Nov 5. Better than expected payrolls but interest rate futures unch’d

–Better than expected employment report (NFP expected 125k, actual 171k) initially sent interest rate futures hurtling lower, but prices recovered all losses by the end of the day, with most euro$ contracts unchanged. Tens and bonds ended marginally lower. Supporting fixed income is a whiff of deflation from ‘risk’ markets, as crude, gold and silver all made new recent lows. Euro has been in a range of just above 128 to just above 131 for the past month and a half, appears to be resolving to the downside. Now below 128 after a big sell off Friday.
–News today includes ISM Services expected 54.9.
–US election voting tomorrow. It will probably take a couple of weeks to learn the official result of a Romney victory; the delay will hopefully will forestall inevitable rioting. Observing the aftermath of the storm on the east coast makes it starkly clear that stability associated with plentiful supplies of food, water and energy can evaporate quickly.
–I continue to believe that dollar/yen strengthening may be the trade of the upcoming year (as I wrongly thought last year too). Here is an interesting quote from David Zervos (as cited by Business Insider): Accompanying the depressing standard BoJ statement on 30-Oct was this very curious additional release – http://www.boj.or.jp/en/announcements/release_2012/k121030b.pdf. Here we have the BoJ governor, the Minister of Finance and the Minister of State for Economic and Fiscal Policy jointly issuing a press release on the BoJ website entitled – “Measures Aimed at Overcoming Deflation”. A press release of this kind is completely unprecedented. And it was published in the “Monetary Policy Releases” section of the BoJ website.
http://www.businessinsider.com/zervos-on-boj-decision-losing-independence-2012-11#ixzz2BLUv6QLr
–This article talks about Japan simply cancelling bonds held by other governmental agencies, thereby improving debt/GDP ratio with the stroke of a pen. In any case, Japan overtly wants to weaken its currency (overcome deflation) and appears more serious about it…I think they will accomplish that goal, with the help of MoF eroding central bank independence.
–Interesting NY Times article has this quote: ‘The atrophying of the country’s ability to “make real things” has been much lamented, but the truth is that U.S. manufacturing has never been stronger. While there are no universally accepted numbers, the United Nations Statistics Division calculates that the dollar value of goods made in America is at an all-time high of $1.9 trillion, just about even with China.’ (Just that it takes fewer workers). This article (notwithstanding previous quote) is about the decay seen along the amtrak train route between NYC and Washington DC. WELL WORTH READING and it’s short.
http://www.nytimes.com/2012/11/04/magazine/amtrak-industrial-corridor.html?pagewanted=all&_r=0

Posted on November 5, 2012 at 5:43 am by alexmanzara · Permalink
In: Eurodollar Options

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