Monday, August 31, 2009

Kelly Services falls on comparative performance

"Stifel Nicolaus analyst James Janesky said in a client note that he views all staffing and employment-related stocks unfavorably "amid continued weakness in the employment market and (we) believe there is potential for our entire ... group to pull back from current levels following the sharp run-up from early-March lows."

"Analyst Ty Govatos of C.L. King & Associates said the stocks could rise twofold or more as business improves in the next two to three years, but he cautioned that his calculations do not include risks that could halt the stocks' climb.

Kelly Services Inc., Manpower Inc. and other staffing companies will likely not perform as well as other companies, though they could still climb between 70 percent and 115 percent, he said in a client note."

Source: AP

Basically, I've been harping on the point that these employment, human resource stocks have been mostly overvalued. With such declines to their revenue and net income compared to the boom present in 2007, there is no way these companies such as Kelly Services and Manpower deserve such multiples.

The multiples that these stocks are trading at are mind blowing considering their businesses have faced tremendous downwards spiral since the 2007 boom.

Sales growth, earnings, operating margins have continued to decline and have only stabilized at a bottom. Rather then drive earnings the recent run up has been purely on speculation that we are entering another growth phase. With governmental debt at an all time high, and growth primary coming from government stimulus spending rather then from the private sector, consumers will continue to feel the brunt of this downturn.

End result is low levels of manufacturing. Tepid demand.

Euro zone joblessness at 10-year high

"In particular, higher unemployment lowers the ability of workers or unions to negotiate big wage increases -- and with a time lag between rising unemployment and wages, this downward pressure on inflation may continue for a long time to come."

"Spain had Europe's highest unemployment rate in June at 18.1 percent, followed by Baltic nations Latvia at 17.2 percent and Estonia at 17 percent. A third of Spanish under-25s can't find a job, it said.

Jobs are disappearing in all EU nations, Eurostat said, but Germany has seen the smallest rate of increase in its employment rate over the year, growing from 7.3 percent to 7.7 percent.

"Expect unemployment to rise further well into 2010," said Jorg Radeke, economist at the Centre for Economic and Business Research."

Source: AP

Unemployment Around the World

Source: VisualEconomics

Cloud over U.S. payrolls: job hunters take summer off

"WASHINGTON (Reuters) - Better-than-expected July jobs numbers have numerous private economists heralding the end of the recession, but the Obama administration is taking a more guarded view because of a worrisome rise in long-term unemployment and a drop in labor force participation."

""We believe this drop in joblessness will prove to be temporary. With the summer in full swing, we assume a larger than usual number of unemployed Americans decided to take a break from job hunting," said Bernard Baumohl, president of the Economic Outlook in Princeton Junction, New Jersey. "It's been a horrible labor market, so who could blame them?"


Sunday, August 30, 2009

Four Reasons That Unemployment Will Recover Slowly

- Consumers Are Still Scared: The Consumer Confidence Index that measures the mood and outlook of American consumers fell unexpectedly in July. While this number doesn’t tell the whole story, it’s clear that consumers remain nervous and economic recovery will be slow without consumers feeling good and spending money again. Sales are down significantly in most industries and most companies have used layoffs as a tool to cut costs to offset lagging sales. Until the consumer returns, businesses won’t be able to afford additional workers.

- Employers Will Help Existing Employees First: Most companies have been forced to take measures that have hurt their employees in some way during this recession. Workers used to working 40 hours a week suddenly found their hours cut in half. Benefit packages were reduced as employees experienced pay freezes and lost health benefits, 401K matches, and other key benefits of employment. Before employers open additional positions and start hiring new workers, many will want to take care of their current employees first. Hours, benefits, and compensation packages, will be restored in many companies before there is room for more headcount. A recent survey showed that 33% of employers plan to unfreeze salaries in the next six months and 79% plan to do so in the coming year.

- Some Industries Are Still Cutting Jobs: The recession has affected every industry differently. Some that experienced major difficulty early on made changes near the beginning of the recession and are now in a position to rebuild. Other industries hung in there month after month as the economy worsened and have started cost cutting measures more recently. While layoffs are down significantly, they’re not over and the jobs added to the economy in the coming months will likely be offset by jobs being lost in different lines of business.

- Employers Remain Cautious: Most businesses have been affected by recessions and downturns in the economy before, but this was no ordinary recession. As far as recessions go, it was violent and many of us were shocked by its severity. Even as there are signs of recovery being reported in economic numbers, employers that are still shell-shocked will not be looking to rebuild aggressively and are likely to approach their businesses more conservatively in the coming months.

David Wise, a business consultant with Hay Group, probably summed up the attitude of hiring managers best when he said, “Most companies want to go into fiscal 2010 with the layoffs and salary freezes behind them. The worst thing a company can do after tough times is loosen the reins before the horse is ready to run

Source: VisualEconomics

Thursday, August 27, 2009

Japan unemployment hits new high

"Companies are continuing to lay off workers even though the economy has returned to growth after the most bruising recession for decades. "

Source: BBC

Monday, August 24, 2009

Meltdown 101: State unemployment by the numbers

15 percent: Michigan's unemployment rate, the nation's highest
12.7 percent: Rhode Island's unemployment rate, the second highest
12.5 percent: Nevada's rate
11.9 percent: California's rate
11.9 percent: Oregon's rate
4.2 percent: North Dakota's unemployment rate, the nation's lowest
4.9 percent: Nebraska's rate, the second lowest
4.9 percent: South Dakota's rate
6 percent: Utah's rate
6.5 percent: Wyoming's rate
6.5 percent: Oklahoma's rate
62,100: Jobs added in New York in July
38,100: Jobs added in Michigan
37,900: Jobs added in Texas
15,600: Jobs added in Tennessee
13,200: Jobs added in District of Columbia
35,800: Jobs lost in California
26,400: Jobs lost in North Carolina
25,200: Jobs lost in Florida
13,000: Jobs lost in Illinois
10.5 percent: Unemployment in the Western region
10.2 percent: Unemployment in the Midwest
9.3 percent: Unemployment in the South
8.7 percent: Unemployment in the Northeast

Source: CNBC

Thursday, August 20, 2009

U.S. jobless claims rise by 15,000

WASHINGTON (MarketWatch) -- Initial claims for state unemployment benefits rose by 15,000 to 576,000 in the week ending Aug. 15, the Labor Department reported Thursday. It was the highest level since July 25. The four-week average of initial claims also rose, by 4,250 to 570,000, and continuing claims climbed as well. For the week ending Aug. 8, continuing claims rose by 2,000 to 6.24 million. It was also the highest since July 25.

Source: marketwatch

Wednesday, August 19, 2009

The U.S. Economy: Time for a Real Jobs Stimulus?

"Indeed, the current situation is stark. When people say there are no jobs out there, it's true. According to the Bureau of Labor Statistics, at the start of the recession in December 2007, the ratio of job seekers to job openings was 1.5 to 1. Now six unemployed workers chase every available job. It's a brutal game of musical chairs in which a great many people lose and spiral downward economically with disastrous consequences, not only for themselves and their families, but also for communities that were once productive and prosperous.

The Obama Administration and economists hailed the dip in July unemployment to 9.4% from the 9.5% level in June as an indication that the economy is beginning to recover. But the drop in unemployment is deceptive. Employers shed another 155,000 jobs in July. And the unemployment rate would have gone up, possibly to 9.7%, if the 400,000 Americans who had previously been searching for a job (but became so discouraged they stopped) had continued to seek employment in July. Economists expect the job picture to remain bleak well into 2010.

The standard unemployment number excludes both those who have given up looking for a job and those who have taken part-time jobs but want full-time work. Include them and the number jumps to 20% or higher in states such as Michigan, California, Rhode Island and Oregon, with Tennessee, Nevada and other states in the high teens.

Why isn't the $787 billion stimulus bill helping unemployment? It was never designed to be a jobs program. Instead it is an ambitious policy prescription to restart — and redirect — the economy in new directions over the next three years. Stimulus spending is not a fast-infusion jobs program, nor is it always targeted toward the hardest-hit states. For example, stimulus road-building largely bypasses large metropolitan regions where antiquated infrastructure snarls traffic to focus on rural areas and smaller states.,8599,1917001,00.html

Source: Time

Tuesday, August 18, 2009

Job Search Firms: Big Pitches at Big Fees, but Few Jobs

"“Career management” or “career marketing” companies like ITS, which charge large up-front fees, are easy to stumble upon on employment Web sites. Often, as in Mr. Fischman’s case, they contact job seekers after they post their résumés. They usually focus on professionals and managers, massaging their egos by boasting that they accept only the most marketable candidates. Some companies place advertisements that appear to be job postings but instead are lures for sales pitches."

Source: New York Times

Be careful everyone when it comes to job agencies that lure you with amazing jobs if they ask you for an upfront "search" fee.

Sunday, August 16, 2009

FDI Falls in China

Foreign direct investment in China fell for a tenth straight month in July as companies stalled expansion plans amid the global financial crisis. 

Investment declined 35.7 percent from a year earlier, the commerce ministry said at a briefing in Beijing today. That compared with a 6.76 percent drop in June. 

Source: Bloomberg

This can be a problematic especially when the fastest growing economy in the world is not receiving as much foreign direct investment as they did last year. The government is providing loans to the locals, however this can only last so long as their monetary policy sees fit. FDI is the true growth driver for many emerging economies. Another reason to be cautious with this global recovery. Times are getting better, but not enough to feel that your job is safe, and that the good times are back.

Friday, August 14, 2009

Manpower received a revised rating from Moody's

"Moody's Investors Service downgraded Thursday the long-term debt ratings of Manpower Inc. to Baa3 from Baa2, saying the staffing company's profitability is expected to weaken further this year amid the recession.

The ratings agency also said Manpower's ratings outlook is stable, based on anticipated year-over-year revenue and profit declines in the last two quarters of 2009, driven by continued sagging demand for permanent-placement and temporary labor.

Moody's said the ratings anticipate modest revenue and profit growth in 2010 as global economies stabilize.

"The downgrade of Manpower's long term ratings reflects Moody's expectation that profitability, leverage and interest coverage metrics will continue to weaken sharply during the remainder of 2009 and will not recover to pre-recession levels over the next two years," Lenny Ajzenman, Moody's senior vice president, said in a statement.

"Manpower derives the majority of its revenues from Europe and we expect labor market conditions to remain difficult in key European markets into 2010," he said.

Manpower reported a 27 percent organic constant currency revenue decline in the second quarter of 2009, though signs of stabilization appeared in key markets such as Italy, France and the U.S.

The agency said Manpower has $1.1 billion of cash and cash equivalents -- compared to $873 million of funded debt -- which gives the company a solid liquidity cushion during a cyclical trough in the staffing business.

It also said Manpower benefits from a leading global market position and trends that support the long-term growth of the staffing sector.

Moody's downgraded Manpower's senior unsecured notes of Euro300 million due 2012 and its senior unsecured notes of Euro200 million due 2013 to Baa3 from Baa2."

Source: AP

Thursday, August 13, 2009

Jobless Claims Rise to 558,000 in the United States

"Better-than-anticipated reports on manufacturing, housing and employment indicate the deepest job cuts may have passed. At the same time, while analysts surveyed by Bloomberg News say the government’s stimulus spending will spur economic growth as of this quarter, they predict it won’t stop the jobless rate from reaching 10 percent and restraining consumer spending.

“The job market is no longer skidding out of control,” Carl Riccadonna, a senior economist at Deutsche Bank Securities Inc. in New York, said before the report. Nonetheless, he said, “while the stimulus is helping the economy gain traction, we’re not going to see a massive ramp-up in hiring because of it.”"

Source: Bloomberg

Although, we are seeing an improvement in the global economy because of stabilization. We are not seeing massive ramp up in growth as the market dictates. For employment to continue to improve manufacturing and consumer spending in the United States has to improve. Consumer spending still remain in depressed levels as there continues to be weak demand in high end products. I would continue to be cautious till more evidence from the government stimulus creates "real" jobs that provide evidence for the economy.

Wednesday, August 12, 2009

Why You Can't Trust Those Jobs Figures

There was an interesting piece in Forbes (which I normally don't read) yesterday regarding the jobs numbers. It seems pretty clear cut to say that nobody should really trust these unemployment numbers. As they don't tell the whole truth of the unemployed.

"He says the U.S. is in a depression, and though the economy may have hit a “plateau,” it’s not about to rebound, as many stock investors apparently assume."

"Williams also doesn’t buy the official unemployment rates, which are based on a separate survey from the one used for the payroll numbers. He notes that in calculating its broadest jobless rate, the so-called "U-6," the Labor Department in 1994 stopped including unemployed workers who had stopped looking for a job for more than year. As this recession drags on, and despair over finding jobs mounts, that’s likely to distort the true labor picture.

The Labor Department reported Friday that the jobless rate in July was 9.4%, one-tenth of percentage point lower than in June. The U-6 rate, which includes frustrated part-timers as well as those who have stopped looking, also fell slightly, to 16.3%. Williams figures that broader rate hit 20.6%, 25% higher than the government figure."

That's a very depressing sign if rates are actually as high as Williams suggests. Shadowstats has the same depressing outlook for the jobs market. I would even suggest that this temporary blip in hiring will face downwards pressure as once the stimulus runs its course. There is still plenty of risk that we might have to hit a double bottom in our economy to continue to weed out the excess capacity.


Monday, August 10, 2009

Adecco post lost second quarter

"Aug. 11 -- Adecco SA, the world’s largest supplier of temporary workers, reported a surprise second- quarter loss.

Adecco’s net loss was 147 million euros ($208 million), as it took 246 million euros in charges for impaired goodwill and job cuts, the Glattbrugg, Switzerland-based company said in a statement today. Analysts surveyed by Bloomberg had predicted net income of 32.8 million euros. Sales fell 31 percent to 3.6 billion euros in the quarter."

Source: Bloomberg

The numbers continue to be quite weak for the recruiting industry with no near term growth. Some pockets of strength and stablization, but that does not mean that growth is coming back. Especially, when many of these jobs are turning to in house recruiting.

Say for example the financial uptick in hiring. Although there is an uptick this does not mean that there is a continued longer term trend in hiring, just selective and longer term outlook for hiring.

Sunday, August 9, 2009

Analyst getting it wrong

Analyst have a difficult time predicting future trends. Hence, be careful with estimates as nobody can really forecast the future. Remember the housing bubble, and all the other bubbles we have faced.

Source: Clusterstock

United States faces zero job growth

Over the last 10 years the U.S. continued to decline to its current levels of no job growth.

This will continue to be the case until there is a fundamental shift in our workforce as it becomes more and more service oriented. Many of these manufacturing jobs have shifted overseas. While there continues to be weak demand by the consumer here which reduces any visablity for a longer term buoy economy.

Please check out the chart regarding the weak demand for temporary services.


Friday, August 7, 2009

Manpower Valuation Analysis

With the recent run up in staffing firms lets look at the valuations of Manpower since it seems to be the most expensive based on P/E both current and forward P/E.

MAN earns an overbought score of 88 out of 99.
50 day moving average at 44.03.
P/E at 66.40.

I'm still trying to figure out how MAN valuation even when you take into account P/S that it is valued over the present analyst price target.

Moody's also put Manpower on credit watch as earnings have fallen through a cliff compared to last year. Although they can manage their debt in the short term with their cash pile, MAN will face continued challenges as other business service providers are more nimble to grow its business with Manpower's mounting debt.

I continue to like RHI (Robert Half International) as valuations are better poised to sidestep this continued credit crisis. The minimal debt is advantageous to RHI position in the near term.

I would like to see more stabilization on Manpower's larger revenue generating markets. Developed nations such as Australia continues to face a soft market. I would cut as much staff there, and / or hours till they see more short term demand. As it seems that they are not optimizing there team. At least MAN is aware that Australia is under performing. Hugging the bottom doesn't mean that there is job growth. Hence, the cautious approach with MAN's valuation.

Canada employment still depressed

"Bucking predictions that the recession may have officially ended in July, Statistics Canada reported that Canada's labour market shed another 45,000 jobs as more people struggled to find work. It was a terrible month for the tourism sector and youth employment fell sharply from one of the worst summer job markets in decades.

The unemployment rate stayed at 8.6 per cent as discouraged workers appeared to leave the labour market and were not counted in the monthly tally from Statistics Canada.

Though the national unemployment rate was unchanged, one note of concern was that full-time employment and private sector jobs - the two most reliable indicators of labour market strength - both continued their downward trajectory.

"While a jobless recovery is possible, a job-destroying recovery isn't, since even if productivity gains allow it for a while, it leaves the household sector without the spending power to sustain it," wrote CIBC chief economist Avery Shenfeld.

"All told, these were much weaker numbers than anticipated."

"No one said it was going to be a smooth recovery, and especially not for employment," said BMO Capital Markets Economist Doug Porter.

  • (Previous month in brackets.)
    -St. John's, N.L. 8.1 (7.6)
    -Halifax 6.0 (5.9)
    -Saint John, N.B. 5.0 (5.0)
    -Saguenay, Que. 9.8 (9.2)
    -Quebec 4.8 (4.6)
    -Trois-Rivieres, Que. 8.3 (8.2)
    -Sherbrooke, Que. 8.5 (9.1)
    -Montreal 9.6 (9.5)
    -Gatineau, Que. 5.4 (5.4)
    -Ottawa 6.0 (6.4)
    -Kingston, Ont. 7.2 (6.6)
    -Toronto 10.0 (9.6)
    -Hamilton 8.2 (7.1)
    -Kitchener, Ont. 9.9 (9.9)
    -London, Ont. 10.6 (10.4)
    -Oshawa, Ont. 9.7 (8.7)
    -St. Catharines-Niagara, Ont. 10.5 (10.9)
    -Sudbury, Ont. 9.8 (8.9)
    -Thunder Bay, Ont. 8.5 (8.8)
    -Windsor, Ont. 15.2 (14.4)
    -Winnipeg 5.3 (4.9)
    -Regina 3.2 (3.4)
    -Saskatoon 4.7 (4.6)
    -Calgary 6.9 (6.6)
    -Edmonton 7.0 (6.5)
    -Abbotsford, B.C. 9.0 (8.2)
    -Vancouver 7.0 (6.9)
    -Victoria 6.1 (6.3)

Source: The Canadian Press

IBM union Layoffs could hit 16,000 by year's end

IBM is reducing headcount in the United States.

"This means that the best information on IBM's workforce reduction in the U.S. come from two sources: The company's own annual report, which shows the year-to-year changes in its U.S. workforce, and the Alliance@IBM.

The Alliance says it has counted about 184 employees who have been laid off in the most recent round of cuts, based on employee information packets it received so far. But it believes the number exceeds that, according to Lee Conrad, the union's national coordinator.
In January, Conrad estimated that as many as 16,000 employees may be cut this year and it's standing by that figure. Based on its count so far, at least 10,000 employees have already been culled from the workforce because of the recession and offshoring.

"It is not right that IBM continues to keep job cut numbers, locations and divisions secret," said Conrad in an email. "IBM needs to come clean on how many jobs are being terminated as the work is offshored. We call for full transparency." The Alliance@IBM is a Communications Workers of America local that doesn't have enough members to gain official recognition as a bargaining unit."

Structural Unemployment Worsens.

The number of people who've been out of work longer than six months soared by a record 584,000 to 5 million, accounting for more than a third of all unemployment for the first time on record.

This is an interesting situation. The unemployment rate ticked down, but that is discounting a large number of job seekers removed from the overall data. This removed about .2% to the overall unemployment rate. So although there was slight improvement in job losses, there continues to be elavated state of job losses.

Another problem is the number of hours worked. The average reported on Thursday is 33.1, a tick up of 400,000+ jobs. However the United States is still running at very low historical hourly work rates. This will lead to reduced spending, and cause retailers to hire as few workers as needed. This continued slow pace of added jobs will limit the amount of hiring that the private sector will employ.

Jobs data propel staffing stocks, risks remain

"Tig Gilliam, who heads North American operations for global staffing giant Adecco SA, said the industrial part of the temporary labor market normally rebounds strongly at the end of recessions, but he has not yet seen evidence of that.

Jobs associated with the physical supply chain will recover as inventories get run down and need to be restocked, Gilliam said, but he added:

"The only place we're seeing the reaction you'd expect there is in automotive, and what scares me is that's artificial. (The) cash-for-clunkers program accelerated demand in that segment."

Source: Reuters

Thursday, August 6, 2009

Prospects of a jobless recovery

From Kathleen Pender:

"The prospect of an economic recovery is growing stronger, but so are fears that unemployment could remain high for a prolonged period as it did during the previous two recessions.

If you are a U.S. manufacturer, you can't raise prices. The only way to increase profits is to cut costs," he says. One way to do that is to move production overseas.

Achuthan says that nonmanufacturing employment recovered quickly after the previous two recessions, but those gains were overwhelmed by job losses in manufacturing. "Ten years ago we had 18 million manufacturing jobs. Today we have 12 million.

What's different this time is that consumers, who are deeply in debt and have watched the value of their homes and investments plummet, might spend less than they normally would in a recovery, keeping a lid on job growth.

Another risk: Normally, when a recession includes a credit crisis, "the recovery is steep and drawn out," says Gary Schlossberg, a senior economist with Wells Capital Management. That suggests this recovery will be slow.

Economist Ed Yardeni expects "a very weak recovery in the labor market, even weaker than in the last recovery," he says.

Washington is throwing too many wrenches into the recovery mechanism. In the past it was simple: cut taxes and help the unemployed. We didn't use a recession to change all sorts of policies," such as health care, energy and union elections, he says. All this uncertainty could discourage hiring.

Yardeni also wonders "how we can have a sustainable recovery with the kind of deficits we are projecting. Normally deficits widen in recessions and narrow in recoveries. This time we are looking at structural deficits. That creates another layer of uncertainty."

Winners and Losers in a Jobless Recovery

Here's an interesting take from the WSJ with the possiblity of a jobless recovery.

Wednesday, August 5, 2009

Job market appears worse then first half of the year.

TrimTabs Investment Research, a research firm in Sausalito, Calif., takes a dimmer view on the upcoming U.S. jobs report, which is scheduled for Friday. Not only that, but TrimTabs says the job market was even worse than it appeared in the first half of the year.

TrimTabs says the U.S. economy probably lost 488,000 jobs in July. And it gets worse: based on unemployment insurance survey results, TrimTabs also expects the U.S. Bureau of Labor Statistics to revise its job loss estimates sharply higher for the first half of the year.

"While Wall Street is convinced the recession is over, the economy continues to shed jobs at an alarming rate," said Charles Biderman, CEO of TrimTabs.

TrimTabs says its "employment estimates are based on analysis of daily income tax deposits to the U.S. Treasury from all salaried U.S. employees."

Here's more from TrimTabs:

As job losses have continued at a rapid clip, declines in wages and salaries have accelerated. According to TrimTabs' tax data, wages and salaries fell 5.9% year-over-year in July, worse than the decline of 5.1% year-over-year in the second quarter.

"The personal income report the Bureau of Economic Analysis released Tuesday contained huge downward revisions to wage and salary growth," said Biderman. "Now that the BEA is using unemployment insurance reports from the first quarter to estimate current wage and salary growth, its data confirms what we have been reporting for months."

The BEA's estimates of wages and salary growth changed from year-over-year declines of 0.8% in April and 1.1% in May to year-over-year declines of 4.0% in April and 4.2% in May. Also, the BEA reported that wages and salaries dropped even more sharply in June, falling 4.7% year-over-year.

"Two months ago, we asked BEA economists how they reconciled the huge declines in real-time tax deposits with their report of a modest decline in wages and salaries," said Biderman. "They could not answer our question. We know now that by ignoring real-time data, the BEA was providing an inaccurate view of the economy's health."

This is going to be a very interesting report that is going to be coming out on Friday. I suspect that the green shoots that everyone feels is present will not materialize at least this quarter. Hence the weak ADP numbers reported this morning. Cisco Systems also reported that they laid off more then expected workers this past quarter. There is not enough demand to drive revenue for the private sector right now.

Private sector employment dropped by 371,000

"Private-sector employment in the United States fell by an estimated 371,000 jobs in the July ADP employment index, the smallest decline since October. The goods producing sector lost 169,000 jobs, while the service sector lost 202,000, according to ADP. On Friday, the government will report on its estimate for nonfarm payrolls, with economists surveyed by MarketWatch looking for a loss of 275,000 jobs, which would be the fewest since August. For June, private-sector jobs fell by a revised 463,000"

This report is more then expected. There might be another round of private sector layoffs coming, as companies continue to try to optimize their margins.

Tuesday, August 4, 2009

SP500 Overvalued

Jeremy Grantham puts fair value at 880 on the S&P 500. That seems a bit precise. Let's call it 900.

So the SP500 is about at least 100 points overvalued at this point. I think all this momentum seems to be priced into the market. Any earnings warnings or shortfall will get crushed. So proceed with caution at this point.

A number of employment will be out during the next three days. I'll be watching to see how they compared to estimates.

Manpower Earnings Q2 2009

Earnings came out. The earnings was fair considering the environment. Stablization in the US, Italy, and France. Weakness in Australia and some other European nations.

Manpower has done a fairly good job containing cost, and has been buoy by Right Management this quarter. However, although third quarter wise is suppose to be Manpower's strongest quarter; margins will come down due to Right Management seasonal decline.

From AP:

"Co issues in-line guidance for Q3, sees EPS of $0.07-0.21 vs. $0.18 consensus."
From Zacks:
"Management provided a cautious outlook for the third quarter of fiscal 2009. On a consolidated basis, it expects revenues to decline between 29% and 31% in reported dollars (24% to 26% in constant currency)."

So forward guidance is a bit iffy on the EPS front. I'm still a bit tepid with the valuations of Manpower when its peers are not receiving as much of a premium as MAN.

P/E excluding extraordinary items at 66x earnings as of July 24, 2009.
While the PEG is over 11x.
Net Profit Margin at 0.03%
Besides that as the chart presents that this stock is well overbought. When net income is down as much as it has the run up has not been justified. Even as they beat estimates this does not reflect a rebound in employment.

I find this extremely expensive vs. its peers. The stock is pricing in a recovery. If for some reason there is a "W" shaped recovery MAN is going to decline. Remember that employment is a lagging indicator to a recovery.

Sunday, August 2, 2009

China's stimulus-fueled stock boom alarms Beijing

"But while investors expect the market -- up more than 80 percent this year -- to keep rising, Chinese leaders are alarmed. They worry that too much of the $1 trillion lending binge by state banks that paid for China's nascent revival was diverted into stocks and real estate, raising the danger of a boom and bust cycle and higher inflation less than two years after an earlier stock market bubble burst.

Beijing is trying to tighten credit controls without derailing the economic revival or causing a market crash -- a risky path at a time when Chinese leaders say a recovery is not firmly established.

"It's a very serious threat. The Chinese government is walking a tightrope," said Mark Williams, Asia economist for Capital Economics in London. "There is the question of what happens if they rein in lending, because there is really no strong evidence that private sector demand is picking up."

"Above 3,000 points, the benchmark index is just in the process of blowing a bigger and bigger bubble," said Wen Lijun, an analyst for Nanjing Securities. "It is just excessive liquidity and no other reason."

Source: AP

Unemployment Insurance Data Summary

This a great site from the government (United States related) for those that are unemployed and want to look at a comparison of how their state is fairing versus the rest of the nation.

Very helpful if you feel that you are nearing the exhaustion of your benefits.

What recession?

Present economic conditions in the United States from Ritholtz:

• Unemployment has risen;
• Wages continue to slide;
• Industrial production has fallen every month;
• Deflation continues to stalk many asset classes;
• Credit availability is weak, lending standards are tight;
• Capacity utilization is at a very low rate of 68%;
• Retail sales (other than gasoline price increases) are soft

As stated the economic bottom hasn't been hit, and growth has been returning although at a very sluggish rate. Credit is still tight, hence the lack of private sector growth. Government spending can temporary provide a cushion against additional downside but it can not continue its debt ridden balance sheet.

Wages will continue to be under pressure as demand has not returned to from the 2007 peak. Hence the increase in savings and tepid spending by the consumer.


David Rosenberg in his latest piece stated the following:

"He wonders, moreover, whether the March 6 lows in the stock market were the real McCoy. Although, in contrast to us, Dave persists in keeping an open mind, he’s doubtful that they were. On March 6, he recounts, the market was trading at two times book, with a 13 times multiple on forward earnings and a P/E of 18 on trailing earnings, and a 3% dividend yield. Pretty rich valuations by all three measures of earnings, but pretty skimpy on yield, to rate as a true market low.

And today, after a 45% rise, the metrics, to dip into the Street cliché, are positively mind-boggling. The dividend yield on the S&P 500, Dave notes, is a meager 2¾%, and payouts so far this year have lagged some 32% behind last year’s not-exactly-torrid pace.

In a like astounding vein, he observes, the trailing P/E on operating earnings (adjusted, he explains, “to take out everything that is bad”) is now at 24 times, while — and if you have a queasy stomach you can skip this number — on trailing reported earnings, the multiple is a mere 760-plus!

“Something tells us,” Dave sighs, “that the marginal buyer of equities today at that price may well be the same person who was loading up on real estate during the summer of ‘06.”

Saturday, August 1, 2009

Standard and Poor's Overvalued

After a 40+% gain from the March lows on sub par volume, the S&P 500 seems overvalued relative to the current conditions in the economy. With companies beating on the EPS front due to cost cutting and reduction in head cut, revenue has been for the most part has not matched top end expectations. Hence, although the worst may have come and gone, we are still not out of the woods in terms of excess in the financial markets. With this added global stimulus program, we maybe in for another bubble to burst with the Chinese Shanghai markets up over 90%.
Clearly there is a lag from what actually happens with the economy and the stock market, however if we continue to buy at this point we may find ourselves paying over what the historical value is in the market.

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