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The next two days will keep Wall Street and investors on edge as the Federal Reserve Board meets. Speculation abounds about whether the Fed will raise interest rates for the first time since June 2006. Yes, it was almost a decade ago. Hard to believe that would have ever happened, but it has.

· First, let's tackle the jobs report for August which by many measures was weak in that "only" 177,000 were created; about 43,000 fewer than expected. If there is any month where the Labor Department (DOL) has been wrong with its first estimate, it is the month of August. According to Goldman Sachs, the initial governmental numbers have averaged 30,000 below the expected number over the past five years, so 43,000 is not that much out of the ordinary. Further, the final August number was revised upwards by an average of 79,000 over the same five years. We will have to wait to see if this pattern holds true again this year. Meanwhile, let's remember this is only one monthly data point and so far this year, even with the modest gains of August, the US has averaged over 200,000 jobs per month.

Additionally, the DOL revised the strong employment numbers from June and July upwards by 44,000, or just about the number by which August underperformed. Unemployment fell to 5.1% from 5.3%. There is a plus and a minus to this. Fewer people unemployed is a good thing for all of the obvious reasons. However, as we approach full employment, it means that businesses have to increase wages at a faster rate than they might like in order to keep their good people, lest the workers start looking somewhere else for a higher paying job...a bad thing for the business and potentially leading to higher/faster inflation.

The Fed must also weigh the effects of the correction in the stock market, China's slowdown, slower worldwide growth, low oil prices, and a host of other economic factors. Candidly, we don't give any of these much credence, individually, in changing the Fed's decision – whatever it is. Collectively, however, they could cause the Fed to postpone the first increase. We will know within 48 hours.

At some point, the Fed has to begin to normalize interest rates. In our opinion, the negative impact is a short term phenomenon, but the longer term impact will be positive. Stay away from the white noise and look at the fundamentals that remain reasonably strong in the US. By no means is our economy as robust as we would like, but it certainly is growing.

· It is the holiday season for defense contractors this September, just like every year. The government's fiscal year ends the end of the month and that means any government agency that has unspent cash, "needs" to spend before the end of the month or risk getting less money next year. It is a government tradition. If they don't spend all of their money, then obviously they don't need as much next year so Congress will not give them as much. Whatever the cause of excess cash, the name of the game is to spend before the fiscal year is over. This seems crazy given we will likely have a deficit this year above $400 billion and our national debt is over $18 trillion dollars. Congress should reward agencies that get their job done in a frugal manner. We agree that government cannot run like a business for a variety of reasons, but this practice isn't one of them.

· In the last week of August investors pulled more than $27 billion dollars out of stock funds – the most since June 2013. That was a month when the markets declined dramatically and investors reacted much as they are now...doing the wrong thing by selling when the market is down. The problem is that most of these investors will get back into the market at a higher level than they got out. This used to be called the "odd-lot" theory. Smaller investors couldn't buy 100 shares at a time and anything less than that was called an odd lot. As the theory went – do the opposite of the small investor, aka "odd-lotters". We will likely see continued volatility, but volatility is the price to pay for higher long term returns.

· Earlier we wrote of the employment numbers and that there was both good and bad news depending on the point of reference. On the positive side, the Labor Department announced last week that job openings hit a record high in July. Employers advertised for 5.8 million jobs which eclipsed the previous record of 5.4 million jobs in May of this year. Again, there is good and bad news. First, there are plenty of jobs yet to be filled which means the job creation number will likely remain strong throughout the rest of the year, BUT it is also a sign that employers are finding it hard to get qualified applicants.


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