Phil Grossfield's Blog

Richard Pryor – Omit The Logic. I watched this Showtime documentary on the life of Richard Pryor, one of my comedic favorites of all time. It’s a fascinating look into his genius, his dedication, and his spirit. It also reveals his weaknesses and ultimate destiny. Undoubtedly he changed comedy forever…just ask Eddie Murphy or any of the great ones to follow. My favorite of all is the SNL skit with Pryor and Chevy Chase doing Word Association…this was very controversial at the time since these words were not permitted on T.V. so it exemplifies Pryor’s modus operandi. Check it out and enjoy!  I highly recommend you check out the documentary too…here is a short trailer.

Last Night’s Game:  I will comment only by referring you to my previous posts…let me know if you have any questions….

• Miami Heat Will Win The NBA Championship
• You’re All Punks!

My Schedule: Available all day….

My Market Watch: Do The Hustle!  Bonds Down and Dancing On A Critical Floor – Prices Worse  
The 30-year bond is down again this morning about -22bps. However, Interbank’s rates were published at 11a and since that time there has been little activity. Put another way, its reasonable to conclude Interbank has already priced in the -20 or so basis point downturn.

And get this…the Fed President from St. Louis mentioned this morning that the Fed might continue aggressive asset purchasing , also known as Quantitative Easing, and still traders are not buying bonds. This is not good. From my perspective, when he reinforced the idea of purchasing bonds traders should have sold off stocks and bought bonds and pricing should have improved. But despite the statement bonds remain lower. Ouch. No bueno.

There’s more bad news. First, Tuesdays have been historically awful for bonds for some time now…that makes me very nervous for tomorrow. But more importantly the bond is dancing on a critical floor of support – the Garage in my graphic below. Remember, traders look for past behavior of how stocks and bonds were bought and sold to make a best guess on what to do now. More specifically, they look to “Moving Averages” which are commonly referred to as floors of support and ceilings of resistance. You can read about it on my Blog – I use the Glass Elevator Analogy.  On Friday the bond took a nasty downturn and this morning started out where it left off. The bond has been dancing between the Lobby and the Garage. If the bond drops below the Garage (which is $99.50) then it will fall -100bps further and pricing could worsen by as much as -0.500 or more. If you’re watching the bond and you see it fall below $99.50 then lock immediately if you can. Let me know if you want to discuss….

Richard Pryor – Omit The Logic. I watched this Showtime documentary on the life of Richard Pryor, one of my comedic favorites of all time. It’s a fascinating look into his genius, his dedication, and his spirit. It also reveals his weaknesses and ultimate destiny. Undoubtedly he changed comedy forever…just ask Eddie Murphy or any of the great ones to follow…. My favorite of all is the SNL skit with Pryor and Chevy Chase doing Word Association…check it out and enjoy! I highly recommend you check out the documentary too…here is a short trailer.

Last Night’s Game: no comment.

My Schedule: Available all day…done around 4p.

My Market Watch: Jobs Report Has Bonds Down – Prices Worse The 30-year bond is down after the Jobs Report came in pretty much as expected. Pricing is worse from yesterday by 0.250 since bonds are selling off…now down -37bps on the day…Interbank has already priced this fall into this morning’s rates.

The Jobs Report was not too far off expectations. 170,000 new jobs were expected and it came in at 175,000 new jobs…not monumental. Nevertheless, since there are more new jobs traders figure the economy is strong and therefore they sold off bonds to invest in stocks. When traders sell off bonds the price of bonds drops and lenders’ rates/pricing worsen. To counter the nominal uptick in new jobs was the unemployment rate which went up slightly from 7.5% to 7.6%. An increase in the unemployment rate means more people are claiming they don’t have jobs…a weak economic signal. But the increase was so small it had little impact.

As a result, we had an uneventful Jobs Report and Unemployment Report. But if you recall, I said yesterday that the market would react more vigorously to today’s reports because of all the volatility of late. I also said there was more downside to upside because signs of a strong economy reinforce Bernanke’s new position to taper QE. So, even though the reports this morning were far from exciting, traders still reacted to it by selling off bonds.

And so, this morning has not gone according to plan. It’s not what I was looking for – that’s for sure. I was really hoping for some upward motion in the price of bonds, but alas, my prayers were not answered in that respect. I am also confused as to why the price of bonds increased over the last few days but we did not get an improvement in pricing…very odd that completely omits the logic. However, the good news is it appears the harsh drop in bonds has leveled out. Even if we don’t get back the 400bps we lost in May we have some hope that things will not get dramatically worse. And I can assure you the Fed will not be eliminating QE any time soon. That’s what I’m taking into the weekend….

My Market Watch:  

Jobs Report Tomorrow!   Tomorrow is the big day…the all important Jobs Report is revealed. Although this report is a big deal every month, tomorrow’s report will have a bigger impact than usual because of all the market volatility…at least that’s my opinion. Keep reading…and then pray for a friendly bond report tomorrow. Bonds Up Big! Prices Strong. The 30-year bond is up big-time, now +45bps so far. Today is a good day to lock unless you think tomorrow’s Jobs Report will be favorable for bonds.Tomorrow’s Jobs Report is expected between 160,000 and 170,000 new jobs in May. However, the actual number of jobs created is irrelevant…it’s more about what we expect versus the actual number that matters. If the number is much less or much higher than expected, then trading will really fly and this will probably set the tone for the remainder of June. So, it’s a pretty big deal…if you haven’t been praying then this is the time to start.

My Analysis goes like this…if more jobs are created in May than was expected, then traders will interpret the news as a strong sign for our economy. When traders feel the economy is strong they invest in stocks. Typically when traders put money in stocks they pull money out of bonds and when that happens rates/pricing worsen. Conversely, if less jobs are created in May than was expected, then this is a weak sign for a our economy. When traders feel the economy is weak they invest in bonds. Typically traders will pull money out of stocks to invest in bonds and when that happens rates/pricing improve. I hope that makes sense.

I believe the report tomorrow has more downside than upside…let me explain. The big reason the bond market has fallen so sharply (and rates/pricing with it) in the last couple of weeks was because of Ben Bernanke’s changed position on Quantitative Easing. That is, Bernanke had been steadfast in his policy to buy bonds throughout 2013 and well into 2014. This buying of bonds is what had kept rates so low…it’s maintained an artificial low-rate mortgage environment we’ve all enjoyed. But just a couple weeks ago he changed his tune for the first time indicating the Fed would taper back the buying of bonds. Keep in mind he never said they would stop buying bonds, he just said they would slow it down. But that change in his stance was enough to send the bond market into the crapper. Therefore, in my opinion, if the report tomorrow shows more jobs than expected it serves to reinforce a strong economy and justifies Bernanke’s changed posture of backing off QE. If this happens then June will be ugly…real ugly…hard-to-look-at-ugly. That’s why I think there’s more downside than upside.With that said, bonds were improved yesterday but pricing did not follow suit. That is, pricing was worse than yesterday despite an increase in the buying of bonds. This is counter-intuitive. Moreover, pricing this morning was worse than yesterday by 0.125. And, the bond market is jumping right now up up nearly +45bps and we only saw an improvement of 0.125 by Capital Markets. This makes me believe everyone is holding back and if the report comes in friendly for bonds tomorrow we will see a significant improvement in pricing.

My Prediction. For the love of all things holy in this land called earth, this is one of the toughest predictions ever. But here we go…My gut tells me the Jobs Report tomorrow will be weaker than expected and therefore traders will sell stocks and buy bonds…I predict an improvement tomorrow in rates/pricing. THERE! I SAID IT!

Please, for the love of all things, do your own research and rely on the same.  Now, please be sure to get on your knees tonight and pray. If you’re not religious this is a good time to reconsider that position. If you are religious, then get cracking!

My Schedule:  Available all day.

Punks…All Of You!  You’re All Wrong About the NBA Finals

My post yesterday that the Miami Heat would win the NBA Finals was met with a flurry of emails from dissenting readers. Look, I know the Spurs are good…they’re in the Finals and that should be enough to prove that point. And yes, Parker is arguably the best point guard in the game. And Yes, Ginobili is brilliant at times. And yes, Leonard can be an explosive role player. And I’ll even concede that the Spurs have a leg up with coaching with one of the best coaches ever in Popovich. But against the Heat, they’re all punks. Lebron is going to make Leonard look like a lost puppy…he won’t be guarding him for long.

And as far as Ginobili goes against the Heat, he’s a punk who will only show up in spurts but it won’t be enough. And Duncan, he’s old. And Parker? Well, I can’t really talk much smack about Parker…if he’s on all cylinders he’s pretty much impossible to stop. But bottom line, if the Heat are on their game, they cannot lose. Wade’s going to be a different player starting tomorrow, guaranteed. And without Hibbert in the game Bosh might even show up for the party. And if Allen gets going, watch out! And if it’s a close game, I’ll take Lebron to win it. I was watching ESPN last night and it seems everyone thinks the Spurs are going to win in 7. I think they’re all wrong and so are you. YOU’RE ALL A BUNCH OF PUNKS!  How do you like me now?! I’ve got the Heat in 6. That’s all I have to say about that.

My Schedule:  I have an appointment in Irvine at 10:30a and otherwise available.

My Market Watch:  Bonds Up – Prices Strong. The 30-year bond is up +32bps so far. We’ve seen this before though…bonds get bought by traders early in the morning and then sell off before the coffee is done brewing. I hope it sticks today!  This morning was the ADP Employment Report and bonds were unaffected. The report indicated less new jobs than anticipated which is obviously considered a negative report for the economy. In turn bonds picked up while stocks declined.

Friday is the Jobs Report and so far based on what I’m reading we are expecting 160,000 new jobs to have been created in May. Remember, the number of jobs created is irrelevant…it’s more about what we expect versus the actual number that matters. If the number is much less or much higher than expected, then trading will really fly. Up until the report, traders can only predict what will happen and buy and sell according to their best guess, based on opinions and other data. More to come….

Miami Heat.  Lebron James, Dwayne Wade and the rest of the Miami Heat own the NBA Championship. Yes, I know they still have to play the San Antonio Spurs but come on! There is no way the Spurs have a chance against this team. The Heat have been playing awful and still they win. Last night they finally got some production from Dwayne Wade and look what happened.  And for all you Lebron James haters out there because he left Cleveland, you need to get over it. I admit he was stupid to make such a big deal out of it with all the press conferences and hoopla. But moving to Miami was smart, very smart. By joining Miami and keeping Wade there he all but insured a long run at the NBA Championship. He looked at other great teams and learned he needed to have more than one superstar to achieve greatness, i.e., the Lakers with Magic and Kareem. Miami now has all the tools…they have a great bench, great role players, and great superstars. Their biggest weakness, besides Wade’s knees, was in my opinion the coaching staff but that too seems to be improving. For example, putting James on Paul George last night was a brilliant coaching move by Erik Spoelstra. I’ll take the Heat to win the Championship this year, and next year too assuming they are all back and healthy.

My Schedule:  I have a conference call with Operations this morning from 9-10a. Then I have an appointment in Irvine at 10:30a and another at 3p. In-between I will return emails and calls but please be patient with replies. If urgent, text me 619-549-9797.

My Market Watch:  Bonds Down – Pricing Worse. The 30-year bond was down -20bps resulting in pricing -0.250 worse from yesterday morning.  Tomorrow is the ADP Employment Report. Friday is the Jobs Report and so far based on what I’m reading we are expecting 170,000 new jobs to have been created in May. Remember, the number of jobs created is irrelevant…it’s more about what we expect versus the actual number that matters. If the number is much less or much higher than expected, then trading will really fly. Up until the report, traders can only predict what will happen and buy and sell according to their best guess, based on opinions and other data, like this blog (most traders on Wall Street read my blog to decide what to do…NOT).

Incredible Babies! These babies are amazing!  I have never seen anything like it. You have to check this out! They can really skate and dance! Baby Roller Skating – Evian Baby Dancing – The Travel Mama’s Guide! My wife, the Travel Mama, has officially launched her book about Vacationing with Babies and Children AND STAYING SANE.LAST DAY TO ENTER CONTEST to win a copy of the book PLUS a $250 Residence Inn by Marriott gift card. The book can be purchased at Amazon.com. Thanks!

My Market Watch:  Bonds Up – Pricing Improved. The 30-year bond is up this morning about +25bps. Actually bonds were doing worse this morning when I woke up…I rolled my eyes and turned over in bed. But by the time I got the kids off to school bonds had fully recovered and are now up significantly. Why?  Weak economic reports including the ISM which normally isn’t that impactful…but with so much volatility traders are looking for any indication of when to buy bonds.

This week is big…BIG. It’s Jobs Report week and Wednesday, Thursday and Friday each can have a significant impact. Specifically, the Jobs Report has the potential to move the markets but before I make a predication I need to read more and see how things look tomorrow. Of course, if I knew for sure what was going to happen I would be a professional poker player who gambled my obnoxious amount of money. I can tell you this…the Jobs Report indicates how many new jobs were created in May. If the report indicates a lot of new jobs, then traders consider that a good sign for the economy. Conversely, if there are less new jobs then traders will interpret the news as bad for the economy. If traders think the economy is stronger they will invest in stocks and pricing will get even worse. If they think the economy is weaker they will invest in bonds and pricing will get better.Equally important, the Fed will speak and presumably will address Bernanke’s statement about Quantitative Easing in mid-May. You know what I think they will say. If I’m right, then bond prices should move significantly higher. If I’m wrong, Lord help us all. More to come….

Don’t Let Your Locks Expire!  Bonds Will Eventually Come Back…. Read Me

My Schedule:  I have an appointment from 11:30a – 2:00p. Otherwise available….