NFP - Move on - Nothing to See Here!

So  - like I said on Friday – I think investors are paying less attention to the NFP report today vs. in years past….…..and apparently they are completely discounting Friday’shorrific report that showed we LOST 33k jobs last month vs. the expected gain of 80k jobs….. That’s right we LOST 33k jobs – you can blame that on hurricanes Harvey and Irma – so it is  being viewed as ‘temporary’ – thus Friday’s report is nothing to get worked up over…..the issue I have is - analysts were quick to blame the hurricanes on the miss -OK...but then how come they didn't adjust their estimates prior to the released based on that expectation?  I mean when the miss hit the tape - the analysis was immediately about the effects of Harvey and Irma.....  If they knew that -then why weren’t the estimates adjusted ahead of the report to reflect those effects?  There is a missing link there – but either way – it is what it is……the only part of the report that was bullish (or concerning - depends on how you look at it)  was the rise in avg hourly earnings…this data point rose more than expected +0.5% vs. the exp of +0.3%.   – and this gives cover to Janet Yellen and her band of merry men to continue to raise rates….. because nascent signs of wage growth will cause the FED to jump in front of this train  - before is it too late... 

Signs of accelerating  wage growth suggest that employers are having to increase wages in order to keep workers and this suggests an ‘overheating’ economy that could see inflation increase rapidly….…it is called ‘Wage Push Inflation’  -

Wage push inflation is defined as – the general increase in the cost of goods because of an increase in wages.  As employers are forced to pay higher wages – they will increase the prices that they charge for the goods they produce. – which then has a circular effect…because as the cost of goods goes up then employers must keep increasing wages to compensate for higher prices and so on… - and once you get Cost Push inflation – it becomes more difficult to stop.

Now this is in direct contrast to ‘Demand Pull Inflation’.    Demand pull inflation is caused by a rise in prices because demand outstrips supply  - but in this case – as prices rise – consumers can choose not to purchase those items which then slows the pace of inflation.  If demand rises at a faster clip than wages  and prices rise quickly– then demand cools down – causing the pressure on inflation to wane.

So this will be the issue to watch….what will Janet have to say about the pace of rising wages?  Is she concerned?  Will she use it further justify a rate increase?  (Yes).   And if Janet thinks that Trump will replace her in February – will she act to drive a stake in the ground and increase interest rates by 50 bps in December vs. the expected 25 bps – citing her concern for Wage Push Inflation?  And a 50 bps increase (hawkish) is absolutely NOT in the cards…. Just sayin…

Now before you get all worked up – expect next month’s job report to ricochet back to previous levels….recall - like prior storms - think Katrina - the NFP report always takes a hit, but then rebounds markedly over the next few months....so don't expect the FED to be overly concerned about the loss of jobs - but do expect that she will be watching wages very closely.....

And since we are now fully expecting a rate hike in December (odds have shot up to 90%) - then the financials should continue to outperform....XLF $26.35 - has also rallied 10% in the past month and since it broke its pivot point at $25.99 - we could expect a price target of $31.80 ish before it hits resistance....

And considering all of the damage – expect construction jobs to soar and everything along the construction food chain to benefit.  The Home Builders ETF - XHB $40.49 -  is already up 6% since the storms began...and is now up 19% ytd.....with room to run......and since this stock broke out of its pivot point at $39.25 - it could run another about 20% from there....which gives it a  target of $47 before it should find significant resistance.  Just a thought.....and like we said - the individual names like PHM, DHI, TOL, WLH, KBH have also all broken out on the back of an improving economy and the opportunity that the storms have created.......

US futures are up 3 pts in early trade - and with today being Columbus Day -the banks and the bond mkt are closed...Equities will trade - but do not expect any fireworks......There are no economic reports today so there will be a lack of directional drivers....I expect the mkt to continue to churn in here today.   
 
The news will focus on the increasing Twitter  (TWTR) storm brewing in DC between Donny and Senator Bob Corker....If nothing else - it will be valuable for the entertainment feature alone....as we witness two grown men - act like spoiled children.
 
Oil is trading up a bit +0.13 cts at $49.42 - after Reuters reports a decline in rigs in the US...
 
Gold is trading up $9 after testing its long term 200 dma at $1259 last week.  Friday it ended the day kissing the 100 dma at $1279/oz and this morning on the back of  some weekend drama.....1. Catalonian independence, 2. an international scuttle with Turkey and 3. more back and forth with Chubby (Kim Jung On).  Traders are taking an opportunity to jump on board.  Expect a test of $1300 before it finds resistance.   
 
European mkts are mixed and quiet.........German September industrial production rose 2.6% vs. the expected +0.8%......and  this caused the German mkt to hit an all time high before backing off a bit.   FTSE -0.25%, CAC 40 +0.01%, DAX +0.03%, Eurostoxx +0.09%, Spain  +0.62% and Italy +0.17%.
 

Rice Timbale w/Sweet Sausage

So now you ask - What is it?  Well - a timbale is a dish - usually made with meat that is prepared and cooked in a mold (think bundt pan) or is wrapped in a pasta dough to form an envelope  and then served.  It could be sautéed beef, veal or pork or any combo of each -  It does take some time to put it all together, but when complete it is delicious.  Try it won't you?  It makes a great thanksgiving side dish. Today we will prepare it in a bundt pan.
 
 
For the rice: 1 lb Arborio rice, 1 diced onion, 5 cups chicken broth, butter, 2 1/2 cups freshly grated parmigiana reggiano, 3 large eggs scrambled and at room temperature.

 For the stuffing - 1/4 cup olive oil, 1lb Italian sweet sausage - removed from casing, (Now if you prefer to use  am mix of the meats  then adjust accordingly), 1 shallot, sliced, 2 cloves of chopped  garlic, s&p, 1 (28ounce) can crushed tomatoes, fresh basil and 1 (3 inch) piece of parmesan cheese rind, 1 cup frozen peas, thawed,  freshly made mozzarella cheese, diced, bread crumbs.

 To begin -

 In a large sauce pan heat up some butter and a splash of oil  and add the chopped onion and cook until soft.  Now combine the Arborio rice, chicken broth and a pinch of salt - be careful here - the chicken broth has salt - so do not overdo it.   Stir and bring to a boil over high heat. Cover the pan with a tight fitting lid, turn the heat down to low and simmer for about 10 or 15 mins - stirring once after 5 mins,  You want the rice slightly undercooked but all the liquid absorbed.

 Pour the rice into a large bowl and cool to room temperature, stirring occasionally. When cool - stir in the parmesan cheese and the eggs mix until well combined and set aside.  The rice needs to be cooled - otherwise you will cook the egg when you combine - you do not want to do this.  

 Meanwhile, using a medium saucepan add in a splash of oil and turn the heat to high.    Add the sausage the hot oil and brown - breaking it up with the back of a wooden spoon as it cooks.  Season with s&p.   Using a slotted spoon, remove and place in a bowl and set aside.

 In the same pan - reduce the heat to medium and add the shallot, garlic.  Cook, stirring constantly for 1 minute or until the shallots are soft. Add the tomatoes, fresh basil and parmesan rind and bring to a boil. Reduce the heat to low and simmer, stirring occasionally with a wooden spoon, for 15 to 20 minutes. Season with s&p.  Remove the cheese rind.  Now add 2 cups of sauce to the meat.  Set aside.  

  Preheat the oven to 350 degrees F.

 Butter the inside of a bundt pan - making sure to coat it very well. Dust the inside of the pan with bread crumbs. Make sure it is evenly coated.
 Now - add the peas and diced mozzarella to the sausage mixture and mix well.

 Next - Spoon 2/3 of the rice into the prepared bundt pan. Using damp hands, press the rice evenly over the bottom of the pan and up the sides and middle of the pan.

 Carefully spoon the sausage meat filling into the well of rice and press gently to make sure it is evenly packed.

Now cover the sausage with the remaining rice mixture and, again, using damp hands, press the rice mixture evenly over the filling being sure to press  along the edges to seal.

 Sprinkle some more bread crumbs on top and dot with butter. Place in the preheated oven and bake for 45 minutes or until lightly browned on top. Remove from the oven and allow to rest for 15 minutes.

 Using a large enough decorative dish - that is larger than the bundt pan - place the dish on top of the bundt and flip it over to release.  Now you can place a bowl of the remaining sauce on the side or you can fill the hole in the center of the Timbale and serve.
  
Buon Appetito.