The Bulls Are Running In Pamplona And On Wall Street; June Jobs Report Calms U.S. Recession Fears; Silver Takes Gold; 1st Stab At Day-Trading Yields A 5.6% Portfolio Gain Last Week — +$21K
First, I want to express my sorrow for the tragedies that occurred in Dallas, Minnesota, Baton Rouge, and elsewhere. I will light a candle for the men in blue; and. hope we can get past our anger — and, find a way to make something positive, and lasting out of this very tragic sequence of events.
The bulls are running in Pamplona, and on Wall Street as well, as U.S. stocks surged higher on the back of the June Non-Farm Payroll Report showing that 287K net new jobs were created in the U.S. in the month of June. Consensus had been in the neighborhood of 180,000. After the May Non Farm Payroll came in at an anemic 38,000, [revised down to just 11K] fears of a potential U.S. recession began to gain some traction. Last Friday’s blow-out jobs number was enough to alleviate those concerns; but, the number — averaged over the last three months at about 147K, wasn’t enough to prompt concerns that the Fed would soon raise interest rates. It was, as they say — not too hot, not too cold, or a Goldilocks number which the street cheered.
The U.S. unemployment rate moved back up to 4.9 percent, from May’s 4.7 percent number, while the labor force participation rate — those who are working, or seeking work ticked up to 62.7 percent well above 2015’s 38-year low of just 62.4 percent. But, these numbers aren’t all that they may seem. Leisure and hospitality [usually lower-wage jobs], accounted for 59k of the 287K, information technology came in at +44K jobs, retail [again, mostly lower wage] came in at +29,900, Temporary Help [also generally low-wage] was +15,200, and manufacturing was +14K. So, 105k of the 287,000 were primarily low wage positions. Larry Macdonald, with ACG Analytics, told CNBC Friday, that there were 350,000 more unemployed in June than May; and that 95M, who could work/want work are still on the sidelines. Fifty-four percent of Americans, according to Mr. Macdonald, aren’t working. He call’s the current unemployment rate of 4.9 percent “a fraud,’ and argues that U.S. unemployment is really closer to 8 percent — and, I think he is much closer to the truth than the Fed. I know, I am out of work.
All that said, the DOW closed higher by 1.1 percent last week, to 18,146 points; while the S&P 500 finished the week up 1.28 percent, to close at 2,129.90, just shy of its all-time closing record of 2,130.82 – set in May, 2015; while the NASDAQ finished the week up 1.94 percent to close at 4,956 points. For the year, the DOW is +4.14 percent; while the S&P 500 is +4.21 percent; and, the NASDAQ is -1.01 percent.
As Lawrence Strauss wrote in this weekend’s Barron’s, “eight of ten S&P 500 sectors ended the holiday-shortened week in positive territory. The best performers were consumer discretionary stocks up 2.27 percent, and health care which gained 1.99 percent. Materials, industrials, and technology also did well, each rising more than 1 percent. Telecommunications and energy [oil], were the laggards — each down a little more than one percent, while utility stocks [the safety trade] were up slightly.
Since I am not working at present — except for the blog — I took a stab at day-trading last week to see how I might do. It was a good week, as I ended the week higher by $21K, or +5.6 percent for the week. While I am under no illusion that things will always go my way, it was an encouraging start. I know there will be some bad weeks, that is just the nature of trading. But, I am going to continue day-trading this coming week — as, I am currently out of work.
Silver Takes The Spotlight
Alexandra Wexler writes in this weekend’s Barron’s, that “gold may be gleaming; but, silver is outshining the yellow metal. The price of silver has rallied to a two year high — spurred by a demand from China, and a global stampede to safe harbor assets after the United Kingdom’s June 23 vote to leave the European Union (E.U.).” Silver, on the COMEX division of the New York Mercantile Exchange, has surged 46 percent this year, far outpacing Nymex gold’s impressive 28 percent rally since January 1, 2016. Nymex silver for September delivery ended on Friday at $20.24 a troy ounce, and +3 percent for the week last week,” Ms. Wexler noted..
“The price of gold has predictably done well in the wake of the U.K.’s surprise vote to leave the E.U……but the real star of the show has been silver,” research firm Capital Economics said in a July 1 note to clients. “Though silver has exceeded its current 2016 target of $19.50 per troy ounce, the firm added that, “we continue to expect silver to outperform gold over the next couple or years.”
“Speculative financial investors are also betting on further rising gold and silver prices, net long positions in both being expanded to new record levels,” German bank, Commerzbank said in a July 4 note to clients. The bank added that silver exchange-traded funds (ETFs) [such as SLV], had seen about 25 percent more inflows by volume than gold ETFs in June.”
While silver’s rapid rise could be interrupted in the short-term, due to some profit taking, “over the longer term, the metal looks to soar,” Ms. Wexler wrote. “Global silver production fell in 2015, after 12 years of steady increases in supply,” according to the World Silver Survey, published by the Silver Institute, an industry lobby group, and metals consultancy, Thomson Reuters GFMS. “That decline was due in large part to aging mines, and a lack of new mines coming on-line, due to the low prices over the past few years — a trajectory that will take some time to reverse,” as restarting these mines is complicated and time-consuming.
The stellar performance in silver contributed to my +5.6 percent portfolio gain last week, as I took a decent position in the silver ETF — SLV. Ms. Wexler ends by noting “investors can bet on silver’s price with ETF’s like the iShares Silver Trust (SLV), and/or, ETFS Physical Silver (SIVR), which hold the actual metal.”
The Bond King On Brexit, Earnings, And Gold
Barron’s Ben Levisohn has a feature interview in this weekend’s Barron’s with DoubleLine Capital’s Jeff Gundlach, with the title above. Mr. Gundlach, who’s fund manages +$100B, and whom Mr. Levisohn writes “is considered one of the world’s best fixed-income investors,” believes Britain’s decision to leave the E.U. “is probably a start to a summer of volatility.”
Mr. Gundlach told Barron’s, that “it matters to U.S. economic growth, if Britain falls into something like a recession,” which is the consensus on the street for Britain in 2017. “The companies in the S&P 500 get more than 40 percent of their revenue from outside the U.S.; and, a big piece of that is Europe — so there is risk there,” Mr. Levisohn notes. “Then there is the risk that it is really just the beginning of something — that there will be more downside for stocks — and not the end of something. That is the real risk.”
I refer you to Barron’s for the full story/interview. Mr. Gundlach ended by noting that the gold miners would be a smart play in this environment. I agree, and it is one of the reasons I bought shares in the GDX ETF, an ETF which includes gold miners. i also bought shares in the silver ETF — SLV.
Randy Smallwood, Silver Wheaton CEO, told CNBC on Friday, that he thinks silver could reach the $30-$40 level in the next 12 months, and gold $1,500 in the next 6 to 12 months. Bank of America/Merrill Lynch also has a $1,500 handle on gold in the next 12 months.
This week we begin second quarter earnings, and third quarter forecasts. If we get a majority beating expectations, then this bull run has legs We’ll see.
And, I will try a second week of day trading. V/R, RCP