The Jobs Report Makes No Sense. Unemployment rate unchanged? Data on how this jobs strength is FALSE.
I am now more concerned than ever about the economy.
Note to Friends: If this email was forwarded to you, please take a second to subscribe to my free email list so that you can get insights on what’s happening in the economy and what this means for the markets. I send periodic insights and exclusive research when I am able to. Going forward, I’m going to be a bit more “raw” in my writing - this means I’m not going to filter my thoughts as much, and I’m going to tell you how I genuinely feel and think about certain situations.
In the first half of this email, I will share with you exclusive research from my November report. In the second half of this email, I will discuss why this month’s jobs data is a complete mirage. For more exclusive investment research, join our Substack or Patreon community to actively protect yourself from the rising risks this market is building up. Our December Investment Strategy is released, and it is our mission to help the good folks position appropriately in this environment and help you STRIP OUT your natural emotions of fear and greed with objective, thoughtful, insightful research.
Dear Friends from my Public and Private Communities,
I want to talk about the jobs market later in this email, but first a recap about what we’ve been doing inside our Community.
Over the past several months, I’ve demonstrated the tremendous value of deep research combined with calm psychology.
In particular, we made the following opinions that we believe have helped thousands of folks navigate this market turmoil (which I believe is far from over) by adding exposure when the time was right and taking wins when risk/reward has become unfavorable.
In fact, I believe the market is about to enter Squid Games Round 2 in 2023! Don’t waste these next 30 days to prepare.
Here is the latest recap over the past 3 months:
After my interpretation of Jackson Hole in August, I was nearly certain the markets were overvalued AND overextended which was a powerful signal to sell into the strength.
As we headed into the Fall (September/October), I discussed with my members inside my Community the 3 key defensive names (DLTR, KR, and JNJ) which have fortress business models in today’s high inflation environment.
With the markets dreading large further 75BP hikes in October timeframe, we reached a yearly low of 3500. At that moment, we talked about how long-term positions started there would likely be fruitful and that patient investors would likely be rewarded.
In November as the S&P 500 reached 3900, and many folks were bewildered by the recovery and attempted to short the market, I instead said this in my Community (see the images below).
First, in the headline title, I discussed that the rally has further to run. This is because the S&P 500 is fundamentally has a different index composition now compared to 6 months ago (read full report below to see why).
And then, later in the report, I discussed that a “less hawkish stance” could send SPX to 4100. Keep in mind, this was all discussed when SPX was at 3900 (already a 400 pt move) from 3500, and many people thought the rally would fail. Some people even shorted 3800-3900! Fast forward just a few weeks, here we are at 4100.
And on China, you’ve seen our opinion playing out on Twitter. We’ve kept folks strong while others have folded. Some people are upset about their cost basis for BABA being at 150/share. Well BABA traded at 60-75 for at least 2-3 weeks. There was clearly an opportunity add a tranche and lower the cost basis of an existing position, which we talked about inside our Community! In October and November, we stayed constructive on China and rated it be a Weak Buy for enterprising investors amidst the chaos in the market. I made a video on this at the lows after 20th Party Congress. Sometimes I read the comments from that video and I think to myself “what a shame”.
There should be no complaining or whining whatsoever - there was an entry, and it was there waiting for you. And I was on Twitter sharing my thoughts nearly every day when valuation was at the basement-levels.
Now, if you have been on my email list for quite some time, you will observe that I CONSTANTLY share premium content with you as samples of our research so that you know exactly what to expect in our Community.
Out of tremendous goodwill, karma, and my committment to helping you, I’m making my November research report now available for you to read (link below).
I sincerely want to help you succeed inside our Community, and our membership pricing reflects this.
I benchmark my value-add with research services that range from 50-100/month in terms of their offer and value proposition. I offer a High-Value research service at an incredibly accessible price. I will help you understand when risk/reward is favorable and when it’s against you.
There are certain people who I want inside my Community. Those are the folks that are patient and understand that things take time to play out - folks that understand that markets go up AND down. Most ideas that I’ve shared have been winners as long as you give it a 3-6 month time horizon. I’m not asking you to wait years for ideas to work out - I’m asking you to just wait a few months.
Then there are the folks who I would not want to join. These are the folks who get upset when the markets are down because they have unrealized losses, and then they get upset when the markets are up because they didn’t “buy more”. Overall, it seems that they are not a good fit for markets, and I cannot help such folks. It seems when markets are down, they lose their cool and when markets are up they also lose their cool.
Those folks cannot be helped, and should simply hide cash under their mattress and call it a day. 👍
Headline Opinion from November Report
Conclusions from November Report
The Jobs Report: An illusion of positive data
Okay now I want to talk about the jobs report that seemingly paints a very rosy picture for our economy. But I want to break it down for you and I how I believe this is a mirage.
The labor force participation rate is BELOW pre-pandemic levels. This will make it very difficult for the Fed to force people back into the workforce with just interest rate increases and QT.
There are several ways to view the jobs report: one is Non-Farms Payroll (NFP) data (which is what we see in media) and the other is the Household Survey. There are economists and analysts who find the pros and cons of each, but according to the Household Survey, jobs have been flat since earlier this year.
There is a significant calculation methodology difference between NFP and the Household Survey. See here:
The Household Survey will consider a person holding 2 jobs as 1 employed individual.
The NFP Data would count and classify this as 2 jobs being created. Over the last 12 months, it’s estimated that over 700,000 U.S. workers had to get an additional job. And the NFP will double count this.
So what’s the conclusion here? The conclusion is that the Jobs Report is masking the weakness of the economy, and more realistic jobs data and unemployment rate figures will show up in corporate earnings in the next 1-2 quarters.
The problem is that the Fed is going to react based on the NFP data and NOT the Household Survey data. This means that this jobs report gives the Fed more ammunition and a stronger narrative to keep rates higher for longer.
The biggest risk to markets is that the terminal rates stay high for a longer-than-anticipated timeframe. The impact from lagged interest rate effects will come back to suddenly and violently eat away at corporate profits in the coming quarters.
Do not for a second believe that the economy is doing well. High interest rates act as a significant force of gravity on valuation and stock prices.
Anyone who chases today’s rally will meet the same fate of those who I told NOT to fly too close to the Sun back in August when I shared a story from Greek Mythology (Icarus flying too close to the sun).
Opportunities are coming, and I will do my best to help you spot them.
If you join us, be long-term. The biggest price movement profiles are generated in a 3-6 month period. In other words, good things (on the upside or downside) take time to play out.
That’ll do for this brief update. Add me on Instagram and Twitter below. On Youtube, I only get to post once per week. But I am able to be a bit more active on Twitter and Instagram.
Add me! 😊
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Best Investment Platform For HK-Listed Shares for Chinese Internet Companies: Interactive Brokers or Moomoo
❤️ this email if you enjoyed the read. And see you in my next Youtube Video.
Your Investment Strategist,
Larry
Important note: My public letters are not financial advice. You must do your own research. They are designed for educational purposes only.