WASHINGTON, October 7, 2016 – Strange trading action today, the Friday before the Columbus Day Holiday that’s not. That is to say, Monday, October 10 is a Federal bank holiday and likely a holiday for many Federal, state and local government workers as well. But for the average Joe—and the average stock trader—it’s business as usual Monday, except for settlement day as we explained in Thursday’s column.
In other words, we expect relatively thin trading today and Monday, just because. That, in turn, can mean greater unpredictability and volatility in stock prices as HFTs will likely use the situation to create a manic-depressive playpen of frequent up-and-down trades, adding to the sickening yo-yo non-momentum that’s been characterizing September and October trading patterns thus far.
The star of the show Friday was the DOL unemployment report, which resulted in a “meh” to negative reaction on Wall Street’s virtual trading floor. Noted CNBC,
“The U.S. economy added 156,000 jobs last month and the unemployment rate ticked up to 5.0 percent, the Labor Department said Friday. Economists surveyed by Reuters had expected 176,000 new jobs and the jobless rate to hold at 4.9 percent. The total was a decline from the upwardly revised 167,000 jobs in August (compared to the original number of 151,000).”
“But,” CNBC uncharacteristically warned, “relying on that one headline number [156,000 jobs] as an indicator of the economy’s direction leaves a lot of important information below the surface.”
Hmmm. That observation seems to track with what the Maven has been complaining about since he began this column back around 2010. CNBC explains this largely-ignored issue quite clearly:
“Every month on ‘Big Jobs Friday,’ the Bureau of Labor Statistics releases a boatload of data, each point of which provides its own unique perspective on a facet of the nation’s employment situation. Economists look past the official unemployment rate — that 5 percent figure, which is known as the ‘U-3’ rate — to other metrics that provide their own nuanced views of the state of jobs.
“One of those figures is called the U-6 rate, which has a broader definition of what unemployment means. That figure remained unchanged at 9.7 percent in September. [Italics by the Maven.]
“The official unemployment rate is composed of ‘total unemployed, as a percent of the civilian labor force,’ but doesn’t include a number of employment situations in which workers might find themselves. The U-6 rate is defined as all unemployed, plus ‘persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the labor force.’
“In other words: That’s the unemployed, the underemployed and the discouraged.”
CNBC provides a chart to illustrate its point, based on DOL’s various “U” measurements. Note particularly the U-6 line—the one we’ve been emphasizing all along.
Gleefully negative as always, ZeroHedge reads further between the DOL lines. Friday’s already dismal (and still misleading) DOL September job figures are even worse than they appear to be, given that once upon a time, 300,000 jobs a month, indefinitely, was what America allegedly needed in order to achieve pre-Great Recession employment levels. “Tyler Durden” notes that “while full-time jobs actually declined by 5,000 to 142,296K part-time jobs soared by 430,000…”
“But perhaps even worse than the breakdown in September job quality,” Tyler continues
“was another seldom-touted series: the number of Multiple jobholders, or people who are forced to hold more than one job due to insufficient wages or for other reasons. It was here that the red flashing light came on because as a result of the 301K monthly surge in Americans holding more than one job, the 5th highest monthly spike in the past decade, the total number of Multiple jobholders soared to 7.863 million, the highest number since the financial crisis, and a number surpassed just once in the past decade: in August of 2008, just before all hell broke loose.”
Perhaps the economic truth of the past eight job-starved years is finally beginning to surface, now that it’s occurred to at least a few financial reporters that they don’t have to cover for Barack “Neo” Obama any more. We shall see.
But it’s good to see at least some truth leaking out, even at this late date. Now if only the financial press and the rest of the lapdog media would stop covering for Crooked Hillary, who’s already planning to give us four more years of Obamanomics. Or eight, if her spin doctors and medical doctors can keep her alert, erect and alive at least part of the time.
None of this will happen, of course, if The Donald grabs the brass ring. But we won’t get ahead of ourselves.
Not much to report today. After dithering for a couple of days, we put in for some shares of Camping World Holding’s (symbol: CWH) IPO, but didn’t get any. Word was that the issue was in considerable demand. That, plus the fact that we’re still enjoying the huge pop we got from last week’s Nutanix (NTNX) IPO probably put us in the back of the queue for this one.
Thus far, we’re not mourning about getting stiffed on those CWH shares. The stock of this long-time RV sales and service giant priced Thursday evening at $22 per share—the midpoint of its estimated range, something that always makes the Maven suspicious. The new shares opened for trading around 10:15 a.m. EDT Friday morning at $23 and change. As of 11 a.m., the shares are already pulling back a bit toward the $23 mark or below.
Actually, this means that the underwriting syndicate, headed by Goldman Sachs, probably priced the issue about right, giving the mixed and still largely internal ownership of CWH pretty much full price for the offering, while still giving IPO investors a bit of a Friday frisson. Over time, this could be a decent company, although current public share owners may never achieve majority voting power—something we find distasteful, though it’s fairly common these days.
We cut and run on our small position in British telecom giant Vodaphone (VOD) and are considering an exit from AT&T as well. As we did with a couple of utilities, we probably overstayed our welcome on the telecoms, which generally provide great dividends, just like the utilities and REITs.
However, Mr. Market has taken all these stocks out to the woodshed, irrationally fearing Fed rate hikes, which, even if they occur, will be minimal. Sometimes it’s best to exit with a modest loss before the clowns running this market punish us even more. We can return to these issues once they’ve been left in the gutter, likely around the end of the year when tax-loss selling tends to abate.
On other fronts, oil refining giants Marathon Petroleum (MPC) and Valero (VLO), periodic favorites of ours both for capital appreciation and dividends, are catching our eye again, as oil’s current price rise has begun to resurrect them. However, after big up-moves this week in both, we’re reluctant to chase them. Oil has lately developed a habit of peaking and then tanking right around the $50+ bbl. mark for West Texas Intermediate (WTI). Maybe we should wait a bit.
See you Monday, if we (and you) don’t decide to take the trading day off.