The market was doing the latest version of the Friday fist pump
today, following a better-than-expected monthly jobs report. I have
more on the job market below, which takes a bit deeper look at the
reality of where things currently stand.
Getting back to the world of actual fundamentals, we were
finding investors giddy about numbers from Kraft Foods (
), EOG Resources (
), and Procter & Gamble (
). Quite honestly, P&G's results were pretty disappointing to
me (but that doesn't matter in today's rip-roaring tape). The
transports, which many like to look at for economic direction
rallied over 100 points today, this despite oil prices (which is
NOT a transports investor's best friend) surging over $4 a barrel.
Whereas, transports fell more than 100 points on Wednesday with oil
up less than $1. Talk about no rhyme or reason! Either way, we'll
take the rally over a sell-off any day of the week.
Elsewhere, utility giant Consolidated Edison (
) traded slightly higher, even as revenues dropped 7%. As I've been
saying for months now, my fear is that some of the investor-crowded
"safe-haven" yield plays like ED aren't exactly executing on all
cylinders in their businesses. With such a large amount of
investors owning a utility name with a sub-4% yield, valuations may
very well come under the microscope. A sudden drop in share price
could then negate whatever yield investors were banking on.
As election season approaches, incumbent politicians and
would-be politicians are analyzing every bit of economic data they
can get their hands on to help paint a sensationalist picture (of
course aimed at discrediting their opponent). This morning's job
numbers were certainly good on paper, but when you look at a
different account of what's
happening to the workforce, it's not pretty.
CNBC.com ran a story discussing a separate number called the
"U-6," which provides a more complete tally of how many people
really are out of work. Interestingly enough, this data is also
collected and provided by the government - yet this more-accurate
figure isn't used in its mainstream communications.
Anyway, some of these U-6 numbers are staggering. For example,
Nevada's U-6 unemployment rate is 22.1 percent, up from just 7.6
percent in 2007! Rhode Island is at 18.3 percent, more than double
its 8.3 percent rate in 2007. California has a 20.3 percent U-6
rate, while Florida is at 17%. Only three states have U-6 rates
under 10 percent: Nebraska (9.1 percent), South Dakota (8.6
percent) and North Dakota (6.1 percent). However, when you add up
the population of these three states, it barely accounts for 1% of
the population of the United States.
Predictably, political candidates looking to unseat their
incumbent opponents will take the easy way out and simply claim
they're going to create jobs if they're elected. This quip is easy
to say, but extremely difficult to actually accomplish. Hopefully
the teams surrounding many of our political candidates realize this
fact, and can dig deeply into some real ideas to help solve our
We spend a lot of time here at Dividend.com looking at economic
items beyond just company earnings reports, as you can probably
surmise. The reason we do so is simple. If you just wait for
companies to paint a picture of what is happening, you become
susceptible to unexpected shocks. Plus, companies are known for
skewing the numbers to their advantage in many cases (share
buybacks, adjusted EPS numbers, deferred revenue, etc.). Our job is
to make sense of the full economic picture, and how future
developments will eventually help or hurt corporate profits. Rest
assured, we're on the case every single day.
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A Look to Next Week and a Weekend Preview
Looking ahead to next week, third quarter earnings will
continue, as we are expecting results from CVS (
), Kohl's (
), Macy's (
), and Vornado Realty Trust (
), just to name a few. The focus will likely be on the economic
data as well as the latest Wall Street analyst calls.
Be sure to visit our complete recommended list of the
Best Dividend Stocks
, as well as a detailed explanation of
our ratings system here