VIX, JOLTS, FOMC, Crude Glut And Peabody Energy

As the U.S. dollar strengthened today, gold lost even more of its safe haven appeal and now appears to be strung out on the corner waiting for a big fix of inflation. If stable-to-lowering yields on U.S. bonds across all maturity dates are any indication, the wait is going to be a long one.

It should be no surprise then either that the CBOE volatility index (VIX) is coming in for a soft landing after its incredible surge to highs over 53.25 just two weeks ago. Today it stands under 25 and seems to be pointing lower on the trend.

Moreover, the likelihood that the Fed will raise rates in one of its next few meetings seems to be growing and growing. There was more fresh documentation in the case for higher rates today in a new data report.

The Job Openings and Labor Turnover Survey (JOLTS) showed the highest number of job openings on record at 5.8 million. The JOLTS snapshot is important because it shows the “supply side” of jobs and 5.8 million is as healthy as we’ve ever achieved.

The non-farm payrolls report that was released on Friday bolstered expectations that the labor market is strong enough to weather a rise in U.S. interest rates – possibly when the Federal Reserve meets next week, although in our view that’s an unlikely scenario.

Call us crazy, but those 5.8 million openings could be filled – especially the ones for younger high-skill workers if companies would break out of traditional recruitment patterns for young people and offer real signing bonuses. (We believe that while there is some skills shortage, it isn’t the whole answer.)

Signing bonuses for tech, manufacturing and “model” degree holders of recent vintage would allow the “kids” to move to where the jobs are, put down-payments on apartments and cover moving expenses. Or it would allow them to pay down some of the staggering college loan debt.

Companies know who and what is out there, now they have to bring the workers in. As they say, you have to fish where the fish are. Those unfilled jobs are a drag on growth.

Returning to the precious metals briefly before we look at energy… silver, platinum and palladium all tumbled heavily today as did king gold. The greenback affected the other precious metals, of course, but the overall market suffered because of renewed interest in equities and a holding pattern mentality while we wait for next week’s FOMC meeting.

In fact, that meeting will put a damper on enthusiasm as well as pessimism in all markets until a statement is released on Friday, September 18 at 2PM Eastern Time. (Expect the real after-effects to kick in on Monday.)

Crude oil dipped. No surprise there. Fundamentals on the ground just have no support to give crude these days. We are awash in oceans of the stuff already, with more waiting to flood the market should OPEC decide to cut production or raise prices unilaterally. A slowdown in China is still a major worry.

Oil may also be in for more and more of a rough long-term ride. Natural gas, which is also being produced in great profusion and alternative energy continue to give oil fits. Alternate generation of electricity will eventually spell oil’s end, just as it has practically destroyed coal.

Heed this: At the end of March in 2011, Peabody Energy was trading at around $72 per share. Today it’s flirting with $2.00 per share. Yes, correct: two dollars per share.

Wishing you as always, good trading,