Blue World Employment Situation Report Analysis 10-05-2012

Posted on October 5, 2012 by blueworldadmin

Release Date: Usually the first Friday of each month

Market Sensitivity: VERY HIGH

Management Value: VERY HIGH

Friday, October 05, 2012

Brain surgery is not rocket science to a brain surgeon©

O.K., here we go…

The public markets work on one level and businesses work on another level. The markets are very reactionary to data points whereas businesses need to pay attention to trends and trends are what give us actionable intelligence. We hear the cheers coming from the markets this morning because the jobs report was “better” than last month. That’s not saying much. As it turns out it was only 7 thousand jobs better which, as you intuitively know, can’t drop the unemployment rate by .3 percent. But better is better and that’s good enough for the markets. After all, since when do we cheer 7.8% unemployment over three years into a “recovery?”

Detailed analysis of the report yields far less reason for exuberance.

We continue to see the effect of a smaller labor force relative to job gains that bring the unemployment rate down artificially. We say artificially because we can’t improve the labor market by making it smaller. These points are validated by the flat employment population ratios and participation rates.

We have demonstrated this phenomenon, graphically, over the course of this year but it has never been as striking as it is for September. Did the labor market grow in September? Yes…but it did not even match the high for this year and it grew by a much smaller percentage than the number of jobs. That, in the land of percentages, could be a good thing so let’s consider the actual numbers.

First, the Revisions

Keep in mind that we need about 250,000 jobs per month just to break even.

We don’t usually focus on revisions but the ones to July and August 2012 were significant and not for the reasons we’d hope. The labor market is only improving if the private sector is adding jobs, not the government. That’s because the government’s source of funds to pay government workers come from the private sector. If the private sector falters, eventually, the government has to lay people off as tax receipts diminish. July jobs were revised up from 141 thousand to 181 thousand. The problem is that of the 40 thousand job increase, 18 thousand came from government jobs. It was even worse in August. The August 2012 jobs number was revised upward from 96 thousand to 142 thousand. Of that 46 thousand job increase, 45 thousand came from government. Government hiring has been on a tear the last three months accounting for over 70 thousand jobs.

For 2012 we are averaging 143 thousand jobs per month and the heft of that average comes from the first quarter. In 2011 we averaged 153 thousand jobs per month. Both are well below where we need to be but the trend is what’s important and the trend is negative. Each month we are flirting with new private jobs at or below 100 thousand. September payrolls grew by only 114 thousand. Of that, 10 thousand came from government, leaving the private sector at only 104 thousand new jobs, exceeding August by just 7 thousand jobs. See why we consider the public markets reactionary?

Here is the chart showing the artificial improvement in the unemployment rate.

Data Source: www.bls.gov

We saw downward revisions to some previous months’ wages, and some were significant. Hours worked in construction were disappointing considering all the news we’ve been hearing about housing, lately. It only matched this year’s February high and still averaging only 38.6 hours per week for the year. Manufacturing hours and overtime are still flat.

The 25+ with a Bachelor’s degree, or higher, are still unemployed at over 4.1% for September. That of course, remains at rates historically never seen until this recessionary period.

Important sectors losing jobs were not a surprise if we follow the interim Fed reports, GDP, and manufacturing data. Included were manufacturing, autos and parts, durables, non-durables, information, wholesale trade and private temporary help services.

The diffusion index measures whether industries are adding or losing jobs where a reading of 50 indicates an equal number of industries adding and losing jobs. The 81 manufacturing industries stand at 39.5 and have trended down all year.

Why the jump in payrolls? In addition to some meaningful gains in transportation, healthcare and a couple of other private service providing industries, there were significant increases in those taking temporary positions for economic reasons i.e. slack work or the inability to fins full time work.

We would be remiss if we didn’t add this to the mix. There are shenanigans going on out there. Earlier this week it was learned that Lockheed Martin, a major employer, was asked to withhold major layoff announcements until after the election. This is shady enough but based on the WARN act it is reported that the company will be in violation of the law by stalling the announcements. In exchange for compliance with the White House request the administration has, apparently, agreed to pick up any legal costs and fines. If this is happening we would be foolish to think it is the only manipulation occurring for political reasons so keep an ear to the ground. Follow us on Twitter (@BlueWorldMatt) to get timely content.

Corporations are warning, factory orders are falling, manufacturing employment is dwindling, politicians are playing games and the labor market is not improving. Don’t get caught asleep at the switch.

A shout out to a good friend (Tony) who pointed this out to me; we keep saying “play defense.” He said “ya always say that but ya never tell us what you recommend for defense if we’re talking about the markets! Are ya ever gonna?” Good point! The answer is “no”, not specifically, anyway. Whether it’s stop-loss orders, bonds, indexes, options, cash vehicles, long-short or any other safety net you or your advisors employ, make sure they’re ready. Ride the upside as long as it lasts but keep that safety net moving up underneath you at the same time just in case any of the significant risks out there catch up to the markets.

For business owners, no such vehicles exist. Watch your costs, be cautious in expansion and remember a cornerstone rule adopted and preached by Blue World:

Profit is Opinion. Only Cash is Fact.

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 05, 2012

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

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.