The Shrinking Labor Market
Posted by Eddy Elfenbein on July 11th, 2011 at 10:49 am

One of the most depressing aspects of the current jobs market is how many Americans have simply dropped out of the labor market. After growing for decades, the labor market participation rate lost all of its gains over the last 25 years.

Over the last 11 years, the civilian population has grown by 27 million, but the labor force has only grown by 10.8 million and the number of employed has grown by just 2.4 million.

Italy Drags Us Down
Posted by Eddy Elfenbein on July 11th, 2011 at 9:07 am

The stock market looks to open sharply lower today. Through Thursday, the S&P 500 was having a nice rally but concerns about Europe have again pushed equity prices lower.

Now traders are worried about the financial condition of Italy. Reuters notes that the cost of insuring Italian debt has risen to a five-year high. Now, some Italian politicians are blaming “speculators” which is a near-universal sign that it’s all the politicians’ fault.

We’re also at the start of the second-quarter earnings season. Alcoa ($AA) will be the first major company to report earnings when it reports after today’s close. The company has a good shot of reporting a doubling of its profit.

Morning News: July 11, 2011
Posted by Eddy Elfenbein on July 11th, 2011 at 8:13 am

Best Currency Forecasters Say Dollar Slump Over

China June Trade Surplus Widens to $22.27 Billion

China Yuan Down Late On Expectations Inflation Has Peaked

Italy Moves to Rein in Short-Selling Amid Market Jitters

Italian, Spanish, Portuguese Bonds Slump

OECD Warns Europe to Agree Greece Deal Quickly

Crude Oil Falls As Concerns Over China, EU Weigh

Tough Era for ‘Macro’ Funds

A Top British Leader Urges Murdoch to Drop TV Deal

Quick Action Helps Google Win Friends in Japan

Alcoa Profit May Double on Aluminum Demand

Nestle Buys 60% of Chinese Candymaker for $1.7 Billion

Elpida Memory to Raise Nearly $1 Billion From Issuances

Howard Lindzon: The Stocktwits Hall of Fame…Miracles and Shame on Wall Street

Epicurean Dealmaker: In Praise of the Outsider

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June NFP = +18,000
Posted by Eddy Elfenbein on July 8th, 2011 at 10:00 am

The June jobs report came out this morning and it was a disaster. The economy created just 18,000 jobs last month and the unemployment rate rose to 9.2%.

Wall Street was expecting a gain of 105,000 jobs which isn’t that strong to begin with. On top of that, the number of jobs created in May was revised down to 25,000.

Factory payrolls rose by 6,000 in June after a 2,000 decline in the previous month.

Employment at service-providers increased 14,000 in June, the least since a decline in September. Construction employment fell 9,000 workers and retailers added 5,200 employees.

Government payrolls declined by 39,000 in June, the eighth straight decline. Employment at state and local governments declined by 25,000.
Average hourly earnings fell 1 cent to $22.99, today’s report showed. The average work week for all workers dropped to 34.3 hours, from 34.4 hours the prior month.

The so-called underemployment rate — which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking — increased to 16.2 percent from 15.8 percent.

Morning News: July 8, 2011
Posted by Eddy Elfenbein on July 8th, 2011 at 7:17 am

German Exports Increased More Than Forecast

Offshore Yuan Clearing Bank to Buy China Bonds

Ethanol Subsidies Besieged

Geithner Doesn’t Think Obama Has The Constitutional Authority To Ignore Debt Ceiling

Elizabeth Warren’s Dream Becomes a Real Agency She May Never Get to Lead

Behind the Gentler Approach to Banks by U.S.

Dim Sum Market Stirs U.S. Borrowers

To Slow Piracy, Internet Providers Ready Penalties

News Corp.’s BSkyB Bid Facing Delay on Review

JPMorgan Settles Bond Bid-Rigging Case for $211 Million

Target, Limited Sales Beat Estimates in June Amid Discounts

S.Korea’s SK Telecom, STX Battle for $2.3 Billion Hynix Stake

Buffett Donates $1.5 Billion in Annual Gates Foundation Gift

James Altucher: 7 Unusual Things I Learned from Louis Armstrong

Brian Shannon: Stock Market Analysis & Ideas for 7/8/11

Phil Pearlman: Drudge Is The Master

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The Wilshire 4500 Rally
Posted by Eddy Elfenbein on July 7th, 2011 at 2:36 pm

The Wilshire 5000 is the probably the ultimate in market-cap weighted indexes. You really can’t get broader than what Wilshire has done. As of May, the total value of the stocks in their index was $14.2 trillion.

Wilshire also tracks its Wilshire 4500 which is all of the companies in the Wilshire 5000 that aren’t in the S&P 500. As of May, the total value of Wilshire 4500 was $2.7 trillion. That shows you just how much Wall Street is dominated by the mega-cap stocks. The top 10% holds roughly 80% of the stock market’s value.

Interestingly, the Wilshire 4500 has been creaming the Wilshire 5000 (or really, the S&P 500) for nearly 13 years. The large-caps had a good run from early 1994 to October 1998. Since then, the small guys have dominated.

From October 8, 1998 to yesterday, the total return of the Wilshire 5000 is 99.78%, but the total return of the Wilshire 4500 is 218.29%. That’s a huge spread. In fact, the Wilshire 4500 has a good chance of making a new all-time high today. The previous high was set on April 29th.

It’s true that equities have been a tough place to be for the last decade. But the problem has been the large-cap names, not most stocks.

To give you another example, we’re coming up on the 10th anniversary of 9/11. Measuring from September 10th, 2001— so we’re including a bear market that lasted for another 18 months—to yesterday, the total return of the Wilshire 4500 is 140.85%. Annualized, that comes out to about 9.4%. That fact probably would have surprised a lot of folks in the aftermath of 9/11.

Here’s a chart of the total return of the Wilshire 4500 and the Wilshire 5000 since October 8, 1998:

Morning News: July 7, 2011
Posted by Eddy Elfenbein on July 7th, 2011 at 8:08 am

BOE Keeps Rates on Hold as Governor King Diverges from Europe

Banks Struggle to Agree on Greek Aid Plan in Rome Talks

Building Boom in China Stirs Fears of Debt Overload

German Banks See Business Developing Positively, Survey Shows

Contagion Fears Weigh on Euro

Irish Begged to Buy Fridges to Boost Economy

SEC Watchdog Refers Leasing Issue to Department of Justice

As Plastic Reigns, the Treasury Slows Its Printing Presses

June Retail Sales Get Lift from Bargains

Berkshire Is in Group Bidding on Citi Unit

JPMorgan, BofA Said to Near Foreclosure Deal

The Murdoch Style, Under Pressure

Costco June Same-store Sales Up 14%, Beat Poll

Jeff Miller: What Investors Need to Know About the Debt Ceiling Debate

Joshua Brown: The Return of Korporate Kindergarten

Stone Street: 4 Week Goose Eggs, Again

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Dividends Up by 11%
Posted by Eddy Elfenbein on July 6th, 2011 at 2:56 pm

From David Berman at the Globe and Mail:

Dividends are going up, up, up. According to the latest report from Standard & Poor’s, the number of U.S. companies that boosted their dividends in the second quarter, which ended last week, rose to 444. That’s up from 335 raises in the second quarter of last year, among the 7,000 companies that report such information. Just 21 companies decreased their dividend payouts, down from 34 cuts last year.

The number of increases means that investors are receiving bigger dividend streams, of course, with average yield for dividend payers rising to 2.51 per cent at the end of the second quarter, up from 2.39 per cent at the end of the first quarter. “If dividends were a paycheque, dividend investors would have received an 11.1 per cent raise in the first half of 2011,” said Howard Silverblatt, senior index analyst at S&P Indices, in a note.

He expects more dividend increases throughout the rest of the year, but the pace could be slightly lower than in the first half of the year.

The recent improvements are quite striking. Just two years ago, in the second quarter of 2009, dividends were being chopped at a furious pace by cash-strapped U.S. companies. Back then, there were 250 dividend decreases, outnumbering the 233 increases. Still, today’s levels still don’t quite measure up to the second quarter of 2007, before the onslaught of the financial crisis. Then, there were 542 dividend increases during the quarter, versus just 18 decreases.

Morning News: July 6, 2011
Posted by Eddy Elfenbein on July 6th, 2011 at 7:40 am

Greek Finance Minister Moves From Crisis to Crisis

China Raises Rates to Counter Fastest Inflation Since 2008

Portugal’s Debt Rating Cut to Junk by Moody’s

W.T.O. Says Chinese Restrictions on Raw Materials Break Rules

German Factory Orders Rise on Domestic Demand

Currency Wars Not Over, Says Brazil

Oil Prices Mixed As Market Looks For Direction

How America Ceded Capitalism’s Bastion to German Boerse

Banks Chafe at Pay Clawbacks in Liquidation Plan

Big Business Leaves Deficit to Politicians

U.S. Farmland Boom May Peak on Rates After Five-Year Surge, Rabobank Says

Microsoft, Baidu to Expand Web-Search Partnership in China

Zuckerberg Finds Fans on Google+

Deal Makers Soak Up Sun Valley

Todd Sullivan: “Davidson” on Employment

Howard Lindzon: Rethinking Anonymity

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Consumer Discretionaries Hit All-Time High
Posted by Eddy Elfenbein on July 5th, 2011 at 1:18 pm

Even though the S&P 500 is still well below its all-time high from October 2007, some parts of the underlying market have been doing well.

On Friday, the Consumer Discretionary Sector closed at an all-time high. The Consumer Staples sector is just below the all-time high it reached in May. (By the way, I also think it’s interesting that the Staples, Discretionaries and Industrials all closed at nearly the same level on Friday — 325.077, 324.157 and 327.472.)

Most surprisingly, the Healthcare sector closed on Friday within 6.5% of the all-time high it reached in December 2000. The sector has been a money-loser for 10-1/2 years.

The Tech, Telecom and Financials sectors are still close to 60% below their all-time highs.