September 23, 2009

Sep 2009 ERRI reflects late summer softness on Wall Street

Posted in economic indicator, economic recovery, ERRI, U.S. Economy tagged , , , , at 5:02 pm by realitytax

Despite significant improvement in the number of job losers in August, traditional end of summer sell-offs on Wall Street sent the Economic Recovery Reality Index (ERRI) itself 1.62 points lower, giving back some of the August gain to a modest 3.13 points over July 2009, to 14.41 for September, 2009. In August, the number of unemployed persons increased by 466,000 to 14.9 million, bumping the unemployment rate by three tenths of a percent – essentially unchanged among the major demographic divisions examined by the U.S. Bureau of Labor Statistics, and few experts doubt an overall rate increase to 10% as hiring necessarily lags other economic indicators;  both construction and manufacturing employment continue downward trends, though overall manufacturers are so light-staffed that any order can stimulate hiring decisions.

Despite the slight correction as summer wound down, investors seem optimistic and stock markets continue to reflect increasing willingness to move capital back into equities over the past quarter. The ERRI is based in part on a weighted, hypothetical mid-cap oriented index fund (see below) which lost nearly 5% of its August value with uneven movement across the sectors and industries being tracked, weighing the ERRI down. Solar technology and  consumer goods reflected weak sentiment, with renewed confidence in finance and non-solar energy.

Average weekly earnings continued modest improvement after a dip in the early part of the summer. The increase in the number of “discouraged” workers is still slowing, while the number of “involuntary part-time” workers crept up slightly. (Discouraged workers are those not currently looking for work because they doubt jobs are available for them.) The bright spot in the figures may be Health Care, where employment continued to make gains – up another 28,000 jobs (roughly the same number of jobs shed in the financial sector) after an increase of 20,000 in July.

U.S. government unemployment figures are estimates based on a monthly survey of households. All persons who are without jobs and are actively seeking and available to work are counted among the unemployed, including those on temporary layoff are included (even if they do not actively seek alternative work.)


Note: The particular selections comprising the security/equity component of the ERRI (data below) were selected to track various sectors, not out-perform the broader U.S. equity markets. These are not investment recommendations, and should not be construed as such. The ERRI fund is an entirely hypothetical construct, and while the author and/or persons connected to the research and/or this website may at times hold positions in these securities, particularly via any one of a number of mutual funds, no representation is made as to the suitability of any given equity, sector, on investment strategy for the reader.

Further, while the hypothetical index fund component shows apparent growth of 17% when calculated simply against an initial cost-basis of $10,000 (the September valuation was $11,697.72) it should be noted that the weighting of various sectors and components means the effective impact is approximately tantamount to only a 7.5% increase. The ERRI fund calculation represents only investor sentiment to the extent stock market behaviors reflect this mostly professional group; domestic (and global) economic recovery depend heavily on wages and employment, as well as difficult-to-quantify public sentiment.

Data on the equities is presented “as though” an investment had been made in an “index fund” for the ease of comparison and understanding, but no such fund exists nor did any investment take place. Equity investments are volatile, particularly when not carefully diversified and monitored. The third column in the table below represents the percentage change in the individual equity prices as of the close of the NYSE on 4 September 2009 versus the previous month.

symbol 4 Sep 09
close
%
+/-
index
value
Sector Industry
EMN $ 50.26
-4.68

1,357.02

Basic Materials Chem. (Plastic & Rubber)
HON $ 37.15
+2.12 594.40 Capital Goods Aerospace & Defense
CAT $ 46.11
-3.50 691.65 Capital Goods Constr. & Agric Machinery
FDML $ 11.46
-23.50 1,180.38 Consumer Cyclical Auto & Truck Parts
HQS $ 8.40
-7.59 999.60 NonCyclic Consumer Fish / Livestock
BBEP $ 9.94 +13.86 675.92 Energy Oil & Gas (Integrated)
PZE $ 6.74
-3.99 559.42 Energy Oil & Gas (Integrated)
AIB $ 6.91 +17.52 497.52 Financial Money Center Banking
CMA $ 25.42 -7.93 381.30 Financial Regional Bank
FITB $ 10.52 +8.34 494.44 Financial Regional Bank
CCI $ 27.83 -1.00 556.60 Services Communications Srvcs
JWN $ 29.23 -3.53 701.52 Services Retail (Apparel)
FSLR $121.47 -17.07 850.29 Solar Technology Semiconductors
RIMM $ 77.50 +0.53 542.50 Technology Comm. Equipment
PLXS $ 25.25 -5.00 580.75 Technology Electronic Instr & Controls
POM $ 14.17 +1.87 1,034.41 Utilities Electric

Disclaimer: Readers are advised that the ideas, materials, and opinions contained herein should be used solely for informational purposes. The author does not purport to tell or suggest investment securities that should be bought or sold. Investors should always conduct their own research and due diligence and obtain professional advice before making any investment decision. Neither the author nor realitytax shall be liable for any loss or damage caused by a reader’s reliance on information obtained in any posts, newsletters, special reports, email correspondence, or comments on the web site. The author is not a registered investment advisor or broker/dealer. The information contained herein does not constitute a representation by the publisher or a solicitation for the purchase (or sale) of securities. Opinions and analyses are based on sources believed to be reliable and are written in good faith, but no representation or warranty is made as to their accuracy or completeness, and we are not liable for errors or omissions. All such information should be independently verified with the companies mentioned. The author(s) receives no compensation of any kind from any companies that may be mentioned on this web site. Any opinions expressed are subject to change without notice. Owners, employees and writers may hold positions in the securities that are discussed; the intent is neither to suggest investment choices/strategies nor to influence market conditions, but rather to divulge methodology for inclusion of equities and sectors in the Economic Recovery Reality Index [ERRI]

Digg the ERRI report.

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