The McNamee Wealth Management
g
Group
p
at Morgan Stanley Smith Barney
Conference Call – February 2011
Thursday, February 24th at 7:30 pm EST
Dial-in: 1-888-216-2160
Passcode: 74408182
Friday, February 25th at 3:00 pm EST
Dial-in: 1-888-216-2160
Passcode: 59676336
Notice to Readers
The views expressed herein are those of the author and do not necessarily reflect the
views of Morgan Stanley Smith Barney or its affiliates. All opinions are subject to change
without notice. Neither the information provided nor any opinions expressed constitutes
a solicitation for the purchase or sale of any security. Past performance is no guarantee
of future results.
2
OPENING
3
4
Source: “How the Great Recession Was Brought to an End, July 27, 2010, by Alan S. Blinder and Mark Zandi
ESTABLISHMENT SURVEY AND
NON-FARM PAYROLL EMPLOYMENT
5
6
Source: Chart of the Day - Current decade job growth: positive but slow – January 7, 2010
7
Source: BLS – Job Openings and Labor Turnover Survey Highlights December 2010 – Bureau of Labor Statistics – February 8, 2011
8
Source: ADP National Employment Report – January 2011 ADP National Employment Report– February 2, 2011
UNEMPLOYMENT RATE
9
10
Source: http://research.stlouisfed.org/fred2/series/UNRATE
11
Source: Chart of the Day - Educational attainment has a dramatic impact on employment – February 4, 2011
12
Source: BSL – The employment situation – January 2010 – Released February 4, 2011
NON-FARM PRIVATE EMPLOYMENT
13
14
Source: Recessions are on the margin by John Mauldin - November 26, 2010
15
Source: Citi – U.S. Economic & Markets Daily – January 5, 2011
US Population vs.
vs Employment,
Employment vs.
vs Labor Force
Force, vs.
vs Continued Unemployed
16
Source: Howestreet.com – What does the “Take this Job and Shove-It Indicator” say about the Economy? – December 10, 2010
WE KNOW IT’S BAD OUT THERE
17
18
Source: Gluskin Sheff’s Economic Research Featuring David Rosenberg - Snack with Dave – November 22, 2010
19
Source: Gluskin Sheff – Breakfast with Dave – January 19, 2011
20
Source: Wells Fargo – Special Commentary: Credit Quality Monitor – December 2010 – December 10, 2010
21
Source: Wells Fargo Securities – Weekly Economic & Financial Commentary – February 11, 2011
22
Source: Wells Fargo Securities – Weekly Economic & Financial Commentary – February 4, 2011
23
Source: BLS – Job Openings and Labor Turnover Survey Highlights December 2010 – Bureau of Labor Statistics – February 8, 2011
24
Source: Howestreet.com – What does the “Take this Job and Shove-It Indicator” say about the Economy? – December 10, 2010
25
Source: Gluskin Sheff – Breakfast with Dave – January 5, 2011
26
Source: Gluskin Sheff – Lunch With Dave – January 7, 2011
27
Source: Gluskin Sheff – Breakfast with Dave – January 10, 2011
28
Source: Blackrock – The Economy, Interest Rates and Fixed Income Markets: What to Expect in 2010 - Point of View with Curtis Arledge and Eric Pellicciaro- APRIL 2010
WHY JOB RECOVERY IS NOT
STRONGER?
29
30
Source: Citi – Portfolio Strategist – December 9, 2010
31
Source: Gluskin Sheff – Breakfast with Dave – 12/15/10
32
Source: Gluskin Sheff – Breakfast with Dave – December 9, 2010
MANUFACTURING
33
34
Source: http://research.stlouisfed.org/fred2/graph/fredgraph.pdf?id=MANEMP
35
Source: Recessions are on the margin by John Mauldin - November 26, 2010
THERE IS SOME GOOD OUT THERE
36
37
Source: http://research.stlouisfed.org/fred2/graph/fredgraph.pdf?id=INDPRO
38
Source: Citi – U.S. Outlook 2011 – January 3, 2011
39
Source: Citi - Port Strat: Economic & Market Analysis - January 6, 2011
40
Source: BLS – Job Openings and Labor Turnover Survey Highlights December 2010 – Bureau of Labor Statistics – February 8, 2011
41
Source: Wells capital Management – Economic and Market Perspectives – January 2011 -- A “Sustained” Economic Recovery!! [January 2011]
42
Source: http://research.stlouisfed.org/fred2/graph/fredgraph.pdf?id=IC4WSA
INDICATORS
43
44
Source: http://research.stlouisfed.org/fred2/graph/fredgraph.pdf?id=BUSLOANS
45
Source: Citi – US Economic & Markets Daily – December 3, 2010
CONCLUSION
46
47
Source: Wells Fargo – Special Commentary: Credit Quality Monitor – December 2010
48
Source: Wells capital Management – Economic and Market Perspectives – January 2011 -- A “Sustained” Economic Recovery!! [January 2011]
Definitions
ADP Employment Report: “The ADP national employment report is computed from a subset of ADP records that in the last six months of 2008,
represented approximately 400,000 U.S. business clients and approximately 24 million U.S. employees working in all private industrial sectors. The data are
collected for pay periods that can be interpolated to include the week of the 12th of each month, and processed with statistical methodologies similar to
those used by the U.S. Bureau of Labor Statistics to compute employment from its monthly survey of establishments. ADP also use ADP contracted with
Macroeconomic Advisors to compute a monthly report that would ultimately help to predict monthly nonfarm payrolls from the Bureau of Labor Statistic's
employment situation. The ADP report only covers private (excluding government) payrolls at this time. As a simplification of the process used by
Macroeconomic Advisors,
Advisors estimates are based upon statistical comparison of ADP growth rates to BLS payroll employment growth rates at the industry
level. ADP also adds in the BLS initial claims data for the week just prior to the employment report as part of its estimation procedure. (Automatic Data
Processing (ADP)/Macroeconomic Advisers)”1
“The new ADP employment report is aimed at improving payroll forecasts by providing information in advance of the employment report.”1
BLS diffusion index is a measure of how widespread changes in employment are. Some people think it measures the percent of industries increasing
employment,
p y
but that isn't q
quite correct. 2
From the BLS handbook: “The diffusion indexes for private nonfarm payroll employment are based on estimates for 278 industries, while the manufacturing
indexes are based on estimates for 84 industries. Each component series is assigned a value of 0, 50, or 100 percent, depending on whether its
employment showed a decrease, no change, or an increase over a given period. The average (mean) value is then calculated, and this percent is the
diffusion index number.” 2
Challenger Job-Cut Report: “This monthly report counts and categorizes announcements of corporate layoffs based on mass layoff data from state
departments of labor.
labor The job
job-cut
cut report must be analyzed with caution
caution. It doesn't distinguish between layoffs scheduled for the short-term
short term or the long term,
term
or whether job cuts are handled through attrition or actual layoffs. Also, the job-cut report does not include jobs eliminated in small batches over a longer
time period. Unlike most economic data, this series is not adjusted for seasonal variation.”1
“The Challenger Job-Cut Report could serve as a leading indicator for new jobless claims. However, not all layoff announcements result in near term job
losses. For instance, companies often announce layoffs that will result in job losses but not immediately. Companies would simply not replace workers who
quit voluntarily.”1
Commercial and Industrial (C&I) Loan: “Any type of loan made to a business or corporation and not to an individual. Commercial and industrial loans can
be made in order to provide either working capital or to finance major capital expenditures. This type of loan is usually short-term in nature and is almost
always backed with some sort of collateral.”4
Components of personal income: “Personal Income is the income that is received by all persons from all sources. It is calculated as the sum of wage and
salary disbursements, supplements to wages and salaries, proprietors' income with inventory valuation and capital consumption adjustments, rental income
off persons with
ith capital
it l consumption
ti adjustment,
dj t
t personall dividend
di id d iincome, personall iinterest
t
t iincome, and
d personall currentt ttransfer
f receipts,
i t less
l
contributions for government social insurance.”3 “The personal income of an area is the income that is received by, or on behalf of, all the individuals who
live in the area; therefore, the estimates of personal income are presented by the place of residence of the income recipients.”3
1.
2.
3.49
4.
econoday.com
http://www.calculatedriskblog.com/2009/07/unemployment-stress-test-scenarios.html
Bureau of Economic Analysis
Investopedia.com
Definitions
Continuing claims: “… a measure of unemployment …”1
“Continuing claims refers to unemployed workers that qualify for benefits under unemployment insurance. In order to be included in continuing claims, the
person must have been covered by unemployment insurance and be currently receiving benefits. Data on unemployment claims is published by the
Department of Labor on a weekly basis, allowing for frequent updates on the levels of unemployment.”2
Covered Employee: “The exact meaning of ‘covered employee’ varies slightly state to state, but not by much. In simple terms it means one is eligible for
unemployment insurance benefits.” 3
“Most states exclude the self-employed, commission based employment such as real estate agents, those in student training programs, academic and
hospital internships, employment by churches or religious organizations, and rehabilitation programs.” 3
“Self-employed individuals must pay into unemployment insurance programs, however, the self-employed are not eligible for benefits anywhere.”3
Employment-To-Population Ratio: “A macroeconomic statistic that takes the ratio of the total working age of the labor force currently employed to the
total working age population of a region
region, municipality or country
country. It is calculated by: labor force employed divided by total population.
population ” 4
Employment Situation: “The employment situation is a set of labor market indicators based on two separate surveys in this one report. Based on the
Household Survey, the unemployment rate measures the number of unemployed as a percentage of the labor force. Other key series come from the
Establishment Survey (of business establishments). Nonfarm payroll employment counts the number of paid employees working part-time or full-time in the
nation's business and government establishments. The average workweek reflects the number of hours worked in the nonfarm sector. Average hourly
4
earnings
g reveal the basic hourly
y rate for major
j industries as indicated in nonfarm p
payrolls.”
y
The establishment survey
“The establishment survey provides information on employment, hours, and earnings of employees on nonfarm payrolls …”5
“BLS collects these data each month from the payroll records of a sample of nonagricultural business establishments. The sample includes about 140,000
businesses and government agencies representing approximately 410,000 worksites and is drawn from a sampling frame of roughly 8.9 million
unemployment insurance tax accounts. The active sample includes approximately one-third of all nonfarm payroll employees.” 5
“E t bli h
“Establishment
t survey. Th
The sample
l establishments
t bli h
t are d
drawn ffrom private
i t nonfarm
f
b
businesses
i
such
h as ffactories,
t i
offices,
ffi
and
d stores,
t
as wellll as ffrom
federal, state, and local government entities. Employees on nonfarm payrolls are those who received pay for any part of the reference pay period, including
persons on paid leave. Persons are counted in each job they hold. Hours and earnings data are produced for the private sector for all employees and for
production and nonsupervisory employees.” 5
“The establishment survey, which is the number we read as the ‘headline’ number, is created by calling up a statistically significant percentage of
established businesses every month and asking them how many people they employ. Almost by definition they do not poll small businesses and start-ups,
which is where the job creation really happens
happens. They have to make an estimate of those jobs
jobs, and this is called the birth/death ratio.
ratio ”6
1.
2.
3.
4.
5.50
6.
State Street Global Advisors – G7 Weekly Economic Perspectives – January 7, 2011
Investopedia.com
Howestreet.com – What does the “Take this Job and Shove-It Indicator” say about the Economy? – December 10, 2010
econoday.com
BSL – The employment situation – December 2010 – Released January 7, 2011
John Mauldin's Weekly E-Letter – Forecast 2011: Better than Muddle Through By John Mauldin – January 8, 2011
Definitions
The household survey: “The household survey provides information on the labor force, employment, and unemployment that appears in the ’ tables,
marked HOUSEHOLD DATA. It is a sample survey of about 60,000 households conducted by the U.S. Census Bureau for the U.S. Bureau of Labor
Statistics (BLS).”1
“Household survey. The sample is selected to reflect the entire civilian noninstitutional population. Based on responses to a series of questions on work
and job search activities, each person 16 years and over in a sample household is classified as employed, unemployed, or not in the labor force.” 1
“The household survey includes agricultural workers, the self-employed, unpaid family workers, and private household workers among the employed.
These groups are excluded from the establishment survey.” 1
“The household survey includes people on unpaid leave among the employed. The establishment survey does not.” 1
“The household survey is limited to workers 16 years of age and older. The establishment survey is not limited by age.” 1
“The household survey has no duplication of individuals, because individuals are counted only once, even if they hold more than one job. In the
establishment survey, employees working at more than one job and thus appearing on more than one payroll are counted separately for each
appearance.”1
initial claims for unemployment insurance: “… a measure of job shedding …”2
Insured unemployment rate: “Obtaining unemployment insurance benefits is a week-to-week process. Those filing for benefits after the initial-claim
filing are included in the insured unemployed data. The insured unemployment rate or jobless rate is a calculated by dividing the number of insured
unemployed by the number of employees that are considered covered or eligible for unemployment insurance. Covered employees represent those
working
g as well as those receiving
g unemployment
p y
benefits. The insured unemployment
p y
data and the insured unemployment
p y
rate are reported
p
one-week
behind the initial claims numbers. Both are presented on a seasonally adjusted and not seasonally adjusted basis.”3
ISM manufacturing index: “The ISM manufacturing composite index is a diffusion index calculated from five of the eleven sub-components of a monthly
survey of purchasing managers at roughly 300 manufacturing firms from 21 industries in all 50 states. The survey queries purchasing managers about the
general direction of production, new orders, order backlogs, their own inventories, customer inventories, employment, supplier deliveries, exports,
imports, and prices. The five components of the composite index are new orders, production, employment, supplier deliveries, and inventories (their own,
nott customer
t
inventories).
i
t i ) The
Th fifive components
t are equally
ll weighted.
i ht d Th
The questions
ti
are qualitative
lit ti rather
th th
than quantitative;
tit ti
th t is,
that
i they
th askk about
b t th
the
general direction, rather than the specific level, of business. Each question is transformed into a diffusion index which is calculated by adding the
percentage of positive responses to one-half of the unchanged responses. Five components are weighted to form the composite.”4
ISM non-manufacturing index: “The non-manufacturing ISM surveys nearly 400 firms from 60 sectors across the United States, including agriculture,
mining, construction, transportation, communications, wholesale trade and retail trade.”4
1.
2.
3.51
4.
BSL – The employment situation – December 2010 – Released January 7, 2011
State Street Global Advisors – G7 Weekly Economic Perspectives – January 7, 2011
schwab.com
econoday.com
Definitions
Jobless Claims: “New unemployment claims are compiled weekly to show the number of individuals who filed for unemployment insurance for the first
time. An increasing (decreasing) trend suggests a deteriorating (improving) labor market. The four-week moving average of new claims smoothes out
weekly volatility.”3
Job openings: “Job openings are submitted by establishments on the last business day of the month and require a specific position to be available where
work could start in the next 30 days. It could include full, part time and seasonal work.”1
labour force participation rate: “The labor force participation rate explains how an increase in the unemployment rate can occur simultaneously with an
increase in employment. If a large amount of new workers enter the labor force but only a small fraction become employed, then the increase in the
number of unemployed workers can outpace the growth in employment.” 2
Monster Employment Index: “The Monster Employment Index is a comprehensive monthly analysis of U.S. online job demand. It is conducted by
Monster Worldwide,
Worldwide Inc
Inc. and is based on a real
real-time
time review of a large,
large representative selection of career sites and job boards
boards, including Monster
Monster,"
according to Monster Worldwide. The Index presents a snapshot of employer online recruitment activity nationwide. It was launched in April 2004 with data
collected since October 2003.”3
New Jobless Claims: “Weekly series fluctuate more dramatically than monthly series even when the series are adjusted for seasonal variation. The 4week moving average gives a better perspective on the underlying trend.” 4
Nominal consumer spending: “Purchase of goods and services by U.S. individuals, accounting for about 2/3 of the GDP. (News commentators like to
say that "consumer spending makes up two-thirds of the economy.") This number includes products of both domestic and foreign origin.” 5
Non-Farm Payroll: “A statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number of paid
U.S. workers of any business, excluding the following employees: general government employees, private household employee, and employees of
nonprofit organizations that provide assistance to individuals farm employees.”1
Personal disposable income: “Disposable personal income is total personal income minus personal current taxes.”6
1.
2.
3.
4.
5.52
6.
Investopedia.com
Peter Barth and Dennis Heffley "Taking Apart Taking Part: Local Labor Force Participation Rates" University of Connecticut, 2004.
Econoday.com
http://www.moneychimp.com/glossary/consumer_spending.htm
Bureau of Economic Analysis
http://payroll.intuit.com/employment_index/
Definitions
Small Business Employment Index: “… the Intuit Small Business Employment Index to provide a unique view into small business employment trends.
This Index is one of the few to focus on employment trends for companies with fewer than 20 employees, which represent 87 percent of all U.S. employer
firms and employ nearly 20 million people1. We believe that these smallest of small businesses play a key role in the economy that is different in interesting
ways from that of larger businesses.” 1
“This
This monthly Index offers statistically
statistically-sound,
sound, near real
real-time
time data that measures three data points: small business employment, hours worked and
compensation. The data for the Index is pulled in aggregate from approximately more than 57,000 employers across the country that use Intuit Online
Payroll and is published monthly on a close to real-time basis.” 1
Unemployment claim (also known as unemployment insurance claim or unemployment compensation claim): “A request made by an individual to
the state government to receive temporary payments after having been laid off from a job. The United States Department of Labor keeps track of the
number of weekly unemployment claims. It provides both seasonally adjusted and seasonally unadjusted claims numbers and also lists which states had
an increase or decrease of 1,000 or more claims. These data are reported in the media as an indication of national and state economic health.”2
Vacancies: “Typically, rising vacancies are associated with lower unemployment.”3
1. http://payroll.intuit.com/employment_index/
2.53 Investopedia.com
3. State Street Global Advisors – G7 Weekly Economic Perpectives – December 10, 2010
Disclosures
The information herein has been obtained from sources considered to be reliable, but we do not guarantee their accuracy or completeness.
The investments listed may not be suitable for all investors. Morgan Stanley Smith Barney LLC recommends that investors independently evaluate
particular investments, and encourages investors to seek the advice of a financial advisor. The appropriateness of a particular investment will depend
upon an investor’s individual circumstances and objectives.
International investing may not be suitable for every investor and is subject to additional risks, including currency fluctuations, political factors,
withholding, lack of liquidity, the absence of adequate financial information, and exchange control restrictions impacting foreign issuers. These risks may
be magnified in emerging markets.
30 Year Treasury ‐ A U.S. Treasury debt obligation that has a maturity of 30 years. The 30‐year Treasury will generally pay a higher interest rate than
shorter Treasuries to compensate for the additional risks inherent in the longer maturity. However, when compared to other bonds, Treasuries are
relatively safe because they are backed by the U.S. government.
Dow Jones Industrial Average ‐ Dow Jones Industrial Average is a price‐weighted index of the 30 “blue‐chip” stocks and serves as a measure of the U.S.
market, covering such diverse industries as financial services, technology, retail, entertainment and consumer goods.
MSCI AC World Index (Net) ‐ The MSCI ACWI (All Country World Index) Index is a free float‐adjusted market capitalization index that is designed to
measure equity market performance in the global developed and emerging markets. For historical return purposes the AC World gross returns are being
used from 1/31/1988 to 12/31/1998 and the net returns begin as of 1/31/1999.
New York Stock Exchange Composite Index ‐ This index covers every common stock listed on the New York Stock Exchange (NYSE). It is a value‐weighted
index calculated on a total return basis with dividends reinvested.
Standard & Poor
Poor’ss 500 Index ‐ S&P 500 Index is an unmanaged,
unmanaged market value
value‐weighted
weighted index of 500 stocks generally representative of the broad stock
market. An investment cannot be made directly in a market index. An investment cannot be made directly in a market index.
An investment cannot be made directly in a market index.
Content provided as general information only and should not be taken as investment advise. All content shall not be construed as a recommendation to buy or sell any
security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this are solely the opinions of the author(s) who
may or may not have a position in any company.
company Any action that you take as a result of information,
information analysis,
analysis or advertisement on is ultimately your responsibility.
responsibility
54
The McNamee Wealth Management Group at
Morgan Stanley Smith Barney
Edward F. McNamee, CFP®
Managing Director - Wealth Management
Senior Investment Management Consultant
Financial Planning Specialist
Family Wealth Director
Senior Portfolio Management Director
Financial Advisor
Jacqueline Francisco
Registered Marketing Associate
Brett E. McNamee, CFP®, CIMA®, CRPS®
Cheryl A. Mara
Portfolio Management Associate
Registered Marketing Associate
Financial Planning Specialist
Richard M. Gumina
Registered
g
Marketingg Associate
Portfolio Management Associate
John M. Badenhop
Senior Vice President - Wealth Management
Investment Management
g
Specialist
p
Harold Shorr
Frank J. Fierro
Diana Bredbenner
Senior Vice President - Wealth Management
Financial Advisor
Registered
g
Marketingg Associate
Client Service Associate
1030 Broad Street
3rd Floor
Shrewsbury, NJ 07702
Tel 732 389 8640 / 800 631 2221
Fax 732 389 8690
th
themcnameegroup@mssb.com
@
b
Visit us at: www.fa.smithbarney.com/edward_mcnamee
Morgan Stanley Smith Barney LLC. Member SIPC.
55
Date of first use: February 24, 2011