October 08, 2014

Sell-off yesterday. And pretty much started with the IMF report on global growth. Light.
Europe in the spotlight..... so what's new and Asia. We'll be looking.

Market nervousness is talked about on CNBC this morning.

road to recovery

The road to the economy's recovery has been a long and winding one. For sure.

What we have to look at is the job picture. Frankly the overall job growth situation has been dismal. It could be worse, so we have that going for us. The addition of more jobs would be beneficial to several sectors of the U.S. economy including housing.

The remainder of 2014 has the pulse of the consumer in the mix. While I'm on that subject, August retail sales were reported earlier today as increasing by 0.6 percent after an upwardly revised 0.3 percent. July was previously reported to have been flat.

The core sales correspond mostly with the GDP, which increased 0.4 percent in August.

Reuters was a source for this entry.

jobs number weak

The jobs report released this morning gave us significantly lower report than expected. This shows growth has slowed or even has halted. The report gave a number of 142,000 jobs added in August. The expectation number was at 225,000.

Labor force participation was little changed at 62.8% and that number has held steady since April.

At this writing the Dow is striving to hold off a fourth down day in-a-row.

This Forbes article was the source for this post.

the taper continues

No surprises from the Federal Reserve Open Market Committee.The committee said it would take $10 billion off its monthly asset purchases. Interest rates to remain at 0 - .25%.

In the June minutes, the committee said it would conclude QE in its October meeting.

In the statement today, the FOMC said, "a range of labor market indicators suggests that there remains significant underutilization of labor resources." Translated: no significant job growth. Expect inflation to rise just a bit too.

For the full statement from the Fed, click here for the story which was the source for this entry.

your own best interest

The issue is the "American Dream" and optimism. Can we all really "make it"? Perhaps it's time to change our paradigm. John Oliver explains:

The wealth gap increased as, according to NBC Nightly News, the 1% had 19.3% of the income in 2013.Policies that benefit the few have been supported by the many. John Oliver says because of optimism. He calls optimism America's greatest quality. Could it also be our greatest downfall? America has a system where wealth is disbursed by a lottery of wealth. We have accepted it.
Here's the source of the story from

supermarket inflation

CNBC welcomed Jim Grant of Grant's Interest Rate Observer. Jim is bullish on the asset class global market. He went on to say that the Fed has crushed credit spreads. This has resulted in many investors shorting treasuries to hedge against rising rates.

Has the Fed fueled inflation?

ADP released the June numbers for payrolls. Manufacturing up 12,000, construction up 36,000. May payrolls left unrevised at 179,000 to the upside.

a tip on tips

I came across an article from Market Watch tweeted by Ben Eisen on Treasury inflation-protected securities (TIPS).

The interesting item that struck me was Fed Chairman Yellen shrugging off a recent rise in inflation. Apparently no big deal. Let's hope.

TIPS protect against inflation. The article goes on to say TIPS have stabilized this year amid rising inflation. If CPI keeps climbing, TIPS look more attractive and could see growing demand.

kill switch

Market participants are trying to come to grips with technology glitches. These glitches have the potential to destabilize the markets. Electronic trading errors and how they can be prevented is being looked at again. Best practices and deployment are among the policies to ensure market participants have better systems.

These are the 5 biggest problems with the U.S. equity markets:
  1. It's extremely fragmented.
  2. High-frequency traders supply 40 to 60 percent of the volume traded.
  3. Mini-flash crashes are erupting in stocks on a daily basis.
  4. Algorithms are rushed to the market and may not be adequately tested.
  5. The SEC lacks a much-needed consolidated audit trail to police all trading activity.
So what can the financial industry do? Automated trading is here to stay. We can't stop progress.

A kill switch approach might be the most widely accepted approach to the problem. A kill switch at the exchange level that could halt trading if a broker-dealer exceeded a certain peak net volume threshold has been discussed among several working groups.

More oversight and testing has been needed to enforce a market-wide framework. Perhaps collaboration on algorithms isn't possible, but on a kill switch.... well, just maybe.