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January Jobs Data - Good, but Slack Remains
by Scott Brown of Raymond James,
Contrary to what you may have heard, the U.S. economy did not add 257,000 jobs in January. That’s the seasonally adjusted figure. We actually lost 2.755 million jobs, which was a smaller decline than the year before (-2.811 million).
Random Thoughts on a Cruise to Nowhere
by Jeffrey Saut of Raymond James,
We have lost our way as a people and a country when we ignore and/or fail to see the significance of history. King Abdullah and his father King Abdul Aziz al Saud were titans of the modern day middle east that so affected us all. I read about his death in the B section of the local paper after a story about our local nursing home under new management. God, Allah, Adonai ... please help us all.
The Road Back, and Ahead
by Scott Brown of Raymond James,
The U.S. economy data are likely to be mixed in the near term, but there is little doubt that we are gathering steam. The plunge in gasoline prices is an enormous tailwind. However, this isn?t just an energy story. The fundamentals are getting better.
Deflation, Low Inflation, and Monetary Policy
by Scott Brown of Raymond James,
Central bank policymakers fear deflation more than anything. However, there is good deflation and there is bad deflation. Yet, even low inflation can create problems for an economy. Low inflation is expected to be a key factor in the ECB?s decision to embark on quantitative easing and ought to have some influence on the timing of the Fed?s initial rate hike.
Rocky Horror Picture Show
by Jeffrey Saut of Raymond James,
?Rocky Horror Picture Show? was a satirical film production done as a tribute to the science and horror ?B? movies of the late 1930s through the 1970s. I was reminded of the flick last week when one portfolio manager I saw in Fort Lauderdale said to me, ?The first few weeks of the New Year have been an absolute horror show!?
The Job Market and the Fed
by Scott Brown of Raymond James,
The December Employment Report presented a mixed job market picture. The establishment survey data reflected strong job growth, but with a lackluster trend in average hourly earnings. The household survey showed a larger-than-expected drop in the unemployment rate, but that was due to a decline in labor force participation. What should Fed policymakers make of this report? Patience, grasshopper, patience ...
All about that base
by Jeffrey Saut of Raymond James,
The transition from one year to the next is always accompanied by a whole host of traditions intended to help people celebrate this annual new beginning. The resolutions, parades, fireworks, football games, food, furniture sales ? they all seem to be experienced in a fresh, optimistic light, like an all-forgiving reset button was hit when that ball dropped on New Year?s Eve.
Adventures in Forecasting
by Scott Brown of Raymond James,
Every December, economists are asked for their projections for the coming year. Whats GDP growth going to be? How many jobs will be added? Whats the Fed going to do? How will the financial markets react? We build models of the economy models that we know are not precise. There are simply too many variables.
Adam Smith or Jerry Goodman
by Jeffrey Saut of Raymond James,
I met Jerry Goodman, whose nom de plume was Adam Smith, late in my career. He was working at my friend Craig Drills money management firm along with another icon in this business, from an era gone by, namely Al Wojnilower. I have had many conversations with all three of these Wall Street legends around the conference table at Drill Capital Management. Jerry wrote The Money Game (1968), Powers of Mind (1975), Paper Money (1981), and The Roaring 80s (1988), but unfortunately we lost his wisdom on January 3rd of this year .
Please Make it Stop!
by Jeffrey Saut of Raymond James,
He said: Jeff, you sure were right in Thursday mornings verbal strategy comments when you said we should get a bounce following Wednesdays 90% Downside Day, but that that bounce should not hold and for the perfect set-up to occur for the Santa Rally would be to have the S&P 500 come back down and travel into the 2000 2010 level.
High Anxiety
by Scott Brown of Raymond James,
Federal Reserve policymakers meet this week to set monetary policy. The key concern is the timing of policy normalization. Officials may be anxious to begin lifting short-term interest rates, but they need to be very careful about managing market expectations. The risks of tightening too soon or too late are not symmetric and with the financial markets in turmoil, the Fed will not want to add to the level of anxiety.
The Fed, Jobs, and the Financial Markets
by Scott Brown of Raymond James,
Looking ahead to 2015, the labor market is expected to play the key part in the Feds path to policy normalization. However, as we learned from New York Fed President Dudley last week, the Fed will also consider the reaction in financial markets.
Quote of the Week
by Jeffrey Saut of Raymond James,
As most of you know I was in New York City most of last week seeing institutional accounts, doing media and speaking at various events. One of the media appearances was to co-host CNBCs Closing Bell on Tuesday, with the sagacious Sara Eisen, who unsurprisingly gave me the quote of the week. The quote was, Think of it this way, lower oil prices are to America what lower labor costs were to the BRICs!
Monetary Policy Outlook
by Scott Brown of Raymond James,
The minutes of the October 28-29 Federal Open Market Committee meeting suggested that there is still no consensus opinion among senior officials regarding when the Fed will begin raising short-term interest rates. There is strong agreement that monetary policy moves will be data-dependent. However, policymakers differ in their views on the amount of slack in the job market.
2015?
by Jeffrey Saut of Raymond James,
Year-end letters are always difficult to write because there is a tendency to discuss the year gone by, or worse, try and predict what is going to happen in the New Year. I mean really, at this time last year who predicted Russia would invade Crimea, that ISIS would effectively take over a significant portion of Iraq, or the Republicans would sweep Congress.
Thanksgiving Recipe
by Jeffrey Saut of Raymond James,
Begin with a turkey chilling in a sink for a few hours. Mix in the Bank of Japans shock and awe announcement of a week ago. Add the U.S. unemployment claims that are at a 14-year low and stir well, include housing prices that are better by +6%, fold in the Leading Economic Indicators advancing by 7%, the ECB announcement by Draghi about a bazooka of Quantitative Easing (QE), and the Thanksgiving dinner result . . . new highs for equity prices!
Monetary Policy Outlook
by Scott Brown of Raymond James,
The minutes of the October 28-29 Federal Open Market Committee meeting suggested that there is still no consensus opinion among senior officials regarding when the Fed will begin raising short-term interest rates. There is strong agreement that monetary policy moves will be data-dependent.
Crude Oil?
by Jeffrey Saut of Raymond James,
Integrity, Websters dictionary defines it as, The quality of being honest and having strong moral principles. Recently the voters of America sent the D.C. crowd a message that they want integrity back in government. Consequently, I viewed the midterm election as a turning point. And, a turning point approaches on December 21st of this year. Thats when the Winter Solstice arrives.
A Mixed Bag, But Optimistic on the Consumer
by Scott Brown of Raymond James,
Inflation-adjusted consumer spending growth, 70% of Gross Domestic Product, rose at a lackluster 1.8% annual rate in the advance estimate for 3Q14. That figure is likely to be revised higher, but the pace is expected to remain disappointing relative to job growth (this year, we are on track to post the largest increase in jobs since 2005). The main restraint on spending appears to be the weak trend in average wages. Until the job market tightens a lot more, were unlikely to see a significant pickup in wage growth.
Dash Dash...Dot Dot
by Jeffrey Saut of Raymond James,
Dash, Dash ... Dot, Dot is all about Morse Code where the dash is three times the duration of the dot. According to Wikipedia, Each character (letter or numeral) is represented by a unique sequence of dots and dashes. Each dot or dash is followed by a short silence, equal to the dot duration.
Income Inequality and Fed Policy
by Scott Brown of Raymond James,
Income inequality has been an important topic this year, but it is one that is mired in politics. That means it is a potentially treacherous debate for the Federal Reserve chair to wade into. To be fair, Yellen said that the purpose of her recent talk on income inequality and opportunity was not to provide answers to these contentious questions, but rather to provide a factual basis for further discussion. She provided a mountain of evidence from the Feds triennial Survey of Consumer Finances, and then got out of the way, as appropriate.
The Week That Was
by Jeffrey Saut of Raymond James,
In the June 26th edition of the Morning Tack, Jeff Saut wrote, I do believe the VIX bottomed last Friday (6/20/14) with an undercut low, much like the undercut low of October 4, 2011 that we identified as the valuation low, and recommended should be bought with the SPX trading back then at 1075. Well that proved to be fitting timing, since from that 6/20 low to the high on Wednesday 10/15, all the VIX did was shoot up about 200%!
Risk and Uncertainty, Confidence and Fear
by Scott Brown of Raymond James,
In recent weeks, the financial markets appear to have been reacting less to weaker expectations of global growth and more to the increased downside risks that is, to the fear that things could get a lot worse. The downside risks to Europe are considerable, but America is much less dependent on exports than most other countries and the prospects for moderately strong growth into 2015 remain promising.
No More Black Mondays
by Jeffrey Saut of Raymond James,
In a true demonstration of impeccable and apropos timing given the recent volatility we have experienced, yesterday marked the 27th anniversary of one of the stock markets most infamous and chronicled events. Black Monday, October 19, 1987 was one of those multiple standard deviation occurrences that statisticians will tell you are not supposed to ever really happen, but as is the case more frequently than most realize, it of course did happen, and its impact is still being felt today even as there are fewer and fewer investors around that actually had to suffer through it.
Global Worries (And Some Benefits)
by Scott Brown of Raymond James,
In the latest update of its World Economic Outlook, the IMF revised lower its expectations of global growth in 2014 and 2015. None of that should have surprised anyone. At this point, the IMF expects that European GDP will be relatively weak in 2014 (+0.8% 4Q14/4Q13) and should improve in 2015 (+1.6% 4Q15/4Q14). However, risks are weighted predominately to the downside. Weaker European growth and a stronger dollar will have a significant impact on many U.S. firms, but may have some benefits for the economy as a whole.
The Right Question
by Jeffrey Saut of Raymond James,
In this business it has been said, Sometimes knowing the right question is more important than actually knowing the answer. Over the years I have found that old Wall Street axiom to serve me well. One example would be reading the footnotes in a companys annual report.
That Was the Week That Was...
by Jeffrey Saut of Raymond James,
A week ago yesterday I arrived in New York City just in time to have dinner with some friends. Avra Estiatorio is arguably the best Greek seafood restaurant in the city and it is located 20 steps from my hotel of choice, the Hyatt 48 lex, which is aptly named since it sits on the corner of Lexington and 48th street.
Looking Back, Looking Ahead
by Scott Brown of Raymond James,
Real GDP is now estimated to have risen at a 4.6% annual rate in 2Q14. However, the second quarters strength must be balanced against the first quarters weakness (a -2.1% pace). As the third quarter ends, we still dont have a complete picture. However, figures are likely to suggest a moderately strong pace of growth and a gradual taking up of economic slack.
Sisyphus Succeeds!
by Jeffrey Saut of Raymond James,
I have been reminded of the Greek mythology character Sisyphus since mid-July as investors tried to roll an immense boulder up a hill, only to watch it roll back down. In this case the boulder in question has been the D-J Industrial Average (INDU/ 17279.74), which since late July has tried seven times to better its all-time high of 17138.20 made on July 16th of this year.
The Dots
by Scott Brown of Raymond James,
As was widely anticipated, Federal Reserve policymakers reduced the monthly pace of asset purchases by another $10 billion and kept the considerable time language. Fed policymakers revised slightly their forecasts of growth, unemployment, and inflation. However, the really interesting item in the Feds Summary of Economic Projections was the dot plot, the projections of the appropriate year-end level of the federal funds rate for each of the next few years. There is a huge range of uncertainty among Fed officials.
Mind Your Language!
by Scott Brown of Raymond James,
The Federal Open Market Committee is widely expected to take another trip to Taper Town on Wednesday, reducing the monthly pace of asset purchases by another $10 billion, one step closer to ending the program in late October. The more interesting issue is whether well see any change in the Feds forward guidance on short-term interest rates specifically, whether the FOMC will jettison the considerable time language.
Then and Now
by Jeffrey Saut of Raymond James,
Dallas-based Greenbrier Partners is captained by my friend Frederick E. Rowe, who is fondly referred to as Shad. Now anyone from Virginia is familiar with the fish known as a shad, and are probably familiar with the political event known as the Shad Planking.
As The World Turns ...
by Scott Brown of Raymond James,
U.S. economic data were mixed last week, but there was nothing in the August Employment Report to suggest that growth is slowing down. A surprise move from the European Central Bank pushed the euro lower, but there appears to be a lot more that the ECB can do.
Lucid Dreaming!
by Jeffrey Saut of Raymond James,
Evidentially, the lucid dreamers on Wall Street practiced their skills two weeks ago as professional traders were sneaking large buy orders into the equity markets on the closing bell. Simultaneously, the Commitment of Traders Report showed those same traders were dramatically reducing their short sale bets.
A Roadmap, Not a Timetable
by Scott Brown of Raymond James,
On Friday morning, Fed Chair Janet Yellen will deliver the keynote address at the Kansas City Feds annual monetary policy symposium in Jackson Hole, Wyoming. Those looking for clues on the timing of the first Fed rate hike are likely to be disappointed.
How Much Slack Is There In the Job Market?
by Scott Brown of Raymond James,
The amount of slack in the labor market will be a key driver of monetary policy in the months ahead. Fed officials differ in their perceptions of job market slack, leading some to want to tighten policy sooner rather than later. Labor market data can present somewhat different pictures, but on balance, there is still a large amount of slack remaining.
A New York State of Mind
by Jeffrey Saut of Raymond James,
I met Arthur, as well as a host of other friends, last Thursday afternoon during my NYC sojourn to see institutional accounts and do media events. Over a scotch, he related the aforementioned story to me. The timing was propitious because another one of our friends had just telephoned to tell us the President was authorizing air strikes against ISIS. After a dinner at Mr. Chows, I went back to my hotel to find the preopening S&P 500 futures printing down roughly 11 points.
Always Wrong?!
by Jeffrey Saut of Raymond James,
s the public always wrong? This is probably the most frequently asked question about the Theory of Contrary Opinion. For a correct answer we need to change the words in the question. Let me put it this way: Is the public wrong all the time? The answer is decidedly, No.
So, What Did We Learn?
by Scott Brown of Raymond James,
The busy week of economic news left investors uneasy. The 4.0% GDP growth figure contributed to concerns that the Fed may be forced to raise short-term interest rates sooner rather than later. However, while the economic data reports, and even the Fed policy statement, had something for everybody, the outlook for monetary policy should be essentially unchanged.
Trains and Boats and Planes?
by Jeffrey Saut of Raymond James,
hose of you who know me know that I have had a love affair with boats ever since I was a kid. In my youth it was speedboats on various lakes in Michigan. In my teens, and into my forties, it was sailboats combined with an occasional trawler. In later life, however, it has been strictly powerboats.
Should Be an Eventful Week
by Scott Brown of Raymond James,
The economic calendar is packed with important items this week. Oddly, Wednesday afternoons policy announcement from the Federal Open Market Committee may be the least interesting. One shouldnt put too much weight on the advance GDP estimate, as the figures will be revised, but the initial estimate, along with annual benchmark revisions, should have important implications for the outlook for growth in the second half of the year.
Are Interest Rates Too Low?
by Scott Brown of Raymond James,
In her monetary policy testimony to Congress, Federal Reserve Chair Janet Yellen offered no new clues regarding when the central bank will begin raising short-term interest rates. The Fed has been criticized for being behind the curve on inflation and for fueling bubbles. Neither criticism is right.
How High is High? (To Whom?)
by Jeffrey Saut of Raymond James,
I have a number of friends who succeeded as investors in the late 1960s, and they are succeeding now. The key to their success more than 20 years ago was that they managed to get out with most of their capital when the market turned down. Most investors were not so astute.
Fireside Chats
by Jeffrey Saut of Raymond James,
While I was in the Pacific Northwest and Canada most of last week, I did have the privilege of listening to J.P. Morgans (JPM/$55.80/Strong Buy) Chief Market Strategist last Monday. Dr. David Kelly has long been known for his keen insights on the equity markets, with JPMs senior portfolio managers like George Gatz and Tom Luddy steering their mutual funds, on said strategic views, to outsized gains for many years.
Reaching Escape Velocity?
by Scott Brown of Raymond James,
The strong pace of growth in nonfarm payrolls suggests much more than a rebound from bad weather. While recent economic figures have been generally mixed, the job market is clearly improving, led by increased hiring at small and medium-sized firms. The hope is that good news will feed on itself, lifting the pace of growth in the second half of the year. However, there are a few concerns in the outlook.
Results 1,101–1,150
of 1,521 found.
