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hey everyone me kevin here the market is being quite weird right now and i'm trying to figure out what's going on because this morning things were kind of rallying a little bit as jobs came in warmer than expected but here's some of the things that are weird jobs came in well hotter than expected and the 10-year treasury is plummeting bitcoin jumped 500 while at the same time stocks initially reacted pretty happily especially uh some momentum stocks and even tech stocks and some recovery stocks and now some of those are selling off for example energy stocks like enphase were up a good chunk whereas stocks like tesla were up as high as three percent and now some of these are down uh either to one percent gains or teslas in tesla's example down to negative point five percent so what happened like what kind of fizzled in the day and what is the signal for the future because usually and this is the fourth thing that's weird usually profit taking happens at the end of a quarter so if it's profit taking then then it's also even more confusing like why would that happen uh you know on july 2nd instead of on june 30th so you've got these really weird things jobs coming in hotter than expected leading bitcoin to jump but then usually you would expect the tenure to go up and it's going down stocks you kind of would have expected a mixed reaction but they were really happy at first and now they're selling off and if it's just people taking profits then why why would you do that two days after the half of your mark like you would have done that two days ago so it's very bizarre but i've done some research and i think we've got some answers also quick note there aren't too many of you but there are a few of you a handful of you that we're working with in email so if you're having a trouble or you had trouble applying your coupon code or something like that just send an email you could reply to your receipt email and kathy will help you out so i thank you for for the very many of you who are signing up uh there are just a few emails that we're dealing with and so it's taking slightly longer than expected all right so here are the answers that i found so far number one in the jobs report when you dig into the details you go into the weeds of the jobs report yes we had 150 000 jobs that got reported which was a larger than my range it was hotter than i expected it was you know about 50 000 more than i thought would have been within the normal reaction range and i thought i would have seen some kind of little peak in the 10-year bond data the 10-year bond is sometimes what we use to see hey what's going on with people's inflation expectations it's used in the inflation breakeven calculations and when i first saw the chart the chart first did this right here on the right of the screen it it jumped up on the first sign of that 850 000 jobs and this is what i expected but i didn't expect that it would do this and plummet after that initial spike so that's really odd why and so digging into it what did i find most jobs are that we ended up gaining were lower paying jobs and these lower paying jobs increase wage inflation more slowly even though you might hear of bonuses of people signing up for businesses average pay according to the labor report only went up 10 cents that is a slower growth rate than what we've been used to it works out to an annualized growth rate of 3.9 percent which is slower than that 4 to 5 growth rate we've been expecting and been used to in wages so in other words even though we had more jobs they were at lower end jobs and wages grew slower than expected this could explain why treasury yields are starting to plummet and you might wonder wait a minute why like how does that relate to treasury yields well here's how it might signal substantial further progress towards the federal reserve's tapering efforts and maybe we might start tapering treasury bonds while at the same time expecting less wage related inflation now these things actually kind of work a little counter to each other but how they average out i'll show you in a moment so here's how to understand this if the fed stops printing as much money it means less cash is flowing into the markets less money is being spent on buying treasury bonds which means generally treasury prices go down which usually means higher yields which is kind of the opposite of what again we would expect because yields are falling but but i made a picture that i think could kind of explain what's going on so let's jump on over here so here we go we have yields so sort of yields expectation and we have inflation it affects a yield expectations right here and then we have the buying pressure and it looks like to me that even though less buying of bonds would create upward pressure on treasury bonds because as prices go down yields go up in bonds you would expect yields to go up the only reason these are actually going down more has to be because of lower inflation expectations and that's because we expect less money to actually end up in the economy that's the only reason that i could see and and i'm sure there could be others but based on what i'm researching this is the only thing that makes sense as to why and i'm sure there's there's a lot more nuance to it in the back end in terms of what other things are going on uh you know but it's weird it's weird and it seems to me like the market saw a big headline number treasury yields spiked up read through the report went oh my gosh no these are just lower end jobs they're not creating wage inflation as much as they had been so it's kind of a an inflation inflection point to the downside so expecting lower inflation but what does it also mean it also means we're closer to that substantial for the progress again where the fed stops pumping as much money into the stock market so you get this sort of dual response of treasury yields falling and potentially stocks going yeah let's pull back a little bit let's be a little less euphoric here we're about to have less money in the market and i kind of align this a little bit with what i just dealt with at the airport there's i went to an airport restaurant and one of the managers there talked to me and mentioned here's the thing what's happening right now kevin we have so much demand at these airports but we can only hire back about five to six people a day and we need 700 people why can we only hire back five to six because we have to stagger out fingerprinting and security clearance appointments with covered restrictions and people have to stand separated and there can only be so many people getting processed at the same time in the particular room and it's a small office because they've never dealt with this kind of hiring surge before so in other words we're not necessarily dealing with crappier service at the airports because there's just because there's more demand but it's also because again supply of people who are able to work at the airport is being restrained because our normal hiring systems are screwed up right now now we still ended up having more job hiring but just in the example of the airport this can actually create a little bit of a phenomenon that we've talked about on the channel before which is when you have a surge in demand and something like travel people end up not just paying in higher prices but they end up paying with their time via delays this is very frustrating my flight that left la was delayed for two hours i've got i had plenty of stories on my instagram you definitely want to watch my instagram if you haven't watched yet plenty of stories about that on main stream uh so two hour delay uh on uh on a 10 55 pm flight that ended up leaving at like 12 55 p.m which was a total or sorry a.m which was totally annoying but i don't really want to go into complaining about that uh and then on the way back we landed and there weren't enough gates available so they made us wait 40 minutes to get to a gate it was supposed to be they're like oh we're gonna have to wait 30 minutes for a gate and then of course that took that got delayed and so it took 40 minutes it's like ah okay like i'm seeing what's happening here and this frustrates people's interest in traveling potentially reducing their willingness to go back to traveling as much or maybe they start delaying some trips which does what again it delays expectations and potentially lowers profits for companies so put but then we've got more okay but put that together for a moment less wage inflation less potential spending because things are just growing slower than expected it's harder to get things reopened so more broadly we're seeing now we're seeing good growth in jobs but again lower prices lower wages than expected lower wage inflation than expected and we're still seeing restrained growth while at the same time or we're not seeing the growth that we're we we hopefully expect uh because of these supply issues of whether it's materials or people but we're also then indicating that maybe the fed says hey looks like we need to set up the taper a little bit sooner which also means less money into the stock market but here's yet another reason which actually reiterates the others slower growth for value value stocks were expected to grow two and a half times faster than growth stocks this year halfway through the year we're on par with growth stocks in other words value stock earnings are coming in way lower than expected and so this reiterates the slower growth that we talked about when we use the airport example so bottom line it looks like we're getting closer to less money being printed and potentially going into the stock market especially if they taper treasuries instead of tapering mortgage-backed securities first which ironically they might do even though the real estate market is on fire but maintaining lower rates for the time being is probably going to be pretty consistent so we're going to have those lower rates but we're going to have less money flowing in the market at the same time potentially lower earnings than we expected from value companies which means value companies could trade continue to trade sideways or downward and it potentially means that people are getting frustrated with the reopening this reopening bubble it's like man this whole reopening thing isn't as fun you know the weights are too long it's too busy there are too many delays let's kind of spread out our spending a little bit again that again also depresses that boom that was expected for value value stocks have already boomed but the earnings haven't really boomed yet yeah they're going to but so far they're not booming as much as expected and the market especially the stock market it's all about expectations and so then when it comes to tech maybe that explains why tech this morning was initially excited but now it's kind of like okay you know tech if we end up seeing lower inflation is happy because generally tech does well because people go to growth which tends to be where tech is in lower inflationary environments but if we're going into lower inflationary environments and the fed at the same time is then going to print less money then it's kind of like oh this is kind of like the worst of both so these are this is the only way i could try to piece together the weirdness that's happening in the market right now hopefully it makes sense to you let me know what your thoughts are link down below or
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