This morn, November U.S. non-farm jobs numbers showed us +203K
additions. That's a modest beat, and in line with hefty ADP
additions shown Wednesday.
The biggest surprise? The household unemployment rate came
out at 7.0%.
The Fed tracks this unemployment rate to decide on a taper in its
bond buying. That was the news of note this morning.
Now, let's see what the bond and stock markets did with the robust
jobs data. The U.S.10-year Treasury rate went from 2.88% to
2.92% before falling back to 2.90% on the news. That means
the prices of existing long bonds fell. Stock futures kept
strongly in green arrows going into the open.
That took me online to find Bill Gross's post in Barron's from
December 3, 2013,
"What's Keeping Me Up at Night".
I took this excerpt out for our Real Time Insight discussion.
What Keeps Mohamed and Me Up at Night?
"Mohamed [El Erian], the creator of the "New Normal"
characterization of our post-Lehman global economy, now focuses on
the possibility of a "T junction".
The "T" is an investment future where markets approach a
time-uncertain inflection point, and then head either bubbly right
or bubble-popping left due to the negative aspects of fiscal and
monetary policies in a highly levered world.
We are both in agreement on the perilous future potential of market
movements. Mohamed's "T", I believe, was meant to be more
descriptive than literal, and is a concept, like the New Normal,
that may gain acceptance over the next few months or years."
But aside from a financial nuclear bomb à la Lehman Brothers,
"Our actual scenario is likely to play out more gradually as
private markets realize that the policy Kings/Queens have no
clothes and as investors gradually vacate historical asset classes
in recognition of insufficient returns relative to increasing
In other words, Bill Gross's base case is one where investor's
vacate historic asset classes (aka Investors exit BONDS).
This is killing off bond funds at places like PIMCO.
My RTI Question: Tell Bill Gross What to Do with
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