Too Many Revisions To Mention
April 29, 02
Last week the conference board announced that its Help Wanted Index dropped by 1 point in March to 46 (a number that suggests Help Wanted ad volume is still extremely low despite the economic turnaround - the index was at 67 just a year ago). However, what the conference board neglected to disclose was why they revised February's reading lower by 4 points.
To put the February Help wanted index into context – it arrived shortly after the BLS reported an erroneous 66K jump in nonfarm payrolls for February (a number that was later revised to –2K). When combined both of these reports helped economists and Wall Street conclude that the jobs situation was improving.
Methodology Malfunction?
To calculate the monthly Help Wanted index the "The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month." Now, think about this for a second: the board calls up 51 major newspapers and asks how many want ads ran in the previous month. Simple enough. However, what exactly happened from March 28 to April 25 to make the conference board revise the February index 4 points lower? Did the Conference Board get a flood of phone calls saying 'we were lying to you – there was less adds in February"? Or did they simply make the numbers up knowing they would have to revise them 1 month later?
This is not a trivial point to discuss. To be sure, I have never before seen the Help Wanted number get revised lower, or higher – it simply doesn't make any sense that the conference board would take 1 month calculating the numbers and then another month recalculating them (the methodology is not that complex).
By contrast, what does make sense is that almost no one paid any attention to the revised February numbers, and this helped March look a heck of a lot better by being down by only 1 point.
As for those people who believed (before the revisions) that the employment situation improved during the first three months of the year – they were wrong. The simple fact is that more jobs were destroyed during the first 3 months of the year than created. Moreover, and unless a miracle occurs, the BLS will revise its March payrolls number lower this Friday.
When will 1Q02 GDP be released?
Last week the government announced that 1Q02 GDP was up by 5.8%. That said, the real GDP numbers for 1Q02 should be released sometime in 2003. Don't believe me? Consider this:
"Each year, the government revises estimates of GDP for certain periods, based on more complete data. It will release annual benchmark revisions for 2001, along with 1999 and 2000, on July 31." Boston Globe
As it turns out all of the 2001 GDP figures are likely wrong because the government GDP numbers overestimated Americans' incomes by roughly $90 billion (as compared with the recently released Commerce Department data). As such, after the July 31 revisions it will probably statistically proven (at least until the next revision) that the economy entered a textbook recession in 2001 (2 quarters of negative growth).
The Week Ahead
The April ISM Index and jobs report are the headliners this week. That said, the markets will first deal with the personal income/spending numbers and conference board confidence.
Given that last weeks Mich. Confidence number came in low it is unlikely that any shocking developments will arise in the conference Board's number. Then again, whenever the conference board calls up 3,500 people to ask them how they 'feel' anything can happen.
As for the personal income/spending numbers - they are yet another collection of strange numbers. For instance, while the BEA is quick to point out that personal income has risen in recent months – what they conveniently neglect to tell people is that these numbers were calculated sequentially (month to month) not year over year. As such, while personal income has actually been down every single month since 911 (yearly comparisons) the BEA's numbers are pointing up.
Then there is the jobs report due out this Friday. This is the first clue as to how the labor market is fairing in April. However, remember that the the operative word is 'clue' – because even if the numbers are good/bad that doesn't mean they won't be dramatically revised in the other direction a month from now.
Golden Days Here To Stay?
When it comes to gold one number that cannot be fudged is 300. To be sure, this number signifies a level at which the price of gold has battled at on many occasions over recent years. That said, the POG once again looks ready to stay above $300 an ounce for good.
What may be important about the current gold rally is that it is not the product of inflationary fears. Rather, the current gold rally has grown legs because the U.S. dollar is weakening, global financial worries in places such as Japan and Argentina have not and will probably not abate anytime soon, and terrorist/war concerns are building. That the gold rally has not been inflationary induced is important because it suggests that gold is regaining its purpose as the ultimate 'safe haven'. In recent years the U.S. dollar has held this title.
As an investment gold (bullion, Eagles) is a safe hedge against uncertainty. After all, if the U.S. economy double dips and/or war related tensions do not ease precious metals could be one of the only asset groups showing appreciation for many years to come. That said, if you attempt to use gold stocks as a hedge against uncertainty be weary of the extreme valuations. Not only have the solid producers had terrific run-ups this year, but so to have many of the unprofitable miners (or the companies that seem to endlessly issue new stock and dig holes in the ground).
In sum, while my intuition tells me that $300 an ounce will hold this go round I also remember that my intuition was wrong back in 1999 (or when gold was surpassing $320 an ounce). Point being, the price of gold is like most investments in that right before its price reaches a peak investors will be most confident that prices are headed even higher.
Dow Jones Industrial Average - 9910.72
7513.40 (Jan 9,98) - Intraday)
7926.90 – Intrday Low (Sept 21, 01)
9,529.46 – Key Support (Jan 30, 02)
-- 10,000 (psychological resistance/support)
10728.90 – Key resistance (Mar 8, 02)
11908.50 – (Jan 14, 00)
Nasdaq - 1663.89
1387.06 – Key 'bottom' (Sept 21,02)
2000/3,000/4,000 (psychological battle zones)
1959.93 – Key resistance (Jan 24, 02)
5,000 (Maniacal Resistance)
5,132.52 (You can tell your grandchildren about it)
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