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The U.S. labor market picture is improving, and is improving faster, according to a regular Labor market report published Friday morning. The unemployment rate declined from 7.3 percent to 7.0 percent in November, and total nonfarm payroll employment rose by 203,000, the U.S. Bureau of Labor Statistics reported today. Employment increased in transportation and warehousing, healthcare, and manufacturing. Most notably, the number of persons unemployed less than 5 weeks declined by 300,000 in November, partially reflecting the return to work of federal employees on furlough in October.

The strong November employment report follows another strong report in the previous month. Total nonfarm payroll employment rose by 204,000 in October, and the unemployment rate was little changed at 7.3 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in leisure and hospitality, retail trade, professional and technical services, manufacturing, and healthcare. Payroll numbers were well above analyst expectations of 120,000 jobs, while unemployment numbers were in line with expectations.

In addition, Friday's report comes after a strong GDP report yesterday-GDP up by 3.6 percent, ahead of analyst expectations. A Brighter U.S. economic picture that's certainly good news for both the Main Street, but for Wall Street things become a little bit complicated.

On the one side, a stronger economy will give a big boost to consumer spending and earnings; and that's good for stocks. On the other side, a stronger economy is certainly bad news for U.S. Treasury bonds and precious metals, as it will eventually put an end to the several rounds of QE that have been providing investors with plenty of cheap money to chase after all three major asset categories: stocks, bonds and commodities.

Judging from a strong Wall Street opening, most investors sided with the first scenario, which was supported by a strong Consumer Sentiment report at 10am--registering 82.5, up from 75.1 last month. Nonetheless, with strong employment and consumer data the game is changing. The QE music is about to stop, and long-term interest rates are to rise. What should investors do?

Major Equity Indexes at 10am

Index

Friday's

Performance (%)

3-Month Performance (%)

12-Month Performance (%)

SPDR S&P 500 Trust (SPY)

+1

+8

27

PowerShares QQQ Trust (QQQ)

+0.83

+13

32

SPDR Dow Jones Industrial Average (DIA)

+0.93

+6

15

Major Precious Metals ETFs at 10am

ETF

Friday's Performance (%)

3-Month Performance (%)

12-Month Performance (%)

SPDR Gold Shares (GLD)

+0.65

-11

-28

like iShares Silver Trust (SLV)

-0.91

-18

-41

Freeport-McMoRan Copper and Gold (FCX)

-0.24

12

7

1. Take profits from high dividend sectors, e.g., pharmaceuticals-dividend stocks become less attractive as they compete with Treasury yields. Big pharma stocks have been stellar performers in 2013. Pfizer (PFE), Bristol Myers Squibb (BMY), Abbott Laboratories (ABT), Eli Lilly (LLY) and Merck (MRK), all trade near their 12-month highs.

The trouble is that the financials of these companies haven't caught up with the stocks-see tables below. Operating margins have been steady or shrinking, and dividend yields have been compressed.

Big pharma financial performance statistics 11/25/2013:

Company

BMY

PFE

LLY

MRK

ABT

SPY

Dividend

2.60%

3%

3.8%

3.50%

2.30%

1.93%

Operating Margin

19.23

32.18

25.04

20.32

22.21

--

Quarterly Earnings Growth

--

-19.30

-9.3

-35.60

-50.30

--

Quarterly Revenue Growth

8.80

-2.4

5.0

-4.0

2.0

--

Source: Finance.yahoo.com

Big pharma financial performance statistics 11/25/2013:

Company

BMY

PFE

LLY

MRK

ABT

SPY

Dividend

3.80%

3.8%

4.6%

4.0%

3.20%

2%

Operating Margin

33.99

29.36

24.84

22.32

21.21

--

Quarterly Earnings Growth

11.7

-6.60

-4.2

66.60

43.8

--

Quarterly Revenue Growth

4.80

-19.3

-4.10

1.30

4.6

--

Source: Finance.yahoo.com

2. Stay away from precious metals that are QE sensitive, but don't short them, as the market may have already discounted the worst scenario. Aggressive investors may want to trade them on the long side.

3. Stay away from momentum stocks. Momentum investing is a strategy based on hype about an investment theme, a new product or a new industry that captures and captivates the investor mind -- at times when money is cheap. In the late 1990s, the theme was telecommunications and networking, with momentum funds flowing into companies like Ciena Corp. (CIEN), JDS Uniphase Corp. (JDSU), Corning, Inc. (GLW), and Ariba Inc. (ARBA). Now the theme is social media and web-based companies, like Netflix, Inc. (NFLX), OpenTable Inc. (OPEN), and LinkedIn Corp. (LNKD). Momentum investing can be very rewarding as long as it lasts. But it can result in hefty losses once it fades away, usually when liquidity dries up.

4. Stay away from U.S. Treasuries -- and Treasury ETFs like TLT. Though U.S. Treasuries are the first investment to come to mind when the economy heads into recession, this time yields are already near record low levels, so any gains from here will be limited.

5. Buy an ETF that is short on U.S. Treasuries like the ProShares UltraShort Lehman 20+ (TBT) or ProShares UltraShort Lehman 7-10 (PST). The problem for investors, however, is that both funds bet against the daily price movements of U.S. Treasuries, and therefore, they do not make good long-term bets.

6. Buy cyclical stocks that may benefit from the two strong employment reports. I particularly like Ford (F), as I discussed in a previous piece.

7. Buy portfolio protection, using puts on SPDR S&P 500 or calls on iPath S&P 500 VIX ST Futures (VXX).

8. Stay away from high dividend stocks, which have been trading like bonds -- higher Treasury yields will make these stocks less appealing.

A few words of caution: While Fed tapering is eventually imminent, it cannot be perfectly timed. That's why I would place these bets gradually rather at once, following closely the indicators that may induce the Fed to taper like the unemployment rate.

Source: Strong Employment And Consumer Data Are Changing The Game On Wall Street