What is going to happen next?
Here's what everybody is thinking. The labor market is really strong. Heck, they just announced 528,000 added to payrolls last Friday! The headline blew people away! But wait a second. Things are not as rosy as they seem. The chart above show the headline number in black bars. But there are also purple bars from the household survey which are very different. They are so different that the Household survey shows two negative months this year. Why the difference and what does it mean? | |
This is from SeekingAlpha.com: "The BLS notes the following differences between the surveys: - The household survey includes agricultural workers, self-employed workers whose businesses are unincorporated, unpaid family workers, and private household workers among the employed. These groups are excluded from the ablishment survey.
- The household survey includes people on unpaid leave among the employed. The establishment survey does not.
- The household survey is limited to workers 16 years of age and older. The establishment survey is not limited by age.
- The household survey has no duplication of individuals, because individuals are counted only once, even if they hold more than one job. In the establishment survey, employees working at more than one job and thus appearing on more than one payroll are counted separately for each appearance."
So what does it mean? Well, the household survey shows that perhaps people are not getting second jobs and are working in the black economy. It's hard to tell. But the sharp difference between the two surveys means that we shouldn't put a lot of credence in the Establishment Survey showing strong employment growth. But here's the rub. The Fed is saying that employment is strong which means they are looking at one survey but not the other one. This means that they will likely raise rates by 75 bps in the next meeting and keep Fed policy tighter than it should be longer than it should be. That means the recession will be deeper than it should be. How do we make money from this? | |
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I think we are just a few weeks away from another steep decline in the stock market. So we want to do things like: - Short QQQ
- Short XHB
- Short Bitcoin
- Buy inverse ETFs
- Short junk bonds by selling short JNK
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Words To Live By The Dow Theory Today by Richard Russell "The market is not like a balloon, plunging hither and thither in the wind. As a whole it represents a serious, well-considered effort on the part of farsighted and well-informed men to adjust prices to such values as exist or which are expected to exist in the not-too-remote future." In other words, Dow discovered that stocks move in definite trends and for definite reasons. | |
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