Pre-market –Monday – 7-7-2014
"The just price is the price established by the 'common estimation' [17] of buyers and sellers."
~ Saint Thomas Aquinas ~
1225 -1274
Dr. John L. Faessel
ON THE MARKET
Commentary and Insights
Quote's of the day
"Experience has shown that even under the best forms of government
those entrusted with power have, in time, and by slow operations,
perverted into tyranny."
~ Thomas Jefferson ~
&
"So sue me"
~ Obama ~
Re his use of executive actions to act without Congress
&
"We've unmasked madmen wielding scepters"
~ Sherlock Holmes ~
~~~~~~
·The stock market is advancing on a broad front - but, but, but …
·Technical picture suggests higher prices - but, but, but …
·The unemployment number of 6.1% was exceptional - but, but, but …
·The world's central banks have it all figured out - but, but, but ...
·Everyone's bullish; happy, happy - but, but, but ...
MARKET
Going Parabolic
Momentum rules: The long term trend remains UP and the short term trend is UP. The McClellan Oscillator (my favorite overbought and oversold indicator) remains in neutral where it has been since late January. (I believe this neutral stance, neither overbought or oversold, caused much by healthy rotation has contributed to the outstanding advance in the market.)
However
Stock markets are extended and there are a declining number of Dow components participating in the uptrend and the indicator now demonstrates a fall below its 15-day moving average. The Nasdaq 100 Index is making new multi-year bull marklet highs, levels however the average component stock in that index is down 7% from its trailing 52-week high.
(SPX) Stochastics are overbought with the SlowK at 93.74 and the Fast K at 98.73.
On Valuations
Scary Comparisons
Click hyperlinks for charts
1.Thursday's forward P/E on the S& P 500 (SPX) moved up to 15.68 from a recent low of 14.4 on February 3. That's a new high for the bull market, and the highest since June 20, 2005.
2.The Shiller P/E Ratio was only higher in 1929, 2000 and 2007. (price to earnings ratio based on average inflation-adjusted earnings from the previous 10 years)
3.The total market capitalization to GDP ratio.. ( "probably the best single measure of where valuations stand at any given moment" - Warren Buffet) was only higher in 2000
4.Tobin's Q Ratio (the ratio of the market's price to replacement costs)was only higher in 2000
Further distorting valuationsand stock "prices " is that since March 2009 the bull market in the S&P 500 (SPX) has been marked by corporations massively buying back their shares and paying out dividends. From Q1-2009 through Q1-2014, S&P 500 companies repurchased $1.9 trillion of their shares and paid out $1.3 trillion in dividends. During the Q1 of this year, buybacks totaled $637 billion at an annual rate, nearly matching the previous record high during Q3-2007.
A Notable quote: "Based on valuation measures most reliably associated with actual subsequent market returns, we presently estimate negative total returns for the S&P 500 on every horizon of 7 years and less, with 10-year nominal total returns averaging just 1.9% annually. I should note that in real-time, the same valuation approach allowed us to identify the 2000 and 2007 extremes, provided latitude for us to shift to a constructive stance near the start of the intervening bull market in 2003, and indicated the shift to undervaluation in late 2008 and 2009." (see Setting the Record Straight). John P. Hussman, Ph.D.
June 2, 2014
Lots on Unemployment
The U.S. created 288,000 jobs last month and the unemployment rate fell to 6.1% from 6.3%,. That's the lowest jobless rate since September 2008. Analysts had expected an increase of 210,000.
However:
There's a "Jobs Gap"! Each month, The Hamilton Project examines the "jobs gap," which is the number of jobs that the U.S. economy needs to create in order to return to pre-recession employment levels while also absorbing the people who enter the labor force each month. As of the end of June 2014, our nation faces a jobs gap of 6.8 million jobs.
If the economy adds about 208,000 jobs per month, which was the average monthly rate for the best year of job creation in the 2000s, then it will take until July 2018 to close the jobs gap. Given a more optimistic rate of 321,000 jobs per month, which was the average monthly rate of the best year of job creation in the 1990s, the economy will reach pre-recession employment levels by September 2016.
While the U.S. created 288,000 jobs the broader unemployment measure, U-6, barely budged, at 12.4%. The labor force participation rate remained stuck at a 36-year low of 62.8%. The number of people working part-time for economic reasons rose by 275,000. Part-time work jumps in June by 799,000 - the largest one-month gain since January 1994. (The standard deviation is 287,000) At the same time, there was a 523,000-person drop in full-time workers, the first decline since October.
Employed persons at work part time:
·Part time involuntarily +275k
·Because hours cut back +72k
·Because that's all they could find +111k
·Part time voluntarily +840k
So, if we really created 288k jobs. And 275k were made involuntarily part-time, then this suggests that there are still way more candidates than there are openings.
The Economic Policy Institute economist Ms. Heidi Shierholz estimates that "even if we saw June's rate of job growth every month from here on out, we still wouldn't get back to health in the labor market for another two and a half years." … Link here for missing worker detail.
Re; "Missing Workers", potential workers who, because of weak job opportunities, are neither employed nor actively seeking a job. In other words, these are people who would be either working or looking for work if job opportunities were significantly stronger.
As of June 2014 5.98 mil (*roughly half of that number are of prime working age. Unemployment rate if you add those missing workers back into the labor force: 9.6%. Compare that number to the official rate of 6.1%.
A Notable quote:
"Curb your enthusiasm … the year-over-year acceleration is still small — arguing that this has been catch-up. Hours worked and average hourly earnings do not imply much momentum for the economy … the household report tells us that more than all the net job gains this month were part-time jobs, as full-time jobs dropped by 700,000."
Robert Brusca, Chief economist at FAO Economics
A culprit; Remember ObamaCare aka the Affordable Care Act?Small employers are opting out to get around the 50-person work requirement by replacing full-time workers with part-timers. Recall the lefties said that wouldn't happen… Really?
Earnings expectations are likewise plunging In Europe.
The estimates for 2014 and 2015 are down 7.0% and 5.0% ytd
Global Debt Running Amuck
In the annual report of the Bank for International Settlements, [BIS](the bank fo
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