Post by Savant on Sept 9, 2004 1:30:10 GMT -5
The Great Employment Enigma - Published 0230 EDT Thursday September 09 2004
Back in mid-August our title theme was: "Market Strength Defies Gravity" and up until wednesday that has most definitely been the case.
However, can we keep up this fairly impressive and somewhat relentless activity much longer? That depends upon a number of factors including to some extent on how the Presidential race unfolds over the next few weeks.
One of the reasons we believe the market has been so strong over the past few weeks, is because beneath the veneer of a smear campaign regarding the so-called net loss of jobs during the current administration, maybe the reality is, that this is actually not the case.
How so?
Well, during July it was reported that the lesser referred to Household Survey, it appears revealed some 600,000 more people working than the relatively anemic employment numbers earlier promulgated for that month, which incidentally were actually revised upwards last week, so the market is perhaps beginning to pick up on this theme that the soft-patch in the economy could already be behind us and the economy is picking up in tempo, potentially quite significantly, powered by a what finally may be a rapidly expanding job market.
As we predicted many months ago in our special reports entitled "The Best Economy Ever", Parts 1 & 2, the US Labor force is at an all time high with more Americans working than ever before...
Without resorting to decimal points: There are over 148 Million Americans working today and that is millions more than in 2000, in spite of some pullback after 911 and simply put, the current administration appears to be a victim of some kind of change in the way payroll jobs are measured versus contractual outsourcing, home based businesses such as the million plus Ebay labor force and many other Internet related endeavors.
The statistics are there and the statistics don't lie as was recently highlighted by a CNBC contributing economist, who explained how the unemployment rate is calculated and the figure he displayed at 148.7 Million was clearly millions greater than in any recent years.
Live on CNBC on Wednesday during Fed Chairman Greenspans unusually upbeat testimony, a member of the congress pointed out and basically endorsed what we have been saying all year:
That the so called worst budget deficit ever, is nothing like what it appears to be for the same two major reasons we outlined earlier:
1. That as a percentage of GDP this current deficit at just 3.6% of GDP is not even in the Top Ten of worst deficits ever.
2. That because interest rates are at their lowest in 50 years the cost of maintaining this deficit is lower than all the rest.
And we added several other compelling reasons behind why this deficit should be looked upon as in investment in our future rather than the some kind of catastrophe it is trumped up to be:
If your house gets hit by a hurricane and you have to get a home equity loan to fix it, how much are you likely to borrow against your house? 10%, 20%, 30% or more?
The US house was hit by a hurricane on 9/11 and we have effectively borrowed 3.6% against our house and at extremely low rates for that matter. But as with any good business that borrows to expand, the US is expanding at an annual rate of 4% plus which has enabled us not only to expand our economy and war effort by significantly greater degree and at the same time invest in our future, we are more than covering the costs and have actually saved some $50 Billion or so less than projections, partly thanks the strength of the US economy.
Every day the contenders are bashing the US for its so called poor employment record and yet in several of the major economies in Europe, unemployment is 10% plus and its even rising in "job-guaranteed" Japan.
Europe is in crisis because the workers there have it too easy and it's putting their economies in jeopardy. As the same congressman re-iterated in his testimony: Where's the bad news? The only bad news is that being uttered by the nay-sayers who have a negative bent.
As Governor Schwarzenegger declared at the RNC Convention last week:
The U.S. Economy is the envy of the World and has led this unprecedented Global recovery all the way. Even Mexico, the tenth largest economy in the World, is now growing at similar rates to the US Economy as we predicted it would in our year end report for 2003. It grew 5.1% in June and is projected to average over 4% for the rest of 2004. China still is growing at a double digit pace and has become an additional major driving force behind World growth, with India helping.
The World is changing... Europe is getting a wake-up call that the status quo 35 hour week with their 6 week luxury vacations doesn't cut it in today's World. The US remains the most competitive and productive economy in the World, but cannot to afford to be complacent anymore, that is the reality of today's World and perhaps may be much of the reasoning as to why job growth has been more subdued this time around.
The US got spoilt in the mid to late 90's with the high-tech jobs boom that was almost without precedent and unfortunately had consequences when the bubble burst. In spite of that and everything else, the recovery has been almost miraculous following one of the mildest and shortest recessions in history. This was a walk in the park compared to earlier recessions where in some cases unemployment rates hit double digits.
As for the markets going forward from here, so far so good. Generally a strong post Labor day trend is fairly positive, but there is a risk the market might catually be overshooting a bit and may need to pull back some.
Among the worries, the leading tech sector issues such as Intel - INTC have been dismal performers and the Nasdaq itself has not been that stellar. If anything it has underperformed for some of this rally. If it begins to outperform, we would consider this to be a major positive.
If the Nasdaq were to turn significantly weaker, this could likely indicate a pullback of some degree may be in the making.
Meanwhile the oil market has come back significantly from the highpoints we called a few weeks ago, we will comment more in-depth on this in the future, but suffice to say our feelings of a potential glut in the making were somewhat vindicated by the announcement this week from the head of OPEC that Crude supplies appear to be adequate to free-flowing right now.
In conclusion: What we mentioned in our last report appears to be happening and should be kept in mind going forward, because any continuation to the upside could be inordinately bullish, especially if the major resistance in the S&P were to be taken out beyond 1,155. That would likely imply a very strong upmove beyond the 1,200 level possibly to 1,225 and that could imply a move above 11,000 or so in the Dow and a move back over 2,000 in the Nasdaq.
Historically, election years have had an upward bias, often, but not always finishing the year higher. It's what happens during the year that can set the tone and invariably there is some kind of severe mid to late year selloff that usually turns out to be a great buying opportunity as we suggested back in early to mid-August. That so far seems to have been the case. A late rebound can carry prices significantly higher, into or sometimes after elections. That late re-bound has clearly been underway majorly for weeks.
The market has risen significantly since then, but does appear to be in pause mode for now at least and may correct some more given Wednesday's down close, but if it were to go back to green again into the end of this week or take out Wednesday's highs, that could be exceedingly positive...
Have a Great Thursday
Trade Extra Well
Savant
Back in mid-August our title theme was: "Market Strength Defies Gravity" and up until wednesday that has most definitely been the case.
However, can we keep up this fairly impressive and somewhat relentless activity much longer? That depends upon a number of factors including to some extent on how the Presidential race unfolds over the next few weeks.
One of the reasons we believe the market has been so strong over the past few weeks, is because beneath the veneer of a smear campaign regarding the so-called net loss of jobs during the current administration, maybe the reality is, that this is actually not the case.
How so?
Well, during July it was reported that the lesser referred to Household Survey, it appears revealed some 600,000 more people working than the relatively anemic employment numbers earlier promulgated for that month, which incidentally were actually revised upwards last week, so the market is perhaps beginning to pick up on this theme that the soft-patch in the economy could already be behind us and the economy is picking up in tempo, potentially quite significantly, powered by a what finally may be a rapidly expanding job market.
As we predicted many months ago in our special reports entitled "The Best Economy Ever", Parts 1 & 2, the US Labor force is at an all time high with more Americans working than ever before...
Without resorting to decimal points: There are over 148 Million Americans working today and that is millions more than in 2000, in spite of some pullback after 911 and simply put, the current administration appears to be a victim of some kind of change in the way payroll jobs are measured versus contractual outsourcing, home based businesses such as the million plus Ebay labor force and many other Internet related endeavors.
The statistics are there and the statistics don't lie as was recently highlighted by a CNBC contributing economist, who explained how the unemployment rate is calculated and the figure he displayed at 148.7 Million was clearly millions greater than in any recent years.
Live on CNBC on Wednesday during Fed Chairman Greenspans unusually upbeat testimony, a member of the congress pointed out and basically endorsed what we have been saying all year:
That the so called worst budget deficit ever, is nothing like what it appears to be for the same two major reasons we outlined earlier:
1. That as a percentage of GDP this current deficit at just 3.6% of GDP is not even in the Top Ten of worst deficits ever.
2. That because interest rates are at their lowest in 50 years the cost of maintaining this deficit is lower than all the rest.
And we added several other compelling reasons behind why this deficit should be looked upon as in investment in our future rather than the some kind of catastrophe it is trumped up to be:
If your house gets hit by a hurricane and you have to get a home equity loan to fix it, how much are you likely to borrow against your house? 10%, 20%, 30% or more?
The US house was hit by a hurricane on 9/11 and we have effectively borrowed 3.6% against our house and at extremely low rates for that matter. But as with any good business that borrows to expand, the US is expanding at an annual rate of 4% plus which has enabled us not only to expand our economy and war effort by significantly greater degree and at the same time invest in our future, we are more than covering the costs and have actually saved some $50 Billion or so less than projections, partly thanks the strength of the US economy.
Every day the contenders are bashing the US for its so called poor employment record and yet in several of the major economies in Europe, unemployment is 10% plus and its even rising in "job-guaranteed" Japan.
Europe is in crisis because the workers there have it too easy and it's putting their economies in jeopardy. As the same congressman re-iterated in his testimony: Where's the bad news? The only bad news is that being uttered by the nay-sayers who have a negative bent.
As Governor Schwarzenegger declared at the RNC Convention last week:
The U.S. Economy is the envy of the World and has led this unprecedented Global recovery all the way. Even Mexico, the tenth largest economy in the World, is now growing at similar rates to the US Economy as we predicted it would in our year end report for 2003. It grew 5.1% in June and is projected to average over 4% for the rest of 2004. China still is growing at a double digit pace and has become an additional major driving force behind World growth, with India helping.
The World is changing... Europe is getting a wake-up call that the status quo 35 hour week with their 6 week luxury vacations doesn't cut it in today's World. The US remains the most competitive and productive economy in the World, but cannot to afford to be complacent anymore, that is the reality of today's World and perhaps may be much of the reasoning as to why job growth has been more subdued this time around.
The US got spoilt in the mid to late 90's with the high-tech jobs boom that was almost without precedent and unfortunately had consequences when the bubble burst. In spite of that and everything else, the recovery has been almost miraculous following one of the mildest and shortest recessions in history. This was a walk in the park compared to earlier recessions where in some cases unemployment rates hit double digits.
As for the markets going forward from here, so far so good. Generally a strong post Labor day trend is fairly positive, but there is a risk the market might catually be overshooting a bit and may need to pull back some.
Among the worries, the leading tech sector issues such as Intel - INTC have been dismal performers and the Nasdaq itself has not been that stellar. If anything it has underperformed for some of this rally. If it begins to outperform, we would consider this to be a major positive.
If the Nasdaq were to turn significantly weaker, this could likely indicate a pullback of some degree may be in the making.
Meanwhile the oil market has come back significantly from the highpoints we called a few weeks ago, we will comment more in-depth on this in the future, but suffice to say our feelings of a potential glut in the making were somewhat vindicated by the announcement this week from the head of OPEC that Crude supplies appear to be adequate to free-flowing right now.
In conclusion: What we mentioned in our last report appears to be happening and should be kept in mind going forward, because any continuation to the upside could be inordinately bullish, especially if the major resistance in the S&P were to be taken out beyond 1,155. That would likely imply a very strong upmove beyond the 1,200 level possibly to 1,225 and that could imply a move above 11,000 or so in the Dow and a move back over 2,000 in the Nasdaq.
Historically, election years have had an upward bias, often, but not always finishing the year higher. It's what happens during the year that can set the tone and invariably there is some kind of severe mid to late year selloff that usually turns out to be a great buying opportunity as we suggested back in early to mid-August. That so far seems to have been the case. A late rebound can carry prices significantly higher, into or sometimes after elections. That late re-bound has clearly been underway majorly for weeks.
The market has risen significantly since then, but does appear to be in pause mode for now at least and may correct some more given Wednesday's down close, but if it were to go back to green again into the end of this week or take out Wednesday's highs, that could be exceedingly positive...
Have a Great Thursday
Trade Extra Well
Savant
