Blue World Economic Index® for November 2016

Posted on December 1, 2016 by blueworldadmin

Brief Explanation

Blue World Economic Index®

Scale: -2 to +2

Release Date: Usually the first Business Day of Each Month

Release Site: www.blueworldassetmanagers.com

Management Value: Critical

Thursday, December 01, 2016

11-nov-2016

The Blue World Economic Index® showed material improvement for the November 2016 report while still landing solidly in negative territory at -.28. Yes, much of the reporting posted after the election, but we need to remember that most of the data was actually collected well in advance. The December report will give a much clearer picture of whether the economy is following the public markets, whose momentum will be closely watched. The weekly data, however, was more indicative of post-election reaction particularly in the Consumer category, via the Bloomberg Consumer Comfort report, whose northerly movement in the second two thirds of the month was unmistakable, yielding an average of 42.2 in October and 45 for November. While the markets made their moves, the data suggests it was more on the backs of retail traders (TD Ameritrade IMX), as institutional investors (State Street Investor Confidence) were more cautiously contemplating the combined implications of Brexit, POTUS, and further EU escape rumblings in places like Germany and Italy.

Of the eight major categories, six were still negative, but there was notable improvement in five including Consumer, Employment, General, Retail, and Manufacturing which included a bump to the Fed sub-group.

We end most of our reports by pointing out that policy matters…and these aren’t working. We firmly believe there is no sin in being wrong. The sin is committed when we refuse to recognize we were wrong and fail to change policy in response. We think it is safe to say…we’re about to get a look at the effects of some VERY different policy!

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, December 01, 2016

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.©

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

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 http://ht.ly/mp8WQ & http://ht.ly/mp8ys) 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 http://ht.ly/mpaNg.

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

Counterfeiting is a Very Serious Crime…Unless the Fed Does It??

Posted on June 20, 2013 by blueworldadmin

Thursday, June 20, 2013

Ignorance is curable. Stupid is forever.©

We have been ringing the alarm bell about this in our posts and Matt has spoken of it on the radio. We are getting more and more questions about it as the likelihood of slowing the current bond buying program (Q.E. whatever) looms.

Ask anyone, including market “experts” if it’s a good idea or bad idea for the government to “kick the can down the road” and they’ll say it’s a bad idea. Then ask if they want the Fed to slow the bond buying program and they’ll exclaim “NO” in a panicked voice! What this betrays is a complete lack of understanding of what “Quantitative Easing” actually is.

First of all, it should be of great concern to anyone with money in the markets that government action, even contemplated government action, has become more important than economic fundamentals. Think of how absurd it is for the markets to panic at the thought of improving economic conditions that would lead to LESS government interference. Ya get that? THE MARKETS SELL OFF WHEN THE ECONOMY SHOWS SIGNS OF IMPROVING!! That is absolutely terrifying. When reality catches up, and it always will eventually, the results for those in the markets unprotected will be potentially catastrophic.

So, what is “Quantitative Easing” in actual practice? As with most things it is very simple. The Fed is buying short term debt (bonds) that are nearing expiration and refinancing the debt for a longer term. It is the very definition of “kicking the can down the road.” That is deplorably dangerous economic policy as it is, but never discount the government’s ability to take a bad idea and make it worse. WE DON’T HAVE THE CASH TO PAY OFF THESE LOANS! They are printing money out of thin air to pay off the loans and borrow the money for a longer period! If you did that you’d be arrested for counterfeiting! Does that help explain why you are hearing all this talk about the U.S. dollar no longer being the world’s reserve currency? By printing more supply of money without the demand for it we dilute the value of the currency and that’s why counterfeiting is illegal. There are two blog posts we did last year that explain this in more detail including an explanation of inflation and commodity impacts. They are:

Some Inconvenient Truths can be Backed Up by Real Math and Science Parts 1 and 2

They can be found at:

http://ht.ly/me0JN

and

http://ht.ly/me3Ka

We hope this helps answer some of the questions surrounding the market’s behavior these days. Call or e-mail us with any others!

Thanks for reading and please stay tuned…

©Blue World Asset Managers, LTD Thursday, June 20, 2013

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

Brain surgery is not rocket science to a brain surgeon©

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

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, December 07, 2012

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

Release Site: www.bls.gov

Market Sensitivity: VERY HIGH

Management Value: VERY HIGH

Friday, October 05, 2012

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