At Arm's Length: 08.12.04

There is growing evidence that the truth is beginning to catch up to the statistics. Jobs have become as divisive a subject supported by information backed by numbers that, interestingly fall on either side of the issue as any that has come down the pike lately. You can argue war records, terrorism, and any of the other fine messes we are in, but only we is faced with conflicting reports. In a recent report published by the federal government, the reason jobs have failed to gain ground may be because they are vanishing faster than they can be created.

What is being termed as the "echo of globalization", the rate of layoffs in this country has not gone down. In a normal economic recovery, the amount of jobs created outpaces the amount that are removed. That has not happened during the Bush administration's robust recovery.

The job displacement report also cites several statistics delivered by way of survey that suggest the once workers are displaced, new employment opportunities present themselves. But those jobs also carry less economic clout and provide less long term security. The survey was first created by President Reagan during a similar period of high layoffs.

The cross section of the country (60,000 households) is asked every two years whether their jobs have changed because of factory closures or job elimination. These workers needed to be on the job at least three years.

The reason this report has called attention to itself is the percentage of these workers. Not since the report began, has the percentage of workers currently displaced reached as high. For the last survey period of 2001-2003, the layoff rate topped at 6.3%. Not since 1981-1983 have as many worked been laid off.

To give you a little better perspective of how many working folks this amounts to, 6.3% of the workers, 20 or older who have held a job three years or longer who are currently laid off is 5.3 million able bodied employees.

At Arm's Length: 08.10.04

There was a time, in the not so distance past when the price of a stock was moved on earnings news alone. Tout TV as Alan Abelson so deftly called it, always seems incredulous at the lack of movement in a share's price because it did or did not meet expectations. A news alert is issued when some large company reports focusing on whether the company was profitable, by how much, and most importantly, was it an improvement. This relationship between a stock's price and the report card past may not be the only piece in the puzzle worrying investors.

A company who has "closed the books" on a quarter finds that Wall Street has placed a great deal of importance on past performance and this shouldn't be overlooked. Acquisitions and mergers, stock buy backs or issuance, credit offerings and sales trends all play major roles in determining forthcoming quarters. Grading a company from past performance should have the markets jubilant but on the contrary, it seems to have been the sole reason stocks have fallen. By now, almost everyone has expressed concern at weakening economic numbers even if they consider them an anomaly creating questions most are loathe to answer. So the markets turn to guidance.

Paying attention to what a company predicts for the future, called guidance and heavily relied on by analysts to adjust investor goals, these forecasts can be incredibly telling. At least from a short term perspective.

Guidance can adversely affect stock prices after lowered forecasts but often fail to energize a stock when the outlook is good. Understanding the nature of these predictions, the relative unpredictability of commodity prices of late as well as ongoing security issues have made guessing a little more troublesome. This past week has seen a spike in oil that should have been predicted but instead created suspicion among traders about the economy.

Using guidance as a tool, comparing what is said to previous outlooks made by the same CEO, and comparing the results should give you a pretty good indication of what lies ahead. A good chief will tell the truth and hope that investors understand the value of the company. A good investor will take it with a grain of salt.

The previous week's articles.

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