How About a Little Economic Reality Check?

Posted on September 20, 2012 by blueworldadmin

Thursday, September 20, 2012

Ignorance is curable. Stupid is forever.©

How About a Little Economic Reality Check?

As we watch the markets struggle with the Fed action and economic data this week, we thought we’d offer a quick summary of what’s really happening out there…and it’s not good so watch your money!

The Fed opiate QE3 is fading a bit and some economic data are taking the lead causing our market “experts” a bit of bi-polar disorder. Watching the market intraday charts shows a market that is looking for any excuse it can find to rise. That’s not a safe or sustainable environment so keep the defense on the field.

We cannot emphasize this point enough. At Blue World we make a very important distinction between “data” and “actionable intelligence.” Data is what the market “experts” react to each day as each weekly, monthly or quarterly economic report hits the wires. This is, simply, foolish. That’s why “experts” are such slaves to data. One data point is useless out of context. Trends are what matter.

Actionable intelligence is what we glean when we look at the trends of each report and {this is the important part} compare them to the trends in all the other reports plus the trends in our industry plus the trends we see in our own business each and every day.

Below we are providing links to summaries of the economic data released this week (week of 9-17-2012). Read the summaries if you’d like but what we want you to study are the graphs. You’ll find that when you add them all together you’ll get a much more complete picture of what’s really going on in the economy than you will by reading the headlines or even the summary of any one week or month’s report.

Starting Monday of this week we got the Empire State Manufacturing Survey and it was dismal, joining the overall trend in manufacturing..

On Tuesday we got:

Goldman Same Store Sales The report showed a drop in sales for the month and that is predictable as the back-to-school rush passes. Take a look at the graph, however, and you can see that if you imagine out the wild volatility you see a retail sales trend that is totally uninspiring. Ok, so how does that stack up with other reports?

Redbook which is as likely as not to confirm the Goldman report agrees this week. More important, look at the long term trend and it is remarkably similar to the Goldman chart. Both are lackluster, at best.

Housing Market Index What do you think people who make a living building houses and are still in business are going to be inclined to say when asked “how do you feel about the home building industry?” The chart says it’s on the rise! YIPPEE! Wait! The anecdotal optimism survey of builders needs to be compared to other housing data.

Wednesday gave us some more figures to consider.

Mortgage Bankers Association New Mortgage Applications This report is considered a predictor of future activity in residential real estate because people need mortgages to buy a house. See if this chart matches the builder’s optimism chart above.

Housing Starts Starts were up a little in 2011 and very shallow to flattening so far in 2012. Compare the “recovery” period graph to the steepness of the drop in 2008-09. This is not what a recovery looks like.

Existing Home Sales While up in each of the last two months, two months is certainly not enough to establish a trend especially as interest rates drop to generational lows and values have plummeted causing a predictable blip. This plus the MBA Applications plus the Existing Home Sales data does not demonstrate a robust real estate recovery underway.

You know it’s Thursday when the unemployment insurance claims from the prior week are revised up!

Jobless Insurance Claims Last week’s numbers were, of course, revised higher and the moving average is up. Regardless, this report has proven to be a relatively unreliable predicator of the official monthly unemployment report so we regard the weekly knee-jerk reaction to this report as utter silliness.

Consumer Comfort In the summary they used the word “brightening.” Just have a look at the graph that is not only depressingly low but, also, making lower highs and lower lows, then let us know how “bright” you think consumer comfort really is!

Philly Fed Survey There was a huge one month bump in new orders (headline)…and it makes the index less negative. (not in headline) That’s the best that can be said based on this one report especially in the face of the Fed reports from last month (there is usually one that is better than the others) and the Empire report from just three days ago.

If you used today’s headlines to make decisions you’d be purchasing more inventories, hiring more employees and looking for a bigger facility. Bad idea!

You don’t have to be an economist (“expert”) to figure this out. As a matter of fact we have lots of evidence that not being an economist is a huge advantage in understanding reality! You can read more about this in our posts:

“The Confusion Suffered by ‘Experts’”

and

“The Confusion Suffered by ‘Experts’ II”

We can get a reasonably reliable picture of what’s really happening in the economy if we ignore the daily headlines and take a look at the economic data in total within the context of the short, medium and long term trends. That is how we convert data into actionable intelligence. That is how we non “experts” plan, predict and make decisions.

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 20, 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”…

©Blue World Asset Managers, LTD Thursday, September 13, 2012

Employment Situation Analysis – 09-07-2012

Posted on September 7, 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, September 07, 2012

Brain surgery is not rocket science to a brain surgeon©

The big question facing us this morning is “to graph or not to graph.” This is one of the worst reports we’ve seen in a while, and that’s up against some pretty stiff competition. The market silliness is always entertaining, and today is no exception. The other data-driven graphs are just striking.

The July number was revised down significantly, and that’s consistent with what we said on CBS Radio last month. {Podcast at http://owl.li/cJ3T1 – starts at 2:30 in} 96,000 net jobs is “only” about 30,000 short of the “expert” consensus, and that is just about the best news we can find no matter how deep we dive into the minutiae.

25+ with a Bachelor’s or higher are still unemployed at over 4%, which was a level unheard of since records have been kept…until the last few years.

The number of people not in the work force continues to balloon, and that’s why the unemployment rate has fallen or remained the same from time to time, not because the labor market is improving.

The work week remains flat overall, but it has fallen to its shortest duration of the year in manufacturing. That’s not encouraging. The really big news in this report, which won’t get much play but is very troubling, are the downward revisions to hourly and weekly pay totals in several sectors, including construction and manufacturing.

We’ve decided the graphs would just rub it in, and we have no desire to subject you to them.

Policy matters, folks. 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, September 07, 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.