The (initially) euphoric response to Friday’s worse than expected jobs report was due to one simple reason: the vast majority of analysts and pundits assumed that with “bad news again good news”, it meant that a September rate hike was officially off the table and it was smooth sailing through at least December. To be sure, while Goldman notably disagreed, and its shift revised September rate hike odd forecast from 40% to 55% helped close the FF futures virtually unchanged on the day after initially sliding , for momentum and trend chasers such as Dennis Gartman, there was no doubt, because as CNBC noted yesterday, “the news was even worse than the headline suggests.”
In his Monday letter, Gartman said the one-tenth decline in hours worked from 34.4 hours to 34.3 hours was “the rough equivalent of actually losing at least 200,000 non-farm payroll workers in the period in question.” The work week decline, reported in the last monthly payrolls release before the Federal Open Market Committee meeting Sept. 20-21, effectively scotches a rate hike, he said.
“This is the number that caught us off, and this is the number that we think shall make it all but impossible for the FOMC to vote to raise the (overnight) fed funds rate at the (September) meeting,” Gartman wrote.
Gartman also said that the Fed has to worry about more than the jobs report. Recent data have indicated a softening in the economic outlook, he said.
Specifically, he pointed to the monthly trade deficit, which actually was less than forecast in August. However, Gartman pointed out that the dip to $39.5 billion came primarily due to a surge in agriculture exports that won’t be sustained, and occurred in conjunction with a 0.8 percent drop in imports led by a decline in consumer goods.
In other words, now, for the first time, we have the two most notoriously followed “forecasters” (if only for contrarian purposes), Goldman and Gartman on the opposite sides of the table, and in just over two weeks we will know who is the undisputed king of wrong calls, and thus Wall Street’s most valuable assets (if for all the wrong reasons).
And while Gartman may or may not be right about the September rate hike, one thing we wholeheartedly agree with Gartman on is how it all ends:
As we said here yesterday… and highlighted and are highlighting again this morning…eventually, this monetary experiment will come to an end and when it does it shall rather obviously end badly, but until it ends… and at this point the light is green until the December FOMC meeting… then the money that is being created shall make its way into equity investment given that it is not making its way into plant and equipment instead. Hence we must understand that in this great game of investment the authorities are playing the music to their liking and as long as the music is playing we’ve no choice but to dance. We said this yesterday; we are saying it here again this morning and we shall say it henceforth until such time as the authorities cease their actions and/or until such time as economic activity is so strong and so self-determined that plant, equipment and labor demand capital from the capital markets:
So does that mean that economic activity will never recover?
Finally, for those wondering how Gartman is positioned, here is the answer:
… we note that in our retirement account we are long of aluminium only, having simplified our position ahead of the employment report on Friday, while we have enough derivative positions in place to bring that long position back to market neutrality. We shall be covering in some… not all, but some… of those derivatives later this morning and we may also buy more aluminium in order to skew our positions long of the market on balance. We are long, too and of course, of gold predicated in EUR terms as we have been for the past several years and with Friday’s close and today’s and yesterday’s continued quiet strength in gold we are content to sit tight, but if we were to act we’d be adding to that position accordingly.
And with all that, time to prepare for a “surprise” Fed rate hike.
via http://ift.tt/2bQHSYo Tyler Durden