initially reacted poorly but rebounded at the end closing up modestly. I guess you never know.
https://www.frbatlanta.org/cqer/research/gdpnow.aspx?panel=1
Markets initially reacted poorly but rebounded at the end closing up modestly. I guess you never know.
Wednesday, September 30, 2015
Enjoy Thyself Today
The last day of the quarter and as expected markets are set to paint the tape for the quarter's end. Certainly not enough paint in the bucket to make this quarter look anything but horrific, but why not end the quarter on an up note. So enjoy the day - until tomorrow.
You see tomorrow the ISM Manufacturing index numbers come out and me thinks they will have an unfavorable aroma associated with them. Since all (as in Philly, NY, Dallas, Chicago, Richmond, Kansas and Milwaukee) the regional numbers out the past couple of weeks, including the latest on Milwaukee today, sucked big time, tomorrow's number is not likely to inspire a lot of happy feelings.
http://www.zerohedge.com/news/2015-09-30/another-regional-fed-survey-collapses-ism-milwaukee-crashes-2009-lows
So while the GDPNow forecast by the Atlanta Fed rose to its highest level for the third quarter earlier this week with a whopping 1.8%, based largely on folks now briefly spending more than they make (yeah!), don't expect this glowing number to hold.
The bigger question to start pondering is what will the month of October hold for the markets. October is known historically for some very prominent crashes, like 1929 and 1987, so it has an emotional connotation to it you cannot ignore. Indeed, with stocks highly overvalued by all historical standards, whether they will stay overvalued is only a matter of emotion, not fundamentals. Where do you think the emotion is right now? Does it support folks wanting to take risk in October and maintain or increase the overvaluation? Or have fear and risk aversion set in with it being likely we will have more reversion to mean (or as Dr. Hussman notes in his weekly article this week, reversion to inversion) The question is, are you feeling lucky? Or, better yet, are people in general feeling lucky? I think you know the answer.
You see tomorrow the ISM Manufacturing index numbers come out and me thinks they will have an unfavorable aroma associated with them. Since all (as in Philly, NY, Dallas, Chicago, Richmond, Kansas and Milwaukee) the regional numbers out the past couple of weeks, including the latest on Milwaukee today, sucked big time, tomorrow's number is not likely to inspire a lot of happy feelings.
http://www.zerohedge.com/news/2015-09-30/another-regional-fed-survey-collapses-ism-milwaukee-crashes-2009-lows
So while the GDPNow forecast by the Atlanta Fed rose to its highest level for the third quarter earlier this week with a whopping 1.8%, based largely on folks now briefly spending more than they make (yeah!), don't expect this glowing number to hold.
The bigger question to start pondering is what will the month of October hold for the markets. October is known historically for some very prominent crashes, like 1929 and 1987, so it has an emotional connotation to it you cannot ignore. Indeed, with stocks highly overvalued by all historical standards, whether they will stay overvalued is only a matter of emotion, not fundamentals. Where do you think the emotion is right now? Does it support folks wanting to take risk in October and maintain or increase the overvaluation? Or have fear and risk aversion set in with it being likely we will have more reversion to mean (or as Dr. Hussman notes in his weekly article this week, reversion to inversion) The question is, are you feeling lucky? Or, better yet, are people in general feeling lucky? I think you know the answer.
Tuesday, September 29, 2015
Let's Just Call Him Dick
I was listening to a financial advisor on the radio over the weekend. I hesitate to use his real name, so let's just call him Dick Forthefun. Dick was noting how interest rates continue to be at lows of a lifetime and everyone should take advantage of it and buy a house or a bigger house or refinance if they can. Dick even gave an example of a couple with an existing 30 year mortgage with only 10 years left to pay and said they should refinance into a new 30 year mortgage at 4% and lower their monthly payments. This was thrown out there without any facts of said hypothetical couple other than what I just gave. Nothing on their age, current rate, retirement plans, monetary situation or anything else. Just hey, rates are low and you are an idiot not to take advantage.
Well I agree that it makes sense to take advantage of the low rates in certain circumstances, but in my book you have to look at each individual's circumstances. If you are retiring in 10 years or have a kid going to school then, perhaps having NO mortgage in 10 years instead of lower payments for 30 years makes sense. Or maybe, if you can refinance with no or minimal closing costs or points, you can do a 10 year mortgage at 3.75%. Monthly payments should still go down, just not as much, and you are still done in 10 years.
I've refinanced three times in the past seven years. The first two times I refinanced into new 30 year mortgages and while my payments did go down as I went from the original 7% to 5.5% to 4.5% and did no cost refinancing, I nonetheless realized at the end of the day that here I was 10 years into my home ownership and still had 28 years of mortgage payments and largely the same loan balance as when I started (since very little goes to equity in the first years of a 30 year mortgage). Those financially intelligent moves just seemed to make less sense in this context. So the last time I refinance three years ago I did a 15 year mortgage, which I was able to get for a fixed 3%. Yes, my payments went up some but my house will be paid for now in 12 years when I am ready to retire. I can stay in it then with no mortgage at all or sell it and have full use of the proceeds. No risk of housing slumping and going under water. My preference is very much to go into retirement debt free. Certainly takes some strain off the golden years.
So Dick, stop throwing around out of context stupid advice. And maybe your announced belief that interest rates are going up, which formed the context of the entire show you did that day, is full of it as well. There was no rate increase in September and presently the vast majority of economists say none this year. For once, I agree with the majority of economists on their forecast. Indeed, I think we will see NIRP before any increase and our dear friend Janet has hinted it is not out of the question.
And Dick, I also heard you the other day touting how wonderful you are in having discovered ETFs long before most financial planners and how you have been steering your clients to these instead of mutual funds for years. So far, so good as there are some benefits to these while the market is rising. Let's just see how that works out now that the market is heading south and the whole liquidity thingy is raising its ugly head. You failed to mention there may be situation where ETFs cannot fund redemptions. Ooops, I guess you didn't consider that one.
http://www.zerohedge.com/news/2015-09-09/mom-and-pop-will-probably-get-trampled-alliance-bernstein-warns-bond-etf-Armageddon
It would seem that none other than Carl Ichan agrees that ETFs are a dangerous place for the average investor:
http://www.zerohedge.com/news/2015-07-16/icahn-vs-fink-wall-street-legends-clash-over-dangerous-etfs
I don't hear you telling your listeners or clients about the ETF flash crashes this month or how many of them have been hastily trying to line up lines of credit to deal with liquidity issues, which must be reassuring..
So Dick, thanks but no thanks for the advice.
Well I agree that it makes sense to take advantage of the low rates in certain circumstances, but in my book you have to look at each individual's circumstances. If you are retiring in 10 years or have a kid going to school then, perhaps having NO mortgage in 10 years instead of lower payments for 30 years makes sense. Or maybe, if you can refinance with no or minimal closing costs or points, you can do a 10 year mortgage at 3.75%. Monthly payments should still go down, just not as much, and you are still done in 10 years.
I've refinanced three times in the past seven years. The first two times I refinanced into new 30 year mortgages and while my payments did go down as I went from the original 7% to 5.5% to 4.5% and did no cost refinancing, I nonetheless realized at the end of the day that here I was 10 years into my home ownership and still had 28 years of mortgage payments and largely the same loan balance as when I started (since very little goes to equity in the first years of a 30 year mortgage). Those financially intelligent moves just seemed to make less sense in this context. So the last time I refinance three years ago I did a 15 year mortgage, which I was able to get for a fixed 3%. Yes, my payments went up some but my house will be paid for now in 12 years when I am ready to retire. I can stay in it then with no mortgage at all or sell it and have full use of the proceeds. No risk of housing slumping and going under water. My preference is very much to go into retirement debt free. Certainly takes some strain off the golden years.
So Dick, stop throwing around out of context stupid advice. And maybe your announced belief that interest rates are going up, which formed the context of the entire show you did that day, is full of it as well. There was no rate increase in September and presently the vast majority of economists say none this year. For once, I agree with the majority of economists on their forecast. Indeed, I think we will see NIRP before any increase and our dear friend Janet has hinted it is not out of the question.
And Dick, I also heard you the other day touting how wonderful you are in having discovered ETFs long before most financial planners and how you have been steering your clients to these instead of mutual funds for years. So far, so good as there are some benefits to these while the market is rising. Let's just see how that works out now that the market is heading south and the whole liquidity thingy is raising its ugly head. You failed to mention there may be situation where ETFs cannot fund redemptions. Ooops, I guess you didn't consider that one.
http://www.zerohedge.com/news/2015-09-09/mom-and-pop-will-probably-get-trampled-alliance-bernstein-warns-bond-etf-Armageddon
It would seem that none other than Carl Ichan agrees that ETFs are a dangerous place for the average investor:
http://www.zerohedge.com/news/2015-07-16/icahn-vs-fink-wall-street-legends-clash-over-dangerous-etfs
I don't hear you telling your listeners or clients about the ETF flash crashes this month or how many of them have been hastily trying to line up lines of credit to deal with liquidity issues, which must be reassuring..
So Dick, thanks but no thanks for the advice.
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