Jobs: Even Worse Than You Think
- A company whose name rhymes with “Gronk”
- Why the job picture is even worse than the headlines say
- The Fed, the Shanghai Accord and a bottom in gold: An update
- Zach Scheidt calls BS on the financial industry’s “logic”
- A negative interest rate milestone… a hollow threat from the guardians of the global payments system… second thoughts about virtual reality… and more!
Hmmm… We’re not sure how we’d feel going to work every day for a storied company that just adopted this name and logo. A little sheepish? Or outright humiliated?
The ’70s called — they want their Blippo typeface back…
When last we checked in on the saga of Tribune Publishing six weeks ago, the CEO was engaged in a mildly amusing email war with the CEO of Gannett — who had launched a takeover bid.
To help fend off the bid, Tribune Publishing chairman Michael Ferro moved yesterday to rename the firm… tronc.
“Effective June 20,” writes the veteran Chicago media critic Robert Feder, “the parent company of the Chicago Tribune, Los Angeles Times and other distinguished bastions of American journalism will be known by a one-syllable, lowercase, guttural discharge meant to symbolize ‘tribune online content.’”
To say nothing of a logo that looks like the dog threw up a snow cone.
Shares of the future tronc — still trading for the moment under the ticker TPUB — instantly plunged 11% after the announcement yesterday, before staging a modest comeback.
Speaking of extreme and instantaneous market moves, check out a chart of gold this morning…
As you might have heard by now, the May jobs number stunk up the joint. As in, the worst showing since September 2010.
So much for the Federal Reserve raising interest rates at its next meeting, on June 15. Yesterday, traders in fed funds futures were pricing in a 21% probability of a June increase. This morning, only 4%.
The wonks at the Bureau of Labor Statistics managed to conjure only 38,000 new jobs for the month of May.
Before this morning’s release, Econoday polled dozens of economists for their guess at the number. The average was 158,000. The lowest was 110,000. Heh…
But hey, the unemployment rate fell to 4.7%, the best since November 2007. Of course, that’s only because the workforce is shrinking. The “NILF” figure — which we hasten to point out means the number of Americans “not in the labor force” and not anything naughty — swelled to a record high 94,708,000.
The real-world unemployment rate calculated by John Williams at ShadowStats — he runs the numbers the way they were during the Carter administration — works out to 23.0%. The number has hovered around that level for four years.
Of course, the awful 38,000 number today could be a one-off thing. But we suspect not, for this reason…
That’s a chart of the year-over-year change in the number of temporary workers. In many businesses, temps are the first to go when managers anticipate leaner times — no unemployment benefits to pay and so on.
As you can see, when the temp workforce begins to shrink — going below the zero line — it’s been a prelude to recession a few months later, both in 2001 and 2007–09. As of this morning, the line is still above zero, but barely — registering a paltry 0.6% increase.
As for the stock market’s reaction… bad news is bad news once again.
From early 2009 up until a few months ago, nearly every lousy economic number was greeted with a stock market rally — on the theory that a lousy economic number would induce more easy-money policies from the Fed, or at least forestall any Fed tightening.
The bad-news-is-good-news dynamic started breaking down last fall… and it’s nowhere in evidence this morning. At last check, the major U.S. stock indexes are all down at least three-quarters of a percent, the S&P 500 at 2,089.
But gold is adding to the gains noted above, the bid now up to $1,240 as we write. Treasuries are also rallying, sending yields tumbling; the yield on a 10-year note is down a tenth of a percentage point from yesterday, at 1.71%.
The dollar, you wonder? About half of May’s big rally in the dollar index has evaporated so far in June, most of that movement coming today. At last check, the dollar index is back to a three-week low, at 94.2.
Say this much: The Fed won’t feel compelled to keep cheating on the “Shanghai Accord.”
At the risk of repeating ourselves, the Shanghai Accord is a secret deal Jim Rickards says the International Monetary Fund cooked up in late February — strengthening the euro and yen, weakening the dollar. That would achieve a desired devaluation of the Chinese yuan (because it’s loosely pegged to the dollar) without China’s monetary mandarins announcing a devaluation and throwing markets into turmoil for the third time in a year.
Everything was proceeding according to plan during March and April, the dollar steadily weakening. But then Fed leaders started talking about raising rates during May and the dollar reversed course.
“Now the reversal itself has run out of steam,” Jim wrote his Currency Wars Alert readers yesterday. “Stocks seem to have hit a ceiling, and gold seems to have found a floor.”
That remark looks downright prescient this morning — although Jim says now still isn’t the time to load up on bullion, for reasons he details at this link.
[Emendation: After we went to virtual press yesterday, we got a note from our friend Chuck Butler at EverBank Global Markets. He wanted to make clear after his remarks in yesterday’s 5 that he’s not “taking the other side of the coin” on Jim Rickards’ Shanghai Accord thesis — only that events during May made him question the thesis.
As well he should; after all, Chuck’s in the trenches of the currency wars, following day-to-day, even hour-to-hour, currency movements. Jim’s outlook isn’t as “granular,” as the expression goes. They’re complementary perspectives, and that’s why we value them both.]
On another front of the currency wars, negative interest rates just reached a milestone.
The total volume of government debt carrying a negative yield just surpassed $10 trillion, according to the rating agency Fitch. That includes 7-year German bunds and 10-year Japanese government bonds.
Chalk it up to supply and demand: Because bond prices rise as yields fall, fund managers don’t mind a subzero yield as long as the price is going up. Strange days these are…
“Hopefully, this lawsuit helps you to realize just how off base many financial advisers have become,” says our income specialist Zach Scheidt.
Yesterday, the U.S. Chamber of Commerce and a couple of Wall Street trade groups sued the federal government. They’re upset because last summer, the Labor Department issued new rules making brokers and advisers to retirement plans operate under a “fiduciary” standard.
That means if you have a 401(k) or IRA, they’d have a legal obligation to act in your best interests. Previously, they were obligated only to find “suitable” investments for you — which usually turned out to be underperforming high-cost mutual funds that worked to their best interests.
Their argument: If they’re held to this higher standard, it will raise costs for retirees and leave them with fewer choices.
“I call BS on this logic!” says Zach. “Financial advisers should already be acting in the best interest of their clients.
“And if these companies file suit against new regulations that require them to look out for everyday investors, then that’s a sad reflection on the way the industry already operates.
“Sure, there are some good ones out there, but the industry itself seems to have lost sight of the fact that they exist to serve their customers. (And not just to charge excessive management fees.) I’m sick of hearing about how greedy Wall Street firms are taking advantage of their customers and charging excessive fees for piss-poor advice (please excuse my language).”
You’re excused, Zach.
This editor, meanwhile, is neutral on the whole thing for reasons we explained when the rules were set out last August. If the lawsuit prevails and the industry stays with the “suitability” standard, Wall Street’s sharks will continue to ply you with their miserable and costly mutual funds. If the government gets its way and the “fiduciary” standard becomes the rule, you’ll be left to fend for yourself in selecting investments for a tax-advantaged retirement account.
Either way, you need independent guidance to preserve your wealth and grow your income. We happen to think Zach’s is among the best. For a modest-sized nest egg, you can check out his strategy right here. If you have a higher net worth, then by all means you should consider this approach.
From the hollow-threat department: “Banks with the weakest cyberdefenses could be kicked off the SWIFT global bank payments system, its chief executive has warned as the organization scrambles to restore faith in its security after several raids by hackers.”
So says today’s Financial Times. Some 11,000 banks belong to SWIFT. Any large institution transacting in dollars needs access to SWIFT. Denying access would be a powerful punishment, indeed.
The salmon-colored rag reminds us that hackers stole $81 million in February from the central bank of Bangladesh. The paper did not see fit to mention that the hackers broke in by way of the Federal Reserve Bank of New York. Just yesterday, a U.S. House committee launched an investigation into how the New York Fed let its guard down.
Our question: Would SWIFT really kick the New York Fed out of the system?
Yeah, didn’t think so…
“Forty years ago we had Pong?” a reader writes skeptically after we cited Elon Musk’s remarks this week as they pertain to virtual reality.
“Well, yes, that’s true, but we also had a 3-D half-electronic, half-mechanical game called pinball, which you could kick and ‘tilt’ in real-time. Soon after, we had the, uh, ‘game that eats the dots,’ Pac-Man, plus other games in the ‘local game arcade,’ which went away. Many of these games required that you go somewhere and waste money with friends, away from family and other annoyances.
“Before that, we had HO-scale model train sets in full 3-D, and we could use a 3-D bicycle to pedal through our town, looking at everything, including girls, in full 3-D. It was fantastic. And before that, we could lie down unsupervised in a (gasp) public park and look at the clouds, using our (now mostly suspect) imagination.
“Now the only imagination allowed is that of ‘game developers,’ and the rest of us get to gaze at screens dumber, fatter, with overdeveloped thumbs. So in a way, mentally, we are all thumbs. Is that good or bad?”
The 5: Your fuddy-duddy editor, who still doesn’t have a smartphone, sympathizes. Kids nowadays have never-ending “screen time.” Sunshine and fresh air — what’s that? And now we’re going to strap a VR headset onto them? Yes. We get it.
On the other hand… a few years on, virtual reality will be saving lives in Los Angeles via a surgeon who never leaves her office in Brussels.
Kids don’t learn about history anymore? What happens when VR gadgets and games put a student up close in an immersive experience at Dachau, or the Trail of Tears, or Hiroshima? History comes alive — maybe in such a way that future generations will find ways to avoid such events repeating themselves.
We really are talking about something transformational. To say nothing of lucrative.
By the way, our publisher Joe Schriefer got a new notice yesterday: The Oculus Rift he ordered for our office has finally shipped. Tracking number and everything. We’ll let you know what our hands-on experience is like in the weeks ahead.
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“It then takes two or three minutes to send an email reply if deemed necessary.
“This is the best investment advisory email that I receive. Keep up the good work!”
Writes another of our regulars: “Gotta love it, you know, the five-minute thing people complain about.
“There is another word in the title: ‘Forecast.’ Hmm, maybe we can open a can of worms and discuss what forecast.”
The 5: You had to go there…
Have a good weekend,
The 5 Min. Forecast
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