Can’t Wait to See the NFP

Today is that time again. Non-farm payrolls. It is the most excitement you see on financial TV. Octoboxes. People shouting. Opinions. A few months after the event, i.e. this “very important” number, we all forget what it was. It certainly isn’t the most important event each month, it is simply touted that way.”


To market to market to buy a fat pig Who? Why? What? When? Where? The Pound got pounded in early Asian trade this morning, it is going to be the story that everyone is talking about. Some blame a fat finger, you know, human error. A long meal and not enough coffee, or perhaps too much coffee and a sugary donut leads to a giant mistake of the human kind. Working at light speed is ok when you have the starship enterprise at your command, working at close to light speed when the whole world is anxious to the maximum about the prospects of your countries currency and what happens next is not ok. Of course these trades would have come from somewhere else, not the UK at all. Being Asia of course.

There was a suggestion that some of the trades may have been as a result of the French President having said that the British must be punished for leaving Europe. See the Bloomberg story about the pounding of the Pound – Flash Crash of the Pound Baffles Traders With Algorithms Being Blamed. See the associated graph, it looks wild.

The Pound was dealt a sickening kidney blow. You cannot physically leave Europe, i.e. shift the UK south or west, imposing favourable trading conditions on your European peers, well, that will be harder. There is an estimated 350 thousand French people who live in the UK and 400 thousand English people that live in France. For them, these logistic issues around Brexit are real. Plus of course there is the same for Spain, there are nearly one million British born people living in Spain. There are only around 70 thousand Spanish people living in the UK.

The fast tracking of the United Kingdom trying to withdraw can and will have many unintended consequences for many different people and their economies too. Being able to live and work where you want across the region represented some sort of flexibility, if that were to go, migrant workers may suck it up and go and try out other European cities. Britons bringing their money into the mainland has positive implications for the locals. And of course for their spending power. Of course, nothing is to stop (provided free movement of people) Europeans hopping across the channel for a cheaper visit. Time will tell. For now, the uncertainty will lead to more selling of the Pound, and it won’t be long in this environment before someone starts to suggest parity.

Stocks across the oceans and afar away in New York, New York closed the session out mixed, the broader market S&P 500 ended the session marginally better, up a smidgen (0.05 percent), whilst the Dow Industrials lost 0.07 percent. The nerds of NASDAQ fell nearly one-fifth of a percent, the biggest news of the day was a tweet storm for Twitter, the share price was absolutely roasted. Down 20 percent in the session, the news emerging from “sources” that none of the majors are likely to bid for the business. Ooops. Either Salesforce is thrilled with this news, it may mean that they get to pay less, or the fact that others walk (or never even talked) means that standing as the lone wolf, you really are alone. Time will tell.

In other related news, the journal reported that Snapchat Parent Working on IPO Valuing Firm at $25 Billion or More. Really? It would not likely happen this year, which has been an absolute disaster for the IPO market. There have been signs in the last few weeks that the IPO market is alive and kicking, perhaps the idea that toxic politics was having an impact has abated. The American president will be the American president, regardless if it is the first woman (that deletes emails and stuff) in the White House to hold the job or some orange looking fellow (who isn’t as rich as he says). Back to Snapchat quickly, the company would then be trading on 25 times annual revenues. Not too sure about the profits, we would have to wait for that.

Facebook, for a comparisons sake, trades on a forward multiple, current year of 32 times. On next years earnings, based on what the analyst community thinks, the stock trades on less than 25 times. That is a premium to Alphabet, which trades on a 22 current year and 19 times next year’s earnings. Where did the expensive go? The analyst community has General Electric, the only thing constant in the Dow Jones Industrial Index for the last 130 odd years, at 17.4 times earnings. Of course, these are all estimates. “Things” could change, a stock may be cheap on a relative basis, there are some others who trade on much lower multiples, we have chatted a lot about Wells Fargo, that company is due to report some more range-bound earnings next Friday. Over the last few days, themselves and many of the financials have caught a bid in anticipation of higher rates sooner, i.e. November may be “live” for the Fed, December is a cert. Certain? Maybe, although it is a little optimistic to presume that anything is certain.

Today is that time again. Non-farm payrolls. It is the most excitement you see on financial TV. Octoboxes. People shouting. Opinions. A few months after the event, i.e. this “very important” number, we all forget what it was. It certainly isn’t the most important event each month, it is simply touted that way. And of course for traders this has big implications, rates, currencies, bonds, futures markets, volatility and so on. For investors, this is just another event. Just another moment in time that passes. As we showed with the ADP graph (the message yesterday), the recovery from the period of bloodletting in 2008 and 2009 led to a steady recovery.

The long term trend is all that matters. Unless of course you can remember the hundreds of thousands who lost their jobs through 2008 and 2009. January 2009 had a print of minus 598 thousand. That was almost the same as the number in November 2008. In December 2008 “only” 577 thousand people lost their jobs, according to the Bureau of Labor Statistics. Feb 2009? Minus 651 thousand. March 2009? Ten thousand thundering typhoons, minus 663 thousand. April? Another 539 thousand jobs shed. These two graphs from back then, side by side, be sure you have not eaten before looking at these:

Yeah. It was absolutely horrible back then. The trend recently has been a return to regular employment, if not increasing labor force participation. It is what it is. Please, unless your open trading positions depend on this, place it in the drawer of interesting to watch, it is not going to make a dent on your long term outlook.


Back where the weather (not in the mother city, I spotted your lack of Instagram posts yesterday) is getting better, in the city founded on a huge pile of gold, stocks dropped half a percent, most of the losses were in the second half of the session. After a strongish start, we slipped away. Industrials sank over a percent, only resource stocks were better on the day. The Rand continues to make ground against the Pound, we are now at 17.35, a level last seen (from my crude graphs) in January of 2015. Can you remember back in March of 2012 when for 12 Rand you could buy a Pound? And in January of 2000 when less than 10 Rand would get you a Pound? By December of 2001 the Rand was getting slammed every day, we were ABOVE levels that we are now. Over the last 12 months the Pound is around 15 percent weaker. And you know what …. there is nothing that you can do about it.

There is nothing you can do about politicians, there is nothing that you can do about currencies, there is nothing that you can do about interest rates. The only choice is what asset class you are likely to invest in, what sector you are going to identify as having a more than even chance of having better prospects in the future and which business inside of that is likely to be bigger in the coming years. And I think that is what scares investors the most, pretty much like early sailors, except for them the prospect of never knowing what you were going to see must have been appealing.


Linkfest, lap it up

I had to look for a ‘chart of the day’ yesterday and I stumbled across this one which we have spoken about before in this blog – GDP, per capita. The scary thing about this graph is that during the 50s and 60s people from South Korea and Japan moved to North Korea because they felt they would have a better life there.

Having vast amounts of information at our finger tips has created massive efficiencies for society. There is some research now indicating that it is also making us lazy in thought – Scientists say Google is changing our brains

It seems that people struggle to save for retirement because they can’t picture themselves in retirement. This leads to a disconnect and then no plan for saving – This is why most people don’t save money for retirement. Research has shown that people who use a financial planner (i.e having a plan) were 3 times more likely to have $250 000 saved for retirement.


Home again, home again, jiggety-jog. Stocks across Asia are lower, the US futures are pointing to a negative start. Heck, the non-farm payrolls around two-thirty this afternoon may well be the only event to look forward to today. And then two national teams, football and rugby take part tomorrow, it is going to be another epic encounter.


Sent to you by Sasha, Byron and Michael on behalf of team Vestact.

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