Stock Talk - You're Fired! You're Fired! Overstated ("Fake?") Jobs Data, and What it Means for Investors

Starting point is 00:00:00 In the words of pre-President Donald Trump, you're fired. And with the stroke of a pen, or maybe it was the delete key on an old Intel Inside PC from the year 2000 or 2007, your taxpayer-funded Bureau of Labor Statistics, also known as the BLS or Economic and Marks tables, eliminated 818,000 jobs in America. Jobs that the investment team had warned you for eight months now that weren't real, but were being reported by the BLS. jobs, jobs that overstated the true strength of the U.S. economy, jobs that many politicians and economists were cheerleading

Starting point is 00:00:37 for as a sign that the current administration's economic policies were, for lack of a better term, killing it. Jobs that the Federal Reserve were basing their higher-for-longer interest rate spew on. I'll drop a link in the description below to our prior YouTube video on this subject at the first of this year. It's title, which I have to thank Nathan and our compliance department for checking off at the time was stock market news, government BLS job data, bullish or just bulls? Back then, like most of the time we do, we were coaching our followers and investors to not, I repeat not.

Starting point is 00:01:13 First, place undue importance on government economic data. Two, waste much time discussing government data releases around the dinner table. We're at a cocktail party. Three, make hasty investment decisions that should be measured in at least quarters. and years based on these headlines. Why? Because as we have just seen, the data is almost never real, at least the initial data releases.

Starting point is 00:01:37 The data in the numbers the BLS releases, even with over 2,000 employees in nearly a billion in annual budget, while fictionally precise, are nearly 100% inaccurate and essentially fake. As I said back then, and I mean no BLS employee ill will by this statement, but the BLS charter funded by taxpayers is to be the principal fact-finding agency for the US government in the area of labor and economic statistics.

Starting point is 00:02:04 Functionally, the BLS collects processes, analyzes, and disseminates data to the American public. The problem for investors relying on this data to make any kind of investment decision is that the data is virtually always inaccurate when it's first released. Horribly inaccurate. And we're not talking about a few hundred or a few thousand jobs

Starting point is 00:02:24 in a country of over 160 million jobs. We're talking about tens, if not hundreds of thousands of jobs monthly and annually. We can send men to outer space and reuse rockets multiple times now. We can even make a jet, the F-35 Lightning Fighter, designed to build by Lockheed Martin, that has a cross-section radar image, the size of a B. But our federal government can't even get a reasonable, accurate count on how many people in the U.S. are working. Viewers, all of the following job data comes from great work done by analysts at 0.0.0. Hedge website. They've been writing about this topic for almost 18 months. I'll put a link in the

Starting point is 00:03:03 description below to their most recent article, and while it's full of very negative democratic rhetoric, which I don't promote, the data is the data, as it's been for almost a year and a half. The real data has been far worse than what our BLS has been reporting and what politicians in D.C. have been promoting. Before we continue, I want to give a shout out to the entire Ocarbis Financial Group, USA Today ranked us as one of the best financial advisory firms for 2024. The award is given to the top registered investment advisors in the United States based on two criteria. First, the recommendations from individuals among 25,000 financial advisors, clients, and industry experts. And second, growth and assets under management over the last 12 months

Starting point is 00:03:52 and five years. I personally am looking forward to helping us move up this list over the coming years by taking care of our current and future client base. Investors, just how wrong and how big is minus 818,000 job revision? It's the second largest on record, just short of 824,000 downward revision in 2009 at the depths of the great financial crisis. Only bigger that one time. Take a look at the data for yourself instead of a strong 230,000 average monthly job increase in 2023, that the current administration was promoting, the actual number was closer to 130,000 or approximately 43.5% less. Investors, and to make matters even worse, of the 818,000 jobs that vaporized overnight, you're fired, you're fired, you're fired, or rather, you weren't hired, you weren't hired,

Starting point is 00:04:45 and you weren't hired in what are the highest paying areas in the economy. Those are professional services losing 358,000 jobs. Leisure losing 150,000 in manufacturing, losing 115,000. The only sector in the economy whose job total went up? Yep, you guessed it. Government workers revised up 1,000 jobs. While almost every economist and politician I heard on TV and the financial press hand waved and pooh-poohed this massive job revision away as nothing more than business as usual from our data gatherers and data scientists on the taxpayer payroll, I don't see it that way. First off, if this had been an accounting restatement in the public equity markets by a public company, the stock would have likely been cut in half on this news, and the entirety of the senior management team would have been forced out, forced to resign.

Starting point is 00:05:36 The company that just reported this would have been downsized, and a new group would have taken over. Of course, now, that doesn't happen in a government agency. Secondly, and more importantly, for investors, what does this mean to you and your money? Well, to me, it means the Federal Reserve will start cutting rates in September, as Jerome Powell just stated at Jackson Hole last week. They can try to dazzle you with talk of Fed Funds Future Markets, which we've discussed numerous times previously, as they aren't predictive at all to interest rates except for about five to seven days before the Fed meeting. And now economists and financial press can get back to their near meaningless spew of Fed governor's dot plots, which literally our economist guesses written

Starting point is 00:06:20 in Cran or pencil about what they think rates will be going forward. Investors, most reporters thought that the key part of the speech that Jerome Powell gave was when he said, the time has come to adjust our policy. The direction of the travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks. However, it was not as far as I'm concerned. The key line that I saw was, we will do everything we can to support a strong labor market as we make further progress towards price stability. Investors, go watch this part of the speech. See his emphasis. This is a man who knows the job markets is not what the data releases have said. This is a man who seems willing now to accept a slower path back to 2% inflation because

Starting point is 00:07:09 the economy is slowing at a faster pace than many seem to have understood. The stock markets initially cheered this speech, led by small caps and interest rate sensitive groups, with S&P 500 closing at a new weekly closing high of around 5634. However, this is where it starts to get tricky because, as I previously discussed, it's virtually impossible to tell a soft landing from a hard landing until it's too late. Don't believe me. If not, go back in time and look at the S&P 500 and look at sector leadership during these three years. the last true soft landing, 2000, the dot-com bubble peak. In 2007, the beginning of the great financial crisis.

Starting point is 00:07:51 Take a look at these three charts of the S&P 500 during those years. 1995, 2000, and 2007. What you will find is during all of these three years, during Goldilocks in 95, during Speculation Nation in 2000, and even during the worst is yet to come in 2007, the markets peaked in mid-July, dropped back towards their 50-day moving average in early August, and in each year, the market set new highs in August and even in 2007 throughout September.

Starting point is 00:08:19 Yes, no dreaded September swoon, which most on TV are bracing investors for this year, in 2007. In fact, in 2007, the markets made a new all-time high into the first and second week in October. Investors, few saw the great financial crisis coming back then, and the Fed certainly did not, and the indexes didn't either. Investors, the Fed is too tight. The bond market knew a weeks ago, and the stock market struggles with it right now. We've seen this playbook before. The markets are on edge because they are struggling with where we are in the economic cycle. Are we mid-cycle?

Starting point is 00:08:52 Which would mean stocks have years more of consistent gains ahead. That's Goldilocks in 1995 and 96. Are we late cycle? Where stocks would be okay returning investors positively for maybe another six or 12 months. Or are we end of cycle, like 2000 and 2007, where the stock markets are topping and rotating into safety sectors because they are forecasting a downturn in the economy and earnings in 2025. The jobs data that was just revived ours views for us being later cycle over mid-cycle. We can't definitively answer that question yet. That said, for now, we continue to have the same

Starting point is 00:09:30 second half outlook we've had since October 2003. Don't get greedy when stocks are up on spikes and volatility is low. Don't panic and sell stocks when volatility spikes and stocks drop. Our investment team continues to believe that over the next few years, a more active stock management style will begin to reassert itself and be rewarded relative to passive index investing. Since the markets have rallied strongly back, the last two weeks, back to near, 5635 and volatility has subsided lower, now is a great time to meet with your financial advisor or your planner if you have a relationship beyond just an investment account. Before you panic and resign yourself to 2000 or 2007 outcome in the fourth quarter of this

Starting point is 00:10:11 year and 2025, remember, both those prior periods were before the Fed found QE, which is quantitative easing. And many other programs, they used to dull or delay economic and market downturns. During both of these prior periods, the market did not cascade lower from where they were during the summers in a straight line. While the previously discussed 2000 to 2007, the cutting cycles did end in recession, they were pre-QE and characterized by a lack of liquid. Quantitative easing in a significant size has been implemented since then, and you know what that is historically done to tame volatility in the markets. So if over the years you found yourself reacting emotionally in your portfolio to presidential elections and the error uncertainty, or when volatility is high like it was in July, now is the time to step back, take a deep breath, and give your advisor a call to walk and talk you through your long-term financial plan.

Starting point is 00:11:08 Do it while the fast money was sidelined, and now is put it. back finding FOMO into what likely will be a surprisingly September higher. Do it when the markets have bounced like they have right now and like we messaged last week. When the markets have come right back to where they started from. If you're uncomfortable of a wider range of possible equity outcomes, the O'Carvis team has launched a new strategy that retains the ability to go long stocks, short stocks, as well as buy partial hedges and shock absorbers for your stock portfolio. information on this new strategy of ours can be found at oak harvest funds.com for myself, from Eric, from everyone else who puts these YouTube videos together, have a great Labor Day weekend.

Starting point is 00:11:50 All content contained with an Oak Harvest podcast expresses the views of the speaker and is for informational purposes only. It is based on information believed to be reliable when created, but any cited data, indicators, statistics, or other sources are not guaranteed. The views and opinion opinions expressed herein may change without notice. Strategies and ideas discussed may not be right for you, and nothing in this podcast should be considered as personalized investment, tax or legal advice, or an offer or solicitation to buy or sell securities. Indexes such as the S&P 500 are not available for direct investment and your investment results may differ when compared to an index. Specific portfolio actions or strategies discussed will not apply to all

Starting point is 00:12:38 client portfolios. Investing involves the risk of loss and past performance is not indicative of future results.

Stock Talk - You're Fired! You're Fired! Overstated ("Fake?") Jobs Data, and What it Means for Investors

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