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"00"

08-06-2021

The government won at beat-the-number today, with nonfarm payrolls reported to be 943,000 versus expectations of 870,000 and last month revised a bit higher. However, beneath the surface there was some sogginess that was not quite as wonderful as it appears, in part because 240,000 jobs in today's number were in government and 220,000 of those were a seasonal adjustment for education. ("A load of jobs, no quality, no productivity," is how Joanie described it.) Nonetheless, as is often the case with these NFP reports, regardless of how ridiculous they are, they seem to move markets (some anyway).

"Out of the Blue and Into the Black" Stocks decided to focus on the positive aspects of the data, at least through midday, although the indices were mixed with the S&P and Dow up a little and the Nasdaq off about 0.5%. Then in the afternoon, the market just drifted sideways (as of 30 minutes to go, when I had to leave).

Away from stocks was where the action was. The dollar index gained about 0.5% while the bond market was hit pretty hard. The combination of those two and people's absurd fixation on supposed real rates determined by the TIPS market (all of which are grossly distorted and inaccurate in any case) weighed on the metals. They were immediately smashed, with gold losing 2.5% and silver more than 3%. As you might imagine, the miners were weak due to the action of the metals.

As Plain As the "No's" On Their Faces I realize that people who own metals and miners are frustrated with the action. Everyone I speak to who I consider smart and have metals positions feels the same way. We are at a moment in time where the ultimate outcome seems quite obvious, but market participants appear to continue to be in denial.

One would think that, given how cheap the miners are and how unpopular gold seems to be, there would be some folks who would want to take advantage of laying in some inflation protection at an opportune time "just in case," but thus far that hasn't happened. One of these days the linkage between supposedly real rates dictated by breakeven spreads and gold will dissolve, which will most likely be a meaningful signal. But until then we're stuck with the precious metals being the ping pong balls that they are.

On that subject, it was interesting that throughout the whole commodities complex the only thing that really took it on the chin today were the precious metals, which makes absolutely no sense, but it is what it is.