MinyanBlog

At the end of the first week of the new year, I would like to take this opportunity to reveal my goals, plans, and changes to the website in 2008. This is an important post and one you'll want to take time to read thoroughly.

For the past few weeks, it was a good time for rest, reflection, evaluation, and planning for 2008. I think it was time well spent and, like many of you, I'm well motivated to achieve great things in the coming year. I've always enjoyed the process of taking time to reflect and think, as well as to seriously evaluate what I'm doing and whether I'm reaching my goals. As the great philosopher Socrates once said, "the unexamined life is not worth living." How very true.

The pain continue into the afternoon as the markets are again near their lows of the year. The DJIA -200, NAZ -71 and SPX -25.5.

Sector strength- utils-

Sector weakness- homies, semis, retail, tech, airlines and real estate;

There was finally some dose of reality in the December jobs report. But as weak as the headline number was (and it was very weak), the details were even worse. Let's take a look at The Employment Situation: December 2007.

The unemployment rate rose to 5.0 percent in December, while nonfarm payroll employment was essentially unchanged (+18,000), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Job growth in several service-providing industries, including professional and technical services, health care, and food services, was largely offset by job losses in construction and manufacturing. Average hourly earnings rose by 7 cents, or 0.4 percent.

Shares of E-Trade Financial Corporation (ETFC) have been in the news recently, first on word that ex-CEO Mitchell Caplan was selling stock and then with the story of his $10.9 million payout. The stock has been hit over the last few months but that same fate has not been suffered The Charles Schwab Corporation (SCHW) or TD Ameritrade Holding Corp. (AMTD). The chart below shows the relative performance over the last six months.

Very risky if considering for a long trade.

I've been reading The Dick Davis Dividend, a recent book written by the well-known market commentator, and have to say that it offers some of the sanest perspectives on trading and investment I've encountered in a while. Davis began his newsletter in 1982 and has been offering commentary on the markets for the past forty years. This book is a distillation of the wisdom he's acquired over that period.

It would be good to go back and review Predicting GDP With Two Variables. Keep in mind that I generally don’t see anything actionable in modeling GDP, jobless claims, or other such stuff, and don’t use that type of modeling in my trading. My point in showing these models is to demonstrate that the vast majority of econopundits are outsmarting themselves – not that that’s a difficult proposition – and that a bug with access to data and some skilz can do a better job in 30 minutes or less.

The initial take was a prediction of next Calendar Year’s GDP change using the Consumer Price Index: All Urban Consumers, All Items and Civilian Unemployment Rate from the end of the second quarter of the previous year, that is, using final June xx data to predict final change over calendar year xx+1. The model looked promising, and showed CPI increase as a drag on future GDP and high unemployment as an engine for higher future GDP, both of which make sense from an Austrian Business Cycle perspective. Based on that data, 2008 was projected to be at trend (+3.3%) and above the projection that (would have been) made for 2007 (based on 2Q ‘06 data) of +2.7%.