Keystone Financial Australia Market Updates Keystone Financial October 2016 Finance Market Upd

Keystone Financial October 2016
Finance Market Update
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I hope you had a great weekend. Weather is a bit up and down but summer is slowly taking hold and
the weekends are getting better and better.
Friday’s NFP (Non Farm Payrolls) was not good. It came in at 156,000 jobs created (and remember
this number is completely made up). The ‘expectation’ was for 176,000 jobs AND the August number
was revised DOWN by 7,000 jobs. Of interest was that the unemployment rate ticked up to 5.0%,
more on that in an moment.
In typical fashion the FED come out and talked up the economy and the market has now priced in
about a 65% chance of rate hike for December. Honestly, who knows and frankly it doesn’t matter.
To re-iterate something I’ve mentioned a few times. The US Fed has increased rates ONCE in the
last 8 years (last December) and by only .25%. So really, all of the consternation over rate hikes is a
waste of energy and a side show. If rates do start to rise the equity market won’t like it and for that
matter neither will the bond market.
But what about the unemployment rate, why is it now increasing all of a sudden? Remember that
about 93 million (probably more) Americans are out of work. The labor force participation rate is at
one of it’s lowest levels since the 1970s as many people have just flat out given up on trying to find a
job. So the increase in the unemployment rate is likely a sign that people are out there again looking
for work which leads me to a speculation. IF people do think the economy is improving they are
going to look for work and if the jobs aren’t really there (I don’t think they are) then the
unemployment rate is going to start rising again, rapidly. This will put further pressure on the Fed to
lower rates as they seem to think they have a mandate to drive job growth.
So what did Gold do? It went up on the news. I expect to see follow through this week. Why? The
Chinese are back from a week long holiday and will probably be buying into this manufactured dip.
Also, US markets are closed on Monday so for at least a day and half we may see true price
discovery.
You see, the west trades paper gold and the east trades real gold. The COMEX (a US Futures
Exchange) deals in paper gold and as such can manufacture many thousands of ounces in a split
second and sell them on the open market. It’s typically a cash settled exchange so in actual fact it’s
really just a big casino.