Posts Tagged ‘BLS’

My Love for Android Knows No Bounds

This has been one of the laziest market weeks I’ve ever gone through. As a result, I’ve had more coffee this week than I’ve had in a long time.

I tell you, the girls over at Dutch Brothers (a drive-thru coffee joint here in Oregon, which hires shockingly good looking people) not only know my name by this point, but they’ve also figured out exactly what I love to drink, and what car I drive.

They have my coffee ready for me by the time I drive up to them! It’s fantastic. But it goes to show you how much time I’ve spent getting coffee this week in order to cope with this flat market.

After all the excitement of Monday’s rally, the rest of the week was flat, flat, flat.

Dow Jones Industrial Average

Just look at that. The Dow Jones stayed in a 33 point range for most of the week.

A big reason why the market was so flat is that investors were posturing for today’s Bureau of Labor Statistics employment report. At the start of the week people were throwing around all sorts of optimistic jobs numbers. I even saw Zero Hedge –- the most bearish blog I’ve ever read in my life — point out analysis calling for a jobs number surpassing 300,000 due to seasonal fudge factors.

From ZH…

An analysis out of Stifel Nicolaus points out that due to various seasonal adjustments, an NFP print of up to +100,000 could be expected (which incidentally does not reflect anything favorable at all about the actual employment picture as it is due exclusively to seasonal fudge factors). In fact, Stifel argues, a print of +316,000 is theoretically possible

Alas, the positive number never came. Instead the employment report showed an 86,000 job drop.

A couple things you should be aware of regarding the employment report…

• Bernanke said himself that it would take 100,000 new jobs a month for the unemployment rate to start dropping.
• When trying to look for a bottom, it’s best to look at how many hours the average work week is. Right now it’s at 33.2. Once employers start feeling better about the economy, we’ll see this number increase. That’s because an employer would rather give an existing employee more hours rather than hiring a new employee.
• There are 2.5 million people that have no job and want one… yet are still not counted in the unemployment report.
• In February the BLS will make revisions to the 2009 unemployment numbers. Analysts are expecting a HUGE decline as the BLS accounts for fewer jobs created at small businesses. Calculated Risk, who is very good when it comes to predicting economic numbers, has calculated that revision to lead to 824,000 more jobs lost. This would most certainly shock the market and lead to a higher unemployment rate.

So while the jobs report has certainly been improving, we’re not out of the woods yet.

As for the market…

The three major US indexes are at or near 52-week highs and overbought. Investor sentiment is at extremely bullish readings. And the VIX is at a 52-week low.

Even the commodity companies I love so much are sitting at 52-week highs. So what does that leave for us, the guys who profit off of short-term market swings?

One rout we could take is getting into some bearish credit spreads. In other words we sell call options in hopes that they are never profitable for the buyer. But honestly I just don’t feel comfortable going against the dominant uptrend right now.  Nearly ten years of playing the stock market has shown that type of play to be a painful one.

What it comes down to is good old fashioned stock picking.

One stock I’ve recently loved up is Google, mainly because of the Android operating system for mobile phones. It’s really started picking up market share after Motorola’s recent release of the Droid for Verizon.

Admittedly I think the Droid is a hideous excuse for a phone. But everyone seems to be eating it up. Most of that love is because it runs on Google’s OS.

In just the last year the Android operating system has picked up 12.4% market share in the smartphone sector, mainly at the expense of the iPhone and the Blackberry.

And with a slew of new Android devices hitting in the first quarter of 2010, I fully expect that market share to hit 20% or more by the end of the year.

This is great news for Google, and so I expect GOOG to be a low risk way of riding the Android OS higher. Another way to take part is to get into Motorola itself. The company has picked up pace ever since the release of the Droid. Analysts expect 1.4 million Android devices sold for Motorola in the 4^th quarter alone. In all, Motorola sold 12.5 million handsets for the year. For a company everyone expected to vanish by 2010, that’s remarkable.

Motorola isn’t sitting on its ass either. It’s gone ahead and released another phone, the backflip, for AT&T. It also plans on introducing more new Android based models this year.

At this point Motorola has good exposure to AT&T, T-Mobile, and Verizon Wireless. That’s good in my books. All it needs to do now is charge for the European market and sales should beat expectations.

Just be aware that positions in these companies should be held over the mid to longer-term (about 6 – 12 months).

Take care,

Charles Delvalle

600,000 or more Job Losses for February?

I have to tell you, the market this week has been downright pathetic.

There’s only so many flat days that I can stand before going insane.

Today marks the third day of range bound trading. And when I say rangebound, I’m not only talking the three major indexes. The dollar moved slightly higher against the Euro and yields on 10-year treasuries slightly moved higher. While gold and the commodity complex lost a little steam.

Maybe it’s just me, but it seems like everyone is just positioning themselves for the jobs report on Friday. Estimates are everywhere. I think the number will come in higher than expected.

And I wouldn’t be shocked to see the market hit new highs. But there’s a few reasons why the party shouldn’t even start.

We have to understand that the Fed is nervous about all the liquidity that’s out there. If the 4^th quarter GDP comes in in frothy and jobs are positive, the Fed will start pulling liquidity out of this market. The FDIC is already warning banks about interest rate risk. The FDIC wants banks to actually test huge jumps in interest rates – I mean 3-4% swings at a time – to make sure that the bank is sufficiently protected.

Why would the FDIC ask banks to protect themselves against such huge swings? I think the FDIC sees something it isn’t saying out loud…

In the end, the big risk is that the Fed pulls out money too quickly.

Another reason why celebrating too early might be foolish has to do with the jobs numbers.

You see, the jobs numbers are nothing more than a sampling that the Bureau of Labor Statistics (BLS) does every month in order to gauge the overall health of the job market.

The Bureau then takes this sampling and applies a few filters to it. It tries to adjust for seasonality, and even adds or subtracts jobs based on “assumptions” of what’s happening to small businesses in the business cycle.

The result is that The BLS has been routinely added about 107,000 jobs a month since February. It’s the birth/death model.

But what happens in February is that the BLS ultimately makes an adjustment to the birth/death number for the previous year. At that time, we’ll probably see jobs decline as the BLS measures just how far off the mark they were. I’m not kidding when I say that the BLS could subtract 600,000 or more jobs.

If the stock market is expecting a positive job number, it will probably be disappointed. And it offers a catalyst for a correction in February.

Stuff to Read

http://www.reuters.com/article/idUSTRE6065MK20100107

http://www.reuters.com/article/idUSTRE5B92XZ20100107

http://www.reuters.com/article/idUSTRE60432520100107