I?m back.
No more croissants for breakfast. Goodbye to the fabulous selection of cold cuts and cheeses. No more great coffee. It?s back to a sugar infused, calorie packed concoction at Starbucks.
In other words, it?s back to the salt mines for me.
I have just come off a grueling 12 ? hour flight from Zurich, Switzerland to San Francisco.
My cell phone no longer worked in the US, so I couldn?t call Uber. That meant taking a regular taxi, complete with smelly seats, fleas, and a rude driver, at double the price.
When I got home, I discovered that the refrigerator had broken down, the contents spoiled, the ice melted, flooding the kitchen floor, and causing the floorboards to buckle.
The network connection for the TIVO failed. The batteries in the remotes died. Some insects of indeterminate origin appear to have moved in.
It turns out that jet lag is worse the older you get. Life is a bitch, and then you die.
Can I go back? What! Not until next year? I better get hustling!
At least I got the July nonfarm payroll right. My prediction of 215,000 new jobs proved dead on. The prolific gains in technology were offset by the hemorrhaging losses in energy and commodities.
The new economy appears to be growing at the expense of the old.
No surprise means no market movement. The post number price action was the most muted I can remember. The volatility Index (VIX) only made it to an intraday high of $14.50.
That was fine with me, since my core position of a (SPY) deep in-the-money bear put spread is also effectively a short volatility position. I?m taking some heat in my offsetting hedge, a short in US Treasury bonds (TLT). But that expires in ten trading days, and I?m still in the money.
I think I nailed the coming market action in my Milan, Italy Global Strategy Webinar. After the big dip, and then the big rally, we get a big nothing. That is how I expect August to play out.
Today?s nonfarm was the last chance for any market volatility until the Federal Reserve meeting during September 17-18. Then the Fed decides whether to raise rates by 0.25%, or not, for the first time in nine years.
It?s 50/50 whether they move then, or wait until next year. The Federal Reserve has its own wall of worry to climb.
It makes no difference which action the Fed takes. The mere fact that the decision is out of the way is the big issue. Then we?ll get a head fake of a dip, to be followed by a major rally that could continue until 2016, and take us to new all time highs.
Worse case, we are looking at ? point rise this year, and another one in the spring. After that, the burden will be only the shoulders of inflation, which is absolutely nowhere to be seen, and shouldn?t make a reappearance until the 2020?s.
Since America is the leader of the free world, there is the rest of the planet to consider as well.
Europe is just starting to see some green shoots. China is in disarray. Japan looks OK. Emerging markets, nearly half the world?s GDP, are in dire straights. Even the IMF and the World Bank have pleaded with the Fed not to be too quick off the mark in raising interest rates.
The payroll figures delivered the strength that we have become accustomed to. The headline unemployment rate remained unchanged at 5.3% a decade low, while the broader U-6 ?discouraged worker? jobless rate hovered at 10.4%. There were 14,000 in upward revisions for May and June.
Retail led the pack, with +36,000 job gains, followed by food services (+29,000), health care (+28,000), and professional and technical services (+27,000). Mining and logging lost -4,000 jobs. No surprise there.
I?ll leave you with a nice little piece of anecdotal evidence.
For the last four years, I have bought my kids back to school clothes at the big Desigual shop at the Milan train station.
In 2011, prices were at a 90% discount. They were literally trying to throw inventory out the window. I had to buy an extra suitcase to take my booty home.
The next year, I got a 70% discount, still great. After that, prices were only half off. This year? A 30% break. Not so great, but better than paying full retail. And my kids get next year?s styles early.
Hey, in San Francisco, for sixth grade girls, it?s all about fashion.
My conclusion? When the ?RISK ON? environment returns, buy Europe first. Throw some Japan in there too. And buy the US dollar with both hands.
