1. ECB lowers rates gives further clarity in its attempts to encourage a greater level of small and medium sized business lending. He also gets another leg lower in the euro via another cut in short rates and by adding covered bonds to its menu of asset purchases. 2. ADP said 204k private sector jobs were created in August. 3. Unemployment rate ticked down in August to a seasonally adjusted 6.1% from 6.2% in July. 4. S&P 500 made a new all-time high; Emerging Market stocks hit their highest levels since August 2011. 5. The Beige book revealed economic activity largely picked up during the summer. 6. ISM manufacturing index came in at 59 v expectations of 56.8, up from 57.1 previously; Markit U.S. Manufacturing PMI rose to 57.9, the highest level since April 2010 7. Japanese wages rose at their fastest pace in over 17 years in July. 8. Mercedes Benz posts best U.S. sales increase ever in August; Chrysler August U.S. sales rose 20% y/o/y, the strongest increase in 12 years. 9. Construction spending rose 1.8% m/o/m vs a 0.9% expected increase.
Negatives:
1. Nonfarm payroll disappoints with 142k new jobs versus 230k consensus. 2. Investors’ intelligence Bears are down to the lowest levels since…1987 3. European Central Bank is far behind the curve in stimulating a recovery 4. Trading volume is terribly low, not saying much for institutional conviction; 5. Prior 2 months of NFP were revised down by 28k. 6. MBA purchase applications fell 2% w/o/w and are down 12% y/o/y.
Howard Marks, chairman of Oaktree Capital Group LLC, talks about assessing market risk, volatility and sentiment. Marks speaks with Stephanie Ruhle and Erik Schatzker on Bloomberg Television’s “Market Makers.”
As I sat down to write this early this morning, no one knew what the jobs numbers would be. But I did know three related things:
1. The median forecast in a Bloomberg survey of economists is that 230,000 workers were added in August;
2. Almost all of the individual forecasters will be wrong. (Actually, every single forecaster was wrong, since the number came in at 142,000, way below the lowest estimate);
3. Many investors (and other finance and business professionals) hang on these forecasts as if they were Morpheus receiving word from the Oracle that "Neo is the One."
Longtime readers of mine know my views on the folly of forecasts. I have spilled plenty of pixels here explaining just why that is (see this, this and this).
Every now and again, it is worth reminding ourselves just how terrible humans are at predicting what will happen in markets and/or the economy.
Today’s nonfarm payroll is a perfect example: That was a big miss. Of course, I have argued in the past that the NFP is the most overrated data point in investing (see this, this and this), but it does make the point of showing just how terrible everyone is at making predictions.
Is it Friday already? Wherever does the time go. Some morning train reads to help you through your commute:
• A bearish technical case for precious metals (Brandt) • Shale is not a ponzi (Slate, Part II) • Millennials aren't changing jobs as much. That's a big problem for the economy (Wonkblog) see also Why hasn’t the class of 2009 grown up? (Vox) • Is It Time to Refinance? Jumbo Fixed-Rate Mortgages have dipped to a year-to-date low (WSJ)
Just a handful of Cisitalias were built (production records suggest 170) but their reputation as the world's first GT car far outweighs their lack of commercial success. This late production example was sold new to Montevideo in Uruguay but its early life remains a mystery. Its Vignale coachwork is very similar in appearance to Pinin Farina’s more common design on the same chassis, one of which featured in Automobiles as Sculpture, an exhibition staged by the Museum of Modern Art in New York which later acquired an example for permanent display.
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