Let’s look at a longer term weekly chart of 10 year note yields, CRB Index, Dollar index, and Gold.

Inflation is exploding – notice the price of the CRB Index (Red).  However 1/3 of the CRB index is weighted towards energy prices.  Gold (Green Line) an often considered inflation hedge and barometer of impending inflation expectations peaked in March.  The obvious question on Gold is this merely a correction or the start of a bigger down move.  The dollar index (blue line) which is heavily weighted against the Euro has been in a consolidation or trading range since April.  Perhaps it’s accumulation but it could be distribution as well before the next down move; as yet unknown.

The big question in my mind however is the action in the bond markets.  On the 10 year yields topped out at about 5.2% in July of ’07 and June of ’06 a double top if you will.    Yields then plunged to under 4% before recently rallying somewhat.  The bothersome point of the bond market is simply yields relative to inflation are negative when you would think bond investors would demand a premium to inflation expectations.  The question IMHO to ponder is who’s wrong?  Bonds appear to be looking ahead towards deflation (once commodities top out) and not inflation. 

Something for everyone to ponder over this long weekend!

Happy Birthday America! 

Enjoy your extended weekend!

The ECB (European Central Bank) as expected raised rates by a ¼ point to 4.25% versus U.S. rates at 2%.

This morning at 8:30 we received the June Jobs Report and the results are: Nonfarm payrolls -62,000,expectations were: -50,000; Unemployment 5.5%,rate expectations were: 5.5 %; Average workweek 33.7 hours ,expectations were: 33.7 hours; Average hourly earnings +0.3%  ,expectations were: +0.3 %; and Jobless Claims 404K  ,expectations were: 385K

ISM Non-Mfg Survey comes out at 10 AM and expectations are for a reading of 51 versus 51.7 for May.

As of about 8:15 AM overseas markets were mostly lower partly in response to Wall Street yesterday: Nikkei 225 -0.16%, Hang Seng -2.13%, Shanghai Composite +1.95%, DAX -0.59%, and the FTSE 100 -0.03%.

Due to the July 4 holiday weekend: today Stock Markets close at 1 PM, Bond Market at 2 PM today.

Just after the Jobs report the futures look: Dow +41, S&P +3, Naz -1, Oil +$1.25, and Gold -$2.7.

Have a Great Day!

I believe it was Joe Granville who coined the term “What everyone knows; isn’t worth knowing”.  Seems to me just about everyone on CNBC, commentators and guests alike, are patiently waiting for the CBOE VIX index to spike higher indicating significant investor fear which often accompanies major market bottoms.  A hopefully good contrarian might look at that and say; the market can rally without a spike in the VIX or if the VIX does indeed spike higher it might not mark a bottom at all but be a continuation signal instead.  What everyone knows, what everyone expects – how often does it really happen?

Three high spikes on the VIX, at or barely above 30 have recently marked tradeable bottoms; that is probably what everyone is looking at, recent history.  Recent history is often not a very good indicator of future activity.  For instance, The Shanghai market collapse in March of 07; the bottom was marked by a VIX reading of only 19, The May/June of 2006 decline’s bottom had a VIX reading of only 25, April 2005 bottom VIX was only 19.

If we go back to the bear market lows of 2002 and 2003 you can see it was much higher VIX readings that coincided with the markets bottom.  Then on the third trip down in March of ’03 (at the time very recent history) everyone was looking for the VIX to once again spike up towards 50.  It never happened and the bull left the vast majority behind; waiting.  It’s just not that simple.  What everyone knows or thinks they know is not worth knowing – Joe Granville was right about that.