WASHINGTON, September 9, 2013 – Wall Street begins another uncertain week Monday, sure to be buffeted by the usual suspects: fear of the taper, Congressional action (up or down) on the Syrian situation, and perhaps most important of all, the nation’s staggeringly bad unemployment rate that continues to affect youthful Obama partisans most of all.
Figures released on Friday showing unemployment ticked down to 7.3 percent in August, causing Administration officials and other partisans to crow. The problem is, these stats are increasingly phony.
What the government reports each week for the headlines is what’s termed the U-3 unemployment rate, a rate calculated by only including those who have not dropped off unemployment compensation rolls. Anyone who has dropped off those rules due to exhausting unemployment benefits is simply not counted.
The Department of Labor (DOL) also reports what’s known as the U-6 unemployment rate, which does include the legion of unlucky souls that’s not counted in U-3. And that rate is currently estimated at a whopping 14% for August, give or take a rounding error. Workforce participation is way down, too, reportedly hanging in there at around 63 percent according to a recent Gallup poll.
Making matters worse (and less truthful), what the government never bothers to tell you is that employment estimates reported the previous week—those people who actually found full-time employment—are usually revised downward when final figures come in.
This lower previous week number means A. that the previous week’s employment “increases” were actually not as good as earlier reported; and B. since the current week’s (or month’s) unemployment number is based on the previous week’s or month’s unemployment number that’s almost always revised downward, the phoniness of the current week’s number is compounded.
If it all sounds confusing, that’s because it is. The government has a good reason for keeping it this way, and for reporting those numbers the way that they do. The phony numbers and the phony downticks in the so-called unemployment rate give the public the impression that the Administration’s “plan” is “working.” When, in fact, there’s no plan except socialist creep, which is why nothing is working. It’s a scandal we’ve raised many times in this column, but nobody is paying a shred of attention. Sadly, this proves that the country is getting precisely the kind of economy it deserves.
Outside the country, save for the catastrophic mess the Administration has caused for itself in Syria, things are looking up for freedom lovers and true democracy fans, at least in one other locale. Our friends down under finally threw out their job destroying leftist government, putting conservatives firmly back into power with what looks to be the strongest parliamentary majority in Australia since 1996.
Look for the new conservative government there to almost immediately begin moving against the leftists’ punitive 30 percent mining taxes and their idiotic carbon taxes as well, both of which have been crippling business in that mineral rich country since they were passed. Guess the voters didn’t love it when they saw it.
It would be nice if some of Australia’s outburst of rationality would wash up on these shores, but the wave would have to wash over and get past the Socialist Republic of California first.
All of which gets us to this morning’s market, which, according to futures as we near midnight Monday morning, look to open modestly higher, though that can change. Typically, the markets have ended up closing down hard on Monday, improving midweek, and then drafting down again by Friday.
Something like this is likely to continue, so let’s not get overly excited by moves that go either way. In a pair of months that are generally not kind to investors—September and October—a general move down remains more likely than one in the opposite direction.
This week’s trading tips
We’re still not very enthusiastic about this market. With bonds continuing to take it on the chin and now quite oversold, we’re dribbling back into them, very slowly, via various ETFs. Since Schwab customers can trade their in-house ETFs commission-free, we’re literally slipping into select Schwab bond ETFs in five share increments, and only on down days. (Other firms may offer similar deals on in-house funds.)
Having been burned badly last week, we’re also, perhaps foolishly, going to try the gold and silver ETFs we exited last week when this manipulated market was slammed down. These positions as well won’t be very large.
Given what happened in the Australian elections, we’ll try to get into the Aussie ETF, EWA, but we won’t chase it if irrational exuberance takes over.
We will watch our small Apple (AAPL) position like a hawk, and likely exit tomorrow before the Apple product announcements scheduled for Tuesday, September 11. That stock almost always gets slaughtered on the day of the announcement after running up in the days prior to the official news. So why hang around? On the other hand, given the market’s utter unpredictability these days, we could regret the move, but we’re going to take it anyway.
A month has now elapsed on our purchase of KAR automobile auction shares in a secondary offering on August 8, and we’re likely to consider terminating that position for a profit sometime this week. KAR has been a good performer, but in this market, you take what you can get and run. That said, each and every time KAR has offered a secondary—at least three times now—we’ve made money on the offering. It’s a lovely thing and very rare these days that you should have such consistently good luck with a single stock, but there it is.
But that’s about it for us. The economy is stagnant, the Nation is rudderless and leaderless, and every investment these days is amounting to a crapshoot in Bizarro World. So we’re still staying in quite a lot of cash. You should, too.
*Branco cartoon above reprinted by permission with a hat tip to LegalInsurrection.com.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate. He currently holds small positions in AAPL, SGOL, and SILV plus select bonds primarily purchased at the height of the 2008-2009 debacle.
Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.
Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.
References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.
Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.
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