Sept 1. Buy ‘Merica
–In the context of Harvey, with 1 million people displaced and 100k homes damaged or destroyed, a swing of 20 or 30k new bartenders and waitstaff in payrolls hardly seems relevant. But, we’re looking for 180k, a rate of 4.3% and 0.3% wage growth. And the algo programs probably don’t know how to account for Harvey yet, or for Irma (with its possibility of making US landfall next week), so there will likely be an opportunity to fade the first reaction.
–Everything rallied yesterday, with Nasdaq posting a new contract high, and the ten year treasury closing at 211.7, down 2.6 on the day and recording a new low in 2017. The 2/10 treasury spread also at a new recent low of 79.5 bps. As mentioned yesterday, the red/green euro$ pack spread closed at 16.75, just under the levels of the election. It’s like Trump never happened…(right?). Red/gold pack spread settled 51, a new low for the year. Mnuchin said that a tax plan is nearly ready, and also mentioned that a weaker dollar is better for trade. We’ve come a long way from Treasury Sec’ys ALWAYS saying that “A strong dollar is in the interests of the United States.” In any case, the market is reacting as if the massive flooding will forestall any tightening by the Fed. The euro$ curve is not projecting any stimulus related to passage of a tax plan, nor to the weaker dollar (spurred on by Mnuchin), which is quite surprising. Of course, increasing military options regarding NK may also be supportive of fixed income.
–Speaking of taxes, the Chicago Tribune reported that Bloomberg spent $3 million on advertisements supporting the $0.01 cent per ounce tax on pop. (We call it pop here). That’s after having already spent $2 million on the same project. Hey Einstein, why don’t you just give $5 million to the city of Chicago so it can put a dent in the unfunded pension liability for the ghost payrollers on Streets and San? It’s almost (can I say it?), ‘adorably out of touch’
