I'm hoping for a terrible jobs number.
Just for the sheer comedy of seeing how Trump blames Obama for it after already taking full credit for all the jobs that were created in January and February. He also took full credit for Consumer Comfort, which is back to where it was before the last crash so, Yay!, I guess but, if you dig into the CC number, you find something very interesting.
It turns out that Republicans are unbelievably comfortable, some would say irrationally comfortable – as if they were ignoring fundamental realities and answering survey questions based on what they WISH were true, as opposed to what is factually true. Democrats, on the other hand, are the least comfrotable they've been in 10 months with the biggest monthly drop since Sept, 2013, when Syria used chemical weapons and Obama authorized the use of force (that's the sort of thing that makes Democrats uncomfortable).
This is not that unusual, of course. Under Bush II, Democratic comfort was down around 20 while GOP comfort was in the 50s but GOP comfort fell off rapidly as the market collapsed and both were under 30 when Obama was elected and the Democrats perked up faster than the Republicans but both topped out early last year and, since then, it's been Republicans on the March.
Keep in mind this is a "feeling" index that reflects jobs, inflation, spending habits, debt and it's a lagging indicator though it does ask consumers about what they THINK will happen – turn out consumers are generally as clueless as any economoron on that front (see 2008). Most significantly, consumers are generally unaware of geopolitical risks or changing macro situations.
8:30 Update: We pulled our index shorts as we expected a strong report but we'll be shorting again once the market is done rallying off a positive jobs number because all it does is put the Fed squarely on the table for not only a March hike, but AT LEAST two more hikes this year and possibly even a 0.5% hike at some point. Strong Comfort, Strong Jobs, Strong Market, Strong Dollar – if they aren't going to raise now, when will they ever?
The official number is 235,000 jobs, which is good for February and 225,000 was expected so a small beat, nothing like the ADP report indicated though (298K). So let's give the President a big hand for adding the same amount of jobs that Obama has been adding consistently since 2011! Of course, Trump will never match Obama's total positives because Obama came in with a tremendous handicap and turned it around while Trump was handed a strong economy and needs to make it "greater".
Now, that stuff is all great but let's now be smarter than the average consumer and think about something besides whether or not we will go out and buy a new TV that can spy on us. For example, the Fed can't possibly say employment is too low or inflation is too low so they MUST now raise rates but rising rates will cost our Government hundreds of Billions of Dollars in interest because what Trump is also increasing bigly is our $20Tn National Debt and every quarter-point of interest on $20Tn is $50Bn PER YEAR of interest payments!
There are some economic realities you can't get away from and 3 hikes in 2017 means Trump's budget needs to account for another $150Bn in interest payments and, if our budget isn't balanced (spoiler alert – it isn't!), then the CBOE will have to score in $600Bn in additional debt over 4 years and then we have to pay interest on the interest of about $18Bn a year but maybe rates go up 3% and then it's $300Bn a year and the interest on interest at 5% on $26Tn (by 2021 under the current Trump budget) is another $300Bn a year in just interest payments while our total interest payments would be $1.3Tn a year.
When Obama took office, our National Debt was 10% of the GDP and now it's 3.4% and we wait for the Trump Budget and I'm sure those Conservatives will get it all under control and avoid the crisis and make us all super-comfortable about our future, right? Well, that's what the market is priced for and, if you have any doubts – you'd better have hedges because on April 1st (3 weeks) there must be a budget proposal that has to be ready for review by Congress on the 15th and then, a month later (May 15th), the House considers the bills through June 10th and by June 15th it must be reconciled and by June 30th it must be finalized or the Government collapses.
So, for the next 3 months we are going to be focusing on deficits and debts and the REALITY of all the BS Trump has been promising will finally have to be put on an actual balance sheet and people will be able to discuss the FACTS without all the hyperbole so the question I will ask the Republican bulls out there is, quite simply, do you feel lucky? Well, do ya?
If not, I strongly suggest some hedging – just in case!
Have a great weekend,
– Phil
