Morning Report: NFIB, JOLTs, wage pressures 9/11/18

Vital Statistics:

Last Change
S&P futures 2872 -8.25
Eurostoxx index 373.62 -1.89
Oil (WTI) 67.66 0.12
10 year government bond yield 2.97%
30 year fixed rate mortgage 4.62%

Stocks are lower this morning on trade and weather fears. Bonds and MBS are continuing their post jobs-report sell-off.

Job openings hit a record high in July, hitting 6.9 million, according to the JOLTS survey. Job openings increased in finance and insuring, but fell in retail and government. The quits rate increased to 2.4%, the highest level since 2001.

Small business optimism set a record last month, hitting 108.8 and beating the previous high set in July 1983. The number of businesses saying it is a good time to expand hit a high, and plans for capital expenditures and inventory investment also hit pre-crisis highs. The NFIB index had a discontinuous jump upward starting in late 2016, but that was primarily driven by expectations of hiring and investment. Now the index is being driven higher by actual hiring and investment and that is driving GDP growth. Labor shortages continue to be a problem.

Same store sales continued their recent strength, rising 6.3% last week. All of this points to a strong Q4.

Signs of building wage pressures? Leaders for the United Steelworker’s Union are demanding pay increases as steelmakers get a profit boost from tariffs. They are targeting US Steel and Arcelor Mittal. Steel prices are up 30% – 40% this year, which is boosting profits. This issue of course is that these increases will probably prove to be temporary as the tariffs are a negotiating tool. That said, expect to see more of this as the labor market tightens. US Steel has offered the union a 4% wage increase next year, and 3% the following two years. After that, base pay will increase by 1%, but profit-sharing bonuses will be implemented.

Finally, a note on 9/11

I was on the trading floor at Bear, Stearns in London. It was just after lunch. A headline went across Bloomberg saying a plane had hit one of the WTC towers. CNBC mentioned the story as well, but no one was thinking “terrorism.” I emailed one of my friends at Merrill Lynch (right across the street at the World Financial Center) and he wasn’t even aware of what happened. The European markets were down a bit on the day, but didn’t really react to the first hit.

After a few minutes, CNBC started showing live footage of the fire and then we saw plane 2 hit. Immediately, the world realized what had happened. The Euro markets were collapsing and I was inundated with sell orders. The news of the Pentagon hit came out. People on our floor started freaking out. We were in Canary Wharf (One Canada Square) in the tallest building in the UK. Planes routinely come close to the building as they approach City Airport. The head of Bear Stearns Europe came on the trading floor and told everyone if they were uncomfortable, to go home. No one knew if today was “fly a plane into financial headquarters day” Everyone bailed, and I was one of the last guys on the trading floor, trying to reconcile my book by hand and get flat before I left.

I looked up at CNBC before I left and saw the place I got married at a year earlier collapse on my birthday.

P.S. As I headed to the tube to go home, I passed the Slug and Lettuce (a pub) and found all of the “uncomfortable” Bear Stearns employees having a pint directly below the building they were so uncomfortable being in.

By the way, I am still searching for a senior capital market role at a mortgage bank. If anyone is hearing of anyone looking, I would appreciate the head’s up.

10 Responses

  1. Someone is channeling NoVA:

    “The Affordable Care Act was 2300 pages of legislative software. To work its way into something remotely resembling effectiveness, it needed another 20,000 pages of enabling regulations. There is a fine art to writing the code that runs our government. It is extremely difficult, specialized work, beyond the skills of our elected representatives and beyond the mental universe of the average voter. Congressmen seldom even attempt to write a law anymore. That function is largely outsourced to internal Congressional specialists or to well-funded think tanks or lobbyists. Hardly more than a handful of our elected representatives had read the ACA before voting on it. Fewer still understood it. We no longer even concern ourselves with this erosion of democratic oversight because it’s so clearly unavoidable, but that’s not how a liberal democracy functions.

    Big corporations regularly write code far more complex than the code that runs our government. However, if Oracle’s management was elected by the voting public, all that skill and dexterity would soon be reduced to a muddle. Our democracy was not designed for elite parallel processing, especially at its distant center. No matter how many votes you muster or how many rallies you attend, you’re not going to get Congressmen or staffers capable of writing the next generation of government code. Those people are wisely investing their energies elsewhere, and reaping the attendant rewards.”

    https://www.politicalorphans.com/social-democracy-wont-save-liberal-democracy/

    Like

  2. Also, honestly, not a big fan of Oracle in terms of software development overall. Stored procedures aren’t as straight forward or as friendly as MSSQL. Automatic-tuning of performance isn’t as good IMO either.

    Like

  3. Good read:

    “Taibbi: David Remnick’s Steve Bannon Flop Was a Journalistic Embarrassment

    The ‘New Yorker’ editor backed himself into a corner and inadvertently legitimized Bannon (and Trumpism) for years to come

    By Matt Taibbi”

    https://www.rollingstone.com/politics/politics-features/taibbi-remnick-bannon-719111/

    Like

  4. This is gonna crack Kavanaugh wide open.

    https://m.dailykos.com/stories/1795075

    It’s over guys.

    Liked by 1 person

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