Bond Buying | Blue World Asset Managers

Blue World Employment Situation Report Analysis

Release Date: Usually the first Friday of each month

Release Site: www.bls.gov

Market Sensitivity: VERY HIGH

Management Value: VERY HIGH

Tuesday, October 22, 2013

Brain surgery is not rocket science to a brain surgeon©

Better late than… Sorry. We can’t back that up.

This is what we waited for? The numbers are short so let’s get to ‘em right away.

The BLS reports total non-farm payroll increased by 148,000 for September. That was a pretty big miss regarding the expectations of the “experts” but it gets worse. In a switch from recent reports, government added 22,000 to the total, making the private sector gains even less inspiring at 126,000. The rate fell to 7.2 percent, but we all know why. The number of those not in the labor force continues its meteoric rise and is mirrored by the participation rate free-fall. The work week, overtime and wage increases remain quite underwhelming as the diffusion rate in manufacturing continues its flirtation with 50.

The Madness of King Market

We’d like to take a moment to focus on the markets. We saw the following headline this morning:

U.S. equity markets rallied after a round of tepid data on the U.S. labor market stoked hopes the Federal Reserve might have to wait until as late as March to begin paring back its massive bond-buying program.

At the top of each jobs report analysis we identify the jobs report influence over markets as VERY HIGH. That remains true, however, it has become for the opposite reason it used to. We remain very skeptical and cautious regarding the markets because, in spite of them doing so for this long, we can’t get comfortable with the idea that bad economic news will perpetually cause the markets to fly because they believe the Fed won’t stop buying bonds. This is very unsettling. The so-called quantitative easing, bond buying, etc., is one of the biggest risks to our long term economic outlook (explained at http://ht.ly/q3Xje) so the markets cause us great pause these days as they put more emphasis on government action than they do on economic fundamentals. Very unsettling.

The next report has been rescheduled for release on Friday, November 8, the second Friday of the month, due to the partial shutdown earlier this month.

Thanks for reading, and please stay tuned…

Release Site: www.bls.gov

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed. The official release site should be cross referenced. The analysis represents the opinion of Blue World Asset Managers, Ltd. who does not warrant or guarantee predictions based on its analysis.

©Blue World Asset Managers, LTD Tuesday, October 22, 2013

Thursday, June 20, 2013

Ignorance is curable. Stupid is forever.©

We have been ringing the alarm bell about this in our posts and Matt has spoken of it on the radio. We are getting more and more questions about it as the likelihood of slowing the current bond buying program (Q.E. whatever) looms.

Ask anyone, including market “experts” if it’s a good idea or bad idea for the government to “kick the can down the road” and they’ll say it’s a bad idea. Then ask if they want the Fed to slow the bond buying program and they’ll exclaim “NO” in a panicked voice! What this betrays is a complete lack of understanding of what “Quantitative Easing” actually is.

First of all, it should be of great concern to anyone with money in the markets that government action, even contemplated government action, has become more important than economic fundamentals. Think of how absurd it is for the markets to panic at the thought of improving economic conditions that would lead to LESS government interference. Ya get that? THE MARKETS SELL OFF WHEN THE ECONOMY SHOWS SIGNS OF IMPROVING!! That is absolutely terrifying. When reality catches up, and it always will eventually, the results for those in the markets unprotected will be potentially catastrophic.

So, what is “Quantitative Easing” in actual practice? As with most things it is very simple. The Fed is buying short term debt (bonds) that are nearing expiration and refinancing the debt for a longer term. It is the very definition of “kicking the can down the road.” That is deplorably dangerous economic policy as it is, but never discount the government’s ability to take a bad idea and make it worse. WE DON’T HAVE THE CASH TO PAY OFF THESE LOANS! They are printing money out of thin air to pay off the loans and borrow the money for a longer period! If you did that you’d be arrested for counterfeiting! Does that help explain why you are hearing all this talk about the U.S. dollar no longer being the world’s reserve currency? By printing more supply of money without the demand for it we dilute the value of the currency and that’s why counterfeiting is illegal. There are two blog posts we did last year that explain this in more detail including an explanation of inflation and commodity impacts. They are:

Some Inconvenient Truths can be Backed Up by Real Math and Science Parts 1 and 2

They can be found at:

http://ht.ly/me0JN

and

http://ht.ly/me3Ka

We hope this helps answer some of the questions surrounding the market’s behavior these days. Call or e-mail us with any others!

Thanks for reading and please stay tuned…

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed. Referenced sources should be reviewed. Any analysis represents the opinion of Blue World Asset Managers, Ltd. who does not warrant or guarantee predictions based on its analysis.

Tag Archives: Bond Buying

Blue World Employment Situation Report Analysis October 22, 2013

Counterfeiting is a Very Serious Crime…Unless the Fed Does It??