Once again we are seeing that JOBS are the canary in the coal mine!!
This month’s employment report shows 120,000 new jobs were created last month. Once again, this is a pathetic number! Economists expected 210,000. But, you know from reading these updates that our economy needs at least 100,000 jobs per month just to place young people entering the work force. In addition, we need at least another 100,000 to place the 8,000,000 people laid off during The Great Recession! That is a minimum need for new jobs of 200,000 per month!!
Here is where the report gets jiggy. Of the 120,000 jobs created 90,000 were fiction. By this I mean the government used the birth / death model to generate 90,000 jobs. The birth / death model is a telephone survey of small businesses. The businesses are called up on the phone to be surveyed for the number of people employed. If they do not answer, as in they are out of business, it is assumed they were all rehired elsewhere. Then any new jobs created at companies that do answer the survey, are added as such.
So, the employment report was actually much worse than the 120,000 jobs reported. In fact, it is more realistic to report that only 30,000 new jobs were created. In an economy that is reported to be four years into an economic recovery this number is not only alarming, it is pretty scary! Why? Because it suggests we are not growing our economy at all and likely contracting once again.
The next key number to reflect expansion or contraction in the economy will be the Gross Domestic Product (GDP) for the first quarter of 2012. That will be released in two weeks on 4-27-12. I will share some insights on what to expect of the GDP number in next week’s update. For now, I would suggest we are looking at a GDP number of less than 3% and we need 3%, or more, to produce anything resembling growth in job creation!
I am interested in your comments. E-mail me at jlunney@wealthstratgroup.com.
Jim Lunney, CFP, RIA
Friday, April 13, 2012
Thursday, April 5, 2012
The Weekly Update 4-5-2012
"They don't ring a bell at the top!"
And you won't really "hear opportunity knocking!"
Instead, you either have to know where to look for real and time trusted economic data or know and trust someone who does. I think the Wealth Strategies Group monthly update of "The Seven Signs of Economic Change" have done this very well. Especially in light of the economic cross currents that have resulted from extreme government interventionion via the various stimulus packages!
The bell you might be hearing now is perhaps a warning bell to exit mid term and long term bonds and / or like managed vehicles. Here is what the bell is saying:
1) From our first President through Bush #43 our country built up a $6.3 TRILLION dollar debt.
2) The 44th President has added $6.5 TRILLION in just three years. Think about that. In 219 years we grew the debt to $6.3 Trillion and in 3 years we have doubled it!!
3) The two biggest buyers of this debt are leaving the complex. A) Per the The Federal Reserve they have purchased 61% of U.S. Treasury debt issued in the last year. B) China, who was the largest buyer of U.S. debt until last year has sold over 10% of it's holdings.
Conclusion: We have doubled our debt burden in just three years and the biggest buyer, the Fed, is scheduled to stop their purchase arrangement (Operation Twist) at the end of June 2012. The second biggest buyer has become a seller. The bell is asking who will pick up the buying after these two very large buyers are no longer buying. Perhaps a better question is.....and to whom are we, and you, going to sell your bonds to?
We have all been to parties that extend way to long into the night. As mom used to say, "nothing good happens after midnight". And at the bond party, we are well past the midnight hour!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
And you won't really "hear opportunity knocking!"
Instead, you either have to know where to look for real and time trusted economic data or know and trust someone who does. I think the Wealth Strategies Group monthly update of "The Seven Signs of Economic Change" have done this very well. Especially in light of the economic cross currents that have resulted from extreme government interventionion via the various stimulus packages!
The bell you might be hearing now is perhaps a warning bell to exit mid term and long term bonds and / or like managed vehicles. Here is what the bell is saying:
1) From our first President through Bush #43 our country built up a $6.3 TRILLION dollar debt.
2) The 44th President has added $6.5 TRILLION in just three years. Think about that. In 219 years we grew the debt to $6.3 Trillion and in 3 years we have doubled it!!
3) The two biggest buyers of this debt are leaving the complex. A) Per the The Federal Reserve they have purchased 61% of U.S. Treasury debt issued in the last year. B) China, who was the largest buyer of U.S. debt until last year has sold over 10% of it's holdings.
Conclusion: We have doubled our debt burden in just three years and the biggest buyer, the Fed, is scheduled to stop their purchase arrangement (Operation Twist) at the end of June 2012. The second biggest buyer has become a seller. The bell is asking who will pick up the buying after these two very large buyers are no longer buying. Perhaps a better question is.....and to whom are we, and you, going to sell your bonds to?
We have all been to parties that extend way to long into the night. As mom used to say, "nothing good happens after midnight". And at the bond party, we are well past the midnight hour!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Thursday, March 22, 2012
The Weekly Update 3-23-2012
Two items:
1) GOLD
2) There will be no update on 3-30-2012 (spring break) :-)
Gold closed at $1,644 per oz. today. Gold has seen weakness in the price. So, why does it make sense for a small portion our a portfolio?
The vehicle we have chosen to have exposure with ( call me for the name as I am legally bound from "name dropping" in this venue) owns more than just gold. We own many of the metals including silver and copper. BUT,....most of all we own, via this vehicle, the mining companies.
Gold bullion represents about 30% of the investment and that is good news. Why? For starters, The Bank of International Settlements bought 6 metric tons of gold bullion last week. Total investment was about $300 million. These are the big buyers and there are plenty more waiting for weakness to add to their own positions.
Most of all the mining stocks are selling at nearly a 20% discount to the historic norm of valuation versus the metal that each happens to mine. This is a sign that investors don't want to own businesses in this space regardless of fair value, i.e. they are scared. As the old saying goes "scared money never wins".
There is still plenty of uncertainty in our world. That uncertainty suggests it is reasonable to have a suitable amount of exposure to this investment space. When combined with who is buying bullion now (noted above) and who is scared, I would suggest exposure is also smart and timely.
Let me know what you think!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
1) GOLD
2) There will be no update on 3-30-2012 (spring break) :-)
Gold closed at $1,644 per oz. today. Gold has seen weakness in the price. So, why does it make sense for a small portion our a portfolio?
The vehicle we have chosen to have exposure with ( call me for the name as I am legally bound from "name dropping" in this venue) owns more than just gold. We own many of the metals including silver and copper. BUT,....most of all we own, via this vehicle, the mining companies.
Gold bullion represents about 30% of the investment and that is good news. Why? For starters, The Bank of International Settlements bought 6 metric tons of gold bullion last week. Total investment was about $300 million. These are the big buyers and there are plenty more waiting for weakness to add to their own positions.
Most of all the mining stocks are selling at nearly a 20% discount to the historic norm of valuation versus the metal that each happens to mine. This is a sign that investors don't want to own businesses in this space regardless of fair value, i.e. they are scared. As the old saying goes "scared money never wins".
There is still plenty of uncertainty in our world. That uncertainty suggests it is reasonable to have a suitable amount of exposure to this investment space. When combined with who is buying bullion now (noted above) and who is scared, I would suggest exposure is also smart and timely.
Let me know what you think!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Friday, March 16, 2012
The Weekly Update 3-16-2012
Now would be a good time to visit the following website:
WWW.USDEBTCLOCK.ORG
If you take a moment and look at what is happening to our countries tax revenue versus our spending you should notice that:
1) we have significant debt.
2) our expenses (costs or bills) exceed revenue (income).
In fact, it would be like you or me owing the bank $15.50, earning $2.46 and spending $3.79. In other words we spend 54% more then we make which increases the amount of debt we have every year.
How long do you think our banker would let this go on before we got "the call" to have "the Chat" about our mutual problem? I would guess not very long. But, this bank customer is the biggest in the world and they have been historically good for their loans. Okay, they get a bit more time and creativity, but there will be a time when "the call" comes.
When "the call" comes for a government, it comes in the form of lower to dramatically lower bond prices, which conversely means higher interest rates. Think Greece who saw interest rates sour to 70%+ when the debt holders started to hear the death rattle!
Can that happen here? I do not know, or pretend to know the future,....unlike when I was 18 and knew everthing.... :-) ... That said, I would again suggest you take a close look at the debt clock website posted above. Let it talk to you. Then think about what investments will benefit and which will not.
For openers, bond like investments could go down in value and investments that do well in times of uncertainty should do well. I am not in a position to make recommendations on this venue, but you are welcome to call or email me for a discussion.
This would be a bad time to fall asleep at the wheel!
Jim Lunney, CFP, RIA 1.800.800.6364
WWW.USDEBTCLOCK.ORG
If you take a moment and look at what is happening to our countries tax revenue versus our spending you should notice that:
1) we have significant debt.
2) our expenses (costs or bills) exceed revenue (income).
In fact, it would be like you or me owing the bank $15.50, earning $2.46 and spending $3.79. In other words we spend 54% more then we make which increases the amount of debt we have every year.
How long do you think our banker would let this go on before we got "the call" to have "the Chat" about our mutual problem? I would guess not very long. But, this bank customer is the biggest in the world and they have been historically good for their loans. Okay, they get a bit more time and creativity, but there will be a time when "the call" comes.
When "the call" comes for a government, it comes in the form of lower to dramatically lower bond prices, which conversely means higher interest rates. Think Greece who saw interest rates sour to 70%+ when the debt holders started to hear the death rattle!
Can that happen here? I do not know, or pretend to know the future,....unlike when I was 18 and knew everthing.... :-) ... That said, I would again suggest you take a close look at the debt clock website posted above. Let it talk to you. Then think about what investments will benefit and which will not.
For openers, bond like investments could go down in value and investments that do well in times of uncertainty should do well. I am not in a position to make recommendations on this venue, but you are welcome to call or email me for a discussion.
This would be a bad time to fall asleep at the wheel!
Jim Lunney, CFP, RIA 1.800.800.6364
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Thursday, March 8, 2012
The Weekly Update 3-9-12
There are positives emerging in the Personal Consumption Expenditures (PCE) data flow! As you would guess some of the positive data is very short-term in its trend, as it is just “days” versus the “consecutive months” we look for, as noted above. However, a trend change has to start somewhere and that is why we look at both live data flow on PCE and the messaged data flow from the Bureau of Economic Analysis (BEA).
The live data flow can be found on our website (www.wealthstratgroup.com) by clicking on the tab for “WSG Investment Index”. In just the last three weeks the “live” consumer spending activity, as measured by the Consumer Metrics Institute, has increased 14%. This is a “peek around the corner” to the future, as this data is about three months upstream from the Bureau’s data flow. A good sign indeed.
The BEA reports Consumer Spending in both “current dollars” and “chained dollars”. Long-time readers will recall that we prefer tracking “chained dollars”, as chained dollars are adjusted for inflation. The last five months of data is as follows: September 2011 +.5%, October 2011 +.2%, November 2011 .0%, December 2011 .0%, January 2012 .0%. So, you can see the data is flat, on an inflation adjusted basis. The press likes to report this data in “current dollars”, which shows very slight growth (+.2), but just look at your own household expenses. It is clear as day that things are costing more on all fronts and that skews “current dollars” data more positive than it is, unless adjusted for with “chained dollars”.
Another positive sign is that consumer confidence, which is an indicator of people’s desire to spend more in the near future, reached its highest level in a year at 70.8 in February. Again, comparison creates perspective and in a normal “growing” economy this confidence level would be closer to 90.0. The annual high in this data point is most likely related to jobs, or lack thereof, as outlined below in Sign #4.
This very key sign of change appears to be on the edge of a positive change, but until the short term data flow turns into two, three or four months, it remains “negative” with a bias toward turning “neutral”, perhaps next month!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Thursday, March 1, 2012
The Weekly Update 3-2-2012
Energy prices and the outlook for same are in the news again!
In the last few weeks I have read a powerful article on the huge amount of oil ( a by-product of natural gas "fracking") coming online from the "fracking" process and another article, from an equally credible source, suggesting we all should expect higher oil prices soon.
Supply and demand economics mandates that you will not have both, i.e. more supply and a higher price! So what gives and who do you listen to?
Personally, I believe that our country has an incredible supply of oil reserves both proven and undiscovered. In the early 1980's one of my clients was Raymond Plank, former CEO and founder of Apache Corporation. Mr. plank told me that our energy policy was pretty clear; it was to import and use other countries energy supply before our own. That said, we may be close to the point where the energy it takes to get new energy out of the ground exceeds the value of the energy found, i.e. "peak energy".
I do not have any references to prove this "peak energy" point is upon us, with or without the oil we have access to from the new fracking technology. I do have resources that suggest it is "heavy", or "dirty oil", and costs more to refine into usable products. In addition, it could be at least a few years before any of the oil flows at meaningful enough levels to reduce the price of oil, if ever.
The credible source mentioned above, suggesting we prepare for higher oil and gasoline prices is John Hofmeister, former Shell Oil CEO. His quote at the North American Prospect Expo in Houston was: "There's not enough oil out there to meet demand".....and to expect "gas lines and paying $7-8.00 a gallon".
I now know a few things:
*New supply will be just as expensive as current costs and is not right around the corner.
* The U.S. produces 7 million barrels of oil per day and consumes 18 million barrels per day.
* China consumes 9 million barrels per day and is projected to consume 15 million barrels per day in just 3 years.
*India now consumes 4 million barrels per day and is expected to consume 7 million barrels per day in 3 years.
* The number of motor vehicles in China grew from 20 million in 2005 to 60 million in 2010. That number is expected to grow 3X again to 180 million by 2015, just 3 years.
*We are allocating as much as 10% of the assets entrusted to our over site at The Wealth Strategies Group to this sector. Yes, the world governments could enter the energy complex to reduce prices, as they have in the past, but that would likely be a temporary delay of the inevitable price increase.
* Expect higher gasoline prices ahead.....and the effect it has on other areas of consumer spending, i.e. slower economic growth and the need for fewer new jobs.
I love comments! Email, tweet or call me. 1.800.800.6364.
In the last few weeks I have read a powerful article on the huge amount of oil ( a by-product of natural gas "fracking") coming online from the "fracking" process and another article, from an equally credible source, suggesting we all should expect higher oil prices soon.
Supply and demand economics mandates that you will not have both, i.e. more supply and a higher price! So what gives and who do you listen to?
Personally, I believe that our country has an incredible supply of oil reserves both proven and undiscovered. In the early 1980's one of my clients was Raymond Plank, former CEO and founder of Apache Corporation. Mr. plank told me that our energy policy was pretty clear; it was to import and use other countries energy supply before our own. That said, we may be close to the point where the energy it takes to get new energy out of the ground exceeds the value of the energy found, i.e. "peak energy".
I do not have any references to prove this "peak energy" point is upon us, with or without the oil we have access to from the new fracking technology. I do have resources that suggest it is "heavy", or "dirty oil", and costs more to refine into usable products. In addition, it could be at least a few years before any of the oil flows at meaningful enough levels to reduce the price of oil, if ever.
The credible source mentioned above, suggesting we prepare for higher oil and gasoline prices is John Hofmeister, former Shell Oil CEO. His quote at the North American Prospect Expo in Houston was: "There's not enough oil out there to meet demand".....and to expect "gas lines and paying $7-8.00 a gallon".
I now know a few things:
*New supply will be just as expensive as current costs and is not right around the corner.
* The U.S. produces 7 million barrels of oil per day and consumes 18 million barrels per day.
* China consumes 9 million barrels per day and is projected to consume 15 million barrels per day in just 3 years.
*India now consumes 4 million barrels per day and is expected to consume 7 million barrels per day in 3 years.
* The number of motor vehicles in China grew from 20 million in 2005 to 60 million in 2010. That number is expected to grow 3X again to 180 million by 2015, just 3 years.
*We are allocating as much as 10% of the assets entrusted to our over site at The Wealth Strategies Group to this sector. Yes, the world governments could enter the energy complex to reduce prices, as they have in the past, but that would likely be a temporary delay of the inevitable price increase.
* Expect higher gasoline prices ahead.....and the effect it has on other areas of consumer spending, i.e. slower economic growth and the need for fewer new jobs.
I love comments! Email, tweet or call me. 1.800.800.6364.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Friday, February 24, 2012
The Weekly Update 2-24-2012
"Ring Around The Rosy"
By Mother Goose
Ring around the rosy,
Pocket full of posy,
Ashes! Ashes!
We all fall down!
The Rosy of the equity markets since October 2011 has been the Reserve Banks of the world. Our own Federal Reserve has continued to keep interest rates artificially low via "Operation Twist". When combined with Quantitative Easing #1 & #2 these actions place close to $3 Trillion dollars of liquidity in to the monetary system.
With the most recent bailout for Greece other currencies have been printed and forced in to the monetary system around the world by:
The Federal Reserve: via the International Monetary Fund (IMF)
The Bank of Japan
The Peoples Bank of China
The European Central Bank
The Bank of England
The European Central bank injected the equivalent of $645 BILLION dollars and The Bank of England $125 BILLION. Now those numbers will start a pretty darn good party!!
Now let the banking system leverage it 20-50X, or more, invest the total in "risk" assets like world equity markets, commodities, bonds, etc. and the party goes from pretty darn good to very very fine, in a hurry!!
As I have written for the last several months, I think this will end in tears. However, until that point....week's, months or years...we will Ring around the rosy, Pocket full of posy. Ultimately and if explained logically, each person older than age ten, understands you don't solve a world debt problem issuing more debt!! That will just create ASHES!! ASHES!! We all fall down!
Until the point that our Target Violation Exit Strategy tells us to step aside we will join in. But as written in last week's post, without the concentration of any one investment that rhymes with apple.
By Mother Goose
Ring around the rosy,
Pocket full of posy,
Ashes! Ashes!
We all fall down!
The Rosy of the equity markets since October 2011 has been the Reserve Banks of the world. Our own Federal Reserve has continued to keep interest rates artificially low via "Operation Twist". When combined with Quantitative Easing #1 & #2 these actions place close to $3 Trillion dollars of liquidity in to the monetary system.
With the most recent bailout for Greece other currencies have been printed and forced in to the monetary system around the world by:
The Federal Reserve: via the International Monetary Fund (IMF)
The Bank of Japan
The Peoples Bank of China
The European Central Bank
The Bank of England
The European Central bank injected the equivalent of $645 BILLION dollars and The Bank of England $125 BILLION. Now those numbers will start a pretty darn good party!!
Now let the banking system leverage it 20-50X, or more, invest the total in "risk" assets like world equity markets, commodities, bonds, etc. and the party goes from pretty darn good to very very fine, in a hurry!!
As I have written for the last several months, I think this will end in tears. However, until that point....week's, months or years...we will Ring around the rosy, Pocket full of posy. Ultimately and if explained logically, each person older than age ten, understands you don't solve a world debt problem issuing more debt!! That will just create ASHES!! ASHES!! We all fall down!
Until the point that our Target Violation Exit Strategy tells us to step aside we will join in. But as written in last week's post, without the concentration of any one investment that rhymes with apple.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Thursday, February 16, 2012
The Weekly Update 2-17-2012
There are two things that humans have a difficult time looking at. Number one is the sun and number two is the truth!
For this example I am going to compare the sun to Apple Inc. If you follow a few of the select companies in corporate America, like Apple, you noticed the spike up in the share price last week. It was enough to add a cool $75 billion in market capitalization!
Since the market averages, like the S&P 500, Nasdaq Composite Index and the Nasdaq 100 Index are market capitalization weighted, Apple's huge market cap skews the entire index up or down, depending on which way in moves on any given day. Ned Davis Research reported that Apple now represents 15% of the entire Nasdaq 100 Index! In my opinion, that is a disproportionate allocation.
In essence, this means money managers are unlikely to outperform a comparable index, like the S&P 500 without owning Apple! The shares of Apple may or may not be over priced by the market place, but if they increase in price and you don't own it, you are likely in the underperform the comparative category. On the other hand if you don't own Apple and it goes down you are likely to outperform a comparable index.
I have seen this before. In the 1980's it was nearly impossible to outperform an international index, like the EAFE without owning Japan. We thought Japan was overvalued and owned the EAFE- ex Japan. We were about one year early on the collapse of the Japanese market, so for one year we underperformed versus the EAFE and then looked really smart after that market dropped. Which was nice!
The TRUTH is that it will be hard to make normal comparisons of performance in 2012 unless the weighting of Apple is reduced in the various indexes. As an independent investment advisor, my TRUTH is that we will be measured versus a data point that would require me to take on potential market and volatility risk to beat. Only time will tell if and when this was the prudent thing to do.
So, the Apple market price valuation is a bit hard to look at, just like the sun. This is especially true for people like me who found there was no bid and were no buyers for Apple on October 19th, 1987!
The TRUTH is that it will be hard to explain underperformance versus an index for 2012 if you choose not to concentrate a portfolio in this one company.
For this example I am going to compare the sun to Apple Inc. If you follow a few of the select companies in corporate America, like Apple, you noticed the spike up in the share price last week. It was enough to add a cool $75 billion in market capitalization!
Since the market averages, like the S&P 500, Nasdaq Composite Index and the Nasdaq 100 Index are market capitalization weighted, Apple's huge market cap skews the entire index up or down, depending on which way in moves on any given day. Ned Davis Research reported that Apple now represents 15% of the entire Nasdaq 100 Index! In my opinion, that is a disproportionate allocation.
In essence, this means money managers are unlikely to outperform a comparable index, like the S&P 500 without owning Apple! The shares of Apple may or may not be over priced by the market place, but if they increase in price and you don't own it, you are likely in the underperform the comparative category. On the other hand if you don't own Apple and it goes down you are likely to outperform a comparable index.
I have seen this before. In the 1980's it was nearly impossible to outperform an international index, like the EAFE without owning Japan. We thought Japan was overvalued and owned the EAFE- ex Japan. We were about one year early on the collapse of the Japanese market, so for one year we underperformed versus the EAFE and then looked really smart after that market dropped. Which was nice!
The TRUTH is that it will be hard to make normal comparisons of performance in 2012 unless the weighting of Apple is reduced in the various indexes. As an independent investment advisor, my TRUTH is that we will be measured versus a data point that would require me to take on potential market and volatility risk to beat. Only time will tell if and when this was the prudent thing to do.
So, the Apple market price valuation is a bit hard to look at, just like the sun. This is especially true for people like me who found there was no bid and were no buyers for Apple on October 19th, 1987!
The TRUTH is that it will be hard to explain underperformance versus an index for 2012 if you choose not to concentrate a portfolio in this one company.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Thursday, February 9, 2012
The Weekly Update 2-10-2012
As I have written for several months, JOBS are the key to the economic turnaround.
Like many others I want to believe in Santa Claus but reality prevents that belief. Instead, we believers settle for "the spirit" of the season. So, when I saw last Friday's (2-3-2012) unemployment report I wanted to believe, but just like believing in Santa reality prevents that belief!
The jobs report headline was the unemployment rate fell to 8.3%. This is now a trend as it is the fifth monthly reduction in this key stat. The number of jobs created grew to 243,000! The number of people unemployed dropped from 13.1 million to 12.8 million. Impressive, if only you could believe.
The reality: the headlines are guilty of lying by omission. In fact The Bureau of Labor Statistics (BLS) reduced the size of the workforce by 1.2 million people. In their report the BLS sites the adjustment as a result of the 2010 census which over calculated the number of people in the workforce for the last ten years. However, the fact that tells "the truth" remains that the labor force participation rate has dropped from 65.7% to 63.7% in the last 2.5 years since the recession "officially" ended. The difference in the two numbers represents the 4.8 million people who have given up on finding a job.
Conclusion: without the adjustment from questionable census detail, meaning using December 2011 numbers, the unemployment rate would have increased .2% to 8.7% versus the headlines yelling about how great a .2% drop to 8.3% is.
Like the reality that forces each of us to confront the fact that there is no Santa Claus, we must understand the reality of what massaging the jobs data can do to distort the truth. Just like Santa, for now we will just have to believe in "the spirit" of a jobs based turn around because the data does not support the headlines.
I am interested in your comments! Feel welcome to contact me via e-mail or directly at 1.800.800.6364.
Like many others I want to believe in Santa Claus but reality prevents that belief. Instead, we believers settle for "the spirit" of the season. So, when I saw last Friday's (2-3-2012) unemployment report I wanted to believe, but just like believing in Santa reality prevents that belief!
The jobs report headline was the unemployment rate fell to 8.3%. This is now a trend as it is the fifth monthly reduction in this key stat. The number of jobs created grew to 243,000! The number of people unemployed dropped from 13.1 million to 12.8 million. Impressive, if only you could believe.
The reality: the headlines are guilty of lying by omission. In fact The Bureau of Labor Statistics (BLS) reduced the size of the workforce by 1.2 million people. In their report the BLS sites the adjustment as a result of the 2010 census which over calculated the number of people in the workforce for the last ten years. However, the fact that tells "the truth" remains that the labor force participation rate has dropped from 65.7% to 63.7% in the last 2.5 years since the recession "officially" ended. The difference in the two numbers represents the 4.8 million people who have given up on finding a job.
Conclusion: without the adjustment from questionable census detail, meaning using December 2011 numbers, the unemployment rate would have increased .2% to 8.7% versus the headlines yelling about how great a .2% drop to 8.3% is.
Like the reality that forces each of us to confront the fact that there is no Santa Claus, we must understand the reality of what massaging the jobs data can do to distort the truth. Just like Santa, for now we will just have to believe in "the spirit" of a jobs based turn around because the data does not support the headlines.
I am interested in your comments! Feel welcome to contact me via e-mail or directly at 1.800.800.6364.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Thursday, January 26, 2012
The Weekly Update 1-27-2012
Clarity of purpose is like a laser beam focused on creating your personally designed future!
Over the years, and several thousand client appointments, I have seen and heard a ton of ideas on creating and growing wealth. I have chunked all of them down to my core rules of clarity. They are easy to write and easy to read, but not always easy to do. If you take them to heart and focus on what they will do for you the clarity and purpose each of us deserves will bubble up. It is a law of the universe! :-)
The Rules Of Clarity:
1) Eliminate outstanding debt and have plenty of cash on hand to eliminate worries during volatile economic times. This can include paying off your mortgage for those inclined to think in terms of philosophy versus quantification.
2) Have a list of your monthly costs. Yes, a budget!
3) Know your sources of income, i.e. your earned income, retirement income, social security, etc.
4) Properly allocate and diversify your investments to reflect your constraints for time, risk and volatility. Once that is done, ALWAYS set a predetermined dollar amount aside to invest each month. This is called "dollar cost averaging" and it is how you grow assets in periods of economic volatility. If you don't know or understand what this is, call me and we will have a class!!
So, back to rule #1 above. I recently had a detailed conversation with a client where it made sense for them to pay off their mortgage and that is what I recommended. At present the numbers suggest keeping a mortgage as interest rates are so low. You could get a 30 year fixed rate at about 3.5% which would cost about 2.45% after taxes.
Paying off your mortgage is not a wrong or bad decision, it is just the fact that there is a sense of freedom in not having a mortgage. Besides, it frees up money to dollar cost average in to a volatile investment environment. There is an old saying that says "scared money never wins". If the house is paid off, you know how much it costs to have the sun come up and you know where the money is coming from to cover it...you are golden!!
For me, I paid off the home I live in and have a small mortgage on the home where I play. Peace of mind always wins over money, as money can get scared and change, but peace of mind is total clarity!!
Over the years, and several thousand client appointments, I have seen and heard a ton of ideas on creating and growing wealth. I have chunked all of them down to my core rules of clarity. They are easy to write and easy to read, but not always easy to do. If you take them to heart and focus on what they will do for you the clarity and purpose each of us deserves will bubble up. It is a law of the universe! :-)
The Rules Of Clarity:
1) Eliminate outstanding debt and have plenty of cash on hand to eliminate worries during volatile economic times. This can include paying off your mortgage for those inclined to think in terms of philosophy versus quantification.
2) Have a list of your monthly costs. Yes, a budget!
3) Know your sources of income, i.e. your earned income, retirement income, social security, etc.
4) Properly allocate and diversify your investments to reflect your constraints for time, risk and volatility. Once that is done, ALWAYS set a predetermined dollar amount aside to invest each month. This is called "dollar cost averaging" and it is how you grow assets in periods of economic volatility. If you don't know or understand what this is, call me and we will have a class!!
So, back to rule #1 above. I recently had a detailed conversation with a client where it made sense for them to pay off their mortgage and that is what I recommended. At present the numbers suggest keeping a mortgage as interest rates are so low. You could get a 30 year fixed rate at about 3.5% which would cost about 2.45% after taxes.
Paying off your mortgage is not a wrong or bad decision, it is just the fact that there is a sense of freedom in not having a mortgage. Besides, it frees up money to dollar cost average in to a volatile investment environment. There is an old saying that says "scared money never wins". If the house is paid off, you know how much it costs to have the sun come up and you know where the money is coming from to cover it...you are golden!!
For me, I paid off the home I live in and have a small mortgage on the home where I play. Peace of mind always wins over money, as money can get scared and change, but peace of mind is total clarity!!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Friday, January 20, 2012
The Weekly Update 1-20-2012
2012 market performance is off to the best start since 1987!
This would have been easy to predict. All you had to do was look at the headlines in your daily news source and it was obvious. I present a few here for you to consider.
The International Monetary Fund (IMF) has reduced their economic growth forecasts for developing countries by 13% and the U.S. in particular by 48.15%!
The IMF is also requesting an additional $600 billion in funding to help out Euroland. The U.S. is the largest part of the IMF and will thus have the lion's share of the tab.
Standard and Poor's downgraded the credit ratings on over half of European countries. They also downgraded the European Financial Stability Fund (EFSF) Aka, the Euro "bailout fund".
Talks are taking place to discuss how to deal with Greece when they default.
Housing starts released today dropped 4% and permits, which indicate future growth, were flat.
Gasoline is pushing up toward $4.00 in most of the country leaving less for discretionary consumer purchases.
Retail sales for the past holiday season ended up as zero growth. Never mind, this one was not in the paper.
There are rumors the Federal Reserve will start a form of QE-3 when they meet next week. The $1 trillion will be used to buy semi worthless mortgaged back securities from banks. In essence transferring the bad loans to we taxpayers.
U.S. Debt is the highest in history at 100% of our productivity or GDP.
The Federal Reserve of Philadelphia index of conditions came in at 7.3% versus economists estimates of 10.3%, only off by a cool 29%!
As I write this The U.S. has routed three aircraft carriers to the Persian Gulf to make a presence in the wake of Iran's threats against the U.S. and other counties located in the gulf region.
Goldman Sachs reported earnings dropped 58% and,......you guessed it... the stock went up 8.10%.
I called our Wealth Strategies Group Solution Network™ Charted Financial Analyst, Charles Sizemore, CFA, and asked him to explain to me how the market could possibly go up in light of this type of news. He replied, it is just like what the character played by Matthew Broderick said in the movie The Freshman, "THERE'S A KIND OF FREEDOM IN BEING COMPLETELY SCREWED BECAUSE YOU KNOW THINGS CAN'T GET ANY WORSE."
We will continue to be open minded, but cautious as February tends to be a risky month. Please call me with questions, comments or discussion. 1.800.800.6364
This would have been easy to predict. All you had to do was look at the headlines in your daily news source and it was obvious. I present a few here for you to consider.
The International Monetary Fund (IMF) has reduced their economic growth forecasts for developing countries by 13% and the U.S. in particular by 48.15%!
The IMF is also requesting an additional $600 billion in funding to help out Euroland. The U.S. is the largest part of the IMF and will thus have the lion's share of the tab.
Standard and Poor's downgraded the credit ratings on over half of European countries. They also downgraded the European Financial Stability Fund (EFSF) Aka, the Euro "bailout fund".
Talks are taking place to discuss how to deal with Greece when they default.
Housing starts released today dropped 4% and permits, which indicate future growth, were flat.
Gasoline is pushing up toward $4.00 in most of the country leaving less for discretionary consumer purchases.
Retail sales for the past holiday season ended up as zero growth. Never mind, this one was not in the paper.
There are rumors the Federal Reserve will start a form of QE-3 when they meet next week. The $1 trillion will be used to buy semi worthless mortgaged back securities from banks. In essence transferring the bad loans to we taxpayers.
U.S. Debt is the highest in history at 100% of our productivity or GDP.
The Federal Reserve of Philadelphia index of conditions came in at 7.3% versus economists estimates of 10.3%, only off by a cool 29%!
As I write this The U.S. has routed three aircraft carriers to the Persian Gulf to make a presence in the wake of Iran's threats against the U.S. and other counties located in the gulf region.
Goldman Sachs reported earnings dropped 58% and,......you guessed it... the stock went up 8.10%.
I called our Wealth Strategies Group Solution Network™ Charted Financial Analyst, Charles Sizemore, CFA, and asked him to explain to me how the market could possibly go up in light of this type of news. He replied, it is just like what the character played by Matthew Broderick said in the movie The Freshman, "THERE'S A KIND OF FREEDOM IN BEING COMPLETELY SCREWED BECAUSE YOU KNOW THINGS CAN'T GET ANY WORSE."
We will continue to be open minded, but cautious as February tends to be a risky month. Please call me with questions, comments or discussion. 1.800.800.6364
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Wednesday, January 11, 2012
The Weekly Update 1-12-2012
I think we are all pretty close to "gills" on the jobs information front! As it is a new year perhaps we should focus on a different subject of equal or more importance. After all it is a root cause of why jobs creation stinks. But, before we leave the "JOBS" are "THE ISSUE" and update "THE DEBT IS AN ISSUE", a quick jobs update is in order.
Last week I suggested that of the 200,000 jobs created last month a good portion were seasonal hires and were likely being fired as I typed the posting. Well the rat has emerged from the data pile and 44% of the 200,000 created last month, 88,000, were created in the high paying careers of restaurants, retail and couriers. Gee, who could have seen that coming!
A quick observation: There were over 1.3 billion cell phones manufactured last year and exactly ZERO were manufactured in the U.S. All those jobs were created elsewhere.
Debt and the ability of various governments around the world to issue it at a reasonable rate of interest is going to be a problem in 2012 This month $1.1 trillion of sovereign debt will need to be reissued, i.e. rolled over. In March there will be an additional $1.3 trillion. For the G7 Nations combined the total 2012 roll over amount will be approximately $7.5 trillion. The size alone is likely to push interest rates up a little bit, if not quite a bit. That increase in interest rates will put additional pressure on expenses and budgets of countries around the world.
The current interest rate debt service is barely manageable and at higher interest rates it could quickly become unmanageable. 2012 could just be the year where the cost to carry the debt built up around the world becomes impossible to service. At the very least, anticipate this reality, as we have, in allocating the assets in your portfolio.
Last week I suggested that of the 200,000 jobs created last month a good portion were seasonal hires and were likely being fired as I typed the posting. Well the rat has emerged from the data pile and 44% of the 200,000 created last month, 88,000, were created in the high paying careers of restaurants, retail and couriers. Gee, who could have seen that coming!
A quick observation: There were over 1.3 billion cell phones manufactured last year and exactly ZERO were manufactured in the U.S. All those jobs were created elsewhere.
Debt and the ability of various governments around the world to issue it at a reasonable rate of interest is going to be a problem in 2012 This month $1.1 trillion of sovereign debt will need to be reissued, i.e. rolled over. In March there will be an additional $1.3 trillion. For the G7 Nations combined the total 2012 roll over amount will be approximately $7.5 trillion. The size alone is likely to push interest rates up a little bit, if not quite a bit. That increase in interest rates will put additional pressure on expenses and budgets of countries around the world.
The current interest rate debt service is barely manageable and at higher interest rates it could quickly become unmanageable. 2012 could just be the year where the cost to carry the debt built up around the world becomes impossible to service. At the very least, anticipate this reality, as we have, in allocating the assets in your portfolio.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Friday, January 6, 2012
The Weekly Update 12-6-2012
The first jobs creation report of 2012 is out!
The non-farm payroll report reflected 200,000 jobs were created in December. 212,000 were private sector jobs and that was offset by a loss of 12,000 government jobs. The net result of this is an unemployment rate of 8.5%, down from 8.6% last month.
Everyone understands this does include seasonal hires for the holiday shopping season, right? Would it not stand to reason that when January data is released many of the jobs just created will evaporate? I hope not, but unless some magic dust is sprinkled over the data you would have to think many of these December jobs have already been lost.
So far this week Boeing permanently released 2,160 workers in Kansas and Pepsi has cut 4,000 more across the country. I am sure there are more, but you see the trend here. As I have commented before, JOBS are THE ISSUE for turning our economy around. Scroll down to The Weekly Update 12-2-2011 below for more detail.
We will have to wait and see if in fact this is a real trend. I hope it is! We will wait and see.
The non-farm payroll report reflected 200,000 jobs were created in December. 212,000 were private sector jobs and that was offset by a loss of 12,000 government jobs. The net result of this is an unemployment rate of 8.5%, down from 8.6% last month.
Everyone understands this does include seasonal hires for the holiday shopping season, right? Would it not stand to reason that when January data is released many of the jobs just created will evaporate? I hope not, but unless some magic dust is sprinkled over the data you would have to think many of these December jobs have already been lost.
So far this week Boeing permanently released 2,160 workers in Kansas and Pepsi has cut 4,000 more across the country. I am sure there are more, but you see the trend here. As I have commented before, JOBS are THE ISSUE for turning our economy around. Scroll down to The Weekly Update 12-2-2011 below for more detail.
We will have to wait and see if in fact this is a real trend. I hope it is! We will wait and see.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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