I sympathize with Bill Miller; no one likes to have a losing streak. That said, by my calculations, he is now behind the S&P 500 over the last ten years.
I want to offer a simple explanation as to why Bill Miller has done so poorly recently. First, he has bought growth companies — companies where the valuation is critically dependent on future earnings growth. Think of Amazon (a success) or Yahoo (a failure). Second, he avoided cyclical companies that benefit from global economic growth, that is, energy and basic materials.
Bill Miller did well in the era where he used simpler valuation metrics, before he moved onto metrics that demanded more from future growth of earnings. Since that time, he has underperformed, and deservedly so. He has neglected the core idea of value investing, which is the margin of safety. By buying companies that will get crushed if growth targets are not met, he has invited his own troubles.
And, for someone who prizes deep thinking, I’m afraid he missed the forest for the trees. (Tsst… MM is a bright guy, I like reading him, but what does he really add?) Better to spend a little time looking at the world, and adjust the investing accordingly, than to insist that a bunch of US-centric growth companies will outperform. Cyclical growth is real growth in this environment.
I hope Bill Miller turns it around because many friends of mine are part of the Baltimore money management community. As Legg Mason shrinks, so do opportunities here. But to turn it around, it means a return to down and dirty value investing, and an eye toward analyzing what sectors will do best from a global context.
In some ways, this one was pure slop on my part.? In September 2005, I thought the setback in Dana’s auto parts business was temporary, and bought a little more.? After the second dose of bad news, I looked at the statements afresh and kicked myself.? How could I have missed the growing negative divergence between earnings and cash flow?? I waited a few days for a rally, and sold.? As it was, Dana filed for Chapter 11 in March 2006.? This could have been a lot worse for me.
How much can you lose on a $7 stock? Seven dollars. Dana (DCN:NYSE) just filed for bankruptcy, and trading is temporarily suspended. I think the common will get wiped out, so any long trades here are purely speculative. Unsecured debt is trading in the high $60s, so they look like they are the new owners of the company (but that’s just a guess).
Don’t be afraid to take losses, if you know the situation is worse than the current price would indicate.
The common was wiped out when Dana recently emerged from bankruptcy in February of this year.? PXRE made out better, merging with Argonaut.
National Atlantic Holdings
I’ve written more than my share on NAHC, and for the good of my readers, probably too much.? Perhaps this one might be a good example of taking time to accumulate a position.? My average cost is $6.67, which means that if the deal goes through at $6.25, this isn’t one of my ten largest losses.? Tentatively, though, I plan on filing for appraisal rights if the deal goes through.
Consider the 1Q08 earnings conference call on Monday:
Operator:
And we have a follow up from David Merkel with Finacorp Securities.
<Q – David Merkel>: Hi.? Sorry to trouble you, one follow up. It’s basically the questions I asked on the last call.? Your loss reserves, there’s nothing there in terms of future development that should have been reflected in the first quarter that isn’t there in the statements, and your bonds are stated at their fair market value to the best of your knowledge.? You’ve got a high-quality portfolio there.
<A – Frank Prudente>: Yes we do, David.? This is Frank Prudente. I’ll take the second part of your question first if you don’t mind.? Our portfolio remains to be very conservative and very high quality.? With the implementation of the new accounting standard we’re at Level 2 two for all of our available for sale securities.? So we continue to feel very comfortable about our investment portfolio.? And as Bruce alluded to earlier, we do a comprehensive actuarial analysis every quarter which is further validated by the review performed by our external auditors each and every quarter.? And what I can tell you is we base our estimates of loss and loss adjustment expense reserves based on all of the most relevant data we have available to us for each and every financial statement close process.
<Q – David Merkel>: Thanks, Frank. I appreciate that. Take care.
What that may mean to the court is that twice after the announcement of the merger, they publicly stated that their most variable assets and liabilities were correctly and conservatively stated on their balance sheet.? That means anyone receiving much less than book is not getting fair compensation.? This one is not over yet; I may get out of this one with a gain.? :(? (Dreamer…)
My failure here was not carefully evaluating the management team, and rely on my usual benchmark that a short-tail P&C company earning money, and trading below book is a good deal.
Vishay Intertechnology
I am still invested in Vishay.? It earns money, generates free cash flow, debt is being reduced, and the balance sheet looks decent.? The sorts of electronic components that they make will be difficult to make obsolete.? I still like the name; I don’t think this one will be a loss for me in the end.
Tellabs
Tellabs looked cheap and got cheaper.? Almost every small tech company was getting thrown out; valuations reached record low levels by the end of third quarter 2002.? Tellabs had disappointment after disappointment, and I concluded that if it couldn’t earn money, the book value was overstated.? I sold, and bought stocks that I thought have more promise.
That said, my rebalancing discipline allowed me to reduce the overall losses from this volatile stock.? I didn’t lose nearly as much as a buy-and-hold investor would have.
Deutsche Bank
This was a failure to integrate my overall markets view, and allowing short-term valuation issues to dominate my decision.? I thought the investment banks wouldn’t do well, but I thought Deutsche Bank might escape the troubles.? Well, I was wrong.? European institutions mimicked Wall Street to a higher degree than most would have expected.
My last buy was a rebalancing buy, but as results came in from other European banks, I ended up selling Deutsche Bank, and RBS as well.? Time will tell how smart that was… the investment banks of our world are tied together through counterparty exposure — to a degree, they succeed and fail as a group… that’s why the Fed bailed out Bear Stearns.
Summary of Part II
I’ll repeat what I said in part one, and add a little.
Don?t play with companies that have moderate credit quality during times of economic stress.
Measure credit quality not only by the balance sheet, but by the ability to generate free cash.
Spend more time trying to see whether management teams are competent or not.
Cut losses when your estimate of future profitability drops to levels that no longer justify holding the asset.
The next two articles in this series will be about investments that went right.? They should come soon.
I’ve been debating in my mind how I would write this piece. In the end, I just decided that I would tell it plain. Part of investing is losing money. There is a connection between willingness to lose money in the short run, and ability to make money in the long run. My experience has been that if you don’t take the risk of losing significant money, you don’t make significant money. Another way of saying it is that if you don’t blow one up every now and then, you’re not taking enough risk.
With that introduction, let me present my 10 worst losses since starting this strategy 7.7 years ago, beginning with the worst, and moving to progressively lesser losses. These ten losses comprise 55% of the total dollar value of losses since I started this strategy.
Deerfield Capital
What can I say?? My original thesis was that Deerfield was a mortgage REIT that did it right.? In spite of my negative real estate views, I did not think that the risk would extend all of the way to prime mortgage and Alt-A (no stated income) collateral.? Alas, my training as an actuary should have told me to avoid companies dependent on market confidence to maintain financing.? As the repo haircuts rose, free assets diminished, aand they had to collapse their balance sheet.? My main mistake was thinking that repo haircuts couldn’t get that high.? I was wrong. I finally sold when I thought the likelihood of insolvency was significant.
YRC Worldwide
I got in this one too early.? My industry models sometimes flash “cheap” when things will get cheaper.? Sometimes I have the sense to remember that.? This time I didn’t.? YRC has more debt than I would like, but it has a huge amount of upside when the economy turns.? Waiting for that turn could be fatal, but I continue to do so.? One other note: for the remainder of this piece — where my graphs say exit, it does not mean sale. For companies that I still owned at 4/30/2008, I market them down as “exited” because that is where my calculations end.
The jury is out on this one.? As with all of my investments, I try to analyze a company versus its likely future prospects.? I don’t care a lot about the past, I just try to analyze current price versus future prospects.? My estimate of future value warrants continued inclusion in the portfolio.
Dynegy
Catch a falling knife?? When there is fraud, I give other investors a pass.? As for me, I should have known better.? Cash flow was light relative to earnings — not a good sign.? Another warning sign ignored: avoid managements that are self-absorbed.? Dynegy and their investment banks had to kick in to fund a settlement.? (Note: it is only worth going through the settlement process when a deep third pocket gets tagged.? Most fraud cases are broke, and only the lawyers do well.)
I’m afraid that friends influenced me here; a number of people in my investment department owned Dynegy, and when I bought, e comment was “Welcome to the Dark Side.”? Dark? — better to say red ink. I can’t prevent being taken in by fraud, but I can minimize it if I focus on companies with strong cash generation.? It’s hard to fake free cash flow.
Jones Apparel Group
Again, my industry models flashed “Cheap” too soon.? Everything depends on whether Jones can turn their operating businesses around.? I think they have a chance, and given the recent sale of one of their subsidiaries, there is enough cash.? That said, I tend to worry when debt levels verge on high, and the debt maturities are near.? There is a new CEO, who was the old CFO.? At present, I still think there is value here, but I will take my loss before the end of 2008 if earnings results don’t turn.
Cable & Wireless plc
One of my ways of trying to make money is to buy strongly capitalized companies in an industry that is having troubles.? Well, the strength of C&W’s balance sheet was overstated; there was a bit of a fraud issue there.? And, I should have listened to Cody Willard, who e-mailed me before we really knew me, and said something to the effect of, “Yeah, they have a balance sheet, but no good businesses.? Can’t make money with that.”
Part I Summary
Every loss is stupid in hindsight.? We all get tempted to say “woulda, coulda, shoulda.”? But the same principles that led to my losses also led to my greatest gains.? Two articles from now in this series, I’ll go over those.? But it is best to lead with failure… we learn far more from our failures than our successes.? What are my lessons here?
Don’t play with companies that have moderate credit quality during times of economic stress.
Measure credit quality not only by the balance sheet, but by the ability to generate free cash.
Spend more time trying to see whether management teams are competent or not.
I’ll see if I can’t do better on these concepts in the future.
If you ask me what is more fundamental to me — am I an economist or and an investor? I will tell you that I am an investor. At present for my work I am putting together a pitch book for my company detailing my value investing for potential clients. In the process of doing that, I decided to analyze all of my investments over the past 7+ years, in an effort to find some stories that are representative of my money management methods (both good and bad).
In order to get those stories, I had to download and clean all of my transactions over the past 7+ years, and then calculate the internal rate of return on each stock that I bought over the period. I still haven’t written the stories, and would appreciate advice from readers as to which stocks to use.
As I did my analysis, I learned a few things:
Over the 7+ years, I have owned 186 stocks.
Slightly more than 75% of my investments have been profitable.
My average holding period has been 503 days.
I have hit some home runs, and hit into triple plays.
My top 11 gains pay for all of my losers.
My cumulative profits comprise more than two-thirds of my assets.
Holding Period
Now, on this graph, the days are averages, so zero represents 0-50 days, 100 represents 50-150 days, etc. As you can see, I occasionally trade (though usually not intentionally) , but most of the time I invest.
Internal Rates of Return
What is an internal rate of return [IRR]? It is the constant rate one earns on an investment from start to finish. It is a way of averaging out all of the cash flows, and annualizing the result, so that it can be compared against other investments. Here is a histogram of the internal rates of return on my investments:
But, IRRs can be misleading. A small gain/loss in a short period of time can result in large absolute IRRs. That’s why I decided to create the imperfect concept of the pseudo-cumulative return. Suppose you earned the IRR over the full length of the investment? What would the cumulative return be?
Now, those who have followed me for a while know that my rebalancing discipline forces me to buy or sell after large moves. The pseudo-cumulative return usually overstates my return, because I sold on the way up, and bought on the way down.
The above graph, tough as it is to interpret, gives a reasonable idea of how my investments have worked. Most of my investments last for a few years, some more, some less. I have tended to make money pretty regularly, but I have had some real stinkers. I’ll pick up on that theme in my next post on Monday.
One of the dangers of being a generalist is that you get spread too thin. Another is that you overplay your abilities. I probably did a little of both in my recent post on ETNs (and blogging while tired). The fine folks at Index Universe took umbrage at my post, and for good reason. I wrote a sloppy post without enough research.
Here’s what I intended, even though it came out wrong. I liked the post that came from Index Universe, because it highlighted an issue with ETNs that I had been talking about for two years — you have a significant credit risk there. In the two years since I wrote the piece that I cited in my article, I have read dozens of articles on ETNs, and not one of them mentioned credit risk. So, I was glad that someone had taken up my point. Or, at least, I thought it was my point.
Now, how was I to know that some writers at Index Universe had already written on the issue of credit risk? I read pretty broadly, but I can’t dig for everything. Also, they took it as a poke/jab; that was not my intent. I don’t think that way, and I genuinely like Index Universe, even though I don’t read it daily.
I offered my apologies at their site, and I offer my apologies to readers here. I apologize for my mistakes; I am not like some writers on the web that can never be wrong.
One final note: I have been dealing with credit issues since 1992 in the insurance, mortgage bond, and corporate bond businesses. My experience is very relevant here. You would be amazed at the panoply of products resembling ETNs that got trotted out since the mid-1980s, though I ran into them in the 1990s.
In any case, hail Index Universe, and investors remember, ETNs carry credit risk.
I thought Felix Salmon did an excellent job on this post regarding economics blogging. His correspondent proposes standards for and a reward to be handed out to the best bloggers. Felix declines. I decline as well, which I will detail later. There are already ways for financial bloggers to be distinguished against one another:
What’s the Alexa, Technorati, and Quantcast rankings of your site?
Do journalists call you to talk about financial issues? (Happens to me a lot.) Do you get mentioned in the paper? (Uh, not so much… the copy editors leave me on the cutting room floor…)
If someone Googles a given term, where do you show up?
How many hits do you get per day? How many subscribe to your RSS feed? E-mail feed? Seeking Alpha? Other?
The thing is, the web is a very competitive environment, with a lot of bright people. Switching on the web is easier newspapers or magazines.
But why do I blog? Let me answer that with a different question, “Why did/do I write for RealMoney?” Well, it’s not for the money, though I would earn more if I submitted my articles to RealMoney rather than placing them at my blog. I like explaining concepts to people and seeing the light go on. I like hearing that someone made a better investment decision because of my educational writings. I also enjoy the challenge of trying to tease out conclusions from dirty data, using an approach that is eclectic.
Oh, and the money? Sorry, not much there. Though my blog costs me $200/year, it makes roughly $1000/year. The $800/year of profit is not enough to compensate me for my time; given the time required, I’m not sure what would be enough. I don’t do it for the money; I do it for the audience. (I would make more if I submitted it all to RealMoney, but then the audience would not be as wide, and I would not be building my brand.)
Now some bloggers are anonymous. I will mention Equity Private and Accrued Interest. Both know their stuff, and they aren’t pulling anyone’s chains. If someone writes anonymously, and does not know their stuff, their readership will not grow, because it will become known through the comments at the blog — it will not appeal to the intelligent commenters that help build an audience.
Blogging is in many ways tougher than being a young journalist. A blogger starts with no audience, whereas a young journalist has an audience from the publication. The young journalist will be guided in what to write about by his superiors, and will automatically get edited. The blogger has to figure out what he can adequately say, and whether anyone really wants to read him. The young journalist will have discipline imposed on him, whereas most successful bloggers have to develop their own discipline — one consistent with their posting style and frequency. Blog audiences decay rapidly with lack of attention, and there is a lot of competition to be heard. Journalists succeed or fail as a group, and the individual journalist does not have a lot of effect on that.
That last point should be changed to when journalistic organizations succeed or fail, the journalists inside tag along. Their competition does not primarily come from bloggers, but from Craigslist (classified ads), Google (targeted advertising), Ebay (targeted consumer to consumer sales), and Monster (Job ads and applicants), which dries up the real revenue streams. Plus, the younger demographic does not as easily pay for print subscriptions.
One other note — many popular bloggers realize that they could become a lot more popular if they head off in a sensationalistic direction, and a few do, with some cost to the truth. They do their readers little service. What I have stared down is that I could write only about stock investing ideas, and my site would be more popular. But those are far less certain than what I write about. I feel comfortable talking about my portfolio, which is over at Stockpickr.com, but individual ideas, particularly the controversial ones, have a lower probability of being correct.
Blogging is easier than being a journalist if you don’t care about being read. Anyone can go to Blogger or Typepad (among others), and start a blog in minutes. It is those bloggers who have something significant to say who will end up with an audience. I thank my audience that reads me regularly; I only hope that I can continue to be worthy of your time.
PS — I recently submitted my blog to Blogged.com, and the editor did not think that much of my blog. If you have a strong opinion about me, positive or negative, perhaps you could write a review. Again, thanks.
Roger, there is a reason to be aware the the ETNs issued by Barclays plc are notes. (or, bonds) If Barclays went bankrupt, the value of the notes would be impaired. From my limited glance through the prospectus:
The Securities are medium-term notes that are uncollateralized debt securities and are linked to the performance of the GSCI? Total Return Index (the “Index”).
and later…
The Securities are unsecured promises of Barclays Bank PLC and are not secured debt. The Securities are riskier than ordinary unsecured debt securities. The return on the Securities is linked to the performance of the Index. Investing in the Securities is not equivalent to investing directly in Index Components or the Index itself.
and much later…
USE OF PROCEEDS
Unless otherwise indicated in the applicable pricing supplement, the net proceeds from the offering of the notes will be applied for our hedging and general corporate purposes.
In essence, a holder of the ETN has bought a senior unsecured zero coupon bond from Barclays, with an ultimate payoff based off of the return on the commodities index less 0.75%/year. But unlike a bond, there is no floor on the implied interest at zero. If commodity indexes fall, the ETN would give a negative return.
I like Barclays. I own the stock. But there is more than one risk to the ETNs: commodity price risk (of course), and Barclays plc credit risk (surprise!).
Position: long BCS, and pondering the days when I used to read structured bond prospectuses regularly…
-=-=-=-
Now, today, I find it funny to see other retail investment commentators catching up with the credit risk angle of ETNs.? Perhaps it is my background in the Equity Indexed Annuity [EIA], Variable Annuity [VA], DC pension and GIC businesses — we had all sorts of guarantees and non-guarantees floating around, so we were used to analyzing the risks.
Now, what if the sponsors packaged the ETN with a default swap (written by third parties) to protect the investors if the company failed?? At that level, the ETN provider should buy Treasuries or Agencies, and layer on the futures or options as the case may be, creating an ETF, because all of the advantage from doing the ETN goes away.
Be wary of ETNs, at least to the level of asking how likely it will be for the sponsor to be in good shape when the ETNs mature.
Every now and then, my hyperactive mind runs the film of the Federal Reserve changing its policy, and an unexpected chain of events happens, triggering a war a long way away. Sound farfetched? US monetary policy with its unending bias toward stimulus, since we are the global reserve currency (for now), pushes inflation out into the countries that lend to us and into the commodity markets as well. (What do you expect from a negative real interest rate?) This has political impacts as the prices for energy, food , and related goods rise.
Nigeria is a basket case because of the light sweet crude buried there. Venezuela gets its share of troubles because nationalized oil gives extra power to their government. Same for Russia, though the politics are different. Now there might be a movement for autonomy in the part of Bolivia where the natural gas is located. I sometimes think that Iran will have internal difficulties once their oil production falls to the degree that they can no longer subsidize their populace.
These are some of the difficulties driven in part by rising energy prices. Now, even in the US rising energy prices pinch. Summer travel will be less (though I will still take my family to the 50th anniversary of my parents — I expect to spend at least $600 on gas… cheaper than plane fare.)
Rationing of rice and other staples is happening globally, even in the US to a limited degree. Personally, I think it will lead to higher prices still and a lot more planting (on land previously considered marginal) for food, not energy purposes.
There are other spillover effects in the US, whether it is pricing/portions in restaurants, or the general rise in price for meats that may come. Remember the meat shortage in the 70s? (Ugh, I am dating myself…) First grain prices rose. Then, ranchers culled their herds/flocks. Meat prices fell. (That may be where we are now.) Once the excess meat was purchased, meat prices rose as well, creating the “meat shortage.”
My endgame for the foolishness for the past 20 years has resembled a repeat of the 1970s, minus country music, truckers being cool, disco, etc. It will have its difficulties; just be grateful to God that you don’t live in Nigeria, or any other place that is coming under stress that is eve n more severe.
Liquidity is like water. Is water a solid, a liquid, or a gas? Depending on the situation, water can be any or all of the three. When I started my blog, my first serious post was “What is Liquidity?” Given what was about to happen in Shanghai seven days later, and what that would do to liquidity, the post was ahead of its time.
Both had a number of good points, though I like my piece better.? Let me borrow from Peter Bernstein, where he said something to the effect of “Liquidity is the ability to have a do-over.”? In other words, if you make an investment mistake, how much does it cost you to reverse it?
The three aspects of liquidity:
What sort of premium does it take to get someone to lock into a long-term commitment?
Slack assets available for deployment into new investments, and
Bid-ask spreads
are correlated.? When there are few slack assets relative to investment needs, large premiums have to be offered to get investors to lock into a long-term investment, and bid-ask spreads tend to be wide as well.
But let’s consider the flip side of liquidity.? Liquidity is akin to holding a long option.? Rising volatility is the friend of one who has liquidity or a long option.? But, being long an option means someone else is short an option.? Having liquidity means that someone else has to provide cash should you choose to buy something.? If you liquidate shares in a money market fund, cash must come either from new investors in the fund who take your spot, or the fund has to raise liquidity internally, handing you some of the proceeds from not entering into an overnight loan.
Or, consider the bid-ask spread in stocks, or other securities.? When the bid-ask spread is tight, it means that the market maker (or specialist), is comfortable that short-term volatility is low enough, that he will be able to profit from the tight spread on average.? When there is severe uncertainty, as there often is in esoteric fixed income instruments during a panic period, the bid-ask spread disappears, and one is reduced to “price discovery, using a broker who is discreet about your intentions regarding buying or selling.? (My, but I got good at that during 2001-2003. ? Ouch.)
I like my definition of liquidity, which is the willingness (price) to enter into or exit fixed commitments.? It covers all three aspects of liquidity, and helps explain why they are usually different manifestations of the same phenomenon.
As for now, versus mid-February 2007, the willingness to enter into fixed commitments has declined markedly, even though it has improved over the last seven weeks.? That is no guarantee that it will continue to improve linearly.? Bear markets have their rallies, and this current rally has been a good one.? It would be rare to have such a short bear market, or one that ended without clearing away most of the prior excess lending problems.? We still have a lot of wood to chop there.
I tried forecasting the non-farm payrolls number when I first came to RealMoney — after all, what other number made as big of a splash? I seemed to do well at it for a while, and then badly, and then I really began to dig in to how the number was calculated. The more I dug into it, the more I concluded that I could not forecast it. Not that it is wrong, made up, whatever. I just could not forecast it, so I gave up.
Not that I like being a quitter, but there are benefits to recognizing reality and respecting it.? I did learn some things along the way, though, and let me explain them:
1) The 12-month change for the seasonally adjusted [SA] and non-seasonally adjusted [NSA] numbers are equal.
2) The seasonal adjustment is more than just an adjustment for seasonality.? There is a distinct annual pattern to the NSA data, and I have done my own seasonal adjustments and they do not reduce that variability nearly as much as the BLS methods which involve ARIMA models.? (As one of my econometrics professors used to say to me, “Practitioners use ARIMA models when they have no idea of what the true model might be.? It’s just a hunt for correlations.”)
In other words, the SA data is not just adjusted for seasonality, but it is smoothed as well.? Now, as an actuary, I can get into smoothing.? We do that all the time when theory would dictate smoothness, as in mortality table construction.? But here the smoothing is opaque to me, and presumes that changes to employment levels happen slowly.? I’m not sure that always holds.
Think of it this way — the SA figures always contain a pad/buffer/fudge factor, whether positive or negative, that gets amortized into future changes in employment.? A particularly large change in the NSA figures will tend to lead to the SA figures changing in the same direction for a little while (or, in some cases, they revise prior months). For what it is worth, I think the pad is small at present.
3) You can’t easily disaggregate the birth/death [B/D] adjustment from the SA figures, because the SA figures come about like this:
Calculate the raw NSA figure
Add the B/D adjustment
perform the seasonal adjustment (and smoothing)
4) The B/D adjustment works sort of like this: estimate the amount of jobs that the economy will add from new businesses that are outside of our survey for the next year.? Add those jobs in using a pattern that reflects our estimate of when businesses add jobs on net.
5) Now, back to the graph at the top of this page.? The blue line is the number of net jobs added over the prior 12 months.? It doesn’t matter whether I use the NSA or SA figures, because over 12 months, they are the same.? The magenta line indicates the number of jobs added by the B/D adjustment over the prior 12 months.
Because I am doing a year-over-year comparison, I escape the problems associated with the seasonal adjustment, and this fairly disaggregates the B/D adjustment.? The yellow line is the proportion of net new jobs coming from the B/D adjustment.? Over the life of the B/D adjustment (since 1/1/2000), the B/D adjustment has made up 82% of all new jobs created.
6) At present, the B/D adjustment is running at an annualized 750-800 thousand jobs per year.? I don’t know if that is right or wrong, but since 2004, it has been near that level.? Recently, non-farm payroll numbers and the B/D adjustment have been declining, but the B/D adjustment has been declining more slowly.?? The B/D adjustment accounts for more than 100% of jobs added over the past twelve months.? That’s not necessarily wrong, but the B/D adjustment does move slowly.
7) I’ve tried to be as neutral as possible here.? Two of my favorite bloggers, Dr. Jeff Miller, and Barry Ritholtz, are on opposite sides of this argument.? I put this out as data for discussion; I am not taking a stand because I can’t vet out the estimates of job creation from the birth/death adjustment.? They could be high, low, or just right.? In a slowdown, perhaps they should be off more, but the global economy is still strong, supporting jobs in some cyclical sectors.
