The Labor Department released a new set of statistics yesterday looking at the problem of underemployment in America. While the official unemployment rate of 8.2 percent is worrisome enough, there are also a sizable number of people who have part-time jobs but want to find a full-time position. Adding the number of underemployed to the picture brings the number up to 15.3 percent, for what the federal government calls U-6.
Here in New Jersey, the official unemployment rate is 9.2 percent, or ranked 40th among the 50 states. But our percentage of underemployed is relatively low, at 6.3 percent, which is below the national average. Adding together our unemployed and underemployed, we edge up to 37th in the nation.
The worst states for underemployment are out west: Nevada's combined percentage of unemployed and underemployed is a whopping 22.1 percent, while California's is 20.3 percent. The best states, by far, are the Dakotas. South Dakota's combined percentage is at 8.6 percent, while North Dakota's is just 6.1 percent.
Tuesday, July 31, 2012
Monday, July 30, 2012
Rise of the Mega-Caps
The shining star of the stock market for 2012 so far has to be the mega-caps. As Paul Lim pointed out in yesterday's New York Times, the 50 biggest American stocks in terms of market capitalization - as measured by the Russell Top 50 index - have risen by more than 14 percent so far this year. The Russell 2000, made up of small-cap stocks, is up just 1 percent. In July alone, a tough month for most of the market, the mega-caps are up 2 percent, while the small caps have dropped by 1 percent.
One of the chief factors driving the larger stocks is that they are more likely to pay dividends. The 50 mega-caps pay an average divident yield of 2.2 percent, while the small caps pay just 1.5 percent.
It's been a huge change for the mega-caps over the past decade, after they were greatly overvalued in the dot-com bubble era. As Lim points out, in 2000, the average price-to-earnings ratio for the mega-caps reached 33. Now that number is all the way down to 13 - and with midcaps at 16 and small-caps at 20, the big stocks look like a relative bargain.
One of the chief factors driving the larger stocks is that they are more likely to pay dividends. The 50 mega-caps pay an average divident yield of 2.2 percent, while the small caps pay just 1.5 percent.
It's been a huge change for the mega-caps over the past decade, after they were greatly overvalued in the dot-com bubble era. As Lim points out, in 2000, the average price-to-earnings ratio for the mega-caps reached 33. Now that number is all the way down to 13 - and with midcaps at 16 and small-caps at 20, the big stocks look like a relative bargain.
Friday, July 27, 2012
Today's GDP Figure
The first estimate of the nation's second quarter GDP came out this morning from the Commerce Department, and the best thing you can say about it is that it could have been a lot worse. The economy grew at 1.5 percent in the second quarter, which is down some from the first quarter's reading of 2 percent. But the expectation from economists - depending on which survey you believe - had been down to 1.3 or 1.4 percent.
The biggest culprit in the slowing economy is consumer spending. The figures showed that it household consumption grew at 1.5 percent in the quarter, which is the lowest rate of growth we've seen in a year. Spending had grown at a 2.4 percent rate in the first quarter of 2012.
The Commerce Department also released revised and presumably final GDP figures for the previous three years, and while some quarters showed significant changes, the overall differences were minor. For the period from the beginning of 2008 (two months after the official start of the recession) to the end of 2011, the overall rate of GDP growth went from 0.4 percent to 0.3 percent. For 2011 alone, real GDP was revised upward by 0.1 percent.
The biggest culprit in the slowing economy is consumer spending. The figures showed that it household consumption grew at 1.5 percent in the quarter, which is the lowest rate of growth we've seen in a year. Spending had grown at a 2.4 percent rate in the first quarter of 2012.
The Commerce Department also released revised and presumably final GDP figures for the previous three years, and while some quarters showed significant changes, the overall differences were minor. For the period from the beginning of 2008 (two months after the official start of the recession) to the end of 2011, the overall rate of GDP growth went from 0.4 percent to 0.3 percent. For 2011 alone, real GDP was revised upward by 0.1 percent.
Thursday, July 26, 2012
The Apple Drop
If there was any remaining doubt about who the 800-pound gorilla of the stock market is, Apple erased it yesterday. We've seen the computer behemoth elevate the entire market with better-than-expected earnings results; now we've seen it sink the entire market with some rare disappointing results.
Apple reported profits for the second quarter of $9.32 a share, which was a 21 percent increase over the previous quarter. But the consensus analysts' estimates expected even more, with a target profit of $10.37 a share. The rare earnings miss - just Apple's second quarterly miss since 2003 - sent the shares down by more than 5 percent.
With Apple still reigning as the most valuable stock in the world, that drop affected the entire equity universe. The S&P 500 had been up by 0.4 percent earlier in the day, but Apple's drop sent the whole index into negative territory, losing 0.1 percent. All by itself, Apple accounted for the difference between an up day for the S&P and a down day.
Apple reported profits for the second quarter of $9.32 a share, which was a 21 percent increase over the previous quarter. But the consensus analysts' estimates expected even more, with a target profit of $10.37 a share. The rare earnings miss - just Apple's second quarterly miss since 2003 - sent the shares down by more than 5 percent.
With Apple still reigning as the most valuable stock in the world, that drop affected the entire equity universe. The S&P 500 had been up by 0.4 percent earlier in the day, but Apple's drop sent the whole index into negative territory, losing 0.1 percent. All by itself, Apple accounted for the difference between an up day for the S&P and a down day.
Wednesday, July 25, 2012
Ready for a Bounceback?
The American Association of Individual Investors publishes a weekly survey of investor sentiment, and the latest one shows that investors have turned sharply negative. The number of people describing themselves as bullish has dropped to 22.2 percent, following the biggest single weekly decline in that measure since April.
Is that bad news for the stock market? Not necessarily. A researcher at the Web site Seeking Alpha has looked into how the investor sentiment reading correlates with movement in the markets, and found that when the bullish sentiment drops below 25 percent, the S&P 500 has a strong tendency to go up over the next six months. In other words, the more pessimistic investors get, the more likely we are to see a rebound in the equity market.
One obvious example: The all-time record for bearish sentiment in the AAII survey was set on March 5, 2009, when 70.3 percent of the respondents described themselves as pessimistic on the stock market. The S&P bottomed out the very next day, and has nearly doubled in the period since then.
Is that bad news for the stock market? Not necessarily. A researcher at the Web site Seeking Alpha has looked into how the investor sentiment reading correlates with movement in the markets, and found that when the bullish sentiment drops below 25 percent, the S&P 500 has a strong tendency to go up over the next six months. In other words, the more pessimistic investors get, the more likely we are to see a rebound in the equity market.
One obvious example: The all-time record for bearish sentiment in the AAII survey was set on March 5, 2009, when 70.3 percent of the respondents described themselves as pessimistic on the stock market. The S&P bottomed out the very next day, and has nearly doubled in the period since then.
Tuesday, July 24, 2012
Getting the Help You Need
Everybody understands what a daunting task it is to save properly for retirement, and what an important job it is. A new survey from LIMRA confirms how critical it is for people to get help with their retirement planning. The survey found that 71 percent of all Americans who work with a financial advisor feel confident about their ability to afford the lifestyle they wanted to have in retirement. Among those who haven't been working with a financial advisor, only 43 percent said the same.
Of those who work with an advisor, 61 percent said they make regular contributions to a 401(k) or IRA. Only 38 percent of those who don't work with an advisor could say the same. Even controlling for income, those with an advisor are much more likely to contribute to a retirement savings plan.
There really is no substitute for the education, information and discipline a good financial advisor can provide you as you plan for your retirement. If you feel like you could use some help getting your financial plans in shape to provide for the retirement you want and deserve, give me a call.
Of those who work with an advisor, 61 percent said they make regular contributions to a 401(k) or IRA. Only 38 percent of those who don't work with an advisor could say the same. Even controlling for income, those with an advisor are much more likely to contribute to a retirement savings plan.
There really is no substitute for the education, information and discipline a good financial advisor can provide you as you plan for your retirement. If you feel like you could use some help getting your financial plans in shape to provide for the retirement you want and deserve, give me a call.
Monday, July 23, 2012
The Fall in Household Debt
As the economy slowly rights itself, Americans continue to spend down their debt. During the first quarter of 2012, American households had 2.11 times as much in assets - bank deposits, stock holdings, and other assets - as they had in debt, including mortgages, credit card debt, car-payment obligations, etc, according to figures compiled by Deutsche Bank. That figure is up sharply from the figure for the fourth quarter of 2011, when it was 1.99.
That increase is the biggest jump between quarters that we've seen for that number since 1999. Such an unusual change in Americans' spending and saving habits suggest that we might be seeing the economy in the midst of making a significant turn on that issue.
Debt as a percentage of GDP has now returned to the levels it was at before the economic crisis, after reaching a peak in the first quarter of 2009. Looking at the combination of household and financial debt combined, that number as a percentage of GDP is now the lowest it's been since the fourth quarter of 2002.
That increase is the biggest jump between quarters that we've seen for that number since 1999. Such an unusual change in Americans' spending and saving habits suggest that we might be seeing the economy in the midst of making a significant turn on that issue.
Debt as a percentage of GDP has now returned to the levels it was at before the economic crisis, after reaching a peak in the first quarter of 2009. Looking at the combination of household and financial debt combined, that number as a percentage of GDP is now the lowest it's been since the fourth quarter of 2002.
Subscribe to:
Posts (Atom)