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Weighing the Week Ahead: What Should Happen? What Will Happen?

5 days ago

We have a big economic calendar, with featuring reports on sentiment, personal income and spending, and an especially interesting first estimate of Q3 GDP. The election campaign continues at high intensity and the COVID news grabs daily headlines. It is a huge week for corporate earnings, an important independent read on the economy.
None of these stories will dominate, allowing investors to choose their own focus. In my continuing effort to call attention to the truly important stories, I suggest that investors should be asking two questions on a wide range of topics?
What should happen?
What will happen?
For those who see the difference, and provide honest answers, there will be a great payoff.

In my last installment of WTWA, I suggested that important earnings news might cut through

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Weighing the Week Ahead: Will Strong Earnings Confirm an Economic Rebound?

12 days ago

We have a light economic calendar with a focus on housing. There are continuing political and pandemic stories that could dominate the news cycle at any time. For those focused on financial markets, earnings season might provide answers to important questions. We will all be asking:
Will earnings signal a strong economic rebound?

In my last installment of WTWA, I asked whether the President’s COVID diagnosis should cause investors to change course. There were some reader complaints that this topic was “political.” As always, I tried to explain that political events determine policies which affect our investments, but the distinction seems to elude those who disagree with the conclusions. It is my mission to highlight everything important for investors, even if the subject is awkward.

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Weighing the Week Ahead: Should Investors Change Course Because of the POTUS Diagnosis?

26 days ago

We have a modest economic calendar including the ISM non-manufacturing index, JOLTS, jobless claims data, and the NFIB index. The Fed minutes from September’s meeting will be released. The Vice-Presidential debate is set for Wednesday.

None of this will lead the daily news headlines as everyone monitors President Trump’s condition. This is important for many important reasons not the least of which are national security and the economy. That said, investment decisions can have long-lasting significance and decisions are in our own hands. It is important to ask:

Should investors change course because of the President’s illness?

In my last installment of WTWA, I began a review of key elements during the pandemic emphasizing what knowledge was available at each stage. I

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Weighing the Week Ahead: What Did We Know — And When Did We Know It?

September 27, 2020

We have a huge economic calendar and the first of three scheduled Presidential debates. The employment report will be the last one before the election, so I expect it to get special attention. Most of the other important economic data will also be reported during the week.
The data provide an opportunity for investors to assess what they can reasonably conclude about the state of the economy and investment prospects. We should all be asking,
What do we know ……and when did we know it?

In my last installment of WTWA, I emphasized the investor need for evidence on key elements of the economy. I also noted that this attention to data might well be overtaken by politics and the Supreme Court vacancy.
I was half right.

I always start my personal review of the week by looking at a great chart.

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Weighing the Week Ahead: Investors Need Some Accurate Evidence!

September 20, 2020

We have a light economic calendar with important data on home sales, jobless claims, and durable goods orders. None of these is likely to stimulate higher heartbeats.
I expect politics and the election to get plenty of attention in the financial media, especially with an open Supreme Court seat as a new issue.
These are important long-term issues, but the answers (which no one knows anyway) shed little light on key questions we all face right now.
Investors need an evidenced-based assessment of the economic rebound.
And then they need to ask if their portfolios are aligned with the answer.

In my last installment of WTWA, I took note of market declines and considered whether this might be the “start of something big.” We still do not know, but it is worth paying attention to the most

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Weighing the Week Ahead: The Start of Something Big?

September 6, 2020

We have a light economic calendar and a holiday-shortened week. The NFIB small business report is interesting, as is the continuing information on jobless claims.
There will be plenty of political news of course, but market attention will be focused on this novel idea that markets can move downward. Maybe even a lot in a single day. Many unconvincing reasons were offered for Thursday’s sell off, so there is plenty of room for the punditry to continue the debate. Most will be asking:
Is this the start of something big?

In my last installment of WTWA, I considered several aspects of the Great Reopening, wondering if it was risky business and how we could tell. The jury is still out for most of this story since there is a lag in getting results about new pandemic hot spots.
We do have

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Nonfarm Payroll Response Rate Warning Continues — 7 Million Jobs Too High?

September 5, 2020

The most important feature of the Nonfarm Payroll report continues to go unnoticed. We should be watching the response rate in the second revision of the data. That is where failed and shuttered business show up.

This is important because the BLS methodology (and they are doing as well as possible with the tools at hand) assumes that missing reports from closed businesses are offset by new businesses. This usually is true but count me as a skeptic in the current environment. Here is the latest table of response rates, abbreviated to focus on recent years and the third release.

This version shows the continued post-COVID increase in missing responses. The first and second responses have returned to normal levels. Why is only the third response lower than usual? The

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Investing for the Long Run: Looking Beyond the Obvious

September 2, 2020

I have separated my long-running Investor section from Weighing the Week Ahead. My hope is to highlight ideas for the long-term investor. In my last investment post I applied the key concepts of the matrix to the deeply bifurcated market – FAANG and everything else. The Great Reset research has moved on. Here are the key points:

How long until the recession ends?

What pandemic developments can facilitate the return to a normal economy?

What are the best stocks for the “other side?”
For now, and for as long as the pandemic weighs on the market, that is the necessary context for each stock idea. To provide a starting point, I created The Great Reset Matrix. The Matrix is a conceptual guide, which I use in evaluating every new stock idea. The current version draws upon results

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Weighing the Week Ahead: Risky Business or Business as Usual?

August 30, 2020

We have a big week for economic data with the emphasis on employment.  With reports on jobless claims, ADP employment, and the official employment situation report all hitting right before Labor Day, we can be sure it will be a big topic.  Throw in the election campaigning and we can expect jobs to be the theme of the week.  For many it will also mean the end of vacation, returning to work after a layoff, or the reopening of a business.  There is a key question however:

Will it be Risky Business or Business as Usual?

(Mrs. OldProf enjoyed listening to Bob Seger as I searched for this image. The song is now the #2 Jukebox Single of all time).

 Last Week Recap

In my last installment of WTWA, I highlighted the changes in the housing market and suggested an investment opportunity.

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Weighing the Week Ahead: Do Housing Market Changes Present an Investment Opportunity?

August 16, 2020

We have a light economic calendar with a sharp focus on housing data.  Earnings season has ended, and Congress is out of town.  There is plenty of space for journalists to fill in a quiet, mid-summer week.  Perhaps the housing data will fill some of that space.  We may be overdue for a closer look, asking:

Do changes in the housing market represent an investment opportunity?

In my last installment of WTWA, I asked whether the U.S. might be enjoying an economic sunrise.  I took each of the key issues and outlined the key questions for investors.

Others picked up the general topic, but no one is doing this type of specific analysis.  That only underscores the importance for thoughtful investors.  Sometimes (perhaps often) we are rewarded for looking beyond the obvious.

I

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Investing for the Long Run: The Challenge of a Bifurcated Market

August 13, 2020

I have separated my long-running Investor section from Weighing the Week Ahead. My hope is to highlight ideas for the long-term investor.  In my last investment post I applied the key concepts of the matrix to a range of investment ideas.  We have been on target so far with what to avoid, and I expect the approach to guide us to the best long-term investments.

For now, and for as long as the pandemic weighs on the market, that is the necessary context for each stock idea.  To provide a starting point, I created The Great Reset Matrix.  The Matrix is a conceptual guide, which I use in evaluating every new stock idea.  The current version draws upon results from the Great Reset Project, where readers have joined in to help with my Wisdom of Crowds approach.  The results may seem like

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Weighing the Week Ahead: Economic Sunrise?

August 9, 2020

We have a big economic calendar with reports on inflation, small business optimism, retail sales, consumer confidence, and unemployment claims.  I expect the data to continue occupation of the back seat.  The election news is easy to write about, and financial media are taking the bait.  Anything about the pandemic is newsworthy.  Most important will be the fate of moves to extend economic assistance to the unemployed and others.

Many pundits have been unduly pessimistic about the economic rebound.  That has also been my viewpoint.  I am accepting a reader suggestion to think carefully about my conclusions.  What would make me bullish?  Put another way:

Are we witnessing an economic sunrise?

In my last installment of WTWA, I raised concerns about the accuracy of the upcoming

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NFP Response Rates Sound a Warning

August 8, 2020

As I wrote in my Non-farm Payroll preview, the most important result to watch is the response rate. If the response rate is below the normal level, it might imply a higher level of business deaths. If this is true, the standard BLS methodology results in a significant overestimate of payroll jobs.

And that is exactly what happened. While the just-reported July response rate was a solid 77.8%, the second and third estimate for prior months are more important. The reason is that shuttered establishments will not respond to the survey, even two months later.

Let’s check the data. For May, which started the series of rebounding numbers, the third (and final) estimate shows a response rate of 90.7%. To most that would seem quite good, but is actually the lowest level in more than

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Employment Report Preview: Interpret with Care!

August 6, 2020

There is something wrong with the monthly Payroll Employment Report.

Economists were very surprised by the massive jump in jobs reported in May.  They quickly changed their viewpoints about the economy as did important policymakers.

The reasons are simple:

Employment is the most important economic indicator – the foundation for income, spending, and government revenue.The payroll employment report is viewed as the best and most important employment indicator.Those analyzing and reporting the data have earned a reputation for honesty and professionalism.This indicator is so important that we must get it right – or at least be aware that something might be wrong.  In this analysis I will explain an arcane element of the methodology that I believe to be the culprit.  The result may

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Weighing the Week Ahead: Is the Payroll Employment Report Accurate?

August 2, 2020

It is a big week for economic data. There are many reports with the most attention on Friday’s Employment Situation data.  We will also get auto sales, the ISM manufacturing and non-manufacturing indexes, construction spending, and factory orders. Weekly jobless claims continue to attract great interest and should.  The corporate earnings story hits a peak for the season.

Many have been reassured by the job growth in the payroll employment report.  It is viewed as the most important by the investment and economic communities and has earned a status as the “official” read on employment.  We should be asking:

Is the payroll employment report accurate in these tumultuous times?

I always start my personal review of the week by looking at a great chart.  This week I am featuring

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Weighing the Week Ahead: Time for A Look Under the Hood of the Economic Engine

July 26, 2020

We face an important economic calendar and earnings reports from 192 companies in the S&P 500.  We will get important data on sentiment, personal income and spending, housing, employment claims, inflation, manufacturing.  The first estimate of Q2 GDP is expected to be bad, very bad. And by the way, the FOMC meets and announces a rate decision on Wednesday.

The punditry will seek any hints about the state of the recovery as well as commentary about the COVID-19 impact.  Earnings reports and the Fed press conference will be the basis for clues.

The difficulty with this search for evidence is confirmation bias.  In a world where the data is suspect, unsupported opinion may sound profound.

In the days before the check engine light, a car owner might hear an odd noise and do their own

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Weighing the Week Ahead: What is Your Personal Downside Risk?

July 19, 2020

The economic calendar is light with a focus on home sales.  Unemployment claims data remains an especially important indicator.  Second quarter earnings reports will be more important than the economic data, but I do not expect much fresh information on COVID-19 and earnings outlook.  The average investor gets little help from any of these reports and certainly not from the punditry.  They are on their own with the key question:

What is my personal downside risk?

My goal is to provide some ideas for that analysis.

In my last installment of WTWA, I suggested that investors might want to study methods of hedging.  On reflection, I should have discussed today’s topic first.  Readers who find today’s post helpful should also review last week’s.

I always start my personal

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Investing for the Long Run: How to Analyze “Expert” Advice

July 18, 2020

I have separated my long-running Investor section from Weighing the Week Ahead. My hope is to highlight ideas for the long-term investor.  In my last investment post I applied the key concepts to a range of investment ideas.  If you missed it, take a look.  We have been on target so far with what to avoid.

For now, and for as long as the pandemic weighs on the market, that is the necessary context for each stock idea.  To provide a starting point, I created The Great Reset Matrix.  Helped by readers suggestions, I have made some improvements.

The Matrix is a conceptual guide, which I use in evaluating every new stock idea.  The current version draws upon results from the Great Reset Project, where readers have joined in to help with my Wisdom of Crowds approach.  The results may

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Weighing the Week Ahead: Time for Some Hedging?

July 12, 2020

The economic calendar is extensive with a focus on housing and consumer behavior.  Expect market participants to look for any sign that the economic recovery is stalling in the face of the COVID-19 surge and the slower pace of reopening.  Unemployment claims data remains an especially important indicator.  Second quarter earnings reports, beginning with the big banks, will also provide a closely watched perspective on the economy.

With so many worried about an economic stall it is natural to ask:

Is it time to do some hedging?

This week’s image is from Sportpunter.com, which takes a British, quantitative, and sports perspective on the hedging question. The image suggests that it is not as easy as it might seem.

In my last installment of WTWA, I drew upon the wisdom of

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Weighing the Week Ahead: Don’t Look Back!

July 5, 2020

The economic calendar is modest, and many market participants will probably extend their long weekends.  The ISM Non-Manufacturing Index and jobless claims data will be the most important.

Credit for today’s theme goes to Satchel Paige, one of the greatest pitchers of all time.

Don’t look back; something might be gaining on you.

Picture Courtesy of Simpson Street Free Press, where you will also find a nice article by Patricia Cazares, age 13.

In my last installment of WTWA, I described the fragile state of the economic recovery and asked whether it could be sustained.  Bloomberg apparently thinks that I was on the right track, since they ran this story on June 29th: Coronavirus Resurgence Threatens Fragile U.S. Economic Recovery.  Check it out and compare the information

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Investing for the Long Term: Consider Potential Outcomes

July 4, 2020

I have separated my long-running Investor section from Weighing the Week Ahead. My hope is to highlight ideas for the long-term investor.  In last week’s post I introduced the key concepts and showed some of our survey results.

For now, and for as long as the pandemic weighs on the market, that is the necessary context for each stock idea.  To provide a starting point, I created The Great Reset Matrix.  Thanks to readers who made suggestions after the first version.  It is still a work in progress.

The Matrix is a conceptual guide, which I use in evaluating every new stock idea.  The current version draws upon results from the Great Reset Project, where readers have joined in to help with my Wisdom of Crowds approach.  The results may seem like common sense.  Good!  Comments from

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Weighing the Week Ahead: Sustaining a Fragile Recovery

June 28, 2020

The economic calendar is a big one, compressed into a holiday-shortened week.  Market participants will be checking out shortly after the Thursday morning jobs report for an extended weekend – somewhere! Employment data is the focus, but ISM manufacturing, consumer confidence, industrial production, factory orders, pending home sales, and auto sales are also all on tap.  Everything except auto sales is predicted to increase smartly.

The economic news is encouraging, but the worry continues:

Can the fragile recovery be sustained?

In my last installment of WTWA, I brought together evidence about the mixed messages facing investors.  I expected that to be a focus for the week and it was. The chart for the week displays the market reaction, confirmed but good economic data and

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Investing for the Long Term: Time to be Wary

June 25, 2020

I have separated the Investor section from Weighing the Week Ahead.  Last weekend I described my intention to highlight investment ideas for long-term investors.  I can do it better in a separate post, as I hope you will soon see.

I am going to include more of my own commentary on each idea.  I will cite only ideas that are well developed and could be a good fit for some investors.  I hope to add value in three ways:

Each idea will get a “matrix nomination.”  This is an effort based upon my Great Reset idea – focusing on what will work on the “other side” of the recession.  You can see past research or become a part of the project by signing up for a free membership.  I will continue to disseminate results in post like this one, and you can help.  Here is the current version of the

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Weighing the Week Ahead: Understanding a Mixed Message

June 21, 2020

The economic calendar is normal including reports on home sales, consumer confidence, personal income and spending and jobless claims.  The final revision of Q1 GDP will be of less interest.  While there is growing interest in economic data, most investors and analysts know that the threat from COVID-19 has not ended.  Bloomberg Businessweek’s cover story about The Great Disconnect.

The most important question remains:

How should investors interpret the mixed economic and market messages?

In my last installment of WTWA, I asked whether investors could depend on the rebound trend.  So far, so good.  The list of “propositions to consider” will be a good touchstone in a few months.  With my vacation at an end, today’s post provides a better opportunity to examine these questions

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Weighing the Week(s) Ahead: Can Investors Depend on the Rebound Trend?

June 14, 2020

The economic calendar is normal, featuring housing data and retail sales. Everyone is also watching jobless claims for confirmation that employment is rebounding from the extremely depressed levels.

With so many economic and market crosscurrents, it is a good time for investors to align their expectations with the time frame of their plan.

Will the rebound trend continue? And for how long?

In my last installment of WTWA, I described the need for balance between economic and health concerns. There was some discussion of this specific topic and lots of talk emphasizing both sides. I expect this to be a continuing question for all – investors or not.

I always start my personal review of the week by looking at a great chart. This week I am featuring Jill Mislinski’s version, an

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Website Migration

June 12, 2020

In order to provide a better user experience, we are currently in the process of moving the website.  You may notice a few hiccups–temporary problems we expect to resolve quickly.

Thanks for reading and for your patience.

Jeff

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Weighing the Week Ahead: Are We There Yet?

May 31, 2020

The economic calendar is a big one, featuring several employment reports, including the official version from the BLS. The ISM manufacturing and non-manufacturing surveys provide an early look at economic changes. Despite the significance of the data, most are regarding it as old news. There is widespread willingness to look beyond the chasm of this recession and ask what it will be like on the other side. You can almost hear the chorus of voices asking,

Are we there yet?
Or might there still be a few detours on the road to Walley World?

In my last installment of WTWA, I described the need for balance between economic and health concerns. There was some discussion of this specific topic and lots of talk emphasizing both sides. I expect this to be a continuing question for all –

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Weighing the Week Ahead: A Search for Balance in the Great Reopening

May 24, 2020

The economic calendar features many important reports – housing, consumer confidence, personal income, personal spending, and the Fed’s Beige Book. We now have April data for economic reports and May data for confidence. It is more relevant for seeing the extent of the economic damage. But it is not what people really want to know.

Everyone is making a personal decision about whether and how to venture out after a period of restrictions. There is a balance between the desire to enjoy freedom and the continuing fear of COVID-19. For business owners it is a question of how quickly to reopen and what precautions are necessary. For investors, it will be the first indication of how long the recession might last.

The economic effects lead in one direction. The need for safety suggests

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Weighing the Week Ahead: There are No Shortcuts!

May 17, 2020

The economic calendar is light with a focus on housing reports. These are becoming interesting again since we are getting a look at data that reflects the crisis effects.

The reopening of the economy will continue as the leading story. What will be the safeguards in reopening businesses and the precautions taken by those venturing out? Many will worry about a rebound in COVID19 cases. Others want to see improvement, and they want it right now!

Dr. Anthony Fauci: “…(Y)ou’ve got to understand that you don’t make the timeline, the virus makes the timeline.”

The virus timeline ripples through the pace of reopening, the economic impact, the need for government action, corporate earnings. And finally, of course, financial markets.

There are no shortcuts.

In my last installment of WTWA,

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Weighing the Week Ahead: Roadblocks to Recovery

May 10, 2020

The economic calendar is a normal one and is beginning to include data from after the start of the crisis. This week includes small business and consumer sentiment surveys, as well as April data for retail sales and industrial production. I will also be watching jobless claims, both new and continuing. As I have noted for weeks, none of this will matter. The stock rally on a day with a terrible jobs number makes clear the actual market focus. I expect market participants to be monitoring the economic reopening and asking,

What are the roadblocks to the rebound?

In my last installment of WTWA, I described the high-stakes gamble involved in the economic reopening. That was a good (but perhaps easy) guess about the topic of the week. Financial news made it the lead story throughout

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