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.
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