Monday
Nov 9, 2015
1-855-RWT-0008
Prepared by the good people at Random Walk, LLC. (and Scott)
Yesterday and Today
Yesterday
Friday was a strange and peculiar day.
Prior to the open people nervously awaited the results of the unemployment numbers 1 hour prior to the open. The average expectation for the non-farm number was 175,000 with Rick Santelli predicting a āphonyā number that would allow the Fed to not raise in December. I happened to agree with Mr. Santelli as he is a pragmatist and KNOWS that the economic numbers are a fiction created by the White House.
The number came in at 271,000. This was 90,000 to 100,000 higher jobs created than anyone expected.
Result
The result was people viewed this number as an indication that the economy is doing well and the Fed can raise rates in December. With that bonds fell had with the TLT being down almost 2 full points on the open. Remember….bonds are an inverse product where rising interest rates means lower bond prices.
In addition the Euro/USD fell had as well, with the Euro falling over 1.7 cents to the USD. The Euro/USD pair was trading near 107. The reason for this is also simple. If Europe is lowering rates and the US is raising rates, where would you put your money to collect interest?
Market
This spooked the markets prior to the open.
The Eminis fell -11 points in the pre-markets right after the release. They then rebounded to positive territory, but were down about -4 when the equity markets finally opened. Once the markets opened the futures repeated everything done in the pre-markets. The futures were up 2 points and down 13 during trading hours. By the end of the day the futures closed down 0.50, the Dow was up 47, the NASDAQ was up modestly. The VIX closed at 14.33%, which was down 0.72.
Next Month
Today’s numbers were Bu77 $h1t. Plain and simple, it had to be wrong, but even with wrong numbers the market has nothing else to go off of. If you are driving your car and you know your speedometer is always showing a speed +8 to +12 mph/kph too fast, you still are better off using it than guesstimating.
Next month I am very certain we will see a major adjustment down, but by then it will be old news and forgotten ā like Greece, falling oil, Hillary’s e-mails, etc. But it still doesn’t negate that something is wrong. If IBM or HWP F’d with their numbers the way the Fed does, someone would be in jail.
TODAY
Over the weekend the shock of what happened Friday should be over. The markets can then run back and test 18,000 which is only 90 points away. We will either hit 18,000 on Monday, Tuesday or Wednesday. My guess is sooner than later.
Longer Term
Make no mistake. The Fed is most likely going to raise in December. They are getting more heat from Wall Street to raise than they are getting from senators to keep rates low. The conspiracy theory side of me says that the numbers were purposely āfinessedā in order to give the Fed a reason to raise.
If you can’t raise rates with unemployment at the bottom edge of 5%, when can you? Of course we are not at 5%. There is NO WAY we are near 5%. This too is Bu77 $h1t. If true unemployment were 5% in this country everyone’s bosses would be giving them raises to keep people from taking a better job. Remember that little abortion called āObamacareā? People forget, but one of the things Da Prez did to make sure people working 39 hours a week were not denied coverage by their employers was to lower the āfull timeā bar to 28 hours. Benevolence, right?
So people working part time jobs at Starbucks make $300 a week are considered fully employed. I know they make a fortune with those clear tip boxes people dump their $0.14 in after giving the cashier $3 for the $2.86 drink, but that is not full time. Neither are a bunch of other tricks being played. You need unemployment at negative 8% for the number to really be at positive 5%.
6 Months Out
But don’t worry.
Right now we are ignoring the $20 trillion deficit (that was $8 when āWā left). People are ignoring fake unemployment numbers. The markets have even come to terms with rates likely going higher in December. But a few more straws on this economic camel/ass back and things will break.
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POT is held each Wednesday night at 7:00pm eastern.
POT people. Some of you may have guessed at what I did today, and some may have missed it. I got long AAPL with naked calls. I got long an SPX $10 call spread and short a $5 put spread (risk reversal). I also did the same risk-reversal in TSLA on Thursday. We are NOW balls out long. I am hoping for a bounce on Monday, and then will spread off the risk for another delicious condor like we had on today.
Remember…we were long the 2095-2100 / 2105-2110 call condor in the SPX for a $0.10 debit. You may recall me saying that āsince the markets parked at SPX 2100 for 7 months, I suspect our next resting period would be 2100. Well, the cash closed at 2099.20. My bad….I was off by $0.80
Below are reprints of the best cartoons I have found.
Too True To Be Funny
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