October Jobs Report Confuses Those with No Portfolio Strategy

October Jobs Report Confuses Those with No Portfolio Strategy

Posted on November 11, 2013

Canterbury Portfolio Thermostat - Weekly Update - 11/11/2013

Current Market Environment: Market State 1: (last 20 trading days): Bullish/Rational - Market State 1 is the most predictable of the Portfolio Thermostat’s 12 Market States (environments). The risk, while in MS 1, is typically around -2% to -4% from the previous market peak. The S&P 500’s closed at 1770.61 up about a half of one percent on the week and is one point below the all time high.

Canterbury Volatility Index (CVI) = 57 (rational market environment) The CVI was up 3 points for the week. Thursday and Friday got a little emotional, based on more than normal noise in the news. The CVI went up 4 points during those two days. Volatility remains low reflecting a low risk market environment.

Our short term overbought/oversold indicator is currently 52% overbought (Neutral) down from 89% overbought (Bearish) last week. The market has worked off most of its overbought condition.

Observation:
The financial experts’ botched another prediction last week. Specifically, I am referring to all the media hype surrounding Friday morning’s October jobs report. Most experts predicted that the October jobs report, released before the opening of the stock market, would be weak. Many attributed the previous day’s 152 point decline on Dow to the expected slowdown in new jobs. This is just another example of the counter intuitive nature of markets and why expert predictions have little or no consistent predictive value. Therefore, we can again conclude that subjectivity has no place in the "science” of risk management and portfolio strategy.

The following URLs (in blue) are time sequenced video clips from last Friday. I hope you will take the effort to click through all six short clips. Also, I apologize in advance because you will watch the same commercial several times at the beginning of each segment.

I promise that the effort to listen to the clips will be worth your time. The events, like the one you will see, continue to change but similar unexpected results will happen over and over.

  1. A very smart fellow clearly explains, in layman’s terms, why October jobs report was going to be bad. Joe has already assumed the terrible numbers.http://video.cnbc.com/gallery/?video=3000216044&startTime=0&endTime=33
  2. But wait! Here is the report. The jobs were not down, they were up. http://video.cnbc.com/gallery/?video=3000216049&startTime=0&endTime=34
  3. In fact, the jobs report was so good that it was "stunning” The really smart guy said that the results were "bazaar.”http://video.cnbc.com/gallery/?video=3000216065&startTime=0&endTime=36
  4. Increased jobs are good news and good for the market! No good news is actually bad news for the market. Another expert explains: http://live.wsj.com/video/us-stock-futures-drop-after-jobs-report/1594C780-C5A0-4013-90FD-59CF4338BDFB.html#!1594C780-C5A0-4013-90FD-59CF4338BDFB
  5. Don’t be confused. The Steve, the economist, will explain and Rick will help him. http://video.cnbc.com/gallery/?video=3000216050&startTime=0&endTime=79
  6. It’s 4:00 EST and the market is now closed. Maria will give an overview of the market’s carnage as a result of a good jobs report.http://video.cnbc.com/gallery/?video=3000215924&startTime=0&endTime=40

Final Headline: USA TODAY / November 8, 2013 Dow Closes at All-Time High after Strong Jobs Data

Observation:
The financial media plays a valuable role in reporting relevant news on a timely basis. My purpose is not to question the knowledge and expertise of professionals who relay the news and their observations to the public. My interest is to point out the fact that many experts and news professionals continue to cross the line by making definitive statements about how they believe an event will play out and the event’s impact on the markets. The investing public is bombarded with strong opinions and predictions that have led to large losses due to bad investment decision making.

The Portfolio Thermostat does not attempt to predict how current events will impact the markets. In fact, our portfolio strategy can’t hear the distracting and misleading "noise” because it has no ears. The goal of the Portfolio Thermostat is to make unemotional adjustments in holdings for the purpose of maintaining a stable and efficient portfolio through dynamic and ever-changing market environments. Today we have a 21st century portfolio strategy and all the innovative investment tools we need and to benefit from any market environment – Bull or Bear.

Bottom line:
We are in Market State 1. Meaning we are in a low risk and Bullish environment. The Portfolio Thermostat has remained in one of the low risk Market States (environments) for over16 months. During that time the financial news has been generally bad and the stock market has remained strong.

Canterbury Investment Management: Tom Hardin

More About Tom Hardin

As Chief Investment Officer, Tom Hardin, Chartered Market Technician (CMT), makes all the final decisions on all investment and portfolio management decisions for Canterbury Investment Management. Tom has more than 30 years experience in the investment management industry and has broad breadth of knowledge. He is known as an innovator, educator and been revolutionary in the advancements in portfolio and risk management.

Every effort was used to provide accurate data and mathematical calculations to provide, what we believe to be, accurate results. Canterbury Investment Management, LLC, and its principal owners, make no guarantee of completeness or accuracy of data or calculations as well as conclusions of any statistical data or information contained in the simulation illustrated on this page. Past results or performance is in no way a guarantee of future results.