Almost half of those unemployed have been
out of work for over 27 weeks; this is a direct result of
easy application of benefits. Last week, over a million people have filed for
extended unemployment benefits. As long as these benefits are easy to get,
unemployment will easily get to 10%+.
Peter Diamond, one
of this year’s Nobel Prize winner in economics, argues for the benefits of
unemployment insurance. His work focuses on the temporary inefficiencies of the
labor market. Since it takes time to find an appropriate employer–employee match,
unemployment benefits provide for those during the interim. The problem is when
the benefits are “too” high. This explains the partisan debate over Diamond’s
Fed nomination.
The economy has
been losing jobs for 4 consecutive months but it’s not quite as bad as it
looks. Since the beginning of the year, our economy has added over 600,000 jobs
(net), with virtually all of these being in the private sector. We still have a
weak labor market, but this should not come as a surprise since firms are still
too unsure of the current political headwinds.
QUANTITATIVE
The VIX index
(18.78 as of 10/22) closed at its lowest levels since 04/29/10 (18.44) . The
index has been steadily trending downward since peaking above 45 in May and we
expect it to remain relatively low throughout the fourth quarter.
The technology and
consumer sectors continue to drive growth over value this past week
(10/18-10/22). Both sectors should continue to benefit from stronger market
sentiment and the expectation of increased corporate capital expenditures.
FUNDAMENTAL
Despite the well publicized “foreclosure
crisis”, the largest banks in the U.S. continue to report improving
fundamentals. Third quarter results show
that credit problems have stabilized and are slowly returning to normal.
Loan losses are better than expected as
evidenced by several large banks releasing loan loss reserves. New regulations
are having a meaningful impact on certain financial institutions – Bank of
America took a $10+ billion ($1.00/share) charge to its credit card business
valuation because new regulations make the business significantly less
profitable due to limits being placed on debit interchange fees.
DISCLOSURES
Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security. We are not soliciting any action based on this document. It is for the general information of clients of Horizon Investments, LLC (“Horizon”). This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any analysis, advice or recommendation in this document, clients should consider whether the mutual fund or other security in question is suitable for their particular circumstances and, if necessary, seek professional advice. Horizon may or may not hold assets described in the Market Mover of the Week section hereof, in any one or more of its portfolios. Even if Horizon does not currently hold the asset, it may in the future. The price and value of investments referred to in this document, if any, and the income from them may go down as well as up, and investors may realize losses on any investments.
Past performance is not a guarantee to future results. A loss of original capital may occur with any of Horizon’s portfolios. Opinions expressed herein are our opinions as of the date of this document. We do not intend to and will not endeavor to update the information discussed in this document. No part of this document may be (i) copied, photocopied, or duplicated in any form by any means or (ii) redistributed without Horizon’s prior written consent. Advice, if any, given in this document is not intended to be advice concerning tax matters and cannot be relied upon by a taxpayer for the purpose of avoiding penalties provided in the Internal Revenue Code. Further information on any of the securities mentioned in this document may be obtained on request. Other disclosure information is available at www.horizoninvestments.com or from Horizon Economic Research, 7401
CarmelExecutive Park,
Suite 106,
Charlotte,
NC28226.
The success of any fact-finding mission is based on the quality of the questioning. Know what questions to ask. Horizon distills the relevant conversations seeking actionable investment ideas.
