Tag Archives: nysearcauup

Weak Wages And Weaker Manufacturing, But How ‘Bout Those Rate Hike Expectations!

When half of the employed folks make less than what it takes to support one’s self, the wage growth required for a stronger economy cannot suddenly appear. Rather, increases in consumption must rely entirely on low-rate debt binging. Crafting a positive spin on the economy should not be a substitute for frank discussions on the actual state of affairs. I started working at the age of 13. I wanted to be productive. I wanted to make money. Gardener, golf caddy, food deliverer, waiter, bartender, entrepreneur, researcher, analyst, writer, planner, adviser, money manager – I probably spent as much time cursing and complaining as I did whistling. Nevertheless, thirty five years of work contributed to my well-being as well as the well-being of others. Will people from my generation (“Gen X”) leave the workforce anytime soon? Not if we intend to maintain our lifestyles. In fact, Gen Xers aren’t slated to begin retiring in earnest until 2030. We may have grown up as apathetic slackers, yet studies routinely demonstrate that those born between 1961 and 1981 are exceptionally industrious. (Good looking too.) So why are Gen Xers and post-World War II baby boomers leaving the workforce at an accelerated pace during this economic recovery? For example, today’s jobs report celebrated the creation of 223,000 new jobs in June and a 5.3% unemployment rate, while barely mentioning that 432,000 civilian workers disappeared from the labor force altogether. At present, a record 93.6 million of the U.S. working-aged population are no longer in the picture, resulting in the employment rate/participation rate hitting 1977 levels of 62.6%. It actually gets worse. There are roughly 100 million Americans out of 160 million Americans considered by the Bureau of Labor Statistics ( BLS ) as fully employed. Yet it has been estimated that 1/2 of those 100 million earn less than $15,000 annually as part-timers or self-employed workers. Should we really be declaring an annual income of $15,000 as sufficient for a spot in the full-time work column? Houston, we’ve got a problem. And I’m not even referring the planned layoffs across the oil and gas space. For one thing, when half of the employed folks make less than what it takes to support one’s self, let alone support children or elderly family members, the wage growth required for a stronger economy cannot suddenly appear; rather, increases in consumption must rely entirely on low-rate debt binging. Can you say, low rates for longer? Secondly, crafting a positive spin on the economy should not be a substitute for frank discussions on the actual state of affairs. Specifically, popular media outlets like the Associated Press have little business calling a tepid jobs report “solid.” In the absence of any month-over-month wage growth? In spite of downward revisions to job growth in prior months? With employment gains only keeping up with population gains? Indeed, the Associated Press even acknowledged that the employment rate/workforce participate rate fell because people out of work gave up on the pursuit and no longer count in the unemployed tally. How exactly is this a topnotch turn of events? There are two key ramifications of today’s data from the BLS as well as ancillary manufacturing data from the U.S. Census Bureau. First, the idea that the dollar can only move higher in light of China uncertainty and euro-zone complications is flawed. Expectations for the timing and the extent of rate hikes by the Fed continue to diminish with every lackluster economic presentation. Since the dollar had already priced in the end of quantitative easing in the U.S. and the eventual beginning of eurozone quantitative easing, I’m more inclined to expect the dollar via the PowerShares DB USD Bull ETF (NYSEARCA: UUP ) to end 2015 very near where it is today. Next, prominent sector investments like industrials and transports will continue to underperform. Simply stated, factory orders have fallen in nine out of the last 10 months; the seasonally adjusted year-over-year decline in factory orders is 6.3%. Strong dollar excuses notwithstanding, this type of data is entirely recessionary. In fact, it’d be difficult to find a period where the weakness in demand for U.S. manufactured goods was this low and it wasn’t associated with economic recession. As I have discussed on many prior occasions, one does not necessarily need to pare back core positions like the iShares S&P 100 ETF (NYSEARCA: OEF ). Not unless one is employing a disciplined approach to risk reduction . Still, if you have been holding onto an allocation to the Industrial Select Sector SPDR ETF (NYSEARCA: XLI ) or the iShares Transportation Average ETF (NYSEARCA: IYT ), consider taking profits. Technical analysis of the sectors suggest further erosion of price, and neither the BLS employment data nor the U.S. Census Bureau manufacturing data indicate a quick turnaround. Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.

Ongoing Exit From Equity Funds Continues 20-Week Streak

“}); $$(‘#article_top_info .info_content div’)[0].insert({bottom: $(‘mover’)}); } $(‘article_top_info’).addClassName(test_version); } SeekingAlpha.Initializer.onDOMLoad(function(){ setEvents();}); By Jeff Tjornehoj Equity mutual fund investors withdrew an estimated $920 million net for the week. Not surprisingly, they pulled money from domestic equity mutual funds (-$2.2 billion)-for a twentieth consecutive week of net outflows for the group. Equity exchange-traded funds (ETFs) saw net inflows of $7.8 billion, although investors turned their backs on emerging markets products (-$346 million) to avoid excess risk. The week’s biggest equity ETF recipient was the SPDR S&P 500 Trust ETF ((NYSEARCA: SPY ) , +$3.0 billion), while modest selling hit the iShares MSCI Emerging Markets ETF ((NYSEARCA: EEM ) , -$342 million ) and the iShares Core S&P 500 ETF ((NYSEARCA: IVV ) , -$477 million). Bond mutual fund investors freaked out on High Yield Funds and pulled $1.7 billion net from that Lipper classification to send taxable bond funds as a whole to a negative $3.4 billion for the week. Mutual fund investors pumped some cash into Lipper’s Core Bond Funds (+$737 million) and Core Plus Bond Funds (+$271 million) classifications. Bond ETF investors pulled $1.8 billion from their accounts to create combined (mutual funds and ETFs) outflows of $5.2 billion-for the largest bond fund outflows since the last week of December 2014. The week’s top individual destination for bond ETF investors was the PowerShares DB USD Bull ETF ((NYSEARCA: UUP ) , +$89 million); outflows of $666 million hit the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEARCA: HYG ) . Municipal bond mutual fund investors pulled $421 million from their accounts for the seventh weekly net outflow in a row. Money market funds saw net outflows of $10.8 billion, of which institutional investors pulled $12.6 billion and retail investors added $1.9 billion. Share this article with a colleague

GLD – Getting On The Record With The Gold ETF

I altered my outlook for gold on Christmas Day, moving from a short view held from September 5 to a long view at what turned out to be perfect inflection. Since marking highs in January, gold and the GLD have again given way. The catalyst working against gold has been a strengthening relative dollar value, I believe greatly on concerns about the euro and Greece’s disruption to it. I see the Greece issue being resolved favorably near-term, and I believe the relative weakness that will follow for the dollar will again lift gold and the GLD. While some risks exist against my view, I see most of those either balanced or priced into the value of gold and the GLD at current levels. On Christmas Day 2014, I ended my short opinion on gold and gold relative securities with the publication of this report, Gold Outlook for 2015 – Buy & Hold Here . I also suggested the best way to play a reversal in gold was through the Market Vectors Gold Miners (NYSE: GDX ). But I never got on the record with my SPDR Gold Trust (NYSE: GLD ) followers, some of whom may not be aware of my positive turn. At this point, after a pull-back from a high price point of above $125 in January, and currently trading at roughly $115, I see current value marking a near-term bottom in the SPDR Gold Trust , and can suggest purchase of the gold security again. I believe gold prices should stabilize and rise from here, as the value of the dollar gives way against major foreign currencies. Though I see some risk that capital could flow heavily into U.S. equities, and potentially draw from gold investments over the short-term, I see gold and the GLD security good to go long-term. Even as the Fed raises interest rates this year, I still anticipate the dollar will give way and allow gold to go higher long-term, as Fed transparency has greatly priced this fact into the dollar already. 3-Month GLD Chart at Seeking Alpha The chart here shows the early year run up of gold from lows marked at the end of 2014, before giving way again more recently this year. I ended my negative outlook for gold initiated on September 5, 2014, and turned to a positive perspective for the commodity on Christmas Day. I just about perfectly captured the inflection point you see in the chart above in doing so, similar to how I did at the start of 2014 and in September of 2014. But since marking highs in January, gold and the SPDR Gold Trust have backed off a bit. This report marks my first published article on gold and relative securities since my early calls to buy and serves as an important reassurance to metals investors about my long-term view from this level. Today, trading near $115, the SPDR Gold Trust suffers from the recent strength of the dollar gained on the euro and yen. Against the yen, a recession in Japan and extraordinary central bank steps in that nation allowed the dollar some room to grow. Against the euro, the economic deceleration of Europe and the extraordinary actions of the European Central Bank (ECB) did the same. But the question raised about Europe more recently, due to the disruptive elections in Greece and its new government’s push for alterations to its bailout agreement, have given an extra lift to the dollar this year. Fear of a Greece exit from the eurozone has been overblown, in my opinion, and has been the thesis for a slew of investment recommendations I’ve made recently for and against other securities. For instance, I see the PowerShares DB US Dollar Bullish ETF (NYSE: UUP ) dropping to $24 soon. That move would come on relative dollar weakness, which would also lift gold up again. Relative Securities YTD TTM SPDR S&P 500 (NYSE: SPY ) +2.2% +16.3% PowerShares DB US Dollar Bullish +3.2% +16.0% SPDR Gold Trust +1.6% -9.1% iShares Silver Trust (NYSE: SLV ) +3.9% -25.2% Market Vectors Gold Miners +8.4% -22.5% As it pertains to the SPDR Gold Trust and gold prices, I believe that when the Greece question is answered favorably, possibly as early as today (Friday February 20th) and surely by February 28th, the dollar will start to give way to the euro. The dollar has already shown signs of wanting to do so and U.S. interest rates have likewise risen from recent lows. However, the saga has continued and the catalyst for a move is still chained, with pent-up energy waiting for a true and definite resolution. The dollar has had other reasons to give way recently. Japan just reported that it has formally exited recession, though the Bank of Japan remains likely to stick to its extraordinary easing strategy near-term. Europe is seeing signs of economic improvement as well, and many of its markets have already enjoyed a rally, with only Greece and Spain lagging due to political uproar. The recent peace accord in Ukraine offers hope that some geopolitical stability may be in the offing. All these developments support my thesis along with the catalyst I see in a Greece resolution. Risks exist against my thesis as well. The U.S. Federal Reserve remains on a path toward raising interest rates, but I believe much if not all of this probability is priced into the dollar and thus gold prices. The Fed has so well telegraphed its moves, thanks to its efforts toward transparency, that few will be surprised when the Fed finally does start to raise rates. And let me remind the reader that interest rates are at historic lows and abnormally low considering the strength of the U.S. economy. At this point, some argue, it is irresponsible not to raise interest rates and that the Fed flirts with future risk of inflation. Secondarily, terrorism in Europe has become a reality and could drive another flight to quality to the U.S. dollar, and thus is a threat against this thesis. However, one might argue that the same risk is likely intensified now for the United States, which is stepping up its own efforts against the Islamic State. Finally, if a Greece resolution occurs, it should also drive a rally in U.S. equities in my opinion. There is risk that gold could serve as a source of capital to fund it. I would argue that U.S. treasuries and other near cash assets are more likely to serve that purpose, especially given gold’s benefit from a weaker dollar. As a result, I see the risks here priced in and/or balanced. I feel comfortable recommending the SPDR Gold Trust at this value, after showing signs of stabilization here at an important technical support which likewise exists for gold here. The world is not a united utopia today, and humans will continue to reach for gold as a default currency against the risk of imperfectly government backed and risky fiat currencies. Gold has increased in use as a reserve currency, increasingly replacing the dollar in many central bank stores, offering indication of what I suggest. The dollar has become overextended in my opinion, due to the Greek scare and the previous weakness of Europe and Japan. However, those factors are now giving way, and the dollar should as well, allowing gold and the SPDR Gold Trust to gain. I follow gold closely and so investors in the sector may find value in following my column . Disclosure: The author is short UUP. (More…) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.