Pixels vs. Images: A Quick Take on GDP, Markets, Business and the Economy

Posted on June 26, 2013 by blueworldadmin

Wednesday, June 26, 2013

Ignorance is curable. Stupid is forever.©

So, China growth slows and the U.S. markets tank. U.S. growth slows and the U.S. markets fly? That’s what happened this month. We even saw a market “expert’s” headline today “GDP Revised Down but Street Still Optimistic on Economy.” “Based on what” is the question we’d ask. Again, every headline today indicates the drop in GDP was “unexpected.” This continues to be our problem with the “experts.” They read one day’s news and proclaim a definitive view on the economy. The next day some new data is released and we get a whole new view, as if yesterday’s news was totally negated or, even worse, totally forgotten.

For market investors that’s fine AS LONG AS they know how to play defense. We, obviously, don’t object to a rising market whatever the reason. We just worry about the folks who are naked. As we’ve said, it makes us nervous when there are no fundamentals to support a bull market. We are happy to make money on it but we are ready for reality shocks, too. As long as you’ve got your swinging accounts, stops, puts, inverse ETFs, long-short strategies, or whatever other defense you/your advisor employs then let the market run and run with it. We do.

Running a business is a different story. As managers we have to be more concerned with economic fundamentals because we don’t have the kind of defensive measures that are available in the markets. The only defense we have is a keen awareness of what the economy is actually doing so that we can make appropriate decisions on everything from hours of operation to inventory stocks to employment.

The deplorable GDP is NOT a surprise if we’ve watched AND REMEMBERED all the other reports from this and previous periods. No report is valuable unto itself. Each must be viewed through the prism of the universe of data sets. Then each new data set must be triangulated with and compared to the rest of that universe. It’s the difference between viewing a single pixel vs. the entire image. Each data point that is released is just a single pixel in the image that is created when all the pixels are viewed together.

That’s how Blue World does it. For example, starting with the two most recent employment reports (Blue World Analysis at & ) we saw a continuing trend of flat hours, overtime hours and wage growth in manufacturing. The diffusion index (number of companies hiring) fell below fifty percent and the labor force remains stagnant. Then, all the regional Fed reports ranged from negative elements to negative across the board in each of the last two months. Sure, we hear some of you yelling at us about the positive Durable Goods report this month but, again, viewed historically the reports has been very volatile. “Good” is nowhere near what “good” should/used to be and the current year over year level is no better than February of 2012 and far worse than it was in 2010! See Econoday’s chart at .

The markets do not reflect reality. Please don’t use them as a gauge to make decisions in your sector, business or department. Just ride them as they produce and let us know if you’d like help with the defense.

There is tremendous uncertainty regarding the effect of tax policy, ObamaCare, immigration reform and a multitude of other domestic and international issues. Follow Blue World for a big-picture take on the economy and to aid in business decisions. Call us for individual help and analysis.

Our assessment continues to be that the economy is not in a meaningful recovery. We have an extensive collection of pixels that we organize into an image to back up that assessment. That’s why we typically only use the word “unexpected” when we read an “expert” who got it right.

As always, thanks for taking the time and stay tuned…

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 Wednesday, June 26, 2013

Blue World Employment Situation Report Analysis 6-7-13

Posted on June 7, 2013 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, June 07, 2013

Brain surgery is not rocket science to a brain surgeon©

Perhaps the most exciting thing about the jobs report was our typo last night on Twitter! We were asked for our prediction and we said “more of the same” but we typo’d >200k new jobs instead of <. Sorry. The appropriate parties are being waterboarded…in Egypt, of course.

The rest of it, well, we nailed it. I wish we could claim some genius status for that, but how could we? The pattern is well established, and there have been no economic or policy shifts during the last month that would precipitate any meaningful change.

The biggest “news” out of this report came in the form of adjustments made to the prior two months which demonstrate a net 12,000 fewer jobs than initially reported.

175 thousand new payrolls are reported for May, which is still up to 75 thousand short of break-even. The number of those reporting as employed rose, but so did the number of those reporting as unemployed. This month the growth in the labor force was proportionately larger than the gain in the number of employed persons, hence the uptick in the rate to 7.6%. All were uninspiring as validated by the continued weakness in employment-population ratio and the participation rate which, by the way, are each equal to and below where they were in May of 2012, respectively. Overall, wages are still stagnant and the work week length remains flat.

Manufacturing Has Become a Real Concern

In addition to developing a three month job shedding trend, weekly manufacturing overtime among all employees continues too short and unchanged. More troubling, however, is that the production and non-supervisory set has established a three month downward trend from 4.4 hours of overtime per week in March to 4.2 hours in May. The diffusion index is still a contractionary sub-50 reading. All of this is consistent with what we saw during the month coming out of the regional Fed reports where four of five were negative. On Monday we Tweeted sarcastically regarding the “experts’” surprise at the negative ISM report. Perhaps the anemic GDP could have offered them more clues…

As much as we like them, there is no need for multi-colored charts and graphs this month. The patterns are, unfortunately, consistent.

We are seeing words from “decent” to “fabulous” in describing this report and the “continued recovery” of the labor market. The markets are responding accordingly, but if you invest real money, manage or hire real people or are responsible for the wealth of yourself or others make no mistake, this is a very poor report wearing the makeup of headline numbers and media spin.

This is the United States of America. When was 7 percent unemployment EVER acceptable for even a short time? Unemployment above 7 percent for this long with stagnation from the labor force size to wages is utterly unacceptable and completely avoidable. We can’t say it often enough. 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, June 07, 2013

Blue World Employment Situation Report Analysis 5-3-2013

Posted on May 3, 2013 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, May 03, 2013

Brain surgery is not rocket science to a brain surgeon©

THE CAUTION FLAG IS STILL OUT!

165,000 net jobs created with an upward revision of last month’s abysmal 88,000 to 138,000 has caused a media/market “yippee.” Allow us to remind those who invest real money and employ real people that this remains consistently about 100,000 jobs per month short of break even with the participation rate reaming at record lows as the civilian labor force fails to grow.

The copy/paste function is getting worn out regarding the continued observation that “reductions” in the unemployment rate are due to a simple mathematical truth instead of any actual improvement in the labor market. Yes, April 2013 demonstrates that the increase in jobs outpaced the growth in labor force size. That moves the two tops closer together and we have the artificial “improvement” in the rate. The current graph…

The rest of the story could be titled “The Next Installment of BLS’s Chamber of Horrors.”

We haven’t seen a “good” labor report in years, now. Some have been worse than others but as we have shown, the pattern of this “recovery” does not match that of any other economic recovery period going back to the 1970’s.Please see our post “A Flute With No Holes Is Not A Flute and a Recovery With No Jobs Is Not A Recovery”

Many argue that the employment numbers are historical in value and some say they have predictive relevance. The truth is that both statements are accurate. There are hundreds of lines of data in the full release spread across more than two dozen tables. We read the data so you don’t have to! There are some very scary trends developing in the foreshadowing portions of this report.

The 25+ with a Bachelor’s degree, or better crowd rose back to 3.9% which continues to be historically record-setting but appears to have become the new “norm.” Additionally, however, we have now seen the rate moving back up toward four percent coupled with a REDUCTION of average weekly pay! That’s not good.

The work week for all employees hit a three month low in April 2013 and is lower than April of 2012, all of which is bad enough considering where we are in the cycle but more concerning is the thee month down trend in work week length in construction and manufacturing with corresponding reductions in weekly earnings in those sectors. If you follow us on Twitter, Linked In or FB this comes as no surprise as we’ve shared some detail from the regional Fed. Manufacturing reports this month. All have been negative and validated by this morning’s diffusion rate across the 81 manufacturing industries falling to 44.4, the latest data point in a steep, three month downward trend. (The diffusion index indicates the number of companies adding as opposed to losing jobs where 50 is break even, below is contraction and above is expansion.)

Those working part time for economic reasons, especially slack work conditions, took a big jump and there were significant increases in those unemployed between 1 and 26 weeks. Those unemployed less than 5 weeks are new job losses.

The report is bad. The market is flying. We are in it and riding the wave but we keep moving the safety net closer and closer on the chance that economic fundamentals once again become at least as important as government actions and headline spin. Let us know if you’d like suggestions.

If you are a business manager/owner then pay close attention to your internal financials, industry dynamics and Blue World’s content via the social media outlets.

SEMINAR ANNOUNCEMENT

Based on popular demand we are sponsoring a seminar at the Union League Club in Chicago on Friday, June 6^th. Content centers on the core entrepreneurial skills required to truly manage a business toward success. The title says it’s for health care professionals but it applies to any business so please realize anyone is welcome. Course description and registration links follow:

Course Outline Link:
http://www.blueworldam.com/seminars/Skils-Heathcare-Provider.html

Registration Link:
https://blueworld.wufoo.com/forms/entrepreneur-skills-for-the-health-care-provider/

As we are about to publish we see factory orders have dropped over 30% more than “expected” by the “experts.” Surprised? Not if you’re following Blue World!!

Thanks for reading and, please, stay tuned…

Release Site: www.bls.gov

©Blue World Asset Managers, LTD Friday, May 03, 2013

Blue World Employment Situation Report Analysis 02-01-2013

Posted on February 1, 2013 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, February 01, 2013

The operative word today is…spin. When we saw the jobs numbers at first pass we thought “wow, this is ugly.” Now we go and read the BLS summary and some stuff around other notable publications and are quite amused by the characterizations of the report. For example, do you notice how when the rate falls by a tenth that is an “improvement,” but when it ticks up a tenth it is “essentially unchanged?” The Journal’s analysis wants to focus on upward revisions to last year’s estimates from an average of 153k per month to 181k per month. That means instead of being 100k short of breakeven per month we’re only 70k short of breakeven per month? Say nothing of the fact that 2012 is over! Are we going to make different business and investment decisions based on an estimated “improvement” from last year? It’s utterly ludicrous!

This is why you read us, folks. No spin, just an objective analysis of the data (with occasional commentary on how policy affects the data.) Remember, the data is not “good” or “bad.” It’s just data that requires the people who invest real money and employ real people to make sound decisions based on the objective analysis of the data. So, analysis can be “good” or “bad” and decisions can be “good” or “bad” but the data is just data.

Some quick numbers, then… The rate ticked up to 7.9%, but so what? We’ve shown how the unemployment rate is a poor indicator of labor market health these days based on the ratio of the labor force size and the total number employed. This month is no exception. That observation is validated by the facts that the participation rate is unchanged for three months during an overall downward trend during 2012 (as long as we’re focusing on 2012), the total number of people not in the labor force increased, and the total number of people reporting as in the labor force but unemployed rose again!

The work week for all employees is unchanged and short for three months, but construction AND manufacturing showed a reduction in the length of the work week for all employees as well as production and non-supervisory employees. That hasn’t happened in a while. There were notable downward revisions to hourly and weekly wages in manufacturing, and the preliminary data for last month shows a decline over those downward revisions.

Is there more? Yeah, but I think we get it.

We analyze over one hundred reports per month. Occasionally we do a post regarding other economic reports, but the employment report is the one we post our analysis of every month. That’s because it gives the investor and business manager the most insight into the economy. Why? Because it tells us who’s not working and for how long; who is working and for how many hours per week in which industries; plus how much they’re making. That eliminates most of the potential surprises in the other reports that come out. For example, was the negative GDP report from earlier this week a surprise? Not if you’ve followed us!

I’ll be on CBS radio Chicago (WBBM AM 780, 105.9 FM) to analyze next month’s jobs report and the economy in general on Friday, March 8^th. A couple of the reports we will be paying particular attention to during month are the consumer mood reports and the income and outlays reports. The consumer mood indicators have already taken a beating and we expect those to remain weak. We predicted that based on the realization that everybody’s paychecks got lighter, not just the $250k/yr + crowd. Next month the effect of 2012 year-end bonuses and dividend income should be gone but the tax bite will still be there. Add this to what we said about wages in manufacturing and we can see the potential for income and outlays to fall tracing the consumer mood values. If that plays out we’ll start to see the effects reflect in the weekly data on retail sales, durable goods orders, etc.

The market is still rising, but remember how fickle it can be. Let’s ride the wave as long and as well as we can, but make sure the defense is ready to deploy. We advise business managers to be watching the economic reports and industry data as closely as their own internals with plans in place for various hypotheticals. Call us if you’d like some help with that.

Have a great February. Thanks for reading and, please, stay tuned…

Release Site: www.bls.gov

Blue World Employment Situation Report Analysis 12-07-2012

Posted on December 7, 2012 by blueworldadmin

Release Date: Usually the first Friday of each month

Release Site: www.bls.gov

Market Sensitivity: VERY HIGH

Management Value: VERY HIGH

Friday, December 07, 2012

C’mon everybody. Sing along. You know the words to this song. The economy added a net 146,000 jobs and the unemployment rate dropped to 7.7%. I admit we were unable to be even cautiously optimistic about the headline numbers due to the details in some other reports out during the month, especially regional manufacturing data and the GDP estimate. We had predicted that GDP would be revised lower but it was actually revised higher. A glimmer of optimism was squelched immediately by the detail which showed the GDP increase coming on the inventory side while the demand side slid. That indicates a data blip as opposed to the emergence of a sustainable upward trend.

November labor details tell a familiar story so here are the most illuminating. We got 146,000 new jobs but the labor force suffered a huge 350,000 worker reduction. The participation rate fell another .2% and the number of employed people fell by another 122,000. The work week remained flat for all employees and the overtime hours in manufacturing are still unchanged at 3.2 hours per week. There was some improvement in wages reported but still not enough to outpace inflation. Additionally, pay readings have been volatile and given to significant revisions over the last couple of years so we can’t put too much stock in single-month changes. College educated unemployment is still way too high but at least has been below 4% (3.8) for two months in a row. That number needs to go below 2.5% in order for any real recovery to be underway.

On the news there was a vertical spike in the S&P 500 futures but it only got back to about even on last night’s close. As the detail is digested and weak consumer sentiment numbers worked their way into the mix, the charts illustrated a retreat back toward the baseline and now (9:56a C) the S&P has gone fractionally negative while crude and corn retreat and gold is choppy and largely lateral.

So far the outcome of the election has done little to quell any of the uncertainty that has hung over the economy for the last few years. Aggression in the Middle East, continued turmoil in Europe, fiscal cliff worries, unresolved tax policy and anxiety over the implementation of Obama Care in the face of what appear to be developing new legal challenges to the Affordable Care Act maintain their grip on those we rely on to spend, invest and hire.

The markets continue their upward trend. While we have been happy to participate in the run we continue to be very cautious and we’re bringing the safety net up tighter and tighter. We have significant concerns about what seems to drive the markets these days. Government commentary, be it from our Fed or European leaders, have greater impact on market sentiment than economic and corporate fundamentals. We believe this as a driver is unsustainable and at some point market fundamentals will have to trump. When will that happen? If you had told us in 1995 that U.S. Ambassadors were being raped and murdered, Palestine had been admitted to the U.N., Iran was close to nukes, Israel was engaged in missile play, Syria was readying chemical weapons to use on its own people, North Korea was rattling its saber, the government owned private car companies, one sixth of the economy was being nationalized, there were only three banks left, GDP was under 3%, unemployment was over 7.5%, corporate profits were mixed as revenues begin to slip across the board and the markets are UP, we’d have recommended you seek professional intervention from a qualified mental health provider. Historically these conditions would drive the markets to extreme lows. Today, however, they continue to climb. We’ll ride the wave, too, but the defense is still on the field and ready to play when reality and perception align. Whatever defensive strategy you/your financial advisor employ, we think it prudent to keep it executable at very short notice.

This is our final jobs analysis to post for 2012. Thanks so much for reading and commenting. God bless you and your families. Have a very Merry Christmas and a Happy New Year. We’ll see ya on the other side.

GO IRISH!!

Release Site: www.bls.gov