THE PUNDITS & THE LABOR MARKET

Today’s employment report was, well, discouraging. Or was it? The range of opinion was unusually wide, or so it seems.
The reported facts, at least, are clear. Quoting from the Labor Department’s press release, “The unemployment rate fell from 10.0 to 9.7% in January, and nonfarm payroll employment was essentially unchanged (-20,000), the U.S. Bureau of Labor Statistics reported today. Employment fell in construction and in transportation and warehousing, while temporary help services and retail trade added jobs.”
But that’s just the beginning. Or is it the end? You decide. Here’s a sampling of the commentary on today’s numbers that, for one reason or another, caught our attention…

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WHAT ARE THE LEADING INVESTMENT TRENDS FOR 2010?

Mercer, the consultancy, has some thoughts. Ten, to be exact…
1. Superannuation legislation will force change in the way we look at retirement and how retirement savings are invested
2. A weaker global banking system will create opportunities for private credit
3. Emerging market growth will outstrip developed markets, but equity markets may have priced this in
4. Environmental, Social and Governance (ESG) factors will continue to rise on investors’ radar
5. Investors will critically examine their investment strategies in the context of evolving deflation/inflation risks
6. Dynamic Asset Allocation (medium-term asset allocation tilts) will be de rigueur to capture market mispricing in the medium-term
7. Investors will undertake more due-diligence on hedge fund strategies
8. The big “macro” moves may be behind us – time to become “micro”?
9. Super funds will question the role of illiquid assets in their portfolios
10. Diversification will remain key.

HEY, BUDDY…CAN YOU SPARE A LOAN?

Yields on short-term government securities vary from just above zero (10 basis points for 3-month T-bills) to around 1% (88 basis points for a 2-year Treasury). Those are extraordinarily low rates by the standards of recent decades. But don’t confuse that with borrowing costs, or the demand or ability to borrow.

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A CHANGE IN THE TREND?

Last week we pondered the possibility that an ill wind was blowing in what had been a fairly consistent decline in initial jobless claims. Today’s update on new filings for jobless benefits doesn’t offering a soothing follow-up. If anything, we’re more anxious.

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MONETARY VS. FISCAL STIMULUS

Economist Scott Sumner makes the case that if we need more stimulus, it should be of the monetary variety rather than fiscal. That sounds about right, based on my analysis at 2009’s close that if there’s any evidence in favor of economically stimulating stimulus over the past year or so, the clues suggest that the monetary toolkit was the productive catalyst for averting a deeper contraction/crisis.

YOUR EDITOR ON THE RADIO…

I’ll be discussing the finer points of portfolio strategy, strategic-minded investing and my new book (Dynamic Asset Allocation: Modern Portfolio Theory Updated for the Smart Investor) this coming Monday evening, February 8, on the Gabriel Wisdom Radio Show. The 60-minute show airs at 7 p.m. on the East Coast (4 p.m in the West). I’m scheduled for 7:30 eastern time. You can listen live via the link above or by way of the conventional channels with terrestrial radio (find your local station here.) In addition, the show will be archived here.

CLEAR GRASP OF THE OBVIOUS

Is it really necessary to remind folks not to spend the rent (or college) money on the slot machines? And if someone is actually engaging in such obsessive and self-destructive behavior, is a casual comment to do otherwise from a stranger on TV likely to make a difference? Apparently the President of the United States thinks so. Maybe he’s right. In that case, let me remind everyone to be sensible and avoid the following: driving with your eyes closed, investing every last dime of your life savings in out-of-the-money options and expecting that politicians will focus (and speak) on the priorities du jour.