This past week we saw one of the fingers of instability give away in the form of a very poor jobs numbers. To be specific, there were only 69,000 new jobs added last month. This number came in at about 1/2 of the recent average and expectations. As you can see from the chart below, the monthly change numbers are showing a trend to the down side.
This weak jobs number is confirmed by Economic Cycle Research Institute’s “Weekly Leading Indicator” or WLI index. The index turned down from being slightly positive to a neutral and heading negative. This indicator measures future economic activity over the next 2 months. The last time this number turned negative was April 2011 when we had another major sell off in the markets.
Since the supposed recovery has been fueled by quantitative easing (QE2 a/k/a printing money), a continued weakness in the WLI suggests that the effects of printing are wearing off. This was inevitable. And now that we have a really poor jobs number, we are seeing correlation and confirmation of the weakness signals that the economy has been and is slowing.
What Does This Mean?
For one, it means that the Fed is going to continue to scrutinize this jobs figure along with other metrics. The White House was probably caught with their pants down around their ankles on this jobs numbers and rest assured that there will be corresponding pressure placed upon the Fed to take action. The Fed is not likely to knee jerk over this number. They will most likely continue to watch over the next 1-2 months. If the WLI and jobs related data continue to bear out what we are currently seeing, then they are most likely to engage in QE3 (print some more money).
What Does This Mean Regarding My Self Directed IRA?
First of all if you have a self directed IRA, you’ve made a wise decision to properly diversify your portfolio. In regards to this new data, it would seem that metals would be a wise choice for the next several months to a year until we start seeing readings that would indicate a new direction. Even though we don’t see real estate prices coming back any time soon, real estate can be a very good choice in many markets for the right type of investor. We don’t necessarily think you will see price appreciation in your real estate portfolio anytime soon, but we do believe that you will continue to see strong rental demand and good cash flow on the right properties.
The information provided is for educational purposes only and are not a solicitation or offering of an investment, investment advice, or tax advice. You should consult with your tax, legal or financial advisor to determine the suitability of any investments made with a self directed IRA account.