More wasted ink, wasted energy and wasted time. Brexit will soon be in the trash bin of threats that have come across the pathway, always taking too many off course.
Before I get started, make sure you jot down the time and date for the Member’s second quarter review call noted above – July 19. We look forward to covering a good deal then.
So here we are – this is it – a day that will stand in infamy. Oh wait, sorry, not. The vote will be what it is – experts will take the stage this evening and breathlessly peer over every update. There will be experts chattering about buy the rumor, sell the news – no matter the market reaction, their opinion beforehand or their success in guessing the outcome.
What has happened to us given our apparent need for fearful elements – even when they are nearly meaningless in the long run?
When the voting is done – short-term traders will react, money will shift for a few weeks and then demographically strong markets will be set to continue their long-term pathway toward expansion over time.
Nutty right? So much for the efficient market theory. More on that in another piece.
Addicted To Fear
Last evening some big storms rolled through Chicago. We had local channels breaking in with numerous “Weather Alerts”. On one such break, while going on-scene to a van where a young lady was reporting, you saw a (one) flash of lighting behind her in the distance.
The lady back at the desk broke in and said, “Oh gosh Jen we can see all the lightening around you.” I nearly choked on my bite of chicken. During the very same break, Jen put her hand up to her ear (I kid you not) and said, “I am told we have breaking news back at the weather desk, Sam?”
The next shot was the normally sedate weather guy running his hands across the weather map which had been blown up to show a close-up of a nearby suburb and he said breathlessly, “We have reports that the electricity is out in this entire area….” as he waved his hand across a swath of red on the map.
Seriously folks….get a grip. We are addicted to fear. If it does not actually exist, we will create it – or pay attention to someone who does.
It is the same psyche with which most investors now handle financial news inflows, market issues, company activities, quarterly reports and global economic updates. If it was not so sad and short-sighted, it would be funny.
How About Those Jobs
Recently there has been chatter about jobs growth after the last “disappointing report” for the month of May. At the time we reminded members we have seen this often. We hinted that it was likely to pass as the remaining data points simply did not add up with the report.
It’s still unfolding as planned. Let’s review quickly:
Jobless claims are at three-month lows – which is deceiving. A tad bit lower number and it would be 30-year lows!
Our problem is not “no jobs growth” – our problem is we need more people with the correct advanced skills to fill the RECORD number of job openings.
From the FED data-bank:
As we all know, the May non-farm payroll was 38,000 new employees minus 59,000 in revisions. There was much chatter and angst. And then the “missing” jobs never showed up anywhere else you might expect them – like a rising jobless claims number.
Experts repeated ’til the cows came home: “This was the weakest monthly report since September 2010.”
The bigger picture – and the facts: In the past 12 months, the average gain in employment was 200,000.
More important: Monthly NFP prints in the US are normally volatile – take a look at the chart above.
Since 2004, NFP prints which tick near 300,000 have often been followed by ones near or under 100,000 – or worse.
Here’s the deal: That has been a pattern during every bull market. Many short-term traders overlook that NFP was negative in 1993, 1995, 1996 and 1997. Recall the low print of 84,000 back in March 2015? Well it, as well as the latest print, actually fit the historical pattern.
This is normal. Tough indeed at times in the near-term, but normal….not unusual, unexpected or a needed addition to the list of assurances of coming doom.
The Bigger Picture
While too many fret over one monster after another headlines, guess what? Important data about the strength of the US economy is picking up!
I was fascinated to listen in on the KB Home conference call earlier in the week. The CEO, while bragging about the beat on revenue and earnings stated, “We were really surprised to see the rapidly increasing number of first-time home buyers…”
Make sure you accept the 80/20 rule ahead. The Barbell Economy is real. Generation Y is coming. Oddly enough the CEO of KB Home is just seeing the front edge. Call it the second pitch of the first out of the first inning – in an overtime game.
Sure they waited longer than the Baby Boom to buy homes. Experts want to make that a bad thing. They want to weave it into a nightmare of some sort.
Oddly, what if it was just because the Boomers liked their kids more and were happy to provide them a place to live longer under one roof while they got a better education? That was usually not the case for the Boomers back at the start of the 80’s, hence the comparison is meaningless.
Back to the important improvements – trucking is moving stuff – and chemicals are through the roof!
Truck tonnage, shown in the chart above, has picked up this year – even allowing for the February data. Spike or no spike, the May data confirms activity has picked up over the course of the year….just as we edge closer to the round-trip of the energy production induced slowdown in this area.
A confirm? Chemical activity is picking up as well – and has almost always been a good leading indicator of production expansion. Note below:
Note the latest monthly data from the American Chemistry Council. The activity barometer has jumped 3% in the past 3 months, and is up 2.5% in the past year.
While many assume doom is headed our way, these combined date strongly suggest that industrial production is on the mend and set to (surprisingly) pick up in coming months.
Again, closely mixing with the suggestions we have made that this cloud will pass in the data once we round-trip the deepest part of the energy reset.
The bottom line:
This all ties in nicely with stronger GDP numbers over the course of the year as well. Definitely good news – and yet another bread-crumb of the pathway of the surprising strength of our growing demand pipeline and Generation Y.
Remember – fear and faith ask of us the same thing. Believing in something we cannot see.
Ignore the Barbell Economy at your peril.
Oh yes – and pray for a summer swoon and a few more Brexit’s ahead.
Stay focused on your Member’s Area updates.
Until we see you again, may your journey be grand and your legacy significant.