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Friday, July 6, 2012 – That’s Just the Way It Is

That’s Just The Way It Isby Sinclair NoeDOW – 124 = 12,772SPX – 12 = 1354NAS – 38 = 293710 YR YLD -.05 = 1.54%OIL – 3.10 = 84.12GOLD – 21.50 = 1583.40SILV -.60 = 27.20PLAT – 28.00 = 1451.00We make a big deal out of the monthly employment outlook report.  It is a natural mistake. We think the report can tell us whether the economy is improving and, if so, by how much. Employment is fundamental for consumption, corporate profits, tax revenues, deficit reduction, and financial markets. People place too much emphasis on the official report, which is really only an estimate; there will be revision.  In about eight months, we’ll have an accurate count from state employment offices, but by then no one will care. There are several approaches to analyzing employment. And then there are seasonal factors. And you will be told there are different numbers that require your attention. And when you cut through all the noise and confusion, the monthly jobs report for June was a gain of 80,000 – and it just plain and simple sucked. The Labor Department said non-farm payrolls expanded by just 80,000 jobs in June, marking the third straight month employment has grown by fewer than 100,000 positions. Job creation was too weak to bring down the 8.2 percent unemployment rate. Job creation averaged 75,000 per month during the second quarter, compared with an average increase of 226,000 in the first quarter. Economists estimate that roughly 125,000 jobs are needed each …

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Friday, June 1, 2012 – Weak Jobs Report – What’s Next? – by Sinclair Noe

DOW – 274 = 12,118SPX – 32 = 1278NAS – 79 = 274710 YR YLD – .11 = 1.47%OIL – 3.27 = 83.26GOLD + 66.10 = 1627.30SILV + .97 = 28.78PLAT + 32.00 = 1451.00 Yesterday we set the stage for today’s jobs report; anything under 150,000 jobs gained would be considered bad. Mitt Romney called it devastating. In fact it was not quite as devastating as the 598,000 jobs lost in January 2009. The economy isn’t losing jobs, just not gaining enough. Nonfarm payroll employment in May increased by 69,000. The unemployment rate ticked up to 8.2%. This was a weak month, and the previous two months were revised down. The change in total nonfarm payroll employment for March was revised from +154,000 to +143,000, and the change for April was revised from +115,000 to +77,000; combined that works out to 47,000 fewer jobs than originally reported. The Labor Force Participation Rate increased to 63.8% in May. This is the percentage of the working age population in the labor force. This means more people felt good enough about economic conditions to jump back into the labor market and look for a job; the bad news is that they didn’t find many jobs. The U6 rate, which measures unemployed and underemployed was 14.6%. JPMorgan reported today: “Taking down the US growth projection has almost become a summertime ritual, and in keeping with tradition we are shaving our 2012 GDP outlook (Q4/Q4) from 2.3% to 2.1%. Over the first five months …

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Thursday, May 31, 2012 – Jobs and the Food Chain – by Sinclair Noe

DOW – 26 = 12393SPX – 2= 1310NAS – 10 = 282710 YR YLD -.04 = 1.58%OIL +.04 = 86.57GOLD – 2.30 = 1561.20SILV – .22 = 27.81PLAT +15.00 = 1421.00 The S&P 500 index fell 6.3 percent in May, its largest percentage drop since September. The Dow’s 6.2 percent drop and Nasdaq’s 7.2 percent loss are their largest monthly declines in two years. Crude oil futures prices finished May with losses of 17%, their worst drop (or best, depending on your position) since December 2008, near the height of the U.S. financial crisis. Gold ended May with its fourth straight monthly decline – about 6%, the most in 12 years, and only slighly better than the S&P500. The troubles in Europe sent investors looking for the safe haven of the dollar and the dollar index gained 5.4% in May. The Euro finished the month at $1.233, down 7%. The Spanish market index, the Ibex25 is down 13%, Japan’s Nikkei is off 10%, and the Russian RTS is down 22% in May. The 10-year US Treasury note returned 1.6% for the month as yields dropped to historic low. If you think the markets are starting to resemble Mr. Toad’s Wild Ride – you are correct. The VIX, the Volatility Index jumped 40%. We had a few economic reports, disappointing economic reports, however the big jobs report tomorrow will overshadow today’s news. The Commerce Department reports economy grew at an annual rate of 1.9 percent in the first three months of …

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Wednesday, May 02, 2012 – Jobs Report, Euro Elections, California Budget, and Watching Paint Dry

DOW – 10 = 13,268SPX – 3 = 1402 NAS + 9 = 305910 YR YLD -.03 = 1.92OIL +.14 = 105.36GOLD – 8.50 = 1654.70SILV – .32 = 30.75PLAT – 9.00 = 1569.00 This is shaping up to be a wild weekend. Friday we get the jobs report. Then, in Europe there will be elections in France and Greece. On a personal note, I’m going to paint the patio on my house, so I’ll be watching paint dry, just to counterbalance the rest of the world. The monthly jobs report, already the most highly anticipated data of the month, will be getting a little extra attention this Friday after a disappointing report on GDP late last week. A bad jobs report and a weak GDP report might be enough to trigger another round of Quantitative Easing from the Federal Reserve. The economy is adding and will continue to add jobs; that is not in question. It is the rate of job growth. Expectations are that there were about 160k to 175k new jobs created in April, up from 120,000 in March, and an unemployment rate that remains steady at 8.2%. The lowball guesses are for only about 125k jobs. With the addition of 120,000 jobs, March marked the 15th straight month of jobs growth, but it broke a three-month streak in which the economy had added more than 200,000 jobs. Now we are only a couple days away from finding out whether March’s report was a fluke or the …

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Monday, April 09, 2012

DOW – 130 = 12, 929 SPX – 15 = 1382NAS – 33 = 304710 YR YLD – .14 = 2.04%OIL – .15 = 102.31GOLD + 10.20 = 1642.30SILV +.05 = 31.86PLAT + 17.00 = 1619.00 Remember Friday? Remember the disappointing jobs report? The economy added 120,000 jobs in March. The unemployment rate dropped from 8.3% to 8.2% but that was just because people dropped out of the labor pool, they just quit looking for a job. While the economy undeniably continues to grow, the rate of that growth continues to disappoint. The stock market was closed on Friday; today, we saw the response and it was ugly. Alcoa kicks off the earnings reporting season tomorrow afternoon. Alcoa is forecast to post a $0.05 loss versus a $0.28 gain a year ago. Even if Alcoa beats expectations, it would be disappointing. A bad first quarter is expected; earnings will almost certainly be lower than last quarter and absolutely down on a year over year basis. And while earnings might be disappointing, big U.S. companies are flush with cash, they’re more productive, more profitable, and less burdened by debt. An analysis by The Murdoch Street Journal of corporate financial reports finds that cumulative sales, profits and employment last year among members of the Standard & Poor’s 500-stock index exceeded the totals of 2007, before the financial crisis. Deep cost cutting during the downturn and caution during the recovery put the companies on firmer financial footing, helping them to outperform the rest …

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April, Friday 06, 2012

If the employment report falls on a holiday weekend, does it make a sound? Yes it does; the sound is a loud thud. Earlier today the US Department Labor released March employment statistics. The report shows an increase of 120,000 non-farm payrolls, which is significantly lower than the estimated 200,000 new jobs and less than half the average monthly increase in the prior three months. On the other hand, the unemployment rate fell from 8.3% to 8.2%, which is lower than the estimate of 8.3%.So clearly, the correct bet was to take the “unders”. Just in case you were wondering, Goldman Sachs yesterday raised their prediction from 175,000 to 200,000; which means Goldman is either a ship of fools or they were betting that you are a muppet that would take that bet, and they were betting against you. What happened? One explanation is that the warm winter weather across much of the country produced a little boost of economic activity in December, January, and February; and now we’re returning to the more normal rate of growth for the past couple of years, which is fairly weak. There is growth, it just isn’t robust. Prices for U.S. Treasury debt rallied on the report, pushing yields to more than three week lows, as investors anticipated further bond purchases by the Fed. This is not a guarantee of QE3 but the report certainly did not take QE3 off the table. The dollar fell. The US stock markets were closed for Good Friday, …

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