U.S. Economy Created 187,000 Jobs in July, Almost Exactly the Forecast of 200,000… The unemployment rate ticked a bit lower, from 3.6% to 3.5%.
What it means— The jobs numbers were a nothingburger, but the report contained a bit of data that will give the Fed agita. Average hourly earnings rose 0.4% for yet another month and increased 4.4% over the last year. This puts wage growth above headline inflation, which could signal wage inflation down the road.
Fitch Downgrades U.S. Government Debt from AAA to AA+… Fitch cited the nation’s deteriorating financial position as the reason for the move.
What it means— What a load of bull poop. Credit ratings reflect the ability of a borrower to repay. While the U.S. doesn’t technically own a printing press, it exerts enormous control over the one down the street at the Fed.
The U.S. will pay its debts. Period.
Those payments might be made in inflated dollars and therefore worth less, but they will be made. Fitch, like Standard & Poor’s in 2011, is just looking for headlines. If any analyst at such a firm showed so little knowledge of how the system works that they thought the government wouldn’t repay debts, he or she would be fired.
Maybe the U.S. should do what other bond issuers do, pay the rating services. That system allowed shady mortgage bond issuers to get coveted AAA ratings as they sold junks bonds in the 2000s.
It might work for Uncle Sam today. Perhaps Secretary Yellen should call Fitch and ask them what’s the vig (interest rate on extortion, betting, etc.) for an AAA rating.
U.S. Treasury Estimates It Will Issue $1.007T in Debt This Quarter… This will be the second largest quarterly issuance in history, after the second quarter of 2020.
What it means— This announcement is more likely what spooked the markets. It’s one thing to say you’re going to issue a trillion dollars in debt over 90 days, it’s another to start pushing it out the door. At the same time, the Fed is letting bonds mature instead of buying more, and other central banks, like the Bank of Japan and Bank of England, are pushing their rates higher. The U.S. bonds will be sold, but at what price? Yields are nearing the highs of last year erasing all 2023 gains in Barclay’s Aggregate Bond Index. The higher rates go, the lower equities fall.
Initial Jobless Claims Up 6,000 Last Week to 227,000… Continued claims increased 21,000 from last week’s revised 1.679M to 1.7M.
What it means— Another week, another all-but-unchanged jobless claims report. There’s no hint of weakness in these figures. On the other hand, rising wages are a problem for the Fed. Though slowing, wage growth continues above pre-covid levels and unemployment remains lower than the Fed’s target. The Teamsters Union is seeking a 40% wage increase over four years while the actors’ guild is on strike over wages, residuals and fears of being replaced by AI. Wages are a “sticky” data point in the Fed’s efforts to reduce inflation. Any bets on who achieves their goal first? Teamsters or the Fed?
California Charges Riverside County Family With Fraudulently Redeeming Almost 200 Tons of Bottles and Cans for $7.6M Over Eight Months… The family members brought bottles and cans from Arizona, which has no redemption policy, to recycling centers in Southern California. The recyclers pay by weight, so it’s not like they are looking for the deposit label or sticker on the bottles and cans. State prosecutors claim the actions amount to fraud because they drain money from the California recycling program to take in items from out of state. For a state government intent on pushing its views on other jurisdictions, this doesn’t seem very neighborly. Aren’t the bottles and cans still recyclable refuse?
As several commenters noted, the state recycling centers don’t pay the deposit rate of 5 cents or 10 cents. Instead, they pay by weight, at a rate that’s less than half of the deposit rate. It looks like more than one group is committing fraud.
Data supplied by HS Dent Research
“When the facts change, I change my mind.
What do you do?” ~ John Maynard Keynes
Our plan is “the plan will change.”
What is your plan?
Relative strength measures the price performance of a stock against a market average, a selected universe of stocks or a single alternative holding. Relative strength improves if it rises faster in an uptrend, or falls less in a downtrend. It is easily applied to individual positions in your portfolio and to sectors and asset classes.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Investor Resources, Inc. (“Investor Resources”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Investor Resources. Please remember to contact Investor Resources, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Investor Resources shall continue to rely on the accuracy of information that you have provided. Investor Resources is neither a law firm, nor a certified public accounting firm, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of Investor Resources’ current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at https://www.investorresourcesinc.com/. Clients Please Note: Advise us if you have not been receiving account statements (at least quarterly) from Charles Schwab & Co.™