I've moved!

 

Hey I've moved!

You can now find me at https://baerlocherbearing.substack.com/ where I continue to comment on all things related to the economy, finance, and markets.

Alan

Alan's Alert 8-9-2021

Even though I was off on Friday, I was still able to check in to see the unemployment rate get released.

It declined by 0.5 percentage points to 5.4% for the month of July. This beat the consensus estimate of 5.7% and is down considerably from the highs during the government shutdown of the economy. The news sent a wave across the economy. Any inflation safe-havens such as gold, oil, and silver were sent tumbling. The S&P500 got a big push up, while the Nasdaq fell. Traders are anticipating that the Fed will begin to slow their purchases of mortgage-backed securities and treasuries. This fall in inflation safe-havens was exacerbated by a $4 billion dollar sell order in gold when futures trading opened up on Sunday.

The price hit a low of $1,677.90/oz. The initial drop in gold on Friday, with the unemployment rate beating consensus estimates, was accelerated by a wave of selling as momentum traders had their stops hit. I had warned about this last week when I said that the Fed had their eyes on the gold market and interest rates. The Fed has stated that this inflation is transitory and they want to be believed, so they will exert their influence and bend the market to their will. This can work for short stretches of time but will eventually end in disaster. Robert Wenzel would have called this a buying opportunity. I’m taking more of a wait-and-see approach. I’m convinced right now, the place to be is soft-commodities such as corn, wheat, soybeans, cattle, cocoa, etc. These all have future’s tickers. For those that don’t trade futures, CORN, WEAT, SOYB, and DBA all have exposure to the soft commodity market.

Keeping with the employment theme. Today the JOLTs data was posted by the Bureau of Labor Statistics. JOLTs is an abbreviation for Job Openings and Labor Turnover survey. Job openings have continued to hit new all-time highs. Openings have risen by 590k from a month earlier. The current level of openings has reached over 10 million.

This is pretty incredible. We now have 1.37 million more job openings than people on unemployment. This leads me to two conclusions. When the pandemic related assistance ends in September and job seekers are looking for work, they will find it. The unemployment rate will crash shortly there-after and the economy is going to start running very hot. Also, since there will be a battle for workers as there are more openings than job seekers, employers will need to raise wage rates to attract them. We’ve already seen average hourly earnings increase above trend.

Now, I think we’ll see it really take off. The current wage data from July showed a 0.36% month-over-month increase. That is a 4.3% annual increase. For some context, prior to the shutdown of the economy, wages increased between 0%-0.3% month-over-month which equated to a 2.5%-3.5% year-over-year increase. We are currently looking at a 4.0% increase on a year-over-year basis. Last month’s reading was 3.8% year-over-year. Wage rates are really heating up. This leads to more disposable income in the pockets of consumers. They will open up their wallets and spend it, putting upward pressure on prices. If these trends continue, this fall looks like it will be one for the record books.

I had mentioned last week that I was working on two new projects. The first is that I’m moving!

I’ve been posting at blogspot for over two months now. After the honeymoon period, I’ve realized that their platform leaves some things to be desired. After speaking with a few others, I’ve decided to move my blog over to Substack. You can find it here; baerlocherbearing.substack.com. If you are already signed-up to receive my newsletter via email, there is nothing you need to do. Starting tomorrow, all email subscribers will be getting my post through Substack’s email portal. In addition, all past, present, and future posts will be on my page at Substack. If you aren’t subscribed to my alert via email, you can navigate over to my Substack page or click here to sign-up.

The second project is still in progress. I’m working on hosting all of Robert Wenzel’s past Daily Alerts that I have access to. My current archive goes back to December 2, 2013 (special thanks to Deken!). If anyone has emails from Robert going back further, please contact me. I would really love the opportunity to host them. You can see it in its under-construction phase here:

https://baerlocherbearing.blogspot.com/p/epj-daily-alert-link-page.html

Consider this a beta-test or early adopter version. In time, I’ll be looking for a way to sort and search the archive by topic.

Important and Potential Market Moving Events This Week

Wednesday, August 11

• 5.30am Consumer Price Index (July)

Thursday, August 12

• 5.30am Producer Price Index (July)

• 5.30am Initial & Continuing Claims (07/Aug)

Friday, August 13

• 5.30am Import/Export Prices (July)

• 7am Michigan Consumer Sentiment & Expectations (Aug)