How Will the Weak Jobs Report Affect Taper Talk?

REPLAY VIDEO
Your next video will start in
Pause

Recommended Videos

  • Info

  • Comments

  • VIDEO TEXT

Sept. 6 (Bloomberg) –- LPL Financial Investment Strategist John Canally and Mitsubishi UFJ Securities USA’a John Herrmann discuss the health of the U.S. labor market and its effect on potential Fed tapering. They speak with Pimm Fox on Bloomberg Television's "Taking stock." (Source: Bloomberg)

Comfortable paying the kinds of subsidies that carriers are required to pay for the high-end apple phone and perhaps the reasoning of them going down this road in the first place.

However bloomberg news is hearing that there will not be an announcement tied to china mobile at the event next week.

Still a major development.

So what products does apple sell already in china?

I know they've got a lot of stores in china.

Is it just the iphone that has been lacking a major network partner?

While they do have major carrier agreements there, obviously having a deal with such a big player like china mobile would be equally helpful.

One trend that we have seen is that while this is a company that has sold more than 140 million iphones over the last four quarters, a massive number, over the last couple of quarters, i guess could you say the first half of this year, when it comes to the market share of total smartphones shipped around the globe, we've seen a decline for apple and we've seen an increase for some of the other players like samsung, lenovo, z.t.e., all players that are catering to the chinese consumer with lower-priced new devices.

So, that's certainly one of the big factors.

One of the other things we should just point out about china mobile is that despite having well over 700 million subscribers, a lot of those subscribers are still in very rural areas that don't necessarily have more than 3-g access.

So there is a question mark of how many necessarily they could actually benefit from immediately.

Still it would be a very major development for the folks at apple.

Want to thank you very much.

Our senior west coast correspondent, shares of apple higher by about .3% in after hours trading at $500 a share.

And today the u.s. payroll report showing poor results.

But could the bad data actually be a good thing when it comes to investors?

Perhaps the federal reserve will continue its stimulus program.

Here to help us understand what the central bank may or may not do and what's next for markets, we've got our director of u.s. interest rate strategy at miss beneficiaryy and an investment strategist.

The report was less than robust but the fed is never going to act on one number.

They're looking at a number of different indicators.

And if you look at what's happened since they announced quantitative easing a year ago, some of the indicators are better, some are worse.

They're not outstanding but they're ok.

So i think from an economic basis, the fed would say they might want to wait a little while and taper but i think markets are kind of forcing their hand here.

I want you to come in on this and take a look at the july and june revisions.

That also caused people to speculate about the federal reserve.

Absolutely.

A lot of speculation going on.

But i think just looking at today's employment report, we've seen over the last 12 months where averaging payroll gains in the private sector, about 190,000. that's very good.

It's trend-like.

It's what we've been seeing the last couple of years.

We'd also like to see more.

190,000 is pretty decent in this environment.

We've also had a remarkable recovery in the motor vehicle sector.

We've had a very, very good recovery in home prices and we've seen a tremendous amount of consumer to leverages over the past year.

So all of these things combined i think, you know, present a more healthier, more balanced picture of the economy.

I think the one that the fed is hoping, you know, continues to gain traction going forward, and would enable them to begin to taper the program.

If that's the case do people sell their bonleds next week?

We have been in the negative bond camp since early may.

And we've been looking for 10-year yields to rise since that time.

And they've risen a fair amount, about 140 basis points almost.

So we think that -- we're still -- we still have our concerns.

And i think in general, i think yields are still headed backwards, more so than forward.

And it's not really a good environment for the bond investor.

So don't buy bonds right now?

I would still be very cautious.

All right.

Does that mean buy stocks as opposed to bonds?

You take a look at the yield on 30-year treasury, what are we talking?

3.8%, 3.%. i think you're starting to see that rotation from people realizing that the 30-year bull market in bonds is over.

And those yields are headed higher.

They might not be headed higher as fast as they have over the last couple of months but they're headed higher.

So i think that then that naturally focuses people on the stock market.

But you have to be careful sometimes in the stock market, don't want to buy interest-sensitive stocks because those haven't done all that well since rates started going up in may.

Vow to be careful.

But i do think in general over the next 12 months, 18 months, that you'll be better off in the stock market than in the bond market.

Just as a carry-on, what we've seen in the second quarter, we saw that business, corporate profits reached an all-tie high in the second quarter.

So any additional pickup, and we saw the unit labor costs for the productivity results yesterday.

Labor costs very low.

So profit margins, going forward we can continue to gain progress in revenue growth.

Top-line growth.

I think the profits will continue to expand going forward.

So that's a good place to be, which is stocks.

But we saw something similar in the 1993, 1994, 1995 tightening cycle where bonds got absolutely destroyed over a year and a half, two-year stretch and where stocks basically held their ground and started to forge higher and as soon as the feds said we're done, stocks just went on a 3 1/2, four-year rip.

Without wage increases, you're not going to have -- how do you get this virtual white house psychle?

Because you're looking for a little bit of inflation, at least the federal reserve is.

If you don't get that wage increase then people don't have more money to spend, then it creates this -- not virtuous.

We have a more or less, i would call it almost a two-tier economy.

So in a knowledge-based economy, the unemployment rate is remarkably low.

It's below 4%. the wage gains, the salaries are very substantial, the benefits are outstanding and then there's the less skilled area of the economy which is slowly coming around, slowly gaining traction.

So i think that -- there's nothing really to change there.

The one thing that could change and that could be helpful is the president and congress could come together and roll out slightly more favorable growth policies.

We've focused on aggregate demand for the last five years because of all the pain and suffering in the household sector.

Going forward to help spur job growth we may need to be, you know, hold out an olive branch to the business sector, the supply side, to help to grow

This text has been automatically generated. It may not be 100% accurate.

Advertisement

BTV Channel Finder

Channel_finder_loader

ZIP is required for U.S. locations

Bloomberg Television in   change