Employment Situation Summary for Friday, January 07, 2011

Employment Situation Summary
Release Date: Usually the first Friday of each month
Release Site: http://www.bls.gov/

Market Relevance: VERY HIGH
Management Value: VERY HIGH

To learn about the official release please follow:
http://www.blueworldassetmanagers.com/explanation.html

Friday, January 07, 2011

Blue World Employment Situation Analysis

The Bureau of Labor Statistics released a jobs report today that was, per usual of late, not surprising. I've seen the word "disappointing" used a lot this morning. The "confusion" most experts are suffering is due to the conflicting indicators week by week with new jobless claims and the monthly ADP report. Since the beginning of time investors, managers and experts have tried to discover a way to accurately and consistently predict the unemployment report. The problem is that no other indicator, government or private, samples as large a pool or evaluates from the two key perspectives simultaneously, meaning household and establishment data. (follow link for explanation http://www.blueworldassetmanagers.com/explanation.html)


We are in uncharted waters, here. This recession is not like prior recessions caused by a normal business cycle downturn, international conflict or some other type of business or confidence disruption that, while significant, had a probable game clock. This recession started with a perceived slow down. It was exacerbated when it appeared a solid anti-business candidate would win the Presidency and have the full support of an anti-business congress. An acceleration occurred when he did win and it continued to deepen as his policies were implemented. At this time our future is still rife with uncertainty regarding healthcare legislation, tax policy and the business climate, in general. Remember, the government CANNOT create jobs no matter how hard they focus on them. All they can do is create a business friendly climate that encourages the private sector to expand or, as is the case now, create a climate of fear and uncertainty, the guaranteed killers of growth . A payroll tax break for...the employees?!? Window dressing. Extending the Bush era tax cuts for only 24 months, healthcare costs to employers already shooting through the roof, the continued threat of crippling regulation of construction, energy and manufacturing by legislation or fiat does nothing to encourage those who invest real money, hire real people and make real contributions to GDP. It really is that simple.

Based on all that you would not be surprised to learn that Blue World expects to see inconsistent and very muted growth in employment, GDP and demand for at least and, hopefully only, the next two years UNLESS we see a very high profile and significant shift in political attitude and policy.

Now, to our analysis of the numbers. The overall rate dropped to 9.4 percent which continues to be a staggering and unacceptable number. The details reveal that no meaningful changes, good or bad, have occurred and the markets are reacting accordingly today as the detail is digested. The unemployed rate for professionals is still flirting with 5 percent (4.8%). Historically 3.5% for this group was considered devastating. There were increases in each of the following negative categories: unemployed for more than 27 weeks, could only find part-time work, marginally attached and discouraged workers and construction job losses. Predictably there were continued gains in healthcare and social assistance. The diffusion index continues its erratic movement. As the inventory component of GDP would predict manufacturing hours worked and overtime per week was flat.

There is no magic here, folks. People who operate on theory can afford to see things in a light substantially different than those who invest real money, hire real people and make real contributions to GDP.

Please look for some upcoming posts with more detail on some of the commentary above.

We remain in a very defensive posture with our investment strategies and will for the foreseeable future.

We always thank you for reading and...stay tuned!

Release Site: http://www.bls.gov/

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed. The official release site should be cross referenced for accuracy and footnoting. The analysis represents the opinion of Blue World Asset Managers, Ltd. who are not giving advice and does not warrant or guarantee predictions based on its analysis.

Blame and Inheritance - Really? C'MON

I'd like to talk to the current administration as well as all executives, consultants, business leaders and responsible adults about blame and inheritance for a few minutes.

A big part of what we do at Blue World includes estate planning so I have a solid grasp on the concept of inheritance.

Another major area is turn-around consulting for troubled businesses so I am painfully familiar with blame.

Blame:
I have been engaged as everything from consultant to CEO in troubled companies. The earliest conversation with remaining management is, unfortunately, what I characterize as a therapy session. It is often helpful to understand the history of decision making (or lack thereof) that led to a company's trouble. Most commonly, however, this "analysis" devolves quickly into blaming a person, people or circumstance(s) for the problems. Once this occurs I stop and say "blame me." "I will accept total blame for all the trouble this firm is in right now." Then I ask the important question. "Now that we have identified a single culprit, consolidated all blame and assigned it to me will someone tell me how that helps?"

Feeling better about making sure blame is assigned to someone else, meaning no one blames you, is not productive. Period. Assign blame to anyone or anything you want to. I have never seen the assignment of blame solve a single problem or turn around a single company. So, please, enough with people of responsibility assigning blame. Let's, instead, have mature adults objectively review history to analyze the viability of altering non-productive policy or process in furtherance of an effort to improve company performance, huh?

Inheritance:
I have had successes and failures just like everyone else. I admit I have learned a great deal more from the failures which, inevitably, led to more successes. But I also admit that the successes are more fun. In either case I reject the notion of "inheritance" as it pertains to professional, executive level turn-around situations. Allow me to explain.

Assume the following: A young man is the son of a business owner. He is 20 years old, in college, care-free and never has really been interested in Dad's business. Dad passes away unexpectedly. The son is now the sole shareholder of the business and learns the business is in big trouble. This is someone who has, legitimately, inherited a problem.

Now assume that I am the CEO of Blue World Asset Managers, Ltd. I am contacted by a company in distress and asked to evaluate it for purposes of turnaround. I go in with my highly skilled and experienced team of professionals. We look at the books, interview the management, the rank and file, customers, vendors, etc. to determine the viability of a turnaround effort. If we feel there is a shot at success we develop a plan to attain that success and then begin to implement and execute the plan. If I am successful I am very happy to take the credit. If I fail I am the first to accept the responsibility. (Note I did not say "take the blame").

Following failures in turn-around it is not uncommon to get a pat on the head and be told "it's not your fault...you didn't create the problems...you inherited an impossible situation... ALL B.S.! Why? Because we CHOOSE the fight. We do not inherit anything! We come in, evaluate a situation, identify a problem, put our hand in the air and say "PICK US, PICK US. WE THINK WE CAN FIX IT." We did not inherit anything!

Perhaps you see where I'm headed. I do not attempt to make political commentary but politics cannot be separated from economics. Political policy driven by philosophy and ideology have a profound impact on the business and economic environment.

Our country, and the free world, is being led by an administration who continues to blame the preceding administration and talk about the mess they've inherited. When you campaign for over two years and spend a hundred million dollars to frame a set of problems, propose solutions and scream "PICK ME PICK ME. I CAN FIX IT." from the highest peaks you MAY NOT claim to have inherited anything. You signed up, made your pitch, won the contract and are expected to deliver, no different than any other new management team or outside consultant.

We can have intellectual, thoughtful discussions and debates regarding policy and economic theory. That can be very productive. But to have adults of responsibility, nay even more, the top executive in the world and his A-team continue to discuss blame for the mess they inherited is unproductive and irrelevant. It terrifies me and it should terrify you, too.

We have over 16 million people unemployed, over a trillion dollars in budget deficit, uncontrolled borders, an unprecedented foreclosure rate, a looming commercial debt catastrophe and a host of additional daunting challenges to our sovereign nation, not just a single company.

So...OK, blame the prior executive and his administration. Assume you get us ALL to agree with you 100%...then tell me how that helps.