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LTI Newsletter - May 2012

LTI Newsletter - May 2012

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Published by LongTermInvesting

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Published by: LongTermInvesting on Jun 15, 2012
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May Investment Newsletter
THE DISCONNECT
There is a huge disconnect between stock markets and theunderlying economic fundamentals in the world, especially in the US.Many parts of Europe are officially in a recession, China is slowing, UK isin a recession and many long term US indicators are showing signs of anunsustainable recovery. Yet, the stock markets, especially the USmarkets, have started the year off with a bang. The S&P 500 is up11.6% in 2012, NASDAQ is up 19.9% and the DJIA is up 8.6%.….So what gives?
May Investment NewsletterWritten by Alain RoyCEO LTI – Long Term InvestingMay 4, 2012
In this issue:
 
 
The Disconnect
 
US Economic Indicators
 
US Leading Indicators
 
CAN Economic Indicators
 
A Technical Look at theMarkets
 
 
Other Interesting Data
 
Summary
 
 
LTI Book of the Month
 
The problems we are seeingin the West are not going tobe resolved in any positiveway. What we have had inthe West, in recent decades,has been the welfare state
.
” 
Hugo Salina Price
Multi-BillionaireFounder Elektra
 
 
 
US ECONOMIC INDICATORS
There has been way too much fanfare in the mainstream media over the supposedrecovery in the US economy. Too much emphasis is placed on monthly data and manyanalysts miss the long term picture. They can’t see the forest through the trees as thesaying goes. There are many gurus who share my opinion that we should be very cautiousabout the current global economy and that stock markets do not reflect the true economiclandscape. Folks like Gary Shilling, Jim Rogers, Marc Faber, Peter Schiff, Lance Roberts andmore, all share a similar view as I. Here is some data why I feel stock markets aredisconnecting from reality and the underlying economic condition of the US economy.The first big disconnect are claims that US employment is improving. The headlineunemployment numbers have been decreasing in recent months. However, these numbersdon’t show you the TRUE picture. Jobs are not improving at all in the long term. Actuallythey are brutal. The employment to population ratio is extremely low and has notrecovered. The US is still growing in population yet job growth is not high enough to keepup with population growth. This graph says a lot about the US job market.
Civilian Employment-Population Ratio
5758596061626364656667Jan-85Jan-87Jan-89Jan-91Jan-93Jan-95Jan-97Jan-99Jan-01Jan-03Jan-05Jan-07Jan-09Jan-11
   R  a   t   i  o
Source: FRED
 
 
The average # of weeks UScitizens have beenunemployed is stuck in a veryalarming zone. So where is allthe job improvement comingfrom?Temporary jobs haveincreased. No long-termsustainability here as these jobs are ‘TEMPORARY’.It’s the old dogs that aretaking all the jobs.Employment for those 55 andover is growing. These peopleare generally savers at thisstage of their lives so it’s notlike they will be stimulatingthe economy via spending.
Average Duration of Unemployment
5101520253035404550
Jan-77Jan-79Jan-81Jan-83Jan-85Jan-87Jan-89Jan-91Jan-93Jan-95Jan-97Jan-99Jan-01Jan-03Jan-05Jan-07Jan-09Jan-11
   A  v  g .   D  u  r  a   t   i  o  n   (  w  e  e   k  s   )
-30-20-100102030405060
   %    C   h  a  n  g  e   Y   O   Y
Avg. Duration% Change YOY
Source: FRED
Temporary Help ServicesProfessional and Business Services
10001200140016001800200022002400260028003000
Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12
   T  e  m  p .   H  e   l  p   (   1   0   0   0   '  s   )
-40-30-20-100102030
   %    C   h  a  n  g  e   Y   O   Y
Temp. Help% Change YOY
Source: FRED
c
US Employment Level55 Years and Over
100001500020000250003000035000
Jan-85 Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11
   E  m  p   l  y  m  e  n   t   (   1   0   0   0   '  s   )
-4-2024681012
   %    C   h  a  n  g  e   Y   O   Y
Employment Level% Change YOYSource: FRED

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