Investment Contrarians

Jobs Numbers

Every month, the Bureau of Labor Statistics releases information regarding the jobs numbers, which shows how the underlying economy is performing. Also called nonfarm payrolls, since they do not include farm-related employment, the jobs numbers are one of the most important data sets for trying to understand the strength or weakness of an economy. If the jobs numbers are improving, this means more people are being employed and the economy is gaining strength. If the jobs numbers are weakening, or there are outright job losses, this is an extremely troubling sign for the economy.

When It Comes to Jobs Numbers, the Market Is Trading on Anything but the Truth

By for Investment Contrarians | May 7, 2013

Jobs NumbersPop the champagne; it’s time to rejoice and toast this month’s jobs numbers, isn’t it? The S&P 500 edged up to another record high above 1,600, while the Dow is seriously eyeing 15,000.

I did think those targets for the two indices were achievable, but not this early in the year.

You can thank the Federal Reserve and the astounding job creation for the high jobs numbers—of course, I’m being sarcastic to a degree.

According to the United States Department of Labor, job creation tallied 165,000 jobs in April, better than the estimate of 135,000. The March reading was also revised upward to 138,000 new jobs from the previous muted reading of 88,000. The 165,000 new jobs is decent, but let’s be realistic: that number is no reason for the S&P 500 to be trading at a record high. The truth of the matter is that we need to see a higher job creation number.

The unemployment rate fell to a four-year low of 7.5%, much better than the estimate of 7.7%. Again, great, but I think the drop has more to do with job seekers leaving the search.

Yes, the job creation numbers are a myth as far as the real strength of the labor market.

The Labor Department estimates there are 11.7 million people unemployed, but in reality, it is probably twice that because many workers have quit looking for work out of frustration.

In fact, a closer examination of the job creation numbers from the Labor Department tells us another story—not what is in the headlines and not what the government wants you to know…. Read More

Don’t Be Fooled by the Retail Numbers—Just Be Selective

By for Investment Contrarians | Apr 16, 2013

Don’t Be Fooled by the Retail NumbersWhen interest rates are as low as they are and consumers begin to hold back on their spending, you have to wonder about the prospects for the retail sector going forward.

With the higher taxes on those earning over $400,000 and other tax increases as a result of the sequestration, we may be seeing some evidence of reduced spending.

The U.S. Department of Commerce said retail sales in March contracted by 0.4% on both a headline and an ex-auto basis, which was below the estimates of flat sales and 0.3%, respectively. This was the second decline in retail sales in the last three months.

While it may be premature to assume a new downtrend for retail sales, I wonder if the decline in take-home pay for some Americans has resulted in less consumer spending.

Or, it may be the softness of the jobs market that is making consumers nervous. With only 88,000 new jobs created in March, the jobs numbers must have had some impact on consumers and the retail sector.

Even consumer sentiment appears to be fading a bit as evidenced by the Thomson Reuters/University of Michigan Consumer Sentiment Index reading of 72.3 in April. This reading represented the worst reading since July 2012, and it’s well below the 76.0 estimate by and the 78.6 reading in February.

According to my estimate, the retail sector continues to be full of opportunities, but you also need to be careful on what retail stocks you buy.

You would have been sideswiped if you bought J. C. Penney Company, Inc. (NYSE/JCP), as the company posted horrible results and subsequently fired … Read More

Dow at Record Highs, but U.S. Economy Continues to Worsen

By for Investment Contrarians | Mar 12, 2013

U.S. Economy Continues to WorsenThe Dow Jones Industrial Average is firing on all cylinders, trading at a record high. The S&P 500 is also close to its all-time record. Technology and small-cap stocks are blazing along. The amount of new stock market wealth created in the first week of March and in 2013 has been great. Add in the better-than-expected jobs numbers and a decline in the unemployment rate to 7.7%, and you would think that the U.S. economy is back, loaded and ready to go. But we may be closer to a financial crisis than most think.

Here’s the problem: the creation of stock market wealth is heavily weighted with the institutional money and the top one to five percent of the wealthiest Americans. (I use the wider range of the top earners, since you have to be doing fairly well to be in this group.)

There’s an old saying—“Money makes money.” But let me put it another way: making money on $1.0 million is a lot easier than making money on $1,000. Earn two percent on $1.0 million, and you’d have an extra $20,000. Make two percent on $1,000, and you only have $20.00, just enough for a dinner for two at McDonald’s Corporation (NYSE/MCD). All I’m saying is don’t be fooled by the new headlines talking about how well America is doing, as a financial crisis is still possible.

The housing market is booming, but we all know that the rally in prices is partially due to rich investors and institutions buying cheap properties from those who had to sell or be foreclosed on due to a lack of funds to … Read More

U.S. Jobs Market: What the Media and Government Aren’t Telling You

By for Investment Contrarians | Mar 8, 2013

What the Media and Government Aren’t Telling YouToday, all eyes will be focused on the February non-farm jobs numbers report. I will be keenly watching to see if the economy can churn out jobs in spite of the somewhat sluggish recovery in America and the weak demand from the European and Chinese economies.

The private Automatic Data Processing (ADP) Employment Change, which is more closely correlated with the more important non-farm jobs numbers reading, was positive at 198,000 new jobs created in February, but not overwhelming versus the upwardly revised 215,000 in January. The number beat the estimate of 150,000 jobs, but it was the lowest reading since October 2012. In fact, the ADP jobs numbers have declined in the last three straight months, which is not exactly a good sign.

The market needs to see the jobs numbers steadily improve. While we likely are far away from the 500,000 or so new jobs needed each month that indicate a healthy economy, we still need to see jobs growth to continue at close to the current level and for the unemployment rate to hold below eight percent in order to offer any hope of a sustained jobs recovery.

US Jobs Numbers Chart

Chart copyright Lombardi Publishing Corporation 2013; data source: Automatic Data Processing web site, last accessed March 7, 2013

Yet the reality is the jobs numbers are not good. There are roughly 22.3 million or so Americans looking for work that are unemployed or underemployed and about 12.3 million fully unemployed. The fact is that these are not good jobs numbers, as many of these people are taking minimal wage jobs just to fight off the creditors and put … Read More

What the New $9.00 Minimum Wage Has to Do with Gold

By for Investment Contrarians | Feb 15, 2013

Minimum Wage Has to Do with GoldJust like he did in 2011, President Barack Obama is taking another stab at increasing the federal minimum wage in order to help the lowest income earners in America. With the President’s proposal to raise the minimum wage to $9.00 an hour by 2015 from the current $7.25, in theory, the move upward shift should help, as it translates into roughly $3,640 extra annually. The proposal also links the level of the minimum wage to the inflation rate after 2015.

The rationale behind the President’s thinking makes sense, and I truly wish it could work; but my view is that the impact of higher jobs market wages on the lower level service and manufacturing jobs across America could likely drive prices on goods and services higher for the consumer, which means greater inflationary pressure. If this becomes the case, you will need to start investing in gold.

For instance, higher jobs market wages for service jobs, such as restaurants, will likely not be absorbed; rather, the higher wage costs will mean higher food costs at all levels from fast-food to high-end restaurants. The impact will be especially hard on the low income earners who, in general, may be more inclined to eat fast foods. The same goes for other goods and services, which means that while the lower income earners would earn more money with a rise in the minimum wage, they’ll end up paying more for goods and services.

But something needs to be done due to the widening income gap between the rich and the middle class and the poor in America. In America, the rich are getting … Read More