How About a Little Economic Reality Check?

Thursday, September 20, 2012

Ignorance is curable. Stupid is forever.©

How About a Little Economic Reality Check?

As we watch the markets struggle with the Fed action and economic data this week, we thought we’d offer a quick summary of what’s really happening out there…and it’s not good so watch your money!

The Fed opiate QE3 is fading a bit and some economic data are taking the lead causing our market “experts” a bit of bi-polar disorder.  Watching the market intraday charts shows a market that is looking for any excuse it can find to rise.  That’s not a safe or sustainable environment so keep the defense on the field.

We cannot emphasize this point enough.  At Blue World we make a very important distinction between “data” and “actionable intelligence.”  Data is what the market “experts” react to each day as each weekly, monthly or quarterly economic report hits the wires.  This is, simply, foolish.  That’s why “experts” are such slaves to data.  One data point is useless out of context.  Trends are what matter.

Actionable intelligence is what we glean when we look at the trends of each report and {this is the important part} compare them to the trends in all the other reports plus the trends in our industry plus the trends we see in our own business each and every day.

Below we are providing links to summaries of the economic data released this week (week of 9-17-2012).  Read the summaries if you’d like but what we want you to study are the graphs.  You’ll find that when you add them all together you’ll get a much more complete picture of what’s really going on in the economy than you will by reading the headlines or even the summary of any one week or month’s report.

Starting Monday of this week we got the Empire State Manufacturing Survey http://ht.ly/dRwzH and it was dismal, joining the overall trend in manufacturing..

On Tuesday we got:

Goldman Same Store Sales http://ht.ly/dRwOv The report showed a drop in sales for the month and that is predictable as the back-to-school rush passes.  Take a look at the graph, however, and you can see that if you imagine out the wild volatility you see a retail sales trend that is totally uninspiring.  Ok, so how does that stack up with other reports?

Redbook http://ht.ly/dRwZv which is as likely as not to confirm the Goldman report agrees this week.  More important, look at the long term trend and it is remarkably similar to the Goldman chart.  Both are lackluster, at best.

Housing Market Index http://ht.ly/dRxbO What do you think people who make a living building houses and are still in business are going to be inclined to say when asked “how do you feel about the home building industry?”   The chart says it’s on the rise! YIPPEE!  Wait! The anecdotal optimism survey of builders needs to be compared to other housing data.

Wednesday gave us some more figures to consider.

Mortgage Bankers Association New Mortgage Applications http://ht.ly/dRxzw This report is considered a predictor of future activity in residential real estate because people need mortgages to buy a house.  See if this chart matches the builder’s optimism chart above.

Housing Starts http://ht.ly/dRxZk Starts were up a little in 2011 and very shallow to flattening so far in 2012.   Compare the “recovery” period graph to the steepness of the drop in 2008-09.  This is not what a recovery looks like.

Existing Home Sales http://ht.ly/dRytG While up in each of the last two months, two months is certainly not enough to establish a trend especially as interest rates drop to generational lows and values have plummeted causing a predictable blip. This plus the MBA Applications plus the Existing Home Sales data does not demonstrate a robust real estate recovery underway.

You know it’s Thursday when the unemployment insurance claims from the prior week are revised up!

Jobless Insurance Claims http://ht.ly/dRzNb  Last week’s numbers were, of course, revised higher and the moving average is up.  Regardless, this report has proven to be a relatively unreliable predicator of the official monthly unemployment report so we regard the weekly knee-jerk reaction to this report as utter silliness.

Consumer Comfort http://ht.ly/dRzqP In the summary they used the word “brightening.”  Just have a look at the graph that is not only depressingly low but, also, making lower highs and lower lows, then let us know how “bright” you think consumer comfort really is!

Philly Fed Survey http://ht.ly/dRAuk There was a huge one month bump in new orders (headline)…and it makes the index less negative. (not in headline) That’s the best that can be said based on this one report especially in the face of the Fed reports from last month (there is usually one that is better than the others) and the Empire report from just three days ago.

If you used today’s headlines to make decisions you’d be purchasing more inventories, hiring more employees and looking for a bigger facility.  Bad idea!

You don’t have to be an economist (“expert”) to figure this out.  As a matter of fact we have lots of evidence that not being an economist is a huge advantage in understanding reality!   You can read more about this in our posts:

 “The Confusion Suffered by ‘Experts’” http://ht.ly/dRPS2

and

“The Confusion Suffered by ‘Experts’ II” http://ht.ly/dRQ38

We can get a reasonably reliable picture of what’s really happening in the economy if we ignore the daily headlines and take a look at the economic data in total within the context of the short, medium and long term trends.  That is how we convert data into actionable intelligence.  That is how we non “experts” plan, predict and make decisions.

 

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  Referenced sources should be reviewed.  Any analysis represents the opinion of Blue World Asset Managers, Ltd. who does not warrant or guarantee predictions based on its analysis.

 

©Blue World Asset Managers, LTD Thursday, September 20, 2012

Messin’ with Markets is More Dangerous than Messin’ with Sasquatch!

Thursday, September 13, 2012

Ignorance is curable. Stupid is forever.©

Messin’ with Markets is More Dangerous than Messin’ with Sasquatch!

Time to Roll Up a Newspaper and Smack the Market “Experts” on the Nose!

GDP is below 2%.  Claims for unemployment benefits are up and get revised higher every week.  A record number of Americans are on government assistance.  Social Security and Disability benefits hit record highs with a full month left in the fiscal year. Consumer comfort, confidence and sentiment are low and falling.  Investor confidence is weak.  Manufacturing is contracting.  The Eurozone is on the brink of financial collapse.  Our national debt is over $16 Trillion. Foreclosures are high and rising.  Terrorists are attacking U.S. Embassies around the world and murdering Americans.  And unemployment is over 8%…for over 40 months…yet, somehow, the Dow is up over 200 points on 9/13/2012 because the Fed announced QE3?

It should be of tremendous concern to everyone who has investments in the public markets that market performance has become SO dependent on government action.  Do you realize that the actions contemplated by governments have become more important to the public markets than business fundamentals?  Governments don’t even have to do anything.  All they have to do is hint that they might do something, and the markets go crazy.  It may be a suggestion that the Europeans may bail out Greece, or it may be the U.S. Fed announcing a new round of stimulus, as is the case today.

Let us explain what Quantitative Easing is in simple terms, then decide if you want your investment nest egg tied to more of it.  In its simplest terms it is trading short term debt for long term debt.  It is the proverbial kick-the-can-down-the-road exercise.  The Fed uses our money (tax receipts) to buy back short term bonds (loans to the government) and refinance them for a longer term.  The massive buy-back causes a drop in interest rates that is expected to stimulate the economy.  It is the exact opposite of what they do during boom times when they think the economy is “overheating” and they want to avoid inflation by artificially raising the interest rates to slow things down.

Folks, we’re telling ya, messin’ with markets is more dangerous than messin’ with Sasquatch!  At some point this will have to revert to being about economic fundamentals.  When it does we recommend having the A-Team defense on the field or watch from the stands because it could be a catastrophe.

We can’t understand the exuberance at any level BECAUSE IT DOESN’T WORK, but we would think that the “experts” who get so giddy about such stupid and detrimental policies would have a learning curve that breaks off 180° somewhere.  After all, we have plenty of evidence that these measures don’t work in the face of the current economic environment.  You know what they say about the definition of insanity being the duplication of effort over and over yet expecting different results?  O.K.  the “experts” are not just morons, they’re insane.

For those of you wondering how we can make such assertions regarding the ineffectiveness of prior actions rendering the current ones “insane”…

GDP is below 2%.  Claims for unemployment benefits are up and get revised higher every week.  A record number of Americans are on government assistance.  Social Security and Disability benefits hit record highs with a full month left in the fiscal year. Consumer comfort, confidence and sentiment are low and falling.  Investor confidence is weak.  Manufacturing is contracting.  The Eurozone is on the brink of financial collapse.  Our national debt is over $16 Trillion. Foreclosures are high and rising.  Terrorists are attacking U.S. Embassies around the world and murdering Americans.  And unemployment is over 8%…for over 40 months…

 

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  Referenced sources should be reviewed.  Any analysis represents the opinion of Blue World Asset Managers, Ltd. who does not warrant or guarantee predictions based on its analysis.

©Blue World Asset Managers, LTD Thursday, September 13, 2012

<> Quick Post – …but we object to water boarding

We felt compelled to comment on the events surrounding the Embassy attacks and the U.S. response.

The first and most important question we asked was “of the people who were terrorized, injured and killed, which of them had anything to do with the “offending” video?

Next, How can our gov’t have the audacity to suggest that free speech is a “global right?” Ask anyone from those countries if they have a “right” to free speech.

if “free speech” is a “global right” how could it possibly be ABUSED? This is The UNITED STATES of AMERICA GOVERNMENT”S response to INNOCENT AMERICANS being murdered and DRAGGED THROUGH THE STREETS a la Black Hawk Down in the Bakara Market? Oh, yes, it gets worse.

It terrifies us that the U.S. response was to condemn the video maker(s) first during a statement that was overall apologetic to the terrorists (whom OUR government has chosen to label “protesters”). Protestors are what we find screwing up traffic in Chicago. TERRORISTS are what we find storming embassies and murdering innocent people!

They dragged a U.S. citizen’s dead body through the street. As the government couldn’t get the photos down fast enough it is reported that Hillary Clinton (Just now repeated by President Obama) claimed that they were dragging the dead body to the hospital. http://ht.ly/dELhk  Why would anyone photograph a living man being “dragged” to safety. This is insulting and terrifying.

This story is moving fast but we had to comment on the early reports and responses. Now, Michelle, you may legitimately be un-proud of your country!

Employment Situation Analysis – 09-07-2012

Blue World Employment Situation Report Analysis

Release Date:  Usually the first Friday of each month

Release Site: www.bls.gov

Market Sensitivity: VERY HIGH

Management Value: VERY HIGH

Friday, September 07, 2012

Brain surgery is not rocket science to a brain surgeon©

The big question facing us this morning is “to graph or not to graph.”  This is one of the worst reports we’ve seen in a while, and that’s up against some pretty stiff competition.  The market silliness is always entertaining, and today is no exception.  The other data-driven graphs are just striking.

The July number was revised down significantly, and that’s consistent with what we said on CBS Radio last month. {Podcast at  http://owl.li/cJ3T1 – starts at 2:30 in} 96,000 net jobs is “only” about 30,000 short of the “expert” consensus, and that is just about the best news we can find no matter how deep we dive into the minutiae.

25+ with a Bachelor’s or higher are still unemployed at over 4%, which was a level unheard of since records have been kept…until the last few years.

The number of people not in the work force continues to balloon, and that’s why the unemployment rate has fallen or remained the same from time to time, not because the labor market is improving.

The work week remains flat overall, but it has fallen to its shortest duration of the year in manufacturing.  That’s not encouraging.  The really big news in this report, which won’t get much play but is very troubling, are the downward revisions to hourly and weekly pay totals in several sectors, including construction and manufacturing.

We’ve decided the graphs would just rub it in, and we have no desire to subject you to them.

Policy matters, folks.  Policy matters.

Thanks for reading, and please, stay tuned…

 

Release Site: www.bls.gov

 

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  The official release site should be cross referenced.  The analysis represents the opinion of Blue World Asset Managers, Ltd. who does not warrant or guarantee predictions based on its analysis.

©Blue World Asset Managers, LTD Friday, September 07, 2012