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Weekly Commentary: Music To The Market

Doug Noland profile picture
Doug Noland


  • The S&P 500 gained 1.5% (up 22.3% y-t-d), and the Dow rose 1.4% (up 17.2%).
  • Three-month Treasury bill rates ended the week at 1.4875%.
  • Investment-grade bond funds saw inflows of $2.324 billion, and junk bond funds posted inflows of $940 million (from Lipper).
  • Federal Reserve credit last week jumped $32.7bn to $3.966 TN.
  • The U.S. dollar index declined 0.7% to 97.121 (up 1.0% y-t-d).

October non-farm payrolls expanded a stronger-than-expected 128,000 (estimate 85k) in a month when the GM (GM) strike reduced payroll growth by upwards of 42,000 and another 20,000 positions were lost to a shrinking census workforce. September's job gains were revised 44,000 higher to 180,000, and August payrolls were revised up 51,000 to 219,000. At 3.6%, the unemployment rate is near a 60-year low. Average hourly earnings were up 3.0% y-o-y versus a 10-year average of 2.3%. And at 34.4 hours, Average Weekly Hours were right at the 10-year average (as well as the average from boom-times 2006-2007).

October 30 - Financial Times (Brendan Greeley and Colby Smith): "The Federal Reserve cut US interest rates by 25 bps for the third time this year but signalled that it has finished easing monetary policy for the time being, pending clearer economic data. The US central bank… said that uncertainty on the economic outlook justified its latest cut but chairman Jay Powell said that a preliminary US-China trade deal and lower risk of a no-deal Brexit had the potential to increase business confidence… After a two-day meeting in Washington, the Fed's rate-setting committee made two significant changes to the language of its monetary policy statement. It said it would 'assess the appropriate path' for rates instead of saying it would 'act as appropriate to sustain the expansion'… 'This is a hawkish cut,' said Peter Tchir, the head of macro strategy at Academy Securities."

With a "hawkish" rate cut and stronger-than-expected October job growth, one might have expected some pressure on bond prices. Ten-year Treasury yields did rise (3bps) to 1.85% on the release of the Fed statement, only to reverse sharply lower during Chairman Powell's press conference - to end the session at 1.77%. Yields then dropped eight bps Thursday and rose only two bps on better payrolls data - to close the week down nine

This article was written by

Doug Noland profile picture
I'm at about 30 years persevering as a “professional bear.” My lucky break came in late-1989, when I was hired by Gordon Ringoen to be the trader for his short-biased hedge fund in San Francisco. Working as a short-side trader, analyst and portfolio manager during the great nineties bull market – for one of the most brilliant individuals I’ve met – was an exciting, demanding and, in the end, a grueling and absolutely invaluable learning experience. Later in the nineties, I had stints at Fleckenstein Capital and East Shore Partners. In January 1999, I began my 16 year run with PrudentBear (that concluded at the end of 2014), working as strategist and portfolio manager with David Tice in Dallas until the bear funds were sold in December 2008. In the early-nineties, I became an impassioned reader of The Richebacher Letter. The great Dr. Richebacher opened my eyes to Austrian economics and solidified my lifetime passion for economics and macro analysis. I had the good fortune to assist Dr. Richebacher with his publication from 1996 through 2001. Prior to my work in investments, I worked as a treasury analyst at Toyota’s U.S. headquarters. It was working at Toyota during the Japanese Bubble period and the 1987 stock market crash where I first recognized my love for macro analysis. Fresh out of college I worked as a Price Waterhouse CPA. I graduated summa cum laude from the University of Oregon (Accounting and Finance majors, 1984) and later received an MBA from Indiana University (1989). By late in the nineties, I was convinced that momentous developments were unfolding in finance, the markets and policymaking that were going unrecognized by conventional analysis and the media. I was inspired to start my blog, which became the Credit Bubble Bulletin, by the desire to shed light on these developments. I believe there is great value in contemporaneous analysis, and I’ll point to Benjamin Anderson’s brilliant writings in the “Chase Economic Bulletin” during the Roaring Twenties and Great Depression era. Ben Bernanke has referred to understanding the forces leading up to the Great Depression as the “Holy Grail of Economics.” I believe “The Grail” will instead be discovered through knowledge and understanding of the current extraordinary global Bubble period.

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Comments (2)

Wow. Just imagine how angry the populist left and the populist right would be if things were going badly (in the aggregate)?
We could very well know sooner than later.
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