Jeff Miller

Economic Data Showing Signs of Negative Trends

Old Trader --

The Naperville Macy's (Chicago burb, as you know but others may not) was very busy yesterday when my wife and son were out shopping for his new suit. They had to compete for their sales person, and overall activity was high.

There was a sale, of course, and people had coupons. I don't know about their inventory or profitability.


On Nov 01 09:55 AM Old Trader wrote:

> apppro,
>
> I'm glad to hear things are going well at your particular location,
> but a couple of questions.
>
> First, I wonder how representative your location is? For example,
> here in Chicago, Macy's acquisition of Marshall Fields has not gone
> very well.
>
> Second, what SORT of merchandise is flying off of the shelves? What
> I've heard from various retail analysts is that the consumer is being
> VERY selective in where/how they're spending their dollars. "Value
> priced" items are doing relatively well....the rest, not so much.
>
>
> Thanks for providing a "worm's eye" view!
>
> On Nov 01 09:44 AM apppro wrote:

ETF Update: High Risk, But Some Opportunity

Enigmaman --- Good question! I can say this honestly because it is one that I raised in discussing the output with Vince. His response was to go back and check some data. He says that we have "robust" results whenever we have a positive rating on a particular ETF. The penalty box exit is now more sensitive in an effort to avoid the "rush for the exits" mentality sometimes seen in this trading.

If we had followed this strategy last week, when things looked about the same, we would have missed a nice week.

Meanwhile, I am compiling data on how the penalty box and the index package have done as macro indicators.

Thanks for taking the time to make your thoughtful comment.

Jeff


On Oct 12 08:30 AM enigmaman wrote:

> Jeff, seems like your trying to thread the eye of a needle as it
> relates to finding some additional green shoots in a garden full
> of weeds. You said "95% (up from 86%) of our sectors are in the "penalty
> box." This means that they are currently disqualified from the buy
> list for technical reasons." At this point in the game wouldn't it
> be wiser for most to just sit on the bench to see how the game plays
> out in the near term, at this level only the seasoned well disciplined
> investor should be sitting at the table.
>
> Why not discuss some other strategies, a holding pattern, an exit
> strategy, some alternative plan, or how to react when there is a
> significant bump in the road, that would seem to be the prudent course
> at this stage of the game and very helpful, that is unless you believe
> we are just in the first few inning of a new ball game with plenty
> of upside. Im not saying think the worst just what if, pays to be
> ready just in case

Evaluating Investment Predictions

Thanks for the comments. I hope it is clear that I am spoofing some of those who make vague predictions with no time frames.

And Tom, thanks for appreciating the effort at getting a smile along the way. The announcer in the video could hardly believe it himself!

A Different Take on September's Employment Numbers

Josh -- I congratulate you on your wisdom in understanding the basics of labor dynamics, but you are vastly over-rating the general state of knowledge. If you listen to any one discussing job creation, you will see that many do not think that ANY jobs are being created. You can hear this from CNBC anchors, the top Internet pundits, and even a few real economists, so I am not picking on SA readers. I remember one famous CNBC anchor, doing a segment on Ohio, asking in surprise, "You mean there are job openings in Ohio? Where? Why don't people go there?"

Note also how some comments are confusing JOLTS (which shows job openings) with Business Dynamics (which describes job creation). Not everyone finds it all as obvious as you do.

My guess is that most of the people writing on employment issues could not come within an order of magnitude if asked the number of new jobs created in a month.

More generally, I am disappointed that readers cannot accept an article like this for what it provides. If you already understood everything in it, well good for you.

Personally, I think Bob's visual aid is badly needed and should get more air time. Here's another one. How many jobs are lost in a year? If you think in gross terms, as Bob suggests, you will reach an answer of 30 million or more. This is a much better read on the devastating impact of the recession, since it makes clear how many are touched.

I am a big fan of Bob's work, and I respect his right to pick topics that he thinks would be helpful. I might add that the SA editorial staff thought the piece was worth a front-page feature. I strongly agree.


On Oct 06 01:30 PM Josh Dowlut wrote:

> Pardon me for throwing the Captain Obvious flag on this but I'd be
> shocked if the average Seeking Alpha reader doesn't already know
> that the net figure is derived by weighing gross gains against gross
> losses. Do you really think anyone actually thinks when we hear
> the net figures that not a single job was created anywhere last month?
> We don't all have a PHD in economics but most of us have IQ's over
> 100. Is there a point you are trying to make? Apparently you find
> this fascinating as you even invented your own visual aid to demonstrate
> this novel concept.
>
> Are you trying to argue that it's really not that bad because there
> are jobs being created? Can you honestly imagine a time when it
> would get so bad that there would never be any GROSS jobs created?
> If you can't then can you admit just how preposterous your suggestion
> is?

Politicizing the Olympic Decision

I was highlighting their actions at the time they held office and their countries pursued Olympic bids, something that some have come to expect. See this, for example, from USA Today content.usatoday.com/c...:

"British Prime Minister Tony Blair played a key role in landing the 2012 Olympics for London. So did Russian President Vladimir Putin when the IOC awarded the 2014 winter games to Sochi."


On Oct 05 12:33 AM Hmm?! wrote:

> Mr. Miller,
>
> You make somewhat of a point, ......... however neither Blair or
> Putin, is currently the leader of his nation.
>
> In the case of Putin, some would say not officially the leader. Saying
> "the critics would have been loud" paints with a pretty broad political
> brush, ...... well beyond Mr. Kudlow.
>
> It really comes down to...what else would President Obama have likely
> done with his time? Given Obama's history, I see nothing that would
> get the investment community or his critics jumping for joy.

Politicizing the Olympic Decision

Mr. Hmmm.

I am always interested in well-researched comments. I suggest that you check out some additional information:

www.universalsports.co...

IOC president Jacques Rogge said disputes with the U.S. Olympic Committee will have "no negative effects whatsoever" on Chicago's chances of landing the 2016 Summer Games.

and later...

"I think I can make a bet today and say that it's probably going to be a couple of votes, two, three, four," Rogge said, echoing his comments in an Associated Press interview last week. "Something like four, five votes is only the situation of a change of mind of two or three persons. You see how close it is. You can convince two people more and you might win."

If you google "Obama not going to Copenhagen" you will see many stories. Things have changed since the last US bid, with Blair and Putin both making personal appeals.

I have provided a strong message in many articles that investors should not play politics with their investments. This article makes the point very clearly.

Those who think that the Olympic loss has some grand implications for investments are looking in the wrong direction.


On Oct 04 11:03 PM Hmm?! wrote:

> Your comment "No one knows what would have happened if Obama had
> not made the trip, but the critics would have been loud." ......is
> way off the mark!
>
> President Obama announced well in advance that the First Lady would
> be making the trip and there was no public criticism. Never has a
> US president made such a trip in the past. Therefore the President
> may have taken a risk in going.
>
> "we should be focused on investments, agnostic about politics .........
> Overtly partisan messages do not fit." You are right, so hopefully
> you do not do it again.

Four Things You Didn't Know About Unemployment

Carlos -- This is a very good question. Rather than answer in the context of a single comment, I'm going to make it part of an article reviewing today's report.

Thanks for following up.

Jeff


On Oct 02 10:05 AM Carlos Lam wrote:

> On Oct 01 10:16 AM Jeff Miller wrote:

One of the Last Bears Standing

Roger -- you write that the (BLS's) "birth/death-of-busine... estimates are being made based on the pattern of previous recession-recoveries and are therefore probably unrealistic.)"

That is not the BLS methodology -- not even close. The BLS imputes a lower rate of job creation for new businesses based upon the behavior of existing businesses. It then has a (much less important) birth/death adjustment. The overall process has been very accurate throughout the business cycle, improving forecasts in every quarter since it has been implemented.

Most commentators on this subject do not want to be confused by actual facts or data :) If you are otherwise, I summarized it here: oldprof.typepad.com/a_...


On Sep 30 07:30 PM Roger Knights wrote:

> "His latest analysis of daily income tax deposits to the U.S. Treasury
> projects 358,000 U.S. jobs lost in September, almost double the consensus
> estimate."
>
> This has an important implication about the unemployment rate at
> the end of the year. It suggests that the BLS may have to revise
> its estimated-employment numbers for earlier in the year sharply
> downward. (Its birth/death-of-businesses estimates are being made
> based on the pattern of previous recession-recoveries and are therefore
> probably unrealistic.)
>
> "When investors realize how weak the economy truly is, stock prices
> are going to plunge."
>
> Sharply revised BLS numbers would strongly revise investors' perceptions.
> The green-shoot beanstalk would wilt under the weight of all the
> Jacks atop it.

Four Things You Didn't Know About Unemployment

Old Trader -- The birth/death adjustment is the focal point for a misguided attack on the BLS. I have written extensively on this topic, but the best way to check it out is my recent three-part series. Here is the concluding article, which has links to the prior two and also to other sources. oldprof.typepad.com/a_...

The data and results from these articles has not been challenged. B/D critics just say the same thing every month, never looking at research data to see if they were correct.

Thanks for helping me to highlight this.

Jeff


On Oct 01 09:08 AM Old Trader wrote:

> Jeff,
>
> Thanks for an informative article, but a question. From what I read,
> one of the aspects that's most questioned by those critical of the
> way employment/unemployment statistics are compiled, is the birth/death
> component, and your article makes no mention of it. Any particular
> reason?

Four Things You Didn't Know About Unemployment

Carlos -- I agree with your point about looking at the incentives of data providers. As someone with special experience in this field, that is how I am trying to help readers.

The problem is in thinking that "the Administration" controls what is reported in most data releases. That assumption is incorrect. Most of the work is done by professional economists and statisticians who keep their jobs even as Presidents come and go. I covered that extensively in my article, "A Crib Sheet for Government Data" oldprof.typepad.com/a_....

Take a look there, and you will get some ideas both about data sources and the "spinning" of data from others.

Thanks for the good question.

Jeff


On Oct 01 07:17 AM Carlos Lam wrote:

> What you write may be correct, but it is always wise to view statistics
> and ask whether the provider somehow has an incentive to skew them.
> Any administration has the incentive to skew unemployment lower to
> attempt to make things look better. The same goes for GDP figures.
>
>
> Again, you may be right. The question that we have to ask ourselves
> is: How much do we trust political animals to produce accurate data?
> My answer is: not much. The political animals do not have the price
> system that is required to ensure that their data is accurate. Private
> data providers (i.e. ADP, TrimTabs) produce data for profit; they
> either prosper or fail based on the quality of their data. I trust
> their figures more.

Four Things You Didn't Know About Unemployment

The last link "This is NOT another great depression" should be as follows: freakonomics.blogs.nyt.../

Sorry for the inconvenience.

Was the Chicago PMI Leaked?

Nice article. The same thing is true of other subscription reports. It is not like government data where all are equal....

Liz Ann Sonders: Job Gains Possible by Year-End

Old Trader -- I think Tom is correct on this one. I agree with your facts, but not the conclusion.

The response to an improving economy will certainly be reflected in hours worked, but there will also be new hires. It remains to be seen how many of each.

As to the CEO survey, the primary source is even more dramatic, since it reports that 87% say "flat to down." Of course 60% say "flat to up." It is an old trick to lump the flat in with the changes as did the report you saw. If you go to the primary source, www.businesswire.com/p... you will see that the expectations in this survey have improved dramatically since last quarter. More importantly, CEO's don't know what they will be doing in six months. The CEO outlook collapsed after the Lehman fall. It is now improving rapidly. Also, this approach does not capture the behavior of firms that are not a part of their sample -- an important source of new job growth.

A fair conclusion would be that not all companies are the same. Some will lay off more. Some will go out of business. Some will hire. Some will increase hours. Thinking about labor dynamics as a distribution of workers and firms is much more productive than trying to portray complex behavior in terms of a single generalization.


On Sep 29 11:20 AM Old Trader wrote:

> Tom,
>
> I wish I could agree, but I can't. You seem to have overlooked the
> fact that many firms have cut hours, rather trhan completely laying
> off workers. Consequently, there could very well be a rebound in
> demand, due to inventory restocking, or whatever, that isn't going
> to translate into higher employment.
>
> Within the last half hour, or so, Bloomberg TV had the results of
> a survey of CEOs on future hiring, over the next quarter, and just
> under 70% said it would be flat, to down.

ETF Update: Here's How Currency Moves Affect Your Positions

Isaac -- a "1" in the penalty box is like a stop loss signal, but using more sophisticated criteria. Send an email to jmiller at newarc dot com and I'll get it to the right people.

The filter change announced this week includes faster stops via the penalty box, recognizing the hot money moves of hedge funds.

Thanks for the question.

Jeff

Is This a Sucker's Rally?

tom -- Thanks for your comment. I know that many people read these articles without making a comment. I hope that many share your approach.

You may have noticed that I have been, for some time, one of your "followers" on Seeking Alpha. I have been impressed by your observations and often go to articles where you have made a comment. These are topics that I might otherwise have missed.

Thanks for your contribution.

Jeff


On Sep 22 03:40 PM Tom Armistead wrote:

> Jeff, the reason I read SA is to get exposure to well-reasoned opinions
> on macro issues and market level. I appreciate your approach which
> is resolutely factual.
>
> As this situation has developed new information comes out every day
> and visibilty is improving. Jim Grant's change of stance is an important
> indication, he has a very good track record of looking at the facts
> and arriving a reliable conclusions.
>
> The bear market seems to have given some people the idea that extremely
> negative views on the economy and the market were somehow hip or
> stylish, but a bad attitude will only take you so far in investing.