Brief Explanation

Blue World Economic Index®

Scale: -2 to +2

Release Date:  Usually the Last or First Business Day of Each Month

Release Site: www.blueworldassetmanagers.com

Management Value: Critical

Date 11/30/2017

Analysis

The BWEI® extended the winning streak and pushed higher into positive territory closing November 2017 at .1. There is still some hurricane influence in there, as some reports are a full two months lagging, but that doesn’t diminish the strength we see, and where hurricanes were still a factor our discretionary values remained largely unchanged.

We know Consumers are still in a good mood even without benefit of the weekly Bloomberg Consumer Comfort report, which didn’t post the last two weeks. That won’t have a material impact on that category. Not surprisingly the Las Vegas Strip Revenues suffered in October, but are holding on to a slight gain for fiscal YTD. Retail slipped fractionally, but that was expected as the hurricane blips wash through. GDP caused an optimistic stir, posting better than 3%. We are as pleased as anyone to see it, but any time inventories make a material contribution we have to be cautious because it’s a while before we see if the build is paced/justified by sales. At this point, the majority of reports lean in the right direction.

Will there be a rate hike? We’re afraid so. This appears to be a Fed looking for any excuse to move rates. For example, they will likely focus on the PCE and Personal Income headlines in today’s Personal Income and Outlays report showing a move in PCE and a bump to income. The detail, however, shows the PCE move to be tiny, and the income increase coming from interest income, while wages and salaries were on the soft side. We just don’t see enough consistency across the six reports followed in the Inflation category to warrant such hawkish policy.

The Numbers

Of the eight major categories, five are positive, three negative, and no break-evens this month. In spite of the hoopla, Employment and Inflation remain stubbornly negative at -.23 and -.26 respectively, with Services flat to October at -.11 but showing some signs of life. Consumer, General Measures, Manufacturing, Real Estate, and Retail are all comfortably in the black with retail being the only one of the plus group to lose any ground, which was explained above. Manufacturing is beyond belief (almost literally), as that category composite sits at a pack-leading .49, where the Fed sub-group is at 1, and the non-fed group is up to .41 with improvements of .05 and .06 respectively from October readings. We hope to see additional corroboration in the Employment Situation report due out next Friday the 8^th.

Is the market overheated? Yes. But that’s been true for five years. Our strategy is to have appropriate safety nets strung and keep riding the wave. If you’d like some thoughts on that, give us a shout. Other than that, see you next week for the Blue World Jobs Report Analysis!

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

©Blue World Asset Managers, LTD Thursday, November 30, 2017

Blue World Employment Situation Report Analysis

Release Date: Usually on the first Friday of the month

Release Site: www.bls.gov

Market Impact: Usually Very High

Management Value: Critical

Date: Friday November 3, 2017 

Brain Surgery is not Rocket Science to a Brain Surgeon©

MIXED…and probably still by hurricanes. The headline looked great, but details just couldn’t hold up their end and in some cases make little sense, but the overall leaning of this report has to be positive due to some specific sector data.

At the top of the Establishment Survey we see 261k net new hires. The Private Sector contributed 252k to that total, and we enjoy net upward revisions of 90k to the last two months. The Total Unemployed retreated and the Diffusion Index readings for the Private Sector and Manufacturing are very strong at 59.6 and 62.2 respectively, where 50 is break even. So far, so good.

Now it gets weird. The Labor Force got smaller…by a lot. Total Employed fell, the Not in Labor Force tally spiked and went solidly back over 95M, and the Participation Rate plummeted .4 to tie its 2017 low of 62.7. All we can say is, “That ain’t normal.” We just don’t see single-month moves of that magnitude in the Participation Rate. Much of the volatility is in industries most impacted by the storms like Hospitality/Food Service, etc.

So, where do we pick up on the big positives? An economy with lateral movement demonstrates constantly conflicting economic data. An economy starting to reveal a direction, positive or negative, begins to establish consistency when the reports are analyzed as a body instead of taken one at a time and day-by-day. This is, of course, the whole point of the Blue World Economic Index®. What we see lately is some emerging agreement between reports in key industries.

Hard data lagged anecdotal survey optimism for many months, but now performance metrics from the Manufacturing sector, for example, are beginning to validate that optimism. This morning’s Employment and Factory Orders reports fell right in line by adding a material number of jobs while extending the work week and requiring more overtime hours. Headline and detail readings in the Factory Orders report posted impressive gains in key areas. We see similar dynamics in Services and Construction.

The picture is not yet clear, and there are substantial internal and external risks that can upset this apple cart, but we can perceive some focus creeping in when triangulating all these information sources. For more on that please review the Blue World Economic Index® report which posted yesterday.

The Fed? We feel “prophylactic” hikes in anticipation of inflation is dangerous policy this early in an actual recovery and there is no hint of it yet. We remain opposed to another rate hike this year but the headlines in this report may feed the hawks if they choose to ignore the current lack of evidence, including weak wage pressure in today’s release. Moving rates too fast is one of the internal risks we consider material.

The next Employment Situation Report is scheduled for release on Friday, December 8^th and, of course, The BWEI® report will post earlier that same week. Until then, have a great November and a very happy Thanksgiving!

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, November 03, 2017

Blue World Employment Situation Report Analysis

Release Date: Usually on the first Friday of the month

Release Site: www.bls.gov

Market Impact: Usually Very High

Management Value: Critical

Date: October 6, 2017 

Brain Surgery is not Rocket Science to a Brain Surgeon©

Should we panic? Perhaps…but not because of this jobs report. Today was a fascinating exercise in data collection and analysis. There is absolutely no reason to go into most of the actual numbers this month, but we have to go through the positives and negatives because, taken at face value, this report is awesome! In fact, if we were to be given the detail in advance and asked to predict job growth based on them, we’d have projected between 200k and 225k.

The Labor Force, Total Employed, Participation Rate, and Employed-Population Ratio all grew by very healthy margins. The Unemployment Rate, Total Unemployed, and Not in Labor Force totals all fell…by very healthy margins! The bad news was all in the headlines. Is there an explanation? Yup.

The obvious answer is the active hurricane season. But how does that throw this report into chaos? One example, without going too deep into the weeds, the report data is acquired from two different surveys, Household, which surveys individuals, and Establishment, which surveys employers. This is an unusual circumstance in that one who is counted as employed by one survey is counted as unemployed in the other based on whether they got paid. As we might suspect, the hospitality industry took it on the chin, so a lot of folks with “jobs” didn’t end up working and didn’t get “paid.” A major data point we were waiting to see was the response rate. We can get significant revisions to the jobs report over the two months following each release as many send their survey responses late. This month we fully expected the timely response rate to be way down. It wasn’t. According to the BLS, response rates were within normal limits in and out of the hurricane affected regions.

So…pay no attention to the details behind the curtain EXCEPT the revisions. The only meaningful data point to come out of this report is the net -38k revisions to July and August. That brings the three-month headline down to a 91k average for Q3 2017. That is simply not good enough.

At writing, S&P futures are trending down, but there is no indication of a gap-down vertical graph, so it seems the markets will take this in stride understanding the temporary nature of a report that will undoubtedly revise between now and year end.

For more on the overall state of the economy you’re invited to review the Blue World Economic Index® Report for September which posted earlier this week. We’ll have no choice but to downgrade the index value for this report under the Employment category, but it won’t be as severe as the numbers imply for all the anomalous reasons listed above.

Have a great and safe Halloween, and we’ll meet back here for the next Employment Situation release, which is scheduled for Friday, November 3.

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, October 06, 2017

Brief Explanation

Blue World Economic Index®

Scale: -2 to +2

Release Date:  Usually the Last or First Business Day of Each Month

Release Site: www.blueworldassetmanagers.com

Management Value: Critical

Date October 3, 2017

Analysis

The economy’s flirtation with a positive reading is as tantalizing as a butter-seared, blood-rare Porterhouse, wild rice and a snifter of cognac is to me on a Saturday night! TMI? Apologies.

The Blue World Economic Index® made a solid move from -.4 to -.1 for the month of September 2017. It must be noted that looking at a lot of the reports would suggest bigger changes from last month in either direction, but we exercised a bit more restraint due to the awareness of the continued but temporary impact of the active hurricane season. There was also a material impact from short and long-term trend upgrades in GDP from -1 to -.5 because the trends are weighted more heavily than the current month’s report.

That said, we expected worse from the hurricanes, especially in reports that post in the second half of the month, and the consumer appears to have already gotten over it. Below we’ll talk about weakness in Real Estate, but there is a lot of thinking out there that the weakness represents a short-term rebalancing and may be a harbinger of better things to come later next year. The Chicago Fed has been the only contrarian in the Fed sub-group two months in a row, which is a bit perplexing and concerning since that report is uniquely national in scope rather than regional like the others we follow for that group, and the regionals are knocking the cover off the ball.

December Fed meeting, you ask? The late entries of Personal Income and Outlays, Farm Prices, and GDP Inflation coupled with the mid-month reports of Producer Price Index-Final Demand and the Consumer Price Index all suggest inflation still resides in the where-are-they-now-file, but there are, as we’ve said, some other positives. We think there are arguments for the doves and hawks, but we are taking the under this month and saying we’ve seen the last of the hikes for 2017. 

The Numbers

Of the eight major categories, five are still above water. They are Consumer, General, Manufacturing, Real Estate, and Retail. Of those, all but one, Real Estate, posted gains since last month, but recall some of the conflicting signals in Retail where negative scores for Motor Vehicle Sales and Retail Sales were cancelled out by equal and opposite scores in Business Inventories and E-Retail, leaving the notoriously contrarian Red Book report to carry the ball. Manufacturing continues to excite with the Fed AND non-Fed groups advancing .03. Employment and Inflation are still underwater, where Employment slipped fractionally, but Inflation, while improved .11, is still solidly negative at -.37. Services remained unchanged at -.16.

We’ll see what else the hurricanes have to offer the fourth quarter, and with high stakes policy issues like tax reform coming up we see volatility and excitement from street level to Wall Street on tap!

The Blue World Jobs Report Analysis will post on Friday. Have a great October, a wonderful Halloween and we’ll see you back here at the opening of November.

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

©Blue World Asset Managers, LTD Tuesday, October 03, 2017