Wow! We are in the Bizarro World. This morning's jobs report was an absolute stinker. Huge miss on the headline payrolls number, weak participation rate, which flattens the unemployment percentage, and the grinding increases in wages that are true of every major corporate cost these days.
As I was reading investing.com this morning, the Reuters report that contained Wall Street strategist comments just confused me terribly. First off, as Cloris Leachman famously said in a Comedy Central Roast "I don't know who any of you people is." In a week that saw the sad news of the passing of Tobias Levkovich, Citi's (C) great market strategist, I think there is just a vacuum of original thought.
I really try to ignore it. This morning, when stocks were up modestly, the yield on the 10-year UST had also jumped sharply. The weaker than expected jobs report - as Jim Cramer always notes, non-farm payrolls is THE most important data of any month - and stocks rise and bonds fall.
What is going on here?
Well, first of all, Wall Street trading desks are being bombarded with these ridiculously non-value-added quotes from their economist/strategists. What nonsense.
One of those Wall Streeters that I actually do follow is Peter Cardillo. I try to follow Peter, although it seems that he has switched firms a few times, and he's now with Spartan Capital. His quote, from the Reuters article:
"These numbers are disappointing. The falling (labor market) participation rate explains why the unemployment rate dropped. But the bottom line is this is weak data.
Thank you, Peter. Once again the market is confused. On such a disappointing print, stocks should be falling, and bonds should be rising (yields falling.) But the opposite is occurring. I attribute that to the weird cult of Janet and Jerome that has enveloped Wall Street.
Hint: Janet and Jerome have never created a job. She's a long-time government functionary, and his background is in private equity, which typically destroys more jobs at acquired companies than it creates.
But that's who we worship these days. It's such nonsense.
Here's what's going to start happening. Companies are going to miss earnings estimates - big time - because analysts are not laser-focused on the cost side. Tobias Levkovich's background was as a machinery analyst, mine is as an auto/auto components analyst and let me tell you, we cyclical sector analysts learn it the hard way. Costs. Costs. Costs.
Damn it, you have to pay attention to costs! But instead we have a bunch of MBAs generating huge banking fees for their firms by huffing "disruptive" companies and justifying astronomical valuations. And then on the buy-side, we have this crazy woman (sorry, Cathie, not sorry) telling us that oil is going to become obsolete (like whale oil, she said, although ambergris is still used) just as oil prices hit a seven-year high.
Wake up! There is just so much disinformation out there.
The U.S economy is gripped by a case of stagflation not seen since the 1970s. That may help stocks on a nominal basis, but on a real basis it really only helps companies that benefit from inflation. Commodities and lightly-processed commodities, such as fertilizers. And the shippers of those commodities, both energy and dry bulk.
The current administration in Washington is desperately unpopular, and the fraction of the market's (over)valuation that is based on Biden's party being able to ram through continuing government stimulus is based on fantasy.
U.S. interest rates are as far removed from the (stagflationary) economic reality as I have seen in my 30-year career.
So then, be proactive. As soon as I finish this column, I will buy more (TBT) , iShares' short long-dated (UST) ETF. This week I have also been buying Flex LNG (FLNG) , (CTRA) (Coterra, the newly created company from the merger of Cabot and Cimarex, which commenced trading Monday), Navios Maritime (NM) and Eagle Bulk Shipping (EGLE) .