Friday, June 5, 2015


We had a really good jobs number today, not that 280, 000 is what we need but it was well above even the highest estimates.  More importantly, rather than people dropping out of the job search, more people were looking for jobs.  In addition average wages went up which all in all is a good sign.

Now of course if one wishes to be consist ant in one's reasoning, one could argue that this number is a snap-back from the dismal first quarter which as everyone knows was caused by the weather...I mean, Il Duce told us so...but let's be positive and head into the weekend with a smile on our faces.

There are, of course, a few other things to consider...the Fed for one.  Now as we know, everybody from Janet Yellen to Chrissy with numerous politically oriented governors in between (Brainard, Tarullo) don't want to raise rates but with this number the market sure as hell wants them to so why not do it/  Don't worry, they will not but I might want to hedge my bets and bring the fourth quarter into play if things keep looking up.

With the number, yields went screaming up with the Ten Year closing at 2.40%.  Remember when it was just 1.85% just a few short months ago?  On the yield the dollar rallied, the Euro slipped and the Bund dropped to 0.81%  To be expected.  But the really interesting thing that is going on is the manner in which the yield curve is flattening.  The Long Bond hasn't moved nearly as much (3.11%) but the 5 year has been on a tear closing at 1.78% today.  The curve has actually been flattening as now we are only getting 120 b.p. for the duration.  In the world of "what does this mean?" I have absolutely no idea except that when confused, stay short(er) and that old bankers--and young ones--do not like flattening yield curves and as far as we are concerned nothing good comes of it...but it sure does provide copy!

Then there is Greece.  James Stewart--a hell of a writer by the way--managed to highlight the Rock Star and game theory today in his column in the New York Times.  Charlie to Jim:  game theory has nothing to do with it.  The Rock Star is a jerk working for a bunch of politicians who are way over their heads who yet might be bailed out simply because at this stage of the game it doesn't matter a toss if Greece is in or out so stop with the "grave risks to be run" talk in this game of chicken.  Game theory never solved anything; people have and always will.  Games are written after the fact and the odds on a flip of a coin are always 50-50.  And never loose sight on the fact that Greece on 20 Drachma a day isn't a bad deal.

Beautiful weekend coming up in the Fly Over Zone.  Hope you have one as well.

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