Wednesday, May 18, 2011

More Jobs needed for those Claims

This post was also missing in the draft box after Blogger's technical issue last week.

Ladies, good morning. Slept alright?

So... this morning we got what I mentioned is a much more reliable job-growth indicator.
The Initial Jobless Claims came at +434k, slightly above market expectations of 430k and last week's surge was revised upwards 4k to +478k.

Beauty pieces below:

My reading of these charts, and perhaps I have this reading because economists mention it, is that average IJC above 400k/week is not positive for job growth.

I charted them together and it seems to, at least, make sense.
If the +400k is the threshold I am really not sure. But, woman, listen to me, these charts, from 1990, tell me that the current level of +437k for the 4-week average is INCOMPATIBLE with 244k NFP monthly growth (April's number) and not even compatible with POSITIVE job growth.

But that's me speaking. I am no economist. I am not adjusting numbers since 1990 for population growth, etc.
I'm just thinking through writing. Organizing my ideas.

EM Equity markets started the way down... through high inflation and an on-going hiking cycle. The Brazilian Ibovespa is claiming 10-month lows. If you discount if by the local CDI risk-free you get a negative 8-10% return for the period. On the way up it was Sep09 when the index hit 63k points.
Commodities then came at us in recent weeks. Comex Copper made highs around 460 earlier in the year... now back to 390, 15% drop. Back to Nov10 levels.
Crude is still way above last-year levels, but dropped a good 15% from the highs.

And that is with rent prices going up in the US. Housing prices marking a double-dip (CoreLogic: House Prices declined 1.5% in March, Prices now 4.6% below 2009 Lows), a surge in Initial Jobless Claims (4wk avg @ Nov10 levels), US average AAA Gas Prices almost 30% from Dec 2010 levels.

I know that corporate earnings came strong for 1Q11 providing room for the S&P 500 equity index to be at current levels, but people say (read Jeremy Grantham from GMOs post from yesterday) margins are peaking or already peaked and, as Vitaly Katselnelson says, we're not in period of hitting offers in terms of P/E multiples. We're in a period of contracting multiples or at least side-ways multiples.

There is a lot of uncertainty in the global economic outlook. You all know those already so I won't repeat them. Be prudent, don't chase stretched rallies, be selective on what you buy, think independently, study very hard. And worry about the return OF your capital and not only about the return ON your capital. Always worry.

Best regards,
The Intrigued Trader

*Disclaimer: charts and data are presented as I receive/see them. Sources are usually not checked for validation and my own calculations are of 'back of the envelope'-type. I am aware that some math that I do myself might be wrong and/or misleading to some extent. In financial markets the rate of change of economic data is often more important than the actual level and the perception of 'what is priced in' is more important than 'what is actually going to happen'. This is actually the way people pick entry and exit points. So... yes, sometimes you might say 'This guy is an idiot, this is way wrong!' with a high conviction, being right. Not to worry. Markets are made of expectations and the clash of conviction between its participants. Portfolio managers know that being an idiot is sometimes profitable and being smart is often a bad choice. It is all reality, sometimes good, sometimes bad. By the way: corrections to my analysis and intelligent debate is welcome. theintriguedtrader AT gmail do com

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