HEY, HEY, CUBBIES!

...as the late, great Jack Brickhouse would have put it/  After a 108 year hiatus, the Chicago Cubs won the World Series.  Prayers answers, dreams fulfilled and who the hell cares about the most important election in the past 108 years.

But, life tho suspended for a moment in time goes on.  Tomorrow is the jobs report which will have less meaning than people thought simply because no one voting cares about anything else by the trials of Hilliary (real and perhaps future ones) and whether The Donald can pull this one out merely by keeping his mouth shut as revelations both from Wiki Leaks and leaks from the FBI point towards a level of corruption and duplicity withing the center of government that in many ways compairs unfavorably to the every day goings-on in Nigeria.  Can one say Third World Republic?  What we are learning is unspeakable if true.

Meantime, in Janet's World, things are still on hold but there are signs that the rate rise is coming in December.  That and the heightened possibility that Trump could actually win this thing or the specter of a crippled Hilliary battling scads of investigations for the next four years sent the DOW down for the seventh day on the trot.  More importantly, however, is the general view as expressed here over the past few days that interest rates are going up world-wide as central banks pull back from the money-creating operations of the past few years.  The Bank of Japan is the latest to essentially declare that mums the word when it comes to continued softening of monetary policy.

That all of this is occurring in the face of not-so-great economic performance as witnessed by third quarter profit reports and economic performance figures world wide is unsettling.  Job numbers, no matter what tomorrow brings have been holding up but besides the bedpan and burger gains a closer examination reveals that there is a lot of part-time work included in the numbers and whilst the government points to wage gains and family wealth performance, the data backing up these "wins" is clearly suspect.  Yet we are OK if not great Over Here.  Over There, I see further signs of economic and political malaise extending into 2017.  If Trump were to win, the effect of the Union could very well be calamitous for the internationalists and Brussels.  Even a close loss will have an effect.  The politics of Europe are, in my mind, the single greatest risk to be faced in the near future...and that's even without BREXIT which took a strange turn yesterday when the British High Court ruled that BREXIT could not go forward without parliamentary approval.  Having bypassed the people's elected representatives and gone directly to the constituency by referendum, it seems a bit odd to throw the whole thing back to the folks from whom it was taken away in the first place.  I mean, like, DUDE, that only happens in California, but then again it might make perfect sense once I read the opinion.

Anyway, we'll keep an eye on this and the number when it comes out tomorrow.  There's a parade in Chicago tomorrow and half the town will be knee-walking tonight so I hope they're still trading on the exchange at 8:30 a.m. EDT.  But the Cubbies did it and good on 'em and their ever-so-patient fans.  Can we all restore normalcy at this stage and go back to rooting for the Yankees?

THE JOBS NUMBER

Comes out tomorrow at 8:30 a.m. EDT.  Should anyone care?  Don't know why although we are told that it will be all-determinative as to whether The Fed hikes rates or not.  My view as I have so-oft stated is that the numbers are crap and when necessary, cooked, but the equity boys stay up all night so as not to miss its release.  Perhaps they should sleep in as the Fed was given all the reason they need NOT to raise in the date that was released today.  It was bad, really bad.  ISM came in at 49.4 which means that manufacturing output actually fell.  52 was expected.  Productivity was down 0.6%--the third consecutive quarter in which the number declined.  Jobless claims were up and just to cap off a perfect day the IMF, should anyone care, just decided that global growth is not going to make 3.2% and the U.S. is probably going to come it below 2.0%.  Great job gang.  How many otherwise out of work economists from the developing world did it take to come up with what anyone knew already.?

But the Equity markets just shrugged it off with the DOW closing up 18 after a big morning drop.  Why?  Well in the afternoon the word started to get out that tomorrow's number would be in the 180-200,000 range but the whisper number was 150,000.   Yippee Wee!  No rate rise for me!  As I said, who cares as the Fed already has their no change of policy excuse.

But if the number is good, that wouldn't be bad, especially for the administration and Hillary Rodham Obama.  Let's, therefore, keep an eye out but I keep asking myself with these lousy economic numbers how can employment be rising?  They numbers could be cooked to be sure but there might also be another explanation which ties in to the productivity number about which we spoke last month.  New hires are a hedge.  Maybe, just maybe, against all predictions the economy begins to improve in which case companies are well-positioned.  But if things stay flat, you can always fire a new worker whereas you can't fire a new piece of equipment.  And guess what?  Capital expenditures are way down and those purchases have been a big part of rises in productivity in the past.  Maybe I was wrong to criticize those who blamed the low productivity numbers on untrained new workers.  Maybe they were right but simply didn't (and don't) understand the real meaning of the data.  Today's mantra was that the ISM report was an aberration.  I'm not so sure and tomorrow isn't going to clear that up or much else for that matter.  But, I'll be up at 8:25.  The things I do for you.

NOW WHAT

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.

A DELIBERATE OVERSIGHT

I should have written something on Friday after the jobs number came out but I didn't.  On purpose.  Didn't know what to make of it.  Still don't.  Anyway, the number was up 200,000+ but in a break to the pattern the percentage of jobless rose to 7.4%.  The headline number got all the play but after a close and sober look it appeared that the Quality of the jobs created was low.  We are now at the point where any number gets parsed and cut 5 ways to Sunday, but at the end of the day markets are still looking at the Fed and it is the Fed that is going to determine future economic and market actions.

Ms. Yellen spoke today and it is even more clear in my mind that that the days of creating money are still with us and will be well into next year.  The Fed, whomsoever is running it and the ECB are on the same page.  Japan is certainly into the "Take it, it's free!" camp and the UK remains on board although there are more than just stirrings in light of an economy that seems to be doing far better than anyone had hoped (which is another thing I don't understand).  If the pressure to raise rates rises to the point where the Bank of England must act, there will be absolutely hell to pay in the Euro zone.  S'truth, I can't see that happening either.  Much easier to blame Germany for all the troubles on the continent although with economic growth at less than 1%, one wonders what the Germans are doing to deserve all the heat except operating in a monetary union that at this stage of it's development (or demise…take your pick) favors the efficient producer in a common market…hey, catchy phrase that; wonder if it has ever been used?

Over Here, The Leader seems consumed with deflecting public opinion on ObamaCare to the point where very little is happening.  I don't have a dog in this fight except to note that there appears to be more trouble lurking on the horizon that first believed.  The end of this week will come the promised first report on the number of sign-ups (or not, as the case may be) and the expiration of half of the time for the promise of the fixing of the web site.  More and more it appears that this effort will result in failure.  If this is the case and the sign-up effort collapses, some feel that the political pressures in a coming election year will result in wholesale abandonment of The Leader by vulnerable Democrats giving Republicans effective control of both houses.  I don't believe it but if that occurs, the effect upon economic activity due to the uncertainty could be devastating.  I realize that most readers already understand this but for those of you outside of our boundaries, probably covered by a single payer system of health care, this is a really big deal.  Stay tuned.