JOBS DATA AT 8:30…AND “MAKE BILLIONAIRES PAY ACT”

Today the all-inclusive BLS Employment report is released.  The employment data released this week was contradictory.  The ADP survey had a large negative miss.  Weekly unemployment and continuing claims had a big positive miss as weekly claims unexpectedly fell to a pandemic low.

In my view the data has the ability to change the prevailing narrative.  Currently analysts are expecting a 1.5 million increase in both non-farm and private sector payrolls, a 10.5% unemployment rate, a 0.5% decline in hourly earnings, a 34.4 hourly work week and 61.8% labor participation rate.

At the time of this writing, a stimulus compromise has not yet been reached.  A major issue is the additional $600-week insurance benefit.  As widely noted and validated by a plethora of government and educational organizations, because of this additional $600-week unemployment benefit, approximately 65% of filers are receiving 134% more than if they were working.

In other words, the government is paying many people more not to work rather to work.  Some have argued that since many cannot find a job anyway the data above is meaningless.

There are several mega sized firms, including Goldman and Blackrock, who recently warned about potential inflationary implications with the passage of another gargantuan stimulus, a warning based upon the explosion of the national debt and the potential cost push inflationary environment, partially the result of this additional $600-weekly benefit that will stifle job creation.

I will not moralize about paying someone more not to work rather than to work but most will agree that there are massive socio-economic ramifications of such policies.  There is a debate that such is wrong, counterproductive, destroys self-confidence and self-esteem, and creates an inferior and weaker society and economy.

Wow!  That statement is a great discussion to have at an extended Thanksgiving gathering, what ever year that may again occur.

Last night the foreign markets were down.  London was up 0.03%, Paris down 0.24% and Frankfurt up 0.26%.  China was down 0.96%,  Japan down 0.39% and Hang Sang down 1.60%.

The Dow should open but this could change radically given the significance of the 830 data.  Also weighing on the markets is the potential impasse on stimulus talks, an impasse focused on the $600 per week additional stipend and additional aid to states.  In my view a high staked political gambit is occurring but the market is believing additional stimulus will be passed as evidenced by gold, the dollar and other indicators.

Also weighing on the markets are trade tensions and the “Make Billionaires Pay Act” proposed by Bernie Sanders and endorsed by several leading democrats which would impose a one-time 60% tax on wealth gains made by billionaires between March 18, 2020 and January 1, 2021.

Top tech leaders and other billionaires whose fortunes have sky rocketed because of the unrelenting advance in the handful of social media and tech companies would be forced to pay a 60% tax on over $731 billion in wealth accumulated by 467 billionaires since March 18 according to the press release obtained by CNBC.

In my view such a proposal is extremely dangerous…. taxing unrealized gains but such is a platform plank of the 2020 Democratic Party.  According to the Democratic Party platform such taxes may start at unrealized gains of $3.5 million.

The 10-year is unchanged at a 0.53% yield.

 

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.