US Job data came lower than expected. Employers added a modest 142,000 jobs in September, while gains in July and August were revised down by a combined 59,000 positions, the Labor Department said Friday. The job creation was enough to keep unemployment at a seven-year low of 5.1%.
However the jobs being created are of a lower quality . Also the new jobs that are being created are of a lower quality as compared to the jobs being lost . We have less well paying jobs in the Oil and mining sectors and more jobs in Restaurants . The days of definite retirement benefits are vanishing fast .
But then for most of the market which has got used to reacting to only the short term outlook , this is good news . Remember we are in the period when some the bad news from US job markets is actually good news for the stock markets.
Bad US jobs data implies that the FED has one more excuse to delay the rise in interest rate . So the markets rejoice at the continuation of easy money .
However the evils of easy money is all around us . Let's take a look at Glencore for instance. Gencore being one of the biggest commodity houses and one of the highest leveraged players .epitomizes the evils of easy money .
As the Fed pushed in additional liquidity into the system, Banks took advantage of the low costs and started giving easy credit to weak players . Commodity prices moved up buoyed more by liquidity than by demand growth . In turn mining and other commodity assets prices reached astronomical levels. Now that all the commodity asset prices are falling all the balance sheet of the commodity houses looks highly inflated .
So the list goes on and on : Glencore is just the bellwether of things to come !!
In India the commodity companies like Vedanta group , Cain , Hindalco , Tata Steel has gone in for expensive acquisitions backed by low cost of credit . As the credit costs goes up and assets prices fall for many of them the damage to the balance sheet is yet to be priced in.