I am not a linguist, nor am I an economist. Nor am I a cook for that matter, but I really love to eat baked goods. I study the markets every day, and when I hear the term “German Bund” thrown around, I think first of the cake and not the debt vehicle of the country that makes my favorite cars. Over the last month, the 10 Year German Bund yield has dropped to .29%, while our US 10 Year T-Bill sits at 1.83%. Both indices have declined about 1/3%, but the (perceived) safer economy in the U.S. is producing a return 600% greater than its lederhosen wearing counterpart. And our stronger dollar means that we can buy more foreign-made stuff than we can of our own goods. That’s great if you want to buy a Porsche or a not-so-fresh German Bundt cake, but if it becomes cheaper to procure goods from a foreign source for too long, we become a society of consumers and not producers. Without production there aren’t any jobs, which means no dollars to buy Porches and pound cake.
That’s precisely why Friday’s Jobs Report is so important. Stay tuned.