Average Annualized Return Per Closed Trade: 22.4%
Average Return Per Closed Trade: 17.9%
Average Holding Period: 297 days

The Bureau of Labor Statistics reported today that the U.S. economy gained 287,000 non-farm jobs in June, well above consensus expectations of 180,000. The strong showing is a welcomed relief after a consistent string of monthly hiring data over the past several months. The unemployment rate ticked up by 0.2 percentage point to 4.9 percent, but labor participation rate also ticked up to 62.7 percent.

The 287,000 gain contrasts starkly with the (revised downward) measly 11,000 gain in May. In both months, economists’ forecasts were off by more than 100,000. These are the largest consecutive monthly forecast misses in almost ten years, underscoring how unusual the last two months were.

The Fed would likely evaluate the jobs data not on a monthly basis, but on multi-month trends. After the strong June showing, the economy has now added on average about 150,000 per month in the last two months; in the second quarter, it averaged roughly 147,000, below the first-quarter average of 196,000.

Thus, today’s surprisingly strong June job numbers likely won’t change the Fed’s interest rate plans, especially with still so much unknown about Brexit and its ramifications. Moreover, domestic economic readings have been somewhat of a mixed bag lately, and likewise probably won’t change the Fed’s mind one way or another.

A slow-growing economy would encourage the Fed to continue its dovish monetary policies that are favorable to risky assets. At the same time, the economy would avoid contraction, which would be bad for the market. Today’s job data suggests that the economy sits in that sweet spot, which explains the stock market’s “good news is good news” reaction today.

Last week, we highlighted silver’s rise and First Majestic’s (AG) tremendous performance this year. Silver closed trading slightly above $20 on both Monday and Wednesday and quickly fell back into the mid-$19s in the day after. It retested $20 again today and managed to close above that mark.

In recent decades, the ratio of the price of gold to the price of silver is about 60:1. In other words, it would take on average 60 ounces of silver to buy one ounce of gold. When investor interest in precious metals is high, the ratio falls, and when the opposite is true, the ratio rises. This is because silver tends to be gold’s volatile cousin such that it will rise more than gold (in percentage terms) during good times, and fall more during bad times.



The ratio dropped to a nadir of about 32:1 at silver’s April 2011 peak and topped out at about 83:1 at the end of February. In precious metals bull markets, silver tends to be slower to take off than gold, but when investor interest grows, silver usually catches up and passes gold.

After silver’s recent run, the ratio has fallen to about 70:1 but still remains above its average in the last four decades. As the chart above shows, although 60 is the historical average, rarely does the actual ratio at any time actually hover close to the average. Rather, the ratio tends to wax and wane until it peaks or troughs. Thus, if the current bull market has legs, historical performance suggests that silver still has room to run.

That said, silver looks overbought in the near run and may be ripe for a breather. Our silver play First Majestic, which we highlighted last week, has shot up to nearly $16, well above our suggested buy-up-to price of $12, an indication of just how heated the rally is. We rate the stock a “hold.” We would not begrudge our readers who, at your own discretion, took a little profit off the table.

We post a snapshot of our Brain Trust Profits Portfolio and the record of our closed trades below. For a more detailed table of current recommendations as well as information on closed trades, log into our website and click on the ‘Portfolio’ link.

Closed Trades: