Five O'Clock Somewhere
Research for Online Investors

by John Dalt

6/01/11

This morning’s premarket looked orderly, although it seemed certain the market would open lower.  Asian markets closed mixed and European markets were mixed.  What happened?  ADP Non-Farm employment change came in much lower than expected.  When I say MUCH lower, how about 38 thousand…economists were expecting 178 thousand additional U.S. jobs last month.

So much for the idea that the U.S. economy was recovering.  Sure, companies are reporting profits, but we are seeing slowing in the manufacturing sector and yesterday’s consumer confidence numbers were less than expected.  Since the U.S. relies on consumers to drive the economic school bus, this does not bode well.

We will get the “official” labor department jobs report on Friday, and it may be better than ADP’s.  ADP processes payroll for a wide variety of companies in the U.S. and can see trends in employment in their customer’s records.

The numbers are not 100% accurate.  Most companies do not purge their employment records until the end of the year.  ADP numbers can show “shadow” employees on company rolls that actually left months ago.  Because of this, ADP numbers get less reliable later in the year.  But, the error is usually reporting higher employment not lower than official statistics.

Yesterday, everyone sighed that Greece would be rescued.  Today, Moody’s downgraded Greece’s credit rating and put the country’s debt on negative watch.  Here is the deal, the IMF, and ECB can paper Greek problems over, but no investor is going to buy their bonds.

Who will buy Greek bonds?  The IMF and ECB.  Who owns the IMF?  Member countries don’t really ‘own’ it, but the the U.S. has 17% of the voting rights.  This is based off the amount of gold each country deposited or pledged to the IMF when it was set up. Does this make you feel better.  The IMF is using U.S. deposits to underwrite 17% of the money they advance to broken countries? The ECB wants eurozone member banks to buy Greek bonds.  German and Finland voters keep asking “Why, so our banks will go bankrupt too?”

When the inevitable restructuring of Greek debt finally does occur, who will lose?  Every bank that bought them to help their neighbors, every central bank that has taken Greek bonds as collateral, and every investor that bought them for the high yield, and everyone that holds their debt will lose.  If the German banks buy enough, they will risk insolvency down the road.

Break out the champagne, we need a drink.  There has to be a reason even if it is five o’clock in the Middle East (a bad place to ask for a drink).  The market looks like it wants to roll over.  It is time to get out my buy list to pick up stocks on sale.

Statistic:
The Small Business Administration estimates total regulatory costs on American’s amount to $1.75 trillion annually.  That exceeds Canadian GDP and is larger than the Federal Budget of just a few years ago. BO. (Before Obama)

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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