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The Wall Street Greek blog is the sexy & syndicated financial securities markets publication of former Senior Equity Analyst Markos N. Kaminis. Our stock market blog reaches reputable publishers & private networks and is an unbiased, independent Wall Street research resource on the economy, stocks, gold & currency, energy & oil, real estate and more. Wall Street & Greece should be as honest, dependable and passionate as The Greek.

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Thursday, January 31, 2013

Apple Not the Prettiest Girl in the Room Anymore

Apple store
By "The Greek"

Darling Apple has captivated the hearts of investors and drawn the money of Americans for years. The company has endeared us to buy both its appealing products and its attractive stock. But in light of its 35% price depreciation since September 2012, Apple (Nasdaq: AAPL) is no longer the prettiest girl in the room. With sexy ladies like Expedia (Nasdaq: EXPE) up 95% in 2012, classy mommas like Whirlpool (NYSE: WHR) higher by 106%, rehabilitated hotties like PulteGroup (NYSE: PHM) up 110%, and wealthy cougars like Bank of America (NYSE: BAC) up 99%, who needs her.

She wowed us with her new styles, with her innovative iPod, iPhone and iPad, but now all the other stylish telecom and tech girls have copied her, with Google (Nasdaq: GOOG), Samsung (OTC: SSNLF.PK), Microsoft (Nasdaq: MSFT) , Nokia (NYSE: NOK) and Blackberry (Nasdaq: RIMM) offering competitive fashions. Like in all Greek tragedies, Apple’s biggest problem is Apple. She got too big and popular, and perhaps now boasts an ego that makes her vulnerable to up and comers with nothing to lose and the right hunger to win. Earning upward of $50 billion in revenue per quarter, Apple has grown too large to grow fast. What was once 71% average annual EPS growth over the last five years has become 14% projected growth for the next five.

One of, if not the best performing stock of the last decade, may be AAPL, which gained 6,558% since the close of 2003 through its September 2012 high of $705. The company’s 2012 performance actually helped the tally higher, with the stock up 33% last year even despite its downturn in the fall. Still, our old girl is suffering from a hangover in 2013, down 14% or so in January. That’s the worst month in the stock’s history.

Best S&P 500 Performers of 2012
Percentage Gain
Sprint Nextel (NYSE: S)
PulteGroup (NYSE: PHM)
Whirlpool (NYSE: WHR)
Bank of America (NYSE: BAC)
Expedia (Nasdaq: EXPE)
Lennar (NYSE: LEN)
Marathon Petroleum (NYSE: MRO)
Seagate Technology (NYSE: STX)
Tesoro (NYSE: TSO)
Gilead Sciences (Nasdaq: GILD)

Our once favorite baby doll could turn things back around before she falls too far off the pedestal, if only she would do what made her prom queen to begin with, innovate. I said it before and I’ll say it again, the smart Apple television must be the little lady’s next product development move. Her brand appeal would immediately make an imprint in television market share. And Apple has got to speed up its penetration in China, and pull some fuel for growth from that country’s burgeoning middle class.

At a P/E-to-growth ratio of just 0.7 now, AAPL should outperform the market. However, with concerns about its future growth at the fore, and with its current market share threatened, the long-term outlook remains sketchy; that’ even despite her sweet operating system. Our girl has got to get her mojo back, and I think the stock will get a facelift from the introduction of a smart TV later this year. So I’m not giving up on her just yet. It may even be time to buy Apple stock again. Call me a sentimental sucker for a lovely lady I guess.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Greek businesses New York

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Wednesday, January 30, 2013

NYC Small Businesses More Optimistic than National Survey

Regina Katopodis Artopolis
Regina Katopodis of Artopolis in Astoria
The National Association of Independent Business (NFIB) publishes its Small Business Optimism Index monthly. When the latest report reached the wire in January it showed business was better in December, but it was not good in absolute terms. In addition to reviewing and analyzing the national report, I determined to survey small businesses in New York City to enhance our perspective of the situation within America’s largest metropolis. I was a bit surprised by some of the responses to my survey.

small business columnist
Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

The NFIB Small Business Optimism Index for December 2012 improved over November, but it did not reflect positive sentiment at the close of the year. The latest report showed the index edged up by a half of a point to a mark of 88.0 in December. At that level, the index was still at its lowest point since March of 2010. Our own survey of New York City business people turned up a notably higher level of optimism.

Obviously, uncertainty about the economy prompted by the fiscal cliff fiasco and Congressional dysfunction is what pinched the perspective of small businessmen at the close of the year. Direct tax consequences to businessmen and an indirect potential impact to the economy hinged upon developments in D.C. Bill Dunkelberg, the chief economist of the NFIB, noted that the next survey measuring January sentiment will shed light on the level of satisfaction of small businessmen with the midnight hour deal. Indeed, stocks have been on a tear since, with the SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones Industrials (NYSE: DIA) and PowerShares QQQ (Nasdaq: QQQ) each posting mid-single digit gains year-to-date.

However, Dunkelberg warned that economic uncertainty continues to exist due to the debt ceiling and a “regulatory avalanche.” While the debt ceiling issue has been mitigated for now, budgetary battles lie ahead throughout the spring, and a potential government shutdown looms as well. If the government doesn’t put a budget together by March 1st, some $50 billion will be cut from the Pentagon defense budget through sequester. Judging by the performance of the SPDR S&P Aerospace & Defense (NYSE: XAR), there’s little fear of that actually happening. The XAR is up 5.6% year-to-date.

The NFIB subtitled its press release this month, One of the Lowest Optimism Readings in Survey History. Indeed, it reflected a significant degree of pessimism, just up slightly from November’s historic low mark. The NFIB noted that December’s reading was more indicative of a recessionary period than one of growth. The details of the data revealed that the index was hindered by deteriorated labor market component measures and the great degree of small businessmen nationally who expect operating conditions to worsen over the next six months.

The NFIB indicated that 70% of business owners surveyed characterized the current period as poor for expansion. Obviously, the issues worrying small businessmen these days are plentiful. Some of the more important issues, according to the NFIB data, are political uncertainty (25%), taxes (23%) and regulations (21%). Obviously taxes matter to everyone, but our group of respondents in New York did not really get caught up in the media hoopla around the fiscal cliff. I believe most Americans didn’t know or understand the details of what made the fiscal cliff so frightening, and I expect many were spared heart problems because of that. I believe this is also the reason why consumer sentiment showed little sign of concern up until the midnight hour, and why the Consumer Discretionary Select Sector SPDR (NYSE: XLY) and the SPDR S&P Retail (NYSE: XRT) held up so well up until the final two weeks of December.

Sales Patterns

Obviously, the macro issues discussed above are out of the control of small businessmen and are anecdotal. However, small business people are intimately tied to their sales results, and 19% of those surveyed said “poor sales” were their toughest challenge. The NFIB reported that just 18% of business owners surveyed saw higher sales over the last three months, while 30% reported lower sales results. One might say that when Apple (Nasdaq: AAPL) product sales disappoint Wall Street, we shouldn’t expect much from small businesses, but Apple’s disappointment extended into market share and margin issues as well as growth questions. In any event, the environment has not been conducive to blockbuster business, but things seem to be changing. We’ll know a little more about that this week when we may face an economic reality check.

Obviously through the seasonal period, these data are going to vary for different types of businesses. So we asked our group about the near-term trend and about sales against the prior year. Most indicated they saw just modest increases in sales growth, which matches the malaise generally experienced by business people over the last several years, given the slowly recovering economy. A representative of Mike's Diner, an iconic spot in Astoria, New York indicated, "Sales are increasing, but it has been at a snail's pace. The economy is moving in the right direction, just very slowly." Indeed, even the largest of restaurateurs have struggled of late, with McDonald’s (NYSE: MCD) facing up against the better burger threat in its U.S. market and the weak economies of Europe.

Consumer spending was reported weak by the NFIB, though the organization said auto sales were an anomaly, having recently showed some strength. Of those business owners surveyed by the NFIB, 20% expect sales improvement over the next three months, while 40% expect decline on a non-seasonally adjusted basis. Within our NYC group, the views ranged from modest growth to a bit more than that. Shelley & Nikoletta at Kentrikon & Noufaro, a wedding and other special events store in Astoria, New York, said, "We see people coming in earlier than usual this year, with orders already being booked. This bodes well for a good spring season, and has us optimistic about the year."

Hiring Patterns

Hiring patterns are of course critically important to our broader economy. We reported recently that the true unemployment rate is likely closer to 11.7% than the reported 7.8%; underemployment is more likely 17.9% instead of the reported U-6 figure at 14.4%. Small businesses employ the majority of Americans, and so their hiring plans are of critical importance to the economy.

The NFIB reported that 41% of business owners hired or attempted to hire employees over the last few months, but that includes for replacement purposes. Employees per firm only increased by a tiny 0.03 people per firm, with just 11% of the business owners saying they added an average of 2.9 workers per firm over the last few months. Some 13% of those surveyed reduced employees by an average of 1.9 workers while 76% made no change. Large and small, the employment environment remained soft through the fourth quarter of 2012. Citigroup (NYSE: C) was among notables making significant layoffs in the quarter.

What’s most important to our readers here is the forward hiring plans of businesses. The NFIB reported a disappointing bit of news on this front. On net, small businesses projected just a 1% increase in employment in the months ahead. Before seasonal adjustment, 7% of business owners plan to increase employment in the months ahead while 11% plan to reduce their workforce.

In our own survey, we discovered that some small businessmen are supporting margins on soft sales by getting more out of employees. It’s not an unfair burden being placed on busy workers, but an effort to keep wage earners busy; it’s a best use of capacity really and smart business. In some cases, rather than increasing workforce during busy seasonal periods, employers are allowing their own workforce to earn more for carrying a higher workload. This may be in compensation for fewer pay raises than during economic boom periods, but that’s just speculation on my part. Of our New York City survey group, we found very few businesses adding to their net workforce count, except for seasonal reasons.

Credit Patterns

Credit availability has improved as the economy has begun to find its way. However, the NFIB said approximately 65% of its survey respondents were disinterested in new debt funding. Only one percent of business owners said finding credit was their biggest problem. 29% said they borrow on a regular basis. The most important question for business owners is how hard is credit to come by today? A net of 9% of those regular borrowers said that loans were harder to get, not easier. Also, a net greater number of owners expect credit to be harder to come by in the future.

We asked our NYC respondents if they had borrowed recently, and if it was for business sustainment or expansion. We found that in almost every case where borrowing occurred, it was for business sustainment (but borrowing had not occurred in most cases). Some indicated that where lenders were once plentiful, sometimes they had to search a little harder and outside of their operating areas for best rates. Another of our respondents, one with a highly successful operation, indicated that offers were plentiful but always seemed to be that way.

Regarding capital spending, the NFIB confirmed what our NYC survey indicated, that most companies were operating in “maintenance mode,” or just spending enough to keep their current operations fresh. The percentage of owners planning capital outlays for the next six months was 20%.

One of our respondents noted that we should query about the usage of credit cards as an indicator of the tough economy. This respondent who wished to remain unnamed said that there was certainly an increase, whereas in the past, “people would come in with big wads of cash.” So I asked a few others qualitatively if they noted increasing credit card usage also. Regina Katopodis, Co-Owner and Manager of Artopolis, a thriving bakery and patisserie in the heart of Astoria, New York, said, "There are more, and we don't mind." The warm-hearted and lively lady continued, "We understand times are tough, and so we have always accommodated our credit card paying customers by having no minimum spend limit. Someone can buy a cup of coffee on credit, and even though it impacts our profit margins, seeing people through tough times is more important to us."

The group of small business people I interviewed was generally more positive than what the NFIB data indicates about sentiment nationally, but maybe that says something about busy New Yorkers and a certain level of optimism that exists here. The New York population center is going to be busier than other areas, because it replenishes itself. When a company goes out of business here, it tends to be replaced by a new firm with bright ideas. Likewise, vacated apartments are quickly filled by newcomers with new jobs. As a result, the big city may sink a bit in recession, but it always resurfaces before long with new vibrance. When asked about the economy and business conditions in 2013, the New York respondents were more optimistic than what was seen nationally and I think that’s why. "I feel a buzz out there. I feel the energy in the air," noted Regina of Artopolis.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

New York City Small Business Organization NYC

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Tuesday, January 29, 2013

This Week – Put Up or Shut Up Time

put up or shut up
FYI, we’re rooting for the bull

This week’s data flow should either confirm the nascent stock rally or offer the first real obstacle to it. The first reporting of GDP for Q4 might offer a damper if economists are right about a slower pace of growth, but I anticipate better consumer confidence numbers will focus investor attention back on the better future we seem to have ahead of us. The big stopper for the market has been the D.C. dilemma and political blockade to fiscal policy. But given the reelection of President Obama, Republicans have wised up to the fact that playing the bad guy and holding up economic and stock market growth won’t gain them any favor when next their seats come into question. And like the market, Facebook (NYSE: FB), which reports earnings this week, will have its big put up or shut up moment. When all is said and done this week though, what shows up on the monthly employment report Friday could very well determine the market’s conviction to rally into February.


Durables Goods Orders lead the week’s wire, with the report due at 8:30 AM ET. The very volatile flow of high ticket durables orders is hard to predict, and so the data can often swing industrial shares one way or another. This week’s data covers the month of December. Economists see new orders increasing by 1.6%, which marks a pickup in pace after November’s 0.7% increase. Excluding transportation goods, economists see just a 0.4% rise, versus the 1.6% increase marked in November. Monthly changes are important, but year-over-year changes here tell a story of slowing industrial growth. While things are still pretty miserable in Europe, I’m feeling some traction below the feet of the American economy today. Given the fiscal policy freeze that dictated trade in December, I wouldn’t look for much positive from any report for the month’s economic activity, but this one can surprise. You can find the durable goods orders data here.

The Pending Home Sales Index is up for report at 10:00 AM ET. Housing stocks outpaced the broader market last week, with the SPDR S&P Homebuilders (NYSE: XHB) rising 3.2% versus the 1.3% gain of the SPDR S&P 500 (NYSE: SPY). Existing Home Sales came in great last week, but New Home Sales fell short of expectations. Still, it was the debt ceiling resolution and a strong weekly jobless claims report that sent stocks higher, including the cyclical homebuilders. As for the Pending Home Sales Index, economists see it edging lower by 0.3% in December, after the index jumped 1.7% in November. Find your Pending Home Sales data here.

Closing out Monday’s domestic economic data, the Dallas Federal Reserve publishes its Manufacturing Survey at 10:30 ET. ISM’s Manufacturing Index, which measures manufacturing activity nationally, measured at 50.7 in December. The Dallas Fed’s Texas Survey produced a Business Activity Index of 6.8 in December. Economists are looking for this measure to slip a little in January, to 4.0. See the Dallas Fed Index here.

Earnings season rolls on for a good many companies reporting this week. Highlighting Monday’s list, look for reports from Yahoo (Nasdaq: YHOO), Caterpillar (NYSE: CAT), BMC Software (NYSE: BMC), Plum Creek Timber (NYSE: PCL), Roper Industries (NYSE: ROP), Seagate Technology (NYSE: STX), Biogen Idec (Nasdaq: BIIB), Zions Bancorp (Nasdaq: ZION) and several more.


Much of the early chatter Tuesday will be about the start of the 2-day Federal Open Market Committee (FOMC) meeting. However, the day offers several economic data points that will be more conclusive than that. First things first, and that will be the International Council of Shopping Centers’ (ICSC) Weekly Same-Store Sales Report, which is due before the bell rings. Last week’s report covering the period ending January 19 showed sales declined by 1.5% against the immediately preceding period. However, there was of course a holiday to fog up the information. On a year-to-year basis, sales measured 3.2% greater.

The 9:00 AM reporting of the S&P Case Shiller Home Price Index should garner a great deal of attention in the early going. It has of course been revealing a housing price recovery. This October measurement arrives a bit late, but the reporters say that makes it more accurate. Economists expect the 20-city measure to show another 0.7% seasonally adjusted increase month-to-month, same as the month before. The yearly comparison is expected to note a 5.8% increase for October, versus the 4.3% increase in September. You can find the Home Price Index here.

By about 10:00 AM the market will be ready for a new bit of info to chew on, and it will get one when the Conference Board reports on its Consumer Confidence Index. Economists expect this January measure to perfectly match the 65.1 mark set in December. Now the December reading was a frightened figure, petrified by consumer fear of a fiscal cliff shocker. For this reason, I don’t agree with the consensus for January. I think the month will be markedly improved. You can find the Consumer Confidence Index her.

Investors will have interest in State Street’s (NYSE: STT) Investor Confidence Index, which is scheduled for report at 10:00 AM ET. The Investor Confidence Index rose slightly in December, increasing by 0.4 points to reach 80.9. The index measures levels of riskier assets in institutional portfolios. There is no economists’ consensus forecast available to us for this figure, but I would expect that it will increase significantly in January. You’ll be able to find the Investor Confidence Index here.

The day’s earnings schedule highlights Amazon.com (Nasdaq: AMZN), ACE Limited (NYSE: ACE), Boston Properties (NYSE: BXP), Boston Scientific (NYSE: BSX), Broadcom (Nasdaq: BRCM), Corning (NYSE: GLW), D.R. Horton (NYSE: DHI), Danaher (NYSE: DHR), Eli Lilly (NYSE: LLY), EMC Corp. (NYSE: EMC), Ford Motor (NYSE: F), Harley-Davidson (NYSE: HOG), Harris Corp. (NYSE: HRS), Illinois Tool Works (NYSE: ITW), International Paper (NYSE: IP), NextEra Energy (NYSE: NEE), Nucor (NYSE: NUE), Peabody Energy (NYSE: BTU), Pentair (NYSE: PNR), Pfizer (NYSE: PFE), Plantronics (NYSE: PLT), T. Rowe Price (Nasdaq: TROW), Tyco International (NYSE: TYC), United States Steel (NYSE: X), Valero Energy (NYSE: VLO) and more.

Greek wedding candles

Obviously, the Federal Open Market Committee (FOMC) Monetary Policy Announcement, due at 2:15 PM ET, will dominate chatter most of the day Wednesday. The economy appears to be on the move, and so I wouldn’t be surprised to catch a glimpse of optimism from the FOMC. Rates are still expected to be held at their lowest, but the market will be keeping its radar attuned to any discussion about asset purchases. The latest jobless claims data at least has seemed supportive of the economic revival argument, but it may yet be too soon, especially for the Fed, to call.

It may help (or hurt) the Fed’s point of view that GDP will be reported at 8:30 AM ET. This will be the first reporting of the fourth quarter of 2012, and economists see a slower pace of growth against the third quarter’s final tally of 3.1%. We warned in one of our columns that fiscal cliff fear alone was hurting the economy. Well, based on the consensus forecast of economists for Q4 GDP growth, set at 1.0%, it looks like it certainly did. There may be some good news for the Fed in the report, though, as the GDP Price Index is expected to have increased by 1.7% last quarter, less than the 2.7% increase in Q3. For as long as inflation remains in check, the Fed can continue to support the housing and other lending markets, and set the economy back up on sturdy legs. You can find the GDP report here.

The ADP Private Employment Report is due for release at 8:15 AM ET Wednesday. This report is notorious, as it precedes the government’s monthly employment report. ADP’s data is actually an estimate of the private employment portion of that all-inclusive government report. Its accuracy has been called into question from time to time, and given that it only precedes the government data by two days, I question its importance to traders. That said, economists are forecasting a net private nonfarm payroll increase of 172K (or for the ADP estimate of it), which would mark a drop from ADP’s December estimate of 215K (the government data showed 168K in December). You can find your ADP Report here.

Also on the day, find the regular Mortgage Applications Survey results from the Mortgage Bankers Association in the pre-market and the Petroleum Status Report at 10:30 AM. Recent weeks' mortgage data have been influenced by seasonal issues, and the latest was inclusive of the Martin Luther King Jr. Day holiday as well. Thus, investors may need to wait a bit longer for noise-free news.

Research in Motion (Nasdaq: RIMM) will introduce its new BB10 software in New York City Wednesday. The day’s earnings highlight reports from Facebook (NYSE: FB), Boeing (NYSE: BA), Qualcomm Nasdaq: QCOM), JDS Uniphase (Nasdaq: JDSU), Northrop Grumman (NYSE: NOC), Hess (NYSE: HES), Rockwell Automation (NYSE: ROK), ADT (NYSE: ADT), Ameriprise Financial (NYSE: AMP), AvalonBay Communities (NYSE: AVB), Avery Dennison (NYSE: AVY), Citrix Systems (Nasdaq: CTXS), ConocoPhillips (NYSE: COP), Electronic Arts (NYSE: EA), Hudson City Bancorp (Nasdaq: HCBK), L-3 Communications (NYSE: LLL), Marathon Petroleum (NYSE: MPC), MeadWestVaco (NYSE: MWV), Murphy Oil (NYSE: MUR), Owens-Illinois (NYSE: OI), Phillips 66 (NYSE: PSX), Southern (NYSE: SO), Wisconsin Energy (NYSE: WEC) and many more.


Expect no relief post hump-day. The close of the week will be busy, with a slew of economic reports set for Thursday release and a bunch more Friday. Look for the Challenger Gray & Christmas Job-Cuts Report in the premarket Thursday morning. December’s layoff data produced the second lowest total of 2012, with announced corporate layoffs down to 32,556. This data is often influenced by significant layoff announcements at major corporations.

Weekly Initial Jobless Claims data are due at the usual 8:30 AM ET reporting time. Last week’s report offered the second soft flow of new claims at a lower plateau. Jobless Claims reached down to 330K, but economists are looking for a pickup to 350K for this week’s data. Find the Jobless Claims Report here.

The GDP data reported earlier this week may serve to smooth the impact of the December Personal Income & Outlays data due for release at 8:30 AM Thursday. Even so, the investment community closely follows the personal consumption data found within this report and the Core PCE Price Index. Economists surveyed by Bloomberg look for a 0.3% increase in spending month-to-month, versus the 0.4% increase reported in November. Personal Income is expected up 0.7%, versus the 0.6% increase seen in November. The Core PCE Price Index, the Fed’s favored inflation gauge, is seen increasing by just 0.1% month-to-month, versus the absence of change seen in November. The consumption and inflation data found within this report are critical so pay attention to the report, which you can find here.

The Chicago PMI Business Barometer showed growth for the third month in a row in December 2012 on new order strength, with the index marking 51.6. Still, 5 of 7 component indexes declined in December, including a big drop in the Employment Index. Economists are looking for the report’s key index to drop in January to 50.5, but while above 50.0, that still marks economic growth for the fiscal cliff fumbled figure. You can find your Chicago-PMI data here at 9:45 AM ET.

Also at 9:45 AM ET, Bloomberg publishes its Consumer Comfort Index, the weekly measure of the consumer mood. This index has been on the decline of late, but I’m expecting a shift in the weeks ahead. Stock market rise is stirring enthusiasm, and as Americans grow increasingly positive about the economy, we would expect consumers to likewise gain courage. Last week’s report showed the index down almost a point, to -36.4. Find the Bloomberg Consumer Comfort Index here.

The only other report on the schedule is the regular Natural Gas Inventory tally from the EIA at 10:30 AM. You’ll find that report here.

Pfizer’s (NYSE: PFE) Zoetis should see IPO Thursday, and the animal health unit might find $2 billion in capital. The day’s highlighted earnings reports will arrive from Viacom (Nasdaq: VIAB, Nasdaq: VIA), McKesson (NYSE: MCK), Dow Chemical (NYSE: DOW), Aetna (NYSE: AET), MasterCard (NYSE: MA), United Parcel Service (NYSE: UPS), Altria (NYSE: MO), AutoNation (NYSE: AN), Ball Corp. (NYSE: BLL), Bemis (NYSE: BMS), C.R. Bard (NYSE: BCR), Cameron Int’l (NYSE: CAM), Chubb (NYSE: CB), Colgate-Palmolive (NYSE: CL), CONSOL Energy (NYSE: CNX), Dominion Resources (NYSE: D), Eastman Chemical (NYSE: EMN), Harman Int’l (NYSE: HAR), Helmerich & Payne (NYSE: HP), Invesco (NYSE: IVZ), Mead Johnson Nutrition (NYSE: MJN), NASDAQ OMX (Nasdaq: NDAQ), PACCAR (Nasdaq: PCAR), PerkinElmer (NYSE: PKI), Pitney Bowes (NYSE: PBI), Principal Financial (NYSE: PFG), Ryder System (NYSE: R), Sherwin-Williams (NYSE: SHW), Hershey (NYSE: HSY), Thermo Fisher Scientific (NYSE: TMO), Time Warner Cable (NYSE: TWC), Whirlpool (NYSE: WHR), Xcel Energy (NYSE: XEL), Zimmer Holdings (NYSE: ZMH) and more.


The last trading day of the week and the first of February offers several economic reports, including the granddaddy of them all, the monthly Employment Situation Report. Last month, when the unemployment rate was reported at 7.8%, we reminded investors of the real unemployment rate, which we calculated at 11.7%. We said underemployment, which includes part-timers who would rather be employed full-time (and others), was likely closer to 17.9% than the government’s published U-6 rate of 14.4%. Looking forward to this week’s report for January, economists expect the unemployment rate to ease to 7.7%. The consensus expects a private nonfarm payroll increase of 185K, versus the 168K increase in December.

The Markit PMI Manufacturing Index is due for report just before 9:00 AM. The organization produces manufacturing indexes across the globe and they’ll all be available as well through the relative period. The economists’ consensus is for an increase in the U.S. index to 55.5 for January, up from 54.0 in December. Find this data here.

The ISM Manufacturing Index is also up for report at 10:00 AM ET Friday. This is the more widely followed domestic measure of manufacturing. Economists are looking for this index to stick at 50.7 in January, where it was in December. That’s perilously close to break-even, so markets will be closely attuned here. See the ISM report.

The Reuters/University of Michigan Consumer Sentiment Index is up for report at 10:00 AM ET. As I mentioned earlier within this planner, I expect consumer sentiment to improve now that the fiscal cliff, debt ceiling and stock market anxiety have all been mitigated. Economists see this measure improving just a bit to 71.5 in January, from 71.3 in December. Investors will catch wind of this report as it finds coverage on the newswire, but those interested in more detail can find that here.

The final economic report on the day will be the Construction Spending data, due for release at 10:00 AM ET. Construction spending has been steadily increasing on a year-to-year basis for quite some time now. On a monthly basis, it decreased in November by 0.3%, but is seen increasing by 0.8% month-to-month by the consensus of economists. Find the construction spending data here.

Automakers will report on monthly motor vehicle sales Friday individually and the data will be compiled and aggregated. Domestic vehicle sales ran at an annual rate of 12.0 million in December and are seen running at that same pace in January. Total vehicle sales ran at a 15.4 million pace in December, and are seen slowing to 15.3 million in January. Investors in General Motors (NYSE: GM), Ford (NYSE: F) and the rest will have special interest in market share information implied. Find more on motor vehicle sales data here.

The SEC will meet to discuss regulations affecting small and emerging companies in Washington D.C.

The day’s earnings schedule highlights reports from Aon (NYSE: AON), Beam (Nasdaq: BEAM), Chevron (NYSE: CVX), Exxon Mobil (NYSE: XOM), Franklin Resources (NYSE: BEN), Ingersoll-Rand (NYSE: IR), Legg Mason (NYSE: LM), LyondellBasell Industries (NYSE: LYB), Mattel (NYSE: MAT), Merck (NYSE: MRK), National Oilwell Varco (NYSE: NOV), Newell Rubbermaid (NYSE: NWL), Perrigo (Nasdaq: PRGO), Tyson Foods (NYSE: TSN) and more.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

blessed incense

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Thursday, January 24, 2013

Stocks Receive the All-Clear Signal

all clear signal

By "The Greek":

Stocks have been issued the all clear signal with Congressional mitigation of the debt ceiling and a new plateau set for jobless claims. So you can look for an unimpaired January Effect to keep stocks moving in the right direction. At least that should be the case once mega-stock Apple (Nasdaq: AAPL) stops infecting the major indexes with its earnings disappointment this week. As a result of the Apple news, the PowerShares QQQ (Nasdaq: QQQ) was off over one full percentage point at the start of trading Thursday morning, as the SPDR Dow Jones Industrials (NYSE: DIA) held green ground and the SPDR S&P 500 (NYSE: SPY) fought for life.

A new level of Initial Jobless Claims was confirmed this morning, as the second week of a lower plateau for claims seems to indicate the spigot is closing on layoff activity. At 330K, jobless claims for the period ending January 19 were far lower than the economists’ consensus expectation for 360K. Furthermore, the second week of decline brought the four-week moving average down by 8,250, to 351,750. That’s good news for the economy and is clearly reflected in the day’s gains at employment services firms Robert Half International (NYSE: RHI) and Korn Ferry Int’l (NYSE: KFY). Each was up by more than a point before noon Thursday.

Add to that news, the fact that Congress got its act together with regard to the debt ceiling, and has determined to meet its obligations (for now), and you have the recipe for a market burst higher. As much as I would like to believe it was the fear of God and the repercussions of a U.S. default on its obligations that inspired representatives to act, it seems that with the President’s approval rating so high around the inauguration, it simply made sense for Republicans not to kick against the goad now. The government’s budgetary issues have not gone away though, with another showdown set for the end of March, when Congressional leaders will have to avoid a government shutdown. Still, they’ve set good inspiration for effort in place now, with their own paychecks on hold without a budget plan in place by April 15.

Given these important bits of information, you would expect an all-clear signal for stocks to set them higher. Unfortunately, Apple (AAPL) produced a disappointing earnings result last evening, and is holding back broader indexes as a result. However, as the Apple impact fades, investors will be left with good enough reason to buy, in my view, for now. Because of this reasoning, we would set our technical indicators aside for now, despite their offering of significant warning signs for stocks. As indicated in our technical report, a break above 1475 for the S&P cash index could fuel the rally into the second quarter. This is supported by the fundamental macroeconomic drivers added to the picture this week. So, you have your all-clear signal to buy stocks today.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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Tuesday, January 22, 2013

Technical Analysis of the Stock Market

technical analysis
By Steven Ferguson:

Even as the S&P 500 Index has closed at a fresh new recovery high, we wanted to warn of dangerous underlying market conditions in this technical analysis of the stock market:

1. A confirmed Hindenburg Omen in mid-November points to a significant risk of market crash over the following 90 days. This indicator is extremely reliable. Note that the projected timing and magnitude of the ensuing "crash" are variables within that definition;

2. Technical non-confirmation of new index highs has remained in recent days. That is, the S&P 500 has made a new, intraday recovery high (although not a new closing high) while the Dow and NASDAQ remain below their previous high marks. This indicates classic price divergence and underlying market weakness, at least as long as the condition persists. If instead the Dow does make a new recovery high, that would bode well for a protracted rally, perhaps even into the second quarter. Should that occur, we would still remain vigilant and likely caution readers to "sell in May and walk away";

3. Market indices remain bound by a "Rising Bearish Wedge" pattern where the related trend-lines have provided very strong support and resistance. Index prices have already fallen out of the confines of that wedge but have recently retested the lower boundary. The only real question is how many more times will we trade up to that lower boundary before a more substantial drop occurs. This retesting could continue for some time, particularly if the Dow makes a new recovery high in the process;

4. The "official" Elliot Wave count supports a forecast of major downward movement in index prices;

5. Economic and political factors are pressing enough to provide catalyst for a big drop in the near future. See debt ceiling for more! A Fitch or Moody's (NYSE: MCO) ratings reduction in U.S. debt would almost certainly bring on a wave of selling in stocks. Ironically, this could lead to a flight from riskier assets back to bonds, the very instrument that's been downgraded. Makes us wonder about underlying motives!;

6. First quarter corporate earnings, projected growth and related P/E multiples don’t support much more upside in the near-term at least. Banks are particularly suspect as they trade at high multiples with more write-offs to follow (see Bank of America (NYSE: BAC) and Citigroup (NYSE: C) actions for examples). Good thing we keep relaxing reserve requirements and extending more liquidity …that's always provided adequate means to ensure the banking integrity, right?;

7. Seasonal fund rebalancing is in process though reallocation invariably takes place over a relatively long period to avoid impact on prices. Sell-side algorithms have become very sophisticated and can disguise this for weeks as 401K fund managers exit positions;

8. Bullish sentiment has once again peaked, providing a strong good contrarian indicator;

9. Volume remains very weak;

10. Based on demographics analyses (e.g. Harry Dent), consumer spending and investment patterns are about to change significantly and irreversibly. This observation alone is worth readers' attention, but has a much longer time horizon for lasting impact;

Readers should be mindful of the following technical levels to watch on the S&P cash index:

  • 1475 - Significant breakout above could extend rally into second quarter
  • 1440 - Significant breakout below would forebode more substantial decline

In any event, new long positions in stocks should be added only with extreme caution.

This technical analysis of the stock market is relevant to broader market interests, including investors in index relative securities including the SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones Industrial Average (NYSE: DIA) and the PowerShares QQQ (NYSE: QQQ).

Disclosure: Ferguson is short the S&P e-minis

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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Real Estate Finding a Higher Gear

home for sale
By "The Greek"

At the start of the housing revival, a majority of the growth was found in multi-family construction. That was of course due greatly to a struggling economy, tighter credit conditions and rising demand for rental units. While there’s still a concentration of strength in the multi-family segment today, single-family housing is clearly participating in an intensifying manner as well. While I like all real estate over the short-term, my perspective for the longer term favors real assets including real estate, and rental unit providers, but not single-family home builders.

The latest Housing Starts data was published last week for the month of December 2012. It showed housing starts running at an annual pace of 954,000, well ahead of the economists’ consensus forecast for 887,000 and November’s pace of 851,000 (revised). Once again, there was strength in multi-family property construction, with Starts of residential properties of 5 units or more up by 23.1% over the November pace. Relative starts were up 115.7% over the rate of activity from a year ago. Today’s new housing market, however, is well-rounded. Starts of single family homes were also up nicely, rising 8.1% over November and up 18.5% over last year’s December pace.

The housing starts news was immediately embraced by investors in housing stocks, with the SPDR S&P Homebuilders (NYSE: XHB) charging ahead by 1.6%. The shares of many individual builders fared even better, with Lennar (NYSE: LEN), PulteGroup (NYSE: PHM) and Toll Brothers (NYSE: TOL) exceeding the XHB. Population growth, debt consolidation efforts for many Americans, and very little new supply added over recent years, has finally allowed for clear recovery in new home sales.

However, I don’t expect the fervor in builder stocks to last as long as the gains in real estate assets do, because I see a key catalyst in price increase coming from depreciation of the dollar. In fact, I believe many Americans could even be priced out of homeownership if interest rates rise and home prices increase in dollar terms as I expect. So the window of opportunity could be small and closing for real estate investors.

Despite the very serious challenges I see on the horizon for the economy and the nation, I believe the current opportunity in real estate is special, especially in rental units. Furthermore, I see real asset values rising significantly in the years ahead, though this time not due to a bubble, but due to damage to the dollar (and this is not the first or even the fifth time I’ve warned of this). A great many more people are finally getting on board with this viewpoint, including it seems the head of the IMF and the nation of Germany (requesting possession of its gold). If politics play a role in the United States not meeting its obligations (due to debt ceiling debate), and another downgrade of U.S. credit occurs, I believe President Obama’s and Madame Lagarde’s usage of terms like “globally catastrophic” are perfectly appropriate in describing the consequences. Even if the debt ceiling issue is mitigated properly, our current path seems to be leading to that same fiery end (read burning dollar bills).

Thus, I reiterate my recommendation for the purchase of real estate where and when you can get it for capital appreciation, and also for basic shelter if you need it and can afford it. Equity investors should also benefit from inclusion of residential REITs like Apartment Investment and Management (NYSE: AIV) and Equity Residential (NYSE: EQR), as homeownership rates remain pressured. Otherwise, I continue to favor agricultural commodities and precious metals and related securities like the SPDR Gold Shares (NYSE: GLD) and the iShares Silver Trust (NYSE: SLV). Further down the food chain, look to gold producers like Goldcorp (NYSE: GG) and/or others and agriculture participants like Monsanto (NYSE: MON).

In conclusion, the very short-term could stay supportive of all real estate, including more participation in the single-family segment. However, my view for the longer term favors rental unit and real asset rise, and continues to look for a weighing economy and rising costs of homeownership to eventually impact the homebuilders. Though those builders holding land inventory might retain some market value on a similar increase in book value, and stay afloat if they can sell off assets. I reiterate: I would buy real assets including real estate now. This is clearly a unique and ballsy perspective; the sort you can only find from unbiased, independent research, and out-of-the box thinking. But it’s also the same off-Wall Street resource that warned you of the real estate collapse and financial crisis when others thought that was far-fetched. We look forward to your continued support.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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Saturday, January 19, 2013

Bothered by Stalled Homebuilder Sentiment?

By "The Greek"

The National Association of Home Builders (NAHB) reported a stalling in the improvement trend in its Housing Market Index (HMI), which is produced monthly in conjunction with Wells Fargo (NYSE: WFC). The HMI measures the mood of builders, and has been steadily improving over the last year. In the case of the latest report, I think the pause in that trend reflects fear rather than reality, and so real estate enthusiasts can expect the good trend to continue at least for the near future.

The NAHB said its Housing Market Index stuck at a mark of 47 in January 2013, killing an improvement trend that had lasted eight months. Economists were looking for a modest gain this month, with the consensus expectation set at 48, according to a Bloomberg survey.

Component indexes were mixed in January. The measure of the home builder view of current sales conditions stuck at 51, while expectations for the next six months eased by a point to a sub-index mark of 49. In the past, I’ve warned that each of these measures is prospective, and that the measure of current traffic conditions is more useful. This last measure improved by a point, but only to a level of 37. I’m reminding readers that 50 is the delineating point between good and poor perspectives. If prospective buyer traffic (a tangible measure) sits so far below 50, then operating conditions are not so great. I’ve explained this in the past by noting that the majority of builders are small operators who are poorly capitalized today versus the big public builders like PulteGroup (NYSE: PHM), D.R. Horton (NYSE: DHI) and Toll Brothers (NYSE: TOL). When given an equal vote, these smaller builders accurately pull down the indexes measuring general perspective. At the same time, larger builders are taking market share and benefiting more from the real estate market recovery.

Still, even the traffic numbers have been improving, despite the obstacles noted by the NAHB including: still relatively tight credit conditions; difficulty in obtaining accurate appraisals; and D.C. dysfunction. In fact, I believe it was very likely the fiscal cliff fiasco that hampered home builder sentiment at the January inquiry. In articles leading up to the end of 2012, I warned of and noted the economic effects of fiscal cliff fear alone, versus the well-documented impending impact of potential legislative change. I believe that’s what we’re seeing in the HMI this month as well. Even after last minute mitigation materialized and stocks celebrated the result, the economy remained on hold due to the risks tied to the debt ceiling debate.

Still, the SPDR S&P Homebuilders (NYSE: XHB) grabbed ground this past week thanks to a better than expected improvement in Housing Starts. The XHB gained 1.6% on the week, beating the 0.85% increase of the SPDR S&P 500 (NYSE: SPY). PulteGroup (NYSE: PHM) did far better, taking 5.9% of upside; TOL was up 4.8%. So, the reality of the situation, as clarified by data tracking real activity, outweighs the importance of the sentiment measure, which has been more grossly infected by the chaos in Congress. Though real and actually terrifying risks remain around the debt ceiling issue, general improvement should continue in housing for as long as Congress doesn’t drop the ball. If they do, all bets are off.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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Wednesday, January 09, 2013

Reverse Your Bank & Builder Bets on Bad Mortgage Data Today

real estate due diligence
Real Estate and securities investors might make the mistake of reading too much into the latest mortgage activity data reported today by the Mortgage Bankers Association (MBA). Please don’t make a panicked securities trade or real estate investment based on any one data point, and especially not this one this week.

real estate consultant
Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

The MBA’s Weekly Application Survey for the period ending January 4 showed a sharp increase in mortgage activity. The Market Composite Index, which measures activity across all application types, increased 11.7% against the immediately preceding period. That’s a huge increase, and it will draw the attention of many investors reading sensationalized headlines published by the popular press and promoted by other media.

You might make the mistake of believing the data is clean, since the MBA offers this as the seasonally adjusted figure. When not adjusted for New Year’s Day, the MBA notes the Market Composite Index increased by 49%. But it’s difficult to perfectly account for holidays and the data-counters themselves will tell you not to rely too heavily upon data published through such noisy periods.

I’ve noted in years past that I believe the data adjustments are imperfect because they do not account for the slack in business activity on the day before and the day after a holiday, especially three-day weekends. I’ve noted that the MBA data often shows big swings in even the adjusted data around holidays. I reiterate that investors are better served by waiting a bit for cleaner data produced in cleaner periods. Furthermore and where offered, moving averages can help investors to see things more clearly.

An investor with an itchy trigger finger, noting such a big increase in mortgage activity this week, could direct capital into the biggest mortgage lenders and other specialists. The shares of some of the nation’s biggest mortgage lenders are mostly higher today, and I hope it is not at all related to this week’s mortgage data. It’s all I can do to warn investors, but traders will put capital to work for even the wrong reason if it turns a profit. Now these lenders have other issues affecting their trading today, and so we’ll look at other real estate related securities as well.

5 Major Mortgage Lenders
Wed. Morning Change (10:42 AM)
J.P. Morgan Chase (NYSE: JPM)
Citigroup (NYSE: C)
Wells Fargo (NYSE: WFC)
Bank of America (NYSE: BAC)
U.S. Bancorp (NYSE: USB)

It certainly looks to me like traders are in frenzy mode, and in error, due to the mortgage activity gain published today. The shares of major homebuilders are also much higher on the news. The gains in both lenders and builders are outsized versus the market, as the SPDR S&P 500 (NYSE: SPY) and the SPDR Dow Jones Industrials (NYSE: DIA) were up just 0.4% and 0.6%, respectively, at the same point in time.

Homebuilder Shares
Wed. Morning Change
SPDR S&P Homebuilders (NYSE: XHB)
PulteGroup (NYSE: PHM)
D.R. Horton (NYSE: DHI)
K.B. Home (NYSE: KBH)
Toll Brothers (NYSE: TOL)

Looking more closely at the data from the MBA helps to clarify things even further, and it should serve to guide traders in frenzy mode today to reverse positions before the close. The Refinance Index, measuring mortgage refinance activity, was marked up 12% against the previous week. However, the MBA notes that when comparing it to the week prior to the holidays, it’s up less than 1.0%. Likewise, the Purchase Index, which measures activity on the purchase of homes, was marked up 10% against the immediately preceding week. However, it was down 2% from the period before the holidays and down 8% against the prior year period.

This information demands that investors reconsider any investment fervor that might have been fueled by today’s report. I hope it has not pushed anyone into a premature or ill-advised real estate purchase, though I favor real estate purchases now generally speaking and where proper due diligence has been applied. Please consider this clarification and act accordingly in your interests.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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Tuesday, January 08, 2013

The Real Rate of Unemployment

real unemployment rate
Nonfarm Payrolls increased by 155,000 on net in December 2012, a number that perfectly matched against the consensus of economists surveyed by Bloomberg. The Unemployment Rate was likewise perfectly placed against economists’ expectations at 7.8%, and it was unchanged from November. But America wants to know what the real rate of unemployment is.

leading economist
Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Real Unemployment Rate

Years ago, we were one of the first columns to shed light on the concept of an underemployment rate, which incorporates people who are not satisfied with their less than full employment and also includes those desperate Americans detached from the labor force. Ahead of the presidential election, Mitt Romney was talking about another version of unemployment that we also suggested Americans consider. That figure used a labor participation rate from when President Obama took office, though we would look back further to when unemployment was under 5.0% instead. It makes sense to use such a participation rate, if you believe population growth and the maturing of Americans at least matches the number of seniors retiring by choice and Americans passing away prematurely. Obviously there are demographic trends at play as well like the aging of the baby boomers, but so much so soon? Because of the relevant issue of long-term unemployment in America today and workers falling off the labor force radar screen while still interested in working, these figures are likely closer to reflecting the true state of American labor.

The calculation of the under-employment rate, or the U-6 by government notation, takes into account the number of Americans working part-time for economic reasons and the detached workforce. Working part-time for economic reasons is equivalent to folks who would prefer full-time employment but have had their hours cut or have had to otherwise settle for part-time work. Detached workers are those Americans who have not recently looked for work, sometimes because they do not believe work exists for them today. In getting to the U-6 “underemployment” figure, we’ll need to include these groups of workers with unemployed Americans. If we add back the excluded 2.614 million displaced workers to the labor market, and include the 7.918 million underemployed part-timers in the unemployed count, December adjusted unemployment is found to be ((12.206M + 2.614M + 7.918M) / (155.511M + 2.614M)) * 100 = 14.4%. In November, the rate was ((12.042M + 2.505M + 8.138M) / (155.319M + 2.505M)) * 100 = 14.4%, or the same misery.

This data can be skewed by any of its components. Starting with the denominator, the labor force count increased in December, which would dilute the numerator and moderate the unemployment rate. Note, however, that in December the number of detached workers increased by 109K and the number of forced part-timers decreased by 220K. It’s hard to say whether detached workers disappeared off the radar screen and part-timers got fired, or if these folks found work of some sort. Most importantly, the number of people reporting unemployed status was up by 164,000. The end result of the changes in the categories netted into something less than significant enough to change the underemployment rate, matching the message of the unchanged unemployment rate in December.

Historically speaking, U-6 unemployment is improved, as you can see by the table here. However, this improvement may be for another reason which is unaccounted for by this data, which we discuss in the paragraphs below.

Monthly Period
U-6 Unemployment Rate (Seasonally Adjusted)
December 2009
December 2010
December 2011
December 2012

What About the Forgotten?
I often talk about the great degree of long-term unemployment plaguing our nation today and how this has uniquely impacted reported employment data. The number of Americans unemployed for 27 weeks or longer was relatively unchanged in December at roughly 4.8 million. This represented 39% of the total unemployed count.

The proportion is down from recent history, though it continues to reflect poorly on the state of labor. That’s because the longer people remain unemployed, the harder it gets for them to find jobs in their specialty fields due to eroding and outdated skill sets. Many of us fear that improvement in the proportion of long-term unemployment is partly due to Americans simply falling out of the labor force count rather than finding new employment.

Orthodox wedding candles
For this reason, some, including yours truly and more notably Mitt Romney, have been considering what the unemployment rate might be at labor force participation rates of the past. The labor force participation rate was 63.6% in December 2012. That compares against 66.4% in December 2006, which was the high for December since 2002. Now, maybe that participation rate reflected the excesses of the mortgage, construction and finance industries that resulted from greed and the fault of the rating agencies and those industries. Those faults are still bearing out in layoffs, like the significant cuts announced last year by Bank of America (NYSE: BAC) and again late this year by Citigroup (NYSE: C). Still, let’s calculate what the unemployment rate would be at such a participation rate, because if the economy had not been so disrupted by the financial crisis, perhaps those employed in the synthetically fattened fields might have found other work.

Applying the 66.4% rate to the noninstitutional population count in December 2012, we get a civilian labor force count of 162,248,400, versus the 155,511,000 reported (Note calculation error exists because of the seasonal adjustment to the labor force count. I’ve attempted to back into that adjustment and apply it to the theorized labor force count, resulting in this figure for the adjusted labor force: 162,357,396). After that adjustment, the difference from this December’s workforce count is 6,846,396 million Americans who would be added to the unemployed count as well. So, the real unemployment rate could be 11.7% (not 7.8%) if those nearly 7 million Americans have simply fallen off the radar. Likewise, the real underemployment rate could be as high as 17.9% today.

Those are much more significant figures reflecting a poorer state of health for American labor and the economy. Now, the trend would still seem to be improving, but the data would argue for continued stimulation of the economy by the Federal Reserve and through fiscal policy. The theme of this article is to simply show what real unemployment might be, and not to get deeper into resulting fiscal and monetary policy consequences and strategy, but perhaps we’ll expand upon this in upcoming work for you. It’s clear that we need to continue to stimulate job creation in America so that we can support and grow consumer spending and personal income, and in so doing raise revenues to support our nation’s needs and growth.

If we can accomplish this while at the same time reining in excess spending and gaining control of our debt, then we might maintain an environment supportive of business. An environment supportive of business is an environment supportive of the stock market. Thus, dignified decision making must overtake dysfunctional politics in Washington D.C. if we are to see the historical average gains of the market continue over the next several decades. Therefore, we must demand more from our politicians. Otherwise, the performance of the broader indexes, reflected in the SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones Industrial Average (NYSE: DIA) and the PowerShares QQQ (Nasdaq: QQQ) will diverge from their historical gains. For this reason, today’s market is a stock-pickers’ market, but one burdened by the heavy weight of macroeconomic issues. To help to lighten that burden, we must continue to seek to spur job creation, because the situation is worse than it seems as indicated by the real unemployment rate.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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