Watch tomorrow’s initial claims for unemployment number for signs that the economy is strong?/weaker? than expected
Time to torture the data!
Wall Street will have the red-hot irons and the Spanish boots out in full force tomorrow morning trying to extract the last bit of information out of the initial claims for unemployment number that will be released at 8:30 a.m. ET.
The hope will be to bend, spindle, and mutilate the data until it tells whether or not unemployment has peaked—or is about to peak—much earlier than expected.
That was certainly the implication of last Friday’s surprisingly low number of jobs lost in November—just 11,000. Most economists had been expecting that unemployment wouldn’t peak until the middle or end of 2010. The November job loss number suggested that the peak could come earlier. Maybe as early as the first quarter of the year.
The implications, if that’s true are huge. They include a stronger than expected economic recovery; a faster than expected turn in Federal Reserve policy toward raising interest rates; and a switch from a falling to a strengthening dollar.
What has the initial claims number been telling investors recently?
Nervous? Afraid to stay in but scared to get out? Join the club (and read my three strategies for coping)
Feeling twitchy?
Your portfolio is probably full of stocks trading at 52-week highs. And I’ll bet you’ve thought about selling.
And you would do that–except that the stock market keeps going up (well except for the last couple of days), cash pays close to nothing, and it’s hard to find a stock to buy that’s not already trading at its 52-week high.
I think you’ve got three choices at this point in this stock market.
- Sell despite the signs that this rally is likely to run into the first half of 2010. Your money will be safely in cash but you won’t make squat for six months.
- Hold if you’re fully invested and buy if you have some cash in the knowledge that you’re betting on market momentum and global cash flows to drive this market higher even in the absence of reliable forecasts for the economy and earnings in 2010. You’ll be hoping that you can somehow see the turn coming (or that there won’t be a turn) in time to beat the rest of the world’s investors out the door.
- Hold carefully and buy even more carefully when and only when you can find some fundamental facts that say the 52-week high isn’t a ceiling but a stopping off point on the way to a higher high. After all Ford Motor (F) did climb to a new 52-week high at $8.98 a share from a 52-week low of just $1.01 a share. But the stock did trade above $14 in 2004. In that year the company made $1.59 in earnings per share. Wall Street estimates Ford will earn 43 cents a share in 2010. It’s clear that the stock will has upside from here if earnings come through.
I think there are problems with each of these three strategies. But I do think that if you take a dash of this and mix it with a pinch of that, you can come up with a strategy that limits risk and gives you decent upside exposure. Let me lay out that hybrid strategy for you and suggest a few stocks suited to playing mix and match.
Capitalism could still get a stem to stern overhaul. To keep score in the Revolution track something economists call “externalities.”
“A crisis is a terrible thing to waste,” said Stanford economist Paul Romer way back in 2007 near the start of the recent (or should that be “current”?) global fiscal and economic crisis.
You certainly understand why if you take a look at U.S. economic history. Most of the time the structure of our economy seems ruled by inertia. It takes a crisis to change anything significant. It took the repeated financial crises of the late nineteenth century to produce the Federal Reserve, antitrust rules, and the Income Tax. The Great Depression to produce Social Security, the Securities & Exchange Commission, and the National Labor Relation, and more. (Hey, it was a BIG crisis.)
And what do we have to show for the crisis that has bankrupted the next generation?
Bubkis is the common conclusion. A tweak of CEO compensation here. A little cosmetic gussying up of bank balance sheets. Maybe, just maybe, some feeble protection against rapacious credit card lenders. Oh, and health care reform that is either “The path to socialism” or “Gee, I wish it went further” depending on your politics.
But compared to the bar set by the Great Depression, the Great Recession seems to have produced remarkably little change.
Well, I say it ain’t so. We’re engaged, final score isn’t in yet folks, in the most far-reaching effort to change the way that capitalism works since Bismarck invented the old age pension.
The economy will start adding jobs again–in April
Unemployment will start to decline and the economy will start to add jobs again in April 2010.
At least that’s the result you get if you extrapolate the current rate of decrease in new jobless claims out into the future. The Financial Times did the calculation in its September 26-27 paper.
The calculation works like this:
Last week the number of initial jobless claims–the number of people newly unemployed–fell by 4% to 530,000.
The weekly number jumps around so much because of short-term news that it isn’t especially useful as an indicator. Economists prefer to use the four week moving average. (This average of the most recent four weeks changes every week as the oldest week drops out of the calculation and the most recently completed week gets added.)
Right now the four week moving average is giving us good news too. By this measure the number of initial jobless claims is falling at a 6% rate.
There’s always a lot of churn in U.S. economy so the number of initial jobless claims doesn’t have to fall to zero before the economy as a whole starts to add jobs. Unemployment will start to drop when the number of people getting new jobs exceeds the number losing their jobs for the first time.
Did the United States prosper because of or inspite of its leaders?
The great stock picker and mutual fund manager Peter Lynch once advised, “Buy businesses so simple even an idiot could run them. Because one day an idiot will.”
After reading David S. Reynolds’s Waking Giant: America in the Age of Jackson (HarperCollins, 2008), I can’t help wondering if the same thing applies to countries.
Call it Manifest Destiny. Or the workings of God’s hand. Or the inevitable workings of capital and labor. Or an idea so simple even an idiot couldn’t mess it up.
But there’s got to be some reason why the United States survived the first half of the nineteenth century despite the rather shaky quality of its leaders. And the somewhat uncertain character of the average citizen, for that matter.
If you like your history strong on armies marching over the landscape or are fascinated by accounts of who skunked who in the smoke-filled back rooms, then this isn’t the book for you.
But if you read history because you enjoy the details that give a period character, that make the past different from the present, then this is your book. Because that’s exactly the parts of the story that Reynolds finds fascinating and brings to life.
Take, for example, the fact that the average American spent most of the years between the war of 1812 and the end of Andrew Jackson’s presidency in 1837 constantly inebriated if not outright drunk.
