Stocks | - Part 2

Now that the U.S. team has been eliminated from the World Cup, we ‘Mericans can focus on what we really do best – inflating asset bubbles – and that effort should be bolstered by what is shaping up to be a big number in the nonfarm payrolls data due out from the Labor Department on Thursday, just prior to the nation celebrating its 238th birthday on Friday.

From these two reports at Gallup come the charts below indicating all systems are go.

Of course, it doesn’t hurt that payroll processor ADP reported earlier today that the private sector added 281,000 jobs last month, the biggest job creation total since November 2012.

This should be much more fun than watching soccer…

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The Institute for Supply Management reported that the U.S. manufacturing sector continued to expand at a healthy pace last month as their purchasing managers index was little changed, down slightly from 55.4 in May to 55.3 in June. Recall that, in this index, readings above and below 50 indicate expansion and contraction, respectively.

The key new orders component improved from 56.9 in May to 58.9 in June, production fell from 61.0 to 60.0 (still indicating robust growth), and employment was unchanged at 52.8. A full 15 of the 18 industries tracked by ISM reported growth last month.

Pricing pressure eased somewhat as this component fell from 60.0 to 58.0, backlog orders fell from 52.5 to 48.0 (indicating contraction), and inventories were unchanged at 53.0.

Obviously, the stock market likes this news quite a bit.

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Yellen on Capitol Hill

Financial markets appear to like what Federal Reserve Chair Janet Yellen has said so far in her appearance before the congressional Joint Economic Committee up on Capitol Hill.

A short time ago she was asked about this Wall Street Journal op-ed by Fed historian Allan Meltzer How the Fed Fuels the Coming Inflation and, while responding, she objected  to the term “goosing” when referring to the effect monetary policy has had on the stock market.

The U.S. Department of Agriculture forecasts that food prices will rise as much as 3.5% this year, the biggest annual increase in three years. Over the past 12 months from March, the consumer-price index increased 1.5% before seasonal adjustment. These are warnings. Never in history has a country that financed big budget deficits with large amounts of central-bank money avoided inflation. Yet the U.S. has been printing money—and in a reckless fashion—for years.

The relationship between Fed money printing and growing inequality in the U.S. was also brought up in this interchange and Ms. Yellen didn’t acquit herself particularly well, offering up the usual “trickle down” theory of boosting the economy without calling it such.

Senator Bernie Sanders (I-VT) just asked her whether we’ve transformed into an oligarchy of some kind with Fed policy only making this situation worse and she similarly didn’t have anything very useful to say. Yellen just admitted that Fed forecasts are just “guesses”, a word she stumbled over twice before finally getting it out, and she clearly seems to be most comfortable talking about such things as the intricacies of the labor force participation rate rather than much weightier questions about the effect of central bank policy.

I haven’t watched one of these in some time (and not one of Yellen’s prior appearances) – it’s all quite fascinating and, for once, lawmakers are asking some interesting questions.

For some reason, Wall Street seems to just love what she’s saying.


The financial media is atwitter (in what is either a poor or ironic word choice, depending on your point of view, given the share price tumble of one microblogging platform yesterday) about today’s big news out of the technology sector – the Alibab IPO filing.

The Chinese company that is responsible for the bulk of online commerce in a nation with over a billion people submitted plans today to offer shares to the public in a deal that could be worth upwards of $200 billion after shunning the Middle Kingdom in favor of Wall Street where there is renewed hope for stumbling technology stocks.

Yahoo! will be the prime U.S. beneficiary of the IPO as their 2005 investment in the company required them to sell a portion of their holdings if/when Alibaba went public and the company’s founders will maintain almost complete control, Jack Ma providing this interesting letter to employees that was translated in this item at the Wall Street Journal.

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