Podcast: Finally Waking Up to Reality

In my latest weekly Panzner Insights podcast, "Finally Waking Up to Reality," I discuss a number of unfolding financial, economic, and geopolitical developments that were previously (and exclusively) highlighted at my members-only site. A commercial interruption? Perhaps, but the truth, nonetheless.

As a special treat, this 30-minute program is also available to non-members. To listen now or download, please click here.

U.S. Employment Data: A Curious Divergence

From Panzner Insights:

Each month, the Bureau of Labor Statistics and Automatic Data Processing, Inc. detail what is happening in the jobs market. Although the tallies of monthly changes reported by each side are often out of kilter, their respective private nonfarm payroll totals have since the end of 2000 moved largely in tandem.

From December 2000 through December 2011, the median monthly gap between the two was 78,000, or 0.07 percent of the total. The largest reported difference was seen in November 2002, when the BLS total was 394,000, or 0.36 percent, higher than its ADP counterpart.

But as the chart shows, there has been a big change. From January 2012 through last month, the spread between the two series has widened dramatically as the BLS tally rose at a faster pace than the one reported by ADP. Over the span, the median differential was 614,000 jobs, or 0.55 percent. The minimum differential was 396,000, or 0.36 percent, in January 2012, while the maximum was 809,000, or 0.72 percent, in December 2012.

One possible reason for the disparity is that either the BLS or ADP altered the methodology they relied on in the previous 11 years and that statisticians on the other side have not yet cottoned on. While this is possible, I find it hard to believe that those who crunch the numbers for such an important data series would not be quick to incorporate an updated approach in their own calculations.

[Editor's note: some have pointed out that ADP did, in fact, revise their methodology in late-2012 to bring its figures more closely into line with those of the BLS; and yet, the gap between the two series appears to be as wide as ever. Say what?]

Another explanation is that statisticians at the BLS or ADP suddenly decided to “fudge” their numbers up or down, respectively. One obvious question, of course, is why would a company that stands to benefit from an improving jobs market want to report a more subdued sense of conditions on the ground than is actually the case? The logical answer is that they wouldn’t.

However, one could readily argue that many in Washington had a compelling interest in painting as bright a picture as possible of what was happening in an area of the economy that has remained in focus since the onset of the Great Recession. Why? Because they stood to gain from ensuring that policies that had benefited them personally–namely, continued government spending–remained in force.

One way to do that, of course, is to try and make it easier for those who were then in power to remain in charge after the next election, which just happened to be coming up in late-2012.


Retail Sales and Jobs

From Panzner Insights:

Economists rely on a variety of indicators to try and get a read on the economy. But the apparent connection between certain data points and trends and future activity isn't always obvious or straightforward.

That doesn't seem to be the case in regard to the connection between retail sales and employment. Indeed, it makes sense that concerns about the job market would be quickly felt when it comes to household spending. If workers fear they might lose their jobs, they don't wait until they get the bad news before cutting back.

More broadly, if a large enough number of workers believes the job market is deteriorating, then it's a good bet the overall trend of retail sales will signal the change before the payroll data does.

As the following chart shows, this has been the pattern previously. Under the circumstances, the latest readings on the pace of retail sales suggest it's only a matter of time before the headline employment data reveals that the jobs market is heading south.


Pensions: The Need-to-Know Guide

Pensions. A concern for the older generations? Another deduction from your pay packet? Or a golden opportunity to secure your future?

The world of pensions can be an overwhelming and confusing affair to the eyes of the unknown. With so much emphasis on saving now, it can sometimes be impossible to think of saving for your future.

Whilst the current economic climate is somewhat unstable to say the least, the new NEST Pension Laws implementing the auto-enrolment of employers and their employee’s onto singular workplace pensions aims to revitalise the way we save.

October’s New NEST Pension Scheme

Whilst many may already have pension schemes in place, a resounding number of UK adults are still not contributing to their pension; fewer than one in three in fact! Which raises the question; why is this so?

The thick and thin of it can be traced down to the simple fact that many people are unsure about the purpose, function and benefits of pensions in both the short and long term. So what do you need to know?

  1. What is a Pension?

In Lehman’s terms, a pension is simply a ‘pot’ of money that you, your employer and the Government contribute to in order to secure your finances for the future.

There is no involvement from the taxman and it means that, come your retirement, you can draw money from your pension or gain annuity, a method of selling your savings to an insurance company for a regular income.

  1. Why should I set up a pension?

The real selling point, apart from saving for the future, is the tax relief. Depending on your rate earnings, you will receive an automatic percentage back. You can claim an additional percentage depending on your rate earnings.

This percentage you receive back is worked out with the earnings on your contribution amount before the tax was deducted, in which you will receive the difference between your contribution and your pre-tax earnings.  

  1. Auto-Enrolment & NEST Pensions…What’s this about?

As of October 2013, employers will be obliged to offer employees access to an auto-enrolment NEST Pension scheme. This is a recent introduction by the government to ease the strain on State Pensions as well as making people aware of the importance of saving for their retirement.

This auto-enrolment scheme emphasises the need for employees to save and is aimed at providing a sole pension. This pension stays with you throughout your employment career even if you change job, become self-employed or stop working. Simple.

  1. How much should I contribute into my pension?

How much you and your employer will contribute will depend on your annual income. 2% (of which 1% is from your employer) must be paid of your qualifying earnings (salary, overtime, bonuses etc) if you earn £5,564 or more, although these figures are annually reviewed.

Ideally, you should be contributing more than the minimum requirements in order to gain the benefits later on in life. The sooner you contribute, the longer your money has to grow. Whilst you are encouraged to put away more for the future, it is important to ensure your current financial security so make sure you find the right balance.

  1. Still unsure? Call in the professionals!

With changing percentages, fluctuating rates and a variety of saving options, it can be difficult to understand just how to look after and gain the most from your hard-earned money. So, when pensions are concerned, make sure you approach an established and specialist financial advice firm and with their experience and expertise, you can begin to save for the future.

When it comes down to it, saving for your future really should be one of your top priorities. The introduction of these new pension schemes, along with the emphasis on making employers and employees aware of the importance of early pension planning, really is a step in the right direction as we look to repair our economy and ensure our futures.

This post was composed by Phil Warrington on behalf of Guardian Wealth Management; a reputable and established financial advice company who specialise in offering advice on a variety of pensions as well as financial planning and investment.

Podcast: Paradigm Shift

In my latest Panzner Insights podcast, "Paradigm Shift," I discuss one of the week's big developments:

Most people knew that Bernanke & Co.’s grand experiment would end one day, but that notion has largely been seen on Wall Street (and elsewhere) as a vaguely distant possibility. However, things have changed following this week’s publication of the minutes from the Federal Reserve’s December policy meeting. In fact, I believe we’ve witnessed a paradigm shift that has important implications for markets, economies, and society overall, as I discuss in today’s broadcast.

As a special treat, this 30-minute program is also available to non-subscribers. To listen now or download, please click here.

Sooner Rather Than Later

In the days leading up to and following this past Sunday's Japanese election, various experts have been advocating selling the yen and buying Japanese stocks. Their view was that a change in leadership means the country will soon embark on an aggressive round of money printing that will weaken the currency and benefit Japan's export-sensitive industries.

I believe they are right (in the longer-term, at least). In fact, I posted two commentaries (including custom charts) at Panzner Insights, my members-only website, on Japan's currency and its equity market, on November 21st and November 23rd, respectively, where I essentially argued the same thing.

Needless to say, those of you who believe this perspective makes sense would probably agree that if would have been better to hear about it a month ago, when the yen-dollar rate was 2 percent higher and Japan's Nikkei-225 index was almost 6 percent lower.

If so, then you might want to consider joining Panzner Insights.