Friday, April 13, 2012

The Weekly Update for 4-13-2012

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
Jim Lunney, CFP, RIA

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.