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

Posted on September 13, 2012 by blueworldadmin

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”…

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

Posted on September 12, 2012 by blueworldadmin

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. 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!

Roads and Bridges…Government Didn’t Build That – He’s Wrong Either Way

Posted on August 22, 2012 by blueworldadmin

Tuesday, August 21, 2012

Ignorance is curable. Stupid is forever.©

The quotes used in this post come from a transcript of the subject speech found at: http://owl.li/d7VF8

Roads and Bridges…Government Didn’t Build That – He’s Wrong Either Way

Our esteemed president recently made remarks on the campaign trail that sparked a bit of an uproar from those who have or support those who have built successful businesses. The quote is, of course,

“If you’ve got a business — you didn’t build that. Somebody else made that happen.”

We should start by answering the defensive claims that Mr. President wasn’t referring to the businesses but rather to the roads and bridges that allow commerce to occur for the business. That claim is made by expanding the offending quote to include its prequel:

“Somebody invested in roads and bridges. If you’ve got a business — you didn’t build that. Somebody else made that happen.”

Even if we expand the quote as suggested the defense is still, uh, indefensible. That’s because there are so many other quotes in the speech that validate that his intent was to say exactly what he is accused of saying. For example:

“— look, if you’ve been successful, you didn’t get there on your own.”

“You didn’t get there on your own.”

“I’m always struck by people who think, well, it must be because I was just so smart.”

“It must be because I worked harder than everybody else. Let me tell you something — there are a whole bunch of hardworking people out there.”

“If you were successful, somebody along the line gave you some help.”

“There was a great teacher somewhere in your life.”

“The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.”

The last two make clear that the “someone” he keeps referring to is government. Public school teachers are government employees. It also shows he and Al Gore read the same history of the internet. Government research is NOT responsible for the internet. That’s a whole different blog post so, please, look it up.

When the speech is taken in total, the message is unmistakably clear. Successful businesses and the people who founded them are a minor component in the success of the enterprise. Without luck, being in the right place at the right time, and taking advantage of the other smart, hard workers plus government help in the form of public education, and the liberal sweethearts of roads and bridges there would be no success. This is completely consistent with the socialistic belief that the only way one becomes successful is to take unfair advantage of the system and the people in it. For example, another quote from the speech:

“There are a lot of wealthy, successful Americans who agree with me — because they want to give something back.”

The liberals are always talking about the need of successful businesses and people to “give back.” Think about the psychological implication of that. The suggestion of the need to give back stems from the desired pre-conceived concept that something has been unjustly taken. That is patently absurd. Why is a business successful in the first place? It is successful because there is a demand for the product or service provided by the business. Nothing is taken! The business exists and thrives based on voluntary trade. Give back? How about the jobs created by the business and with them the opportunity to learn, advance and improve? How about all the jobs a private business supports well outside of its own workforce? If it’s a private sector business, it depends on and is dependent on other private sector businesses for inventory, customers and supplies. And oh, by the way, all these businesses, their owners and employees are the only source of cash the government has. Please note, while it is commonplace to refer to tax receipts as “revenues”, they are not. The government does not produce goods or provide services for voluntary purchase in exchange for legitimate revenue. It simply taxes the proceeds from private trade and earnings then redistributes the wealth based on a selfish , arbitrary and period-convenient definition of fair. So please, don’t talk to entrepreneurs, innovators and business owners about “giving back.” Government should give back to us so we can pay our employees more, invest more, expand our businesses more, employ more people, grow the economy and, therefore, grow opportunity for everyone!

The United States is not a conglomeration of fixed underclasses as the liberals would have us believe. No one has any guarantee of staying up or down. No fortune is too big to lose or gain and multiple times in many cases. Opportunity. That’s the key. For a much-expanded explanation of this concept please read what has been our most popular post to date. It was written in April of 2011 and continues to be read internationally.

Progressives are not Progressive. Capitalists Are!

Class Envy in America – Square Peg and a Round Hole

http://owl.li/d809Q

He’s Wrong Either Way

Debunking the defensive claim of “that’s not what he meant” is no more difficult than reading the speech in total or even just the key quotes included here.

Now, let’s have a little fun and go a step further. Let’s give the speech explainers the benefit of the doubt. Let’s say we accept the two key clarification premises:

He was referring to roads and bridges.
The business would not be successful without roads and bridges.

OK, we’ll give you those…and you’re still wrong! Why? For three very important reasons.

First of all how do you Socialist-Obama-Warren-ites defend a notion that the business owner has contributed nothing to the very tax receipts used to build the roads and bridges when in fact they have borne the lion’s share of the burden by not only paying their own taxes but also providing for the taxes paid in by the employees who’ve contributed to and benefited from the businesses success??? Strike one.

Strike two is even more basic. It’s based on the free market, capitalist, conservative sweethearts of supply and demand! Folks, roads and bridges did not come first. There had to be an expectation of demand for access to the areas connected by the roads and bridges. The expectation of need for those connections goes all the way back to ancient times and was always in response to expanding commerce. The Great Silk Road across ancient Asia was not arbitrarily and benevolently built by government and then taken advantage of by business!! Have you ever seen a road that did not fulfill the expectation of need or became unnecessary for commerce? They revert back to fields pretty quickly, don’t they? Many businesses have had to pay for their own access, first of all. Second, no road or bridge has ever been built in response to a lack of expectation of the need for a road or bridge for commerce. If it’s access to a business, it means the business had an expectation of the need for access by customers and employees. If it is access to a residential area, it means there was an expectation that people would live there. If people lived there, they would need a way to get to and from – wait for it – WORK. Ya see, that’s the best way to be able to keep living there. Not through food stamps and government dependence. Roads and bridges owe their existence to private commerce, not the other way around!

Government never “built” anything. It used funds collected from everyone – successful business owners included – and compensated private companies pursuing profit and employing more people for the construction. Guess what…the owners, managers and employees all contributed to the very tax receipts used to pay for the construction of the roads and bridges. Strike three.

No matter how you cut it, the very idea that success has more to do with general societal and governmental support than it does with individual smarts, hard work and sacrifice is not defendable. If it was, all of those other nations subscribing to that thinking would historically be as successful as the U.S. They’re not. Just ask Greece, Spain…

For the more simple socialist:

You may need an additional sports analogy to grasp these concepts. O.K.

“Someone” had to build the sewers to capture the water that “someone” had to work in a facility to purify and pump to a faucet that could be used to fill a swimming pool. Based on that set of facts are we going to discount (that means ignore) the superior competitive strategy (represents smart), sacrifice and training (represents hard work) and tell Mr. Phelps:

“You didn’t swim that. Someone else made that happen.”

Same argument.

©Blue World Asset Managers, LTD Tuesday, August 21, 2012

Blue World Employment Situation Analysis 8-3-2012

Posted on August 3, 2012 by blueworldadmin

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, August 03, 2012

Brain surgery is not rocket science to a brain surgeon©

163,000 new jobs vs. 100,000 expected! WOO HOO, right? Sorry folks, this report is the cap on a miserable month of data. Why? Here we go…

In the winter and spring we explained ad nauseum that the falling unemployment rate was an artificial improvement in the labor picture because we can’t make the labor market better by making the labor force smaller. The uptick in the last couple of months is an indication of a deteriorating market but, as always, the details not the headlines tell us why:

The Establishment Survey indicates 163,000 payrolls were added last month. The problem is that the size of the labor force fell by 150,000 workers, the number of those not in the labor force rose by 348,000, the number of employed people fell by 195,000 and, wait for it, the number of unemployed people rose by 45,000. I’m afraid this just doesn’t make for a good report but, of course, there’s more. 25 years old and up with a Bachelor’s Degree or higher remain unemployed at over 4%. The work week length, and consequently, overtime hours are not increasing and wage increases still lag inflation.

Other data for the month show GDP at a very weak 1.5%, which falls to 1.3% when we strip out inventories. The regional Fed reports all have a common theme of contracting orders and evaporating inventories validated by a dismal factory orders report . Productivity is down, unit labor costs are up, consumer comfort, confidence and sentiment are trending down, and the FOMC acknowledges the economy is slowing but isn’t ready to “act” yet.

Many institutions out there have an interest in trying to show the data in its most positive or negative light. Since our job is to help businesses develop strategy based on the realities of the economy, we have to take the data as it is…and the data is negative.

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.

The Confusion Suffered by “Experts” II – GDP April, 2012

Posted on April 27, 2012 by blueworldadmin

Friday, April 27, 2012

The Confusion Suffered by “Experts” II – GDP April, 2012

As our regular followers know we don’t usually do a post to analyze the GDP report in detail, because if we follow the monthly BLS Unemployment Report (www.bls.gov) the GDP is old news. All the data we need to predict GDP (at least to an accuracy of worse, flat, better) can be found in the jobs data. While today is no exception to the “no need to scrutinize” rule, we did feel a sense of obligation to comment on it due to the significant “unexpected” results reported today. As we talked about today’s release it became apparent that what we had was a sequel to our post The Confusion Suffered by “Experts” from August, 2011. It would be very helpful to review that post now so here’s the link. http://owl.li/ayFhe

Whenever we write experts in quotes you may assume we are saying the group or individual we are referring to is intellectually bankrupt (that means “moron”, “experts.”) Why do we exhibit such loathing for the “experts?” Because their financially or politically motivated spin analysis serves no useful purpose for those who invest real money, employ real people and are responsible for real performance. In fact, it can lead to conclusions and decisions that are dangerous to a business. And, of course, in some cases they’re just stupid.

So, why was the GDP report no surprise to us or our readers but was to so many “experts,” including the 85 economists (academics) polled by Bloomberg, for example? Because they don’t compare what they see in the data of one report to the data published in other reports and view the full body of information through the prism of real life. There was no defendable evidence that the GDP report was going to spike sharply or tank abruptly. We predicted a flat to shallow downward move from Q4 ’11 and that’s what we got. Kudos to those “experts” who also got it right.

The Confusion Suffered by Experts, referenced above, explains when and why some data releases lose their predictive value under certain macro conditions of the economy and, consequently, why it’s so silly to have wild market reactions to weekly data like first time unemployment insurance claims.

The Gross Domestic Product Report

We don’t need an in-depth tutorial on how to read the GDP report in order to follow this trail. All we need to know is that there are 4 marquee headings that contribute to overall Gross Domestic Product. They are:

Personal Consumption Expenditures
- the total of what consumers spent
  - consumer spending is 70% of our economy
Gross Private Domestic Investment
- the total of what private sector businesses spend on fixed assets
  - buildings, equipment, etc.
Net Exports
- the net difference in value between what the U.S. sells and buys from other countries
  - Since the 70’s the U.S. virtually always has a trade deficit and that subtracts from total GDP
Government Spending
- total spent by federal, state and local governments

Remember, no single number, data point or report is valuable unto itself. Trends are what matter. Here are some examples of the trends that irrefutably predicted an uninspiring GDP report.

There have been three unemployment reports since the last GDP estimate. The key indicators that we can look at to get a sense of GDP are the following:

Total unemployed population
- This is not the unemployment rate. The unemployment rate has been very misleading lately. See why at Why Does Blue World Keep Saying the Labor Market is not Improving http://owl.li/ayLvx
- The total unemployed rose in one month and fell in another. Coupled with a similar pattern in the total labor force size suggests an overall flat complexion so that would not predict an uptick in GDP
Unemployment Rate of Workers who are 25yoa+ with a Bachelor’s Degree or Higher
- This group of professional, management, entrepreneurial and big ticket consumer types has been unemployed at rates never seen since records have been kept for nearly 3 years
- Expansion requires managers, entrepreneurs and big spenders. When the needle on this demographic is not trending to the right, GDP cannot advance aggressively.
Avg. Hours Worked per Week in Manufacturing
- The number of hours worked in a week across the manufacturing sector is a major indicator of demand and, therefore, a great predictor of GDP.
- In the last three months the most optimistic read is a flat work-week length. This does not suggest GDP growth
Avg. Overtime Hours Worked per Week in Manufacturing
- For corroboration and predictive analysis we review the need for Overtime Hours in manufacturing. Even if the work week length is flat, if overtime is trending up it’s a good bet companies will need to start hiring soon.
- Over the last several months O.T. hours in manufacturing have been completely flat and well below the number needed to presage the need for new workers. This does not support confidence in GDP growth prospects.
Avg. Hours per Week in Construction
- Flat at best
- Need we go on?

Those are just a couple of examples of how one report can predict another report which is in stark contrast to the irresponsible reactions to shorter term output described in The Confusion Suffered by “Experts.”

Blue World has opined that recent increases in durable goods spending has been more about deferred expenditures than evidence of a true recovery. This hypothesis is supported by the durable goods orders report from yesterday (4-26-12) that showed a slowdown of consumer and business spending on items built to last at least three years. Blue World, therefore, expects a downward revision in that GDP category at the next estimate release on May 31, 2012.

The increase in consumer spending on non-durable goods (clothing, food, etc.) appears right in line with inflation so consumer spending is unimpressive and unconvincing.

Of particular note is the significant drop in business investment for the first quarter. This, too, signals prior quarter’s strength was more attributable to spending that had been put off during the worst of the recession and just couldn’t wait any longer.

Another line item that we watch closely is the Change in Private Inventories line. Inventories are goods that were produced but not sold. They can give pretty good clues about supply and demand. If inventories are striped out of the 2.2% GDP reported today the GDP growth drops to 1.6%. We’ll need to watch this over the next two Q1 estimates because the big drop from Q4 inventory’s contribution to the total GDP percent change could signal the deferred expenditure buying spree for consumers and business is over with the jobs data, manufacturing in particular, showing new finished inventory is not being replaced as fast.

Government spending continues to decline and for very understandable reasons. Remember, the government produces nothing. Taxes are a levy. They are not offered voluntarily in exchange for a product or service. When the private sector suffers government has no choice but to suffer as well because private sector success is government’s only source of revenue. This is why we keep yelling at the top of our lungs “POLICY MATTERS!!”

So, here ends the (first) sequel regarding the confusion suffered by experts. We would be very proud, flattered and humbled if we could say we have prevented even a single person from becoming an “expert.”

We could never adequately express our appreciation of you for talking the time to read our posts.

Thank you.

Category Archives: Blue World Blog Post

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

Roads and Bridges…Government Didn’t Build That – He’s Wrong Either Way

Blue World Employment Situation Analysis 8-3-2012

©Blue World Asset Managers, LTD Friday, August 03, 2012

The Confusion Suffered by “Experts” II – GDP April, 2012