The Daily Dose: Blood, Sweat, Tears

 | Aug 30, 2013 | 11:30 AM EDT  | Comments
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Stock quotes in this article:

cmg

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payx

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adp

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ctas

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pep

History of Labor Day

"Labor Day, the first Monday in September, is a creation of the labor movement and is dedicated to the social and economic achievements of American workers. It constitutes a yearly national tribute to the contributions workers have made to the strength, prosperity, and well-being of our country." –U.S. Department of Labor

Two Signs the U.S. Economy Is Laboring

  • 77% of the 1 million jobs created in 2013 could be classified as part-time.
  • On average, state personal income fell 1.2% in the first quarter...but inflation only declined 0.2%.

Congratulations, you made it to Labor Day weekend with at least 35 stocks that are worth considerably more (hopefully) than January 1. That is no small achievement considering the powerful cosmic forces embedded in the markets that could have wreaked havoc on your financial well-being, at a drop of a dime.

When returning to the office on Tuesday we will be in September, a dreaded month for investors, according to those that pray at the altar of the Stock Trader's Almanac. Things could get downright ugly indeed, as there is a Fed meeting that has been circled on the calendar since three years ago. That will be accompanied by a bunch of elected folk out of touch with reality blowing hot air on C-Span regarding the debt they and their predecessors created. Add to that the geopolitical risks that abound from a country with cowardly leaders that smile prior to dropping gas on innocent civilians.

In front of this snack tray of potential market badness, I suggest a straightforward approach: Do like me and have no Labor Day celebrations. Yes, that is correct, kind sir or madam. Cancel all plans, hibernate in the home office and embody the spirit of the U.S. labor movement by pouring some good ole' fashioned blood, sweat, and tears into the pursuit of profitable macro and micro investment themes/opportunities.

I am telling you this now: Ignore my advice at your own peril. Become come Sept. 3, 2013, you will be overwhelmed by an abundance of news and investment bank maneuvers in order to position clients to win in a likely volatile September. Be prepared, and commence that preparation today.

My Personal List of Labor Day To-Do Items

Initial jobless claims had a pretty nice showing in August (provided you want to see the U.S. economy do better than +2.5% GDP). That really spurred hope for an acceleration in non-farm payrolls following a disgusting July reading.

Even the preliminary estimates for headline payrolls of 215,000 to 230,000 backup, the claims induced hopium. However, shares of what I often reference as "payrolls predictor stocks", names such as ADP (ADP), Paychex (PAYX), and Cintas (CTAS), have lagged the Dow Jones Industrial Average in the past five sessions. This is despite the low level of claims held in storage and generally reassuring snapshots on employment in various confidence/manufacturing surveys.

This doesn't make me feel warm and fuzzy inside going into the August employment report on an absolute basis (meaning, absent a bunch of dot-connecting, which I will explain). Who I do believe at this particular juncture, Mr. Market or government data compiler lifer?

The answer matters a great deal as the August employment report will sway those voting FOMC members regarding:

1. A full scale taper, headlined by $10 billion in bond purchases a month;

2. Taper light of $5 billion in bond purchases a month;

3. The mixed taper, with mortgages being tapered first;

4. No taper, a continued adherence to the Bank of Japan model.

Thanks to government bond-buying, sugar prices are at a five-year high. Could be the reason why Coca-Cola (KO) and Pepsi (PEP) are down 4.79% and 6.90%, respectively in the past month? Or, is it consumer spending weakness related? I am inclined to think it is consumer spending-related as the earnings report from Campbell's (CPB) on Thursday whispered this to me: "we had to promote more quarter over quarter or our numbers would have missed consensus spreadsheets, sad but true bro."

The bottom fell out of J.C. Penney (JCP) shares on Thursday evening, hitting my firm's $12.00 price target. Is this move an indication that J.C. Penney is not partaking in the ramp being experienced in the malls prior to back to school? That would be beyond troubling as J.C. Penney is currently giving the store away -- and that includes the online store -- as a means to drive traffic and to squeeze fast cash from merchandise inventories). If so, the stock will be below $10.00 before you can say "Ron Johnson had a creepy smile."

Jeff Gundlach is still not short shares of Chipotle (CMG), but he remains no fan. I talked to the company earlier this month (rating: sell) and could offer this insight: if the stock fails to hold the August 27 intra-day low of $398.00, it's the market beginning to price in a P&L hit in first half 2014 from investments to offer non-GMO menu items. Although I was left with the sense from the call that Chipotle's enhanced marketing initiatives have re-ignited traffic, and tame inflation in key ingredients helps the cost line, transitioning portions of a menu will be costly and unwelcome to a stock priced for perfection.

Columnist Conversations

Futures are up nicely to start the trading day. Chipotle Mexican Grill (CMG) should have big up day on blowout...
This tidbit making the rounds today: So far 74, or 15%, of S&P 500 companies have reported earnings and of...
Lang:
I'm home from a week of vacation in Myrtle Beach and am ready for action. Seeing some good numbers overnight ...
This looks like an important research note from the Fed, on the decline in long-term unemployment: http://www....

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