Market Review: Market Mentality

Once a month, the Bureau of Labor Statistics release reports to show how many jobs have been added in the past month, what the unemployment rate is, and other fun facts.

Yesterday, they released October’s jobs data, and we found out that while wages did rise at their fastest pace in over two years, job growth is at a stall. After seasonally-adjusting the numbers (October is the month that holiday help is hired), only 56,000 jobs were added to the U.S. economy – about half the number economists were hoping for.

"Job growth…appeared below trend in October," said Kathleen Utgoff, commissioner of the BLS, in a statement. "It is possible, of course, that employment growth for the nation could have been held down by indirect effects of hurricanes Katrina and Rita, for example, because of their impact on gas prices."

However, points out that hiring was lagging throughout the country, even in regions not directly affected by the hurricanes. In a recent poll by the University of Michigan, 60 percent of people questioned said that they expected the next five years to bring periods of widespread unemployment.

The doesn’t say much for consumer confidence – and many of the sectors that would usually be beefing up their staff this time of year is proving that point.

"In October, car dealers, hotels, restaurants and movie and music studios all cut jobs. Department stores added fewer jobs than they typically do during October; that shows up as a loss in the Labor Department report, because the government adjusts its numbers to account for normal seasonal variations," says an article in the NY Times.

So, while retailers did report surprisingly good sales for October, these sectors are still wary that high energy prices will eventually take their toll on consumers.

While this data for the jobs reports is fairly straightforward, what about all the other numbers and statistics found in there? What should we be looking at? For the answer, we turn to EverBank’s Chuck Butler, who covers the data (which he calls the "Jobs Jamboree") in his daily e-letter, The Daily Pfennig.

"These labor reports are a pile of junk," he says. "They don’t tell us anything but the total number of jobs."

"They don’t say what kind of jobs were created. They don’t say if the jobs have benefits. They don’t say if they will earn more than the minimum wage."

According to Chuck, even with the high margin for error in these reports, the markets love them.

"I remember when trading desks stopped to see what the weekly money supply numbers were. Now that was worth putting emphasis on – but some trumped up, no-information jobs report? Come on."

The point Chuck wants to make is that, as we all know, the market’s mentality is out of whack. He advises that the average weekly hours worked and earnings are more important when looking at the reports.

Just another reason why you shouldn’t be swayed by the mentality of the markets.

Kate Incontrera
The Daily Reckoning

November 06, 2005 — Baltimore, Maryland

P.S. In addition to writing The Daily Pfennig, which you can find posted every morning on the DR home page, Chuck Butler is Senior Vice President of EverBank World Markets.

Chuck and his long-time partner-in-crime Frank Trotter, a co-founder of EverBank, have been trying to figure out a way for investors to lock in the upside potential of the gold market for 15 years. They toyed with futures contracts and all kinds of complicated interest rate structures but never figured anything out… that is until this fall.

— Daily Reckoning Book Of The Week —

Empire of Debt: The Rise of an Epic Financial Crisis
by Bill Bonner and Addison Wiggin

"Watching the news is a bit like watching a bad opera," say bestselling authors Bill Bonner and Addison Wiggin. "You can tell from all the shrieking that something very important is supposed to be happening, but you don’t quite know what it is. What you’re missing is the plot."

After a generation of being spoon-fed reality by media, it’s understandable that Americans are confused about the state of their nation. In their newly released book, Empire of Debt, Bonner and Wiggin wield their sardonic brand of humor to expose the nation for what it really is – an empire built on delusions.

Americans are rapidly facing a choice: recognize these dangerous delusions and take steps to avoid their collapse. Or remain ignorant of them and risk losing all of their wealth when the house of cards comes crashing down.

THIS WEEK in THE DAILY RECKONING: "Speculator." The word conjures up images of irresponsible gamblers, throwing their money away on a whim…but in Doug Casey’s essay, "The Speculator as Hero" he hopes to squelch those misconceptions…

Looking Up…Down the Pampas        11/04/05
by Bill Bonner

"Investing in any country is a gamble. Not only have you know idea what cards might turn up, you also have a sneaking suspicion that the dealer may have one or two up his sleeve."

The Dollar Hit Parade               11/03/05
by Justice Litle

"So why is the dollar so popular? What gives America free reign to settle debts in its own currency, print more of it at will and impose its fiscal whims on the rest of the world?"

The Speculator as Hero              11/02/05
by Doug Casey

"A speculator is simply someone who sees, or anticipates distortions in the marketplace and positions himself to take advantage of them. He can do that because he understands their causes, and their effects."

All Saints’ Day         11/01/05
by Bill Bonner

"Pumpkins, witches and cobwebs. With all the décor around Paris at the moment, you’d never know Halloween was once an unknown holiday."

Gold and 1,000 Frozen Pizzas        10/31/05
by The Mogambo Guru

"I noticed that my entire portfolio used to be able to buy exactly 1000 frozen pizzas, but after all of this inflation, my quarterly statement shows that my portfolio can only buy 960 pizzas.


FLOTSAM AND JETSAM: "We’re going to send a copy of Empire of Debt to every Senator, every member of Congress, Alan Greenspan, and George Bush. What do you think?" That’s the question Addison Wiggin posed to DR readers this past week, after he and Bill Bonner’s newest book, Empire of Debt, was released. As always, our readers had quite a bit to say…and here are some of the responses we received…

Empire of Debt Goes to Washington
by our loyal DR readers

"Great idea! This country is sinking fast. There’s an old saw about finding yourself in a hole. The first thing you must do is stop digging."

"Don’t forget to send a copy of Empire of Debt to each member of the Supreme Court. Most of them are so out of touch with reality that they might actually welcome a chance to learn what is really going on out there."

"This is a great idea, especially since you are all heavily positioned in gold. Send Empire of Debt; but could you please wait until I sell my house at the end of this month. I am scrambling to perfect its marketability and almost done. That is the good side of a bubble right? Ride it and then jump out. I have been a faithful reader of the Daily Reckoning since 2002. By 2003 I was so scared of America I ran away to Europe. I returned to find a booming real estate bubble and now I’m just about to make enough $ from fixing junk houses in Los Angeles so I can actually invest in all your great ideas. Let everyone be delusional just a little longer."

"It is a great idea to send all of congress and the Executive leaders a copy – you might also include a copy of our Constitution, as I suspect few of those who will receive your book have this personal guidebook on what this country is about."

And one last comment…

"Great idea to send copies of your book to Washington. I would suggest for you to take out any big words from your book that might not be readily understood by the average American politician.

"You may also want to try to insert a note with your book explaining a million of something is a lot of something. A billion of something is a lot more than a lot of something. And generally the only time the word trillion is used is when describing a dollar amount being begged, borrowed, stolen, and then spent by American politicians hell bent on destroying the best country I believe the world has ever known. I enjoy your reads every day."

The Daily Reckoning