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]

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March 4, 2009

We need to invest in our country

Posted in foreclosure crisis, health care, mortgage reform, Obama administration, President Barack H. Obama, taxes, U.S. Economy tagged , , , , , , , , , , at 5:18 am by realitytax

USA flagAs an entrepreneur who has run several small businesses, I think it’s time to return to fundamentals on the economy, starting with investing in America again. It’s small businesses that will put people back to work; that’s how we’re going to get this country back on its feet. It’s entrepreneurs and small business owners who respond with enthusiasm instead of being bound in their decision-making by CFOs and slow-moving Boards of Directors focused on short-term bottom line numbers, (the kind of decision-making that led to the foreclosure and credit crisis, and ultimately the big business bailout using taxpayer dollars.)

To be sure, we need public education, technical schools, and affordable college tuition so young Americans are ready for these new jobs. It’s a global economy, but most of us work in the same city we live in. When we see bulldozersCaterpillar tractor and excavators moving dirt, and trucks hauling instead of sitting idle at auction sites, then we’ll know things are turning around.

The President is intent on stimulating the private sector, but big businesses with names we all know have abused deregulation and the public trust. Credit card companies raise their rates willy-nilly, and hide extra fees in the small print. How much of his economic stimulus can be paid for simply by ending wasteful government spending, and eliminating tax cuts for the super-rich?

Is it a coincidence that the size of the bailout Bush proposed roughly equals the cost of the war in Iraq?

That war has been a burden on our military, and paying the debt is a drag on our economy that will linger for years. The new President is winding that down, but we’ll be paying for it for years and spending is only half of the equation. The money to do these things has to come from somewhere. Government is here to stay: In some way we need to fund the things that make government work for the people. Our elected leaders, in turn, must stop letting our hard-earned tax dollars simply line the pockets of special interests.

The American Dream isn’t about letting lobbyists control who pays taxes and who gets rich, it’s that any child in this country should have a chance at becoming a productive adult who can support and raise a family comfortably.  Working full-time and pulling your weight should mean you don’t have to worry about grocery bills, the price of commuting, or paying to see a good doctor when you or your family needs medical care.

Tax credits for continuing education make it tempting to better yourself.  The tax cuts for the middle and lower class earners proposed by the Obama administration make a start at offsetting the skyrocketing costs of groceries, health care, and college, but we need to go further. One great idea is to give tax incentives to companies that cover increases in health care costs while the President tries to reform that out-of-control system.

Public pressure and increased scrutiny are starting to make companies think twice about  huge salaries and bigger bonuses for wealthy executives while pleading for bailout funds and cutting paychecks and benefits and pensions of the people who do the real work. Let’s take it a step further and tax those who make money by exploiting cheap labor overseas. Our government needs money to operate, Job Growth Aheadno matter if it’s to build roads, insure products made overseas are safe,  or to keep our military strong, and if a company doesn’t want to pay American workers they still have an obligation to contribute and support the system that has made their success possible. We need to reverse the trend of layoffs and plant closures; we need to rebuild the foundation of our economy – and the American Dream – by putting Americans back to work.

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October 27, 2008

I’m Joe the plumber, and I’ve decided who I’ll vote for.

Posted in 2008 Elections, John McCain's campaign, Presidential campaign, Senator Barack H. Obama, taxes, U.S. Economy tagged , , , , , , , , , , at 2:51 pm by realitytax

I’m Joe the plumber, and I’ve done some research into who will raise my taxes more, and I’ve reached a conclusion. It’s not an easy choice. I wanted to consider capital gains tax, too, because I own a home.

OK, I should clarify a few things in the interest of full disclosure.  My first name isn’t really Joe, but you can call me Joe, OK?  And while I’m not a licensed plumber if you’ve ever tried to install a garbage disposal, or reseat a toilet on a new wax ring yourself, you know you want somebody else to do it for you. OK, technically my boss isn’t running a licensed plumbing company either, but all that regulation isn’t really necessary, is it?  I mean, sure, a bit of regulation might have helped prevent the need to bailout the rich guys running Wall Street Banks and big insurance companies like AIG, but come on – plumbers?  What could go wrong?

See, here’s the thing: I’ve got the entrepreneurial spirit.  I don’t mean like some guy who rides in to town selling snake oil in the old wild west, either. I want to own my own business, that’s my version of the American dream.  I’ll bet you’re a lot like me – unless you’ve always voted for the same party in every election, or you’re a licensed plumber, of course.  So I compared McCain and Obama on other stuff, too, like their plan for health care (’cause that cost matters to a guy like me – I don’t actually even have health care right now.)

My family thinks I’m making it.  They make light-hearted jokes, and call me “Lord of the Rings” when it’s time to fix a toilet.  They think it’s very cool that I work for a small business.  Honestly? I’d be happy to earn more at a big company right now, but when the boss doesn’t even take in $250,000 in gross receipts it’s not like I can expect to be making six figures myself, right?

McCain’s an honorable man, he’s personally avoided making outright attacks as reprehensible as, say, Congresswoman Michelle Bachman who can’t even figure why she should apologize for implying a Senator might be un-American! Furthermore, he’s actually running as much against his record of voting with Bush as Senator Norm Coleman up in Minnesota, so even if his plans aren’t as well-developed and spelled out as Obama’s we know McCain’s now against some of what Bush got wrong anyway.

And I know that politicians will often say anything to win, so I’m not surprised that not everything coming out of the McCain campaign is true or that his message changes. That’s just politics as usual. I sure don’t expect that the media is covering either candidate accurately – they’re in it to make money, after all, they want us to keep tuning in, and that’s just business

Based on research, endorsements by people who obviously know more than I do, and talking to friends I’ve decided to vote for Barack Obama on November 4th.  

It’s just a lot easier for me to trust that a guy who only owns one house might follow through on his promises to work for the good of everybody. I mean, come on: McCain’s wife spent more on one outfit than I’ve earned in the last 8 years, just how concerned would he be about my taxes, leaky toilet flappers, homes being foreclosed, and other issues that matter to me here in the midwest if he gets an 8th house by being elected to fix the mess George Bush made of the budget and the Middle East?

I’m Joe the Plumber,
sometimes known as “Lord of the Rings,”
and I approve this message.

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