IS A MINSKY MOMENT AT HAND? JOBS DATA AT 8:30

Led by technology, equities tumbled the most in almost three months.  The NASDAQ 100 which has been on an incredible run fell the most since March, declined 5.25%.  On the other hand, the beleaguered value sector was nominally unchanged.

There was the lack of an accepted catalyst for the decline.  Could I remotely suggest it could be the result of the data consistently indicating stronger than expected growth amplified by extremely dovish Fed whose will now tolerate an above average inflation rate for a period of time.  The issue at hand is how high and how long.

Or is this noise, profit taking after an unrelenting advance, an advance concentrated in a few names, and were the same names that fell yesterday?

Some have recently written about “Natural Laws,” and the recent massive violations of these “Natural Laws.”  Market wise, the biggest violation of a Natural Law is negative interest rates on $16 trillion of debt.  Another violation is the largest company in the world, a company that is worth more than many sectors and indices combined, is viewed as a “growth company.”  Another is record deficit spending and near record low interest rates.

Former PIMCO Chief Economist Paul McCulley thinks the markets are about to enter into a new paradigm.  What has worked the last forty years may not work in the next forty years.  McCulley thinks we are at the verge of a “Minsky Moment,” or the proverbial “Ah Ha” moment where the “perceived truths of yesterday” are no longer valid for such are a violation of the “Natural Law,” hence resulting a violent correction to correction correct the prevailing mistruths.

Wow!  To many this is way to philosophical.

Today the August unemployment data is released.  Analysts are expecting a 1.350 million increase in non-farm payrolls, a 1.280 million increase in Private Payrolls, a 9.8% unemployment rate, a 4.5% increase in average hourly earnings and a 34.5 hourly work week.  The Labor Participation Rate is expected to rise to 61.8%.

To write the obvious, markets may trade off the data as the statistics offer considerable insight into the strength of the economy.

Last night the foreign markets were mixed.  London was up 0.36%, Paris up 0.33% and Frankfurt down 0.39%.  China was down 0.87%, Japan down 1.11%  and Hang Sang down 1.25%.

The Dow should open but nominally higher and the NASDAQ moderately lower but this could change radically given the potential importance of the 8:30 data.  The 10-year is off 2/32 to yield 0.65%.

 

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