That siren starts in the distance, then works its way past your block and keeps on going, bellowing out from every third or fourth telephone pole up and down the main avenues. Still, you sometimes hear these ancient calls on occasion. Towns still test them once or twice a year. For a while, they were used as calls to volunteer firefighters in areas without professional fire departments. Those fire departments now have more modern means of communication.
When I was a child, they were known as "air raid warnings." They were relics of World War II that in my youth would have meant that Soviet missiles or perhaps aircraft were on their way. My dad was a soldier. My mom was FBI, so I knew that if the Soviets successfully hit New York City, hiding in my Queens basement or garage was not going to save us. That said, the noise is jarring. The noise would, if during school hours, rattle the nuns as they forced us out into the school hallways, with our backs up against the wall and our heads placed between our knees with our hands locked over the back of our necks. After school? Those screams from above would break up street football or whiffle ball games as kids would break and run for home.
The Fun House
Heavy-set, or thin. Tall or short. How would one know? Each mirror seemingly casts a different reflection. The media? Does not cover the story. What is the truth? What is not? Last Friday, a second consecutive disappointing month of job creation was reported by the Bureau of Labor Statistics. That's the story. The BLS tells you that across the entire nation, merely 559,000 (a really good number pre-pandemic) jobs were created in May. The March number was revised up small to a still awful 278,000. Sans the seasonal salt and pepper that seasons only to taste. I have said it before, and I have written it a thousand times. Seasonally adjusting pandemic numbers either going into or coming out of economic shutdown by mandate serve only to mislead.
Using raw data, the United States economy created 973,000 jobs in April and 1.097 million jobs in March. Now, that's not so bad, is it? The same BLS will likely let us know by this Wednesday that more than 8 milllion jobs remain unfilled across the land, which if filled would not employ everyone still receiving some kind of pandemic unemployment assistance, but return aggregate employment to not just its pre-pandemic headcount but to somewhere beyond. In fact, over a period that covers the last four months, the United States economy has created a rough 4.4 million jobs that have been seasonally adjusted down to 2.1 million. One can only ask why.
So, why? Would it not make sense to forego the seasonal adjustment, especially given how misleading this adjustment has become? Without pointing fingers (because that would be rude), just who is best served by reporting "adjusted" job creation data that differs quite significantly from the "boots on the ground" reality?
We all can see plainly that both the economy itself is taking off as is consumer-level inflation, gassed on all of that fiscal jet fuel passed by the legislature both late in the Trump administration as well as early in the Biden administration. This has substituted well in the short term for organic economic growth. To me. What I had found most distressing about the BLS employment report for May was the 160.000 or so individuals who left the labor force, contracting overall participation. Then again, being that numbers nerd who knew everyone's ERA and slugging percentage in Little League, I checked on that number, too. Turns out that sans the seasonal adjustment, the number of folks "Not in the Labor Force'' did not only not increase by160,000. That number, unadjusted, actually contracted by some 120,000 from April into May. All we want is the truth, why is it hidden so deeply and left unreported?
"Smoke on the Water...
.... A fire in the sky."
- Gilllian, Lord, Blackmore, Glover, Paice (Deep Purple) 1971
Oh, by the way.... as Peter Tchir posted in his weekend note, U.S. GDP (seasonally adjusted and annualized, so who really knows?) as reported on the St. Louis Fed's FRED website that uses the Bureau of Economic Analysis (BEA) as a source, shows first-quarter U.S. GDP at a nominal $22.061 trillion in aggregate, while fourth-quarter 2020 printed at $21.747 trillion. In other words, with all the underlying accommodation provided by Congress, Treasury and the Fed, U.S. GDP has not only returned to pre-pandemic level, but has in fact returned "to trend."
The fact is that through the creation of smoke, we create a fire. Fire is a gift that prehistoric humans went to great lengths to preserve. There is a point where fire spreads at an uncontrollable pace and becomes more than difficult for those charged with the protection of both lives and property to slow down. Let's hope increased accommodation that has returned a massive and growing economy to a trend that itself had been built upon excessive accommodation does not create such a monster.
Check This Out
Friday's incorrect determination of disappointing jobs data was probably correctly seen by market participants as likely to slow down the pulling back on accommodation by the Federal Reserve. The U.S. Treasury yield curve flattened on that news. The 10-year note went from giving up 1.63% on Friday morning to the 1.58% you see here on Monday morning. On Friday, equity markets turned back to the Technology sector for leadership, although aggregate trading volume literally made like a pea rolling off of a table on Friday. Take that for what its worth.
I found this interesting: It would appear that as the VIX has gone back and forth between 16 and 19 for three weeks, the disparity between CBOE Put/ Call ratios is startling. While interest in buying downside protection for individual equities has clearly been waning for almost a month...
... there are just as clearly bets being made against the market's future on the index level. Just take a look at this.
It's the most bearish reading for this particular ratio since February. Oh, readers who are also retail traders will want to know that TD Ameritrade, now a subsidiary of Charles Schwab (SCHW) , has placed limits on the trading of AMC Entertainment (AMC) equity as well as on related options. I do not trade on that platform, but I would expect to see restrictions placed on trading on margin that spread beyond this one platform.
You Need to Know...
... that the "Landmark Deal" struck by the G-7 that would place a global minimum tax of 15% on multinational corporations based on where sales are made and not necessarily on where they are domiciled is not anywhere close to a done deal and should not impact stocks (if ever) for many months yet. The G-7 has to take this to the G-20, which in turn will have to take this to the 140+ nation Organization for Economic Cooperation and Development (OECD) before it gets serious.
While it is nice that the U.S., European Union and UK can all play nice in the sandbox, the deal is meaningless unless Bremuda, the Cayman Islands, Ireland, Luxembourg, the Netherlands, Singapore and Switzerland all play ball, too. According to Bank of America, these seven nations are where about 60% of all U.S. multinational foreign income is booked. If you think the little guys are going to readily give up what for them is a competitive advantage, then you just don't understand the little guy.
Higher Interest Rates Might Be Fun
No one enjoys a healthy yield curve as much as I do. I often encourage the Fed to pin the short end and let the long end dangle. That said, I am not the Secretary of the Treasury. Let's get that out in the open. On Sunday, Treasury Secretary Janet Yellen, to Bloomberg News, actually said, "If we ended up with a slightly higher interest rate environment it would actually be a plus for society's point of view and the Fed's point of view."
Now, I know, Yellen spent the pinnacle of her career at the Fed, unsuccessfully trying to create consumer-level inflation, so her point of view here is very possibly jaded. For you to understand, there are two reasons that interest rate environments can change. One, the economy is growing rapidly (and organically) and demand for credit over time forces rates higher as the supply side can pick and choose where to place capital profitably. That is good for the economy. The second is where the inflation genie is out of the bottle and through policy the Fed is forced to raise interest rates in order to slow inflation, which also constricts economic growth while strengthening the dollar.
Now a weaker dollar would greatly benefit those deeply indebted, such as the U.S. Treasury, higher interest rates (Economics 101) counter weakness in the dollar. Higher interest rates also make it more expensive for the U.S. government to service its debt. In short, higher interest rates would simply be terrible for the Treasury Department. That's where Janet Yellen works for those not quite following along. Madam Secretary needs a better staff around her, I think.
1) President Biden and Sen. Shelley Moore Capito will continue their negotiation over this next infrastructure-based stimulus package. This is the single biggest market story as one earnings season has ended and before another begins.
2) Apple (AAPL) kicks off the annual Worldwide Developers Conference on Monday (today).
Readers will see that after the cup with handle pattern failed to produce anything close to a rally as the 21-day exponential moving average (EMA) crosses over the 50-day simple moving average (SMA) in May, that 21-day line has become resistance that could now prove catalyst. This is key now that the 200-day SMA has been such stalwart support for about a month straight. BTW, Apple is a holding of Jim Cramer's Action Alerts PLUS charitable trust. https://secure2.thestreet.com/cap/prm.do?OID=031628
3) Tesla (TSLA) finally is expected to hold its Model S Plaid launch event this Thursday after cancelling last week. On Sunday, CEO Elon Musk tweeted that the Model S Plaid+ would be cancelled because the "Plaid is just so good." It is widely believed that the advanced batteries that would have been required for the Plaid+ may not make it to mass production until sometime in 2022, putting other Tesla offerings in jeopardy at the same time.
In Thursday's interview with Katherine Ross for The Street, I gave you the 20-day line (now $604) as the line that Tesla needs to retake if there were to be a rally in the near term. The stock has now failed to that line for two consecutive days.
You see before you a "descending triangle" pattern, which is a bearish pattern of continuance. Musk is going to have to "Wow" his cult following this week in order to get TSLA over that spot of resistance and hold the level. TSLA could be a buy this week, but only on momentum above the 200-day line. Failure at that line this week swings open a door to much lower prices.
Economics (All Times Eastern)
15:00 - Consumer Credit (Apr): Last $22.84B.
The Fed (All Times Eastern)
Fed Blackout Period.
Today's Earnings Highlights (Consensus EPS Expectations)