Berthel's and Fry's Book, "Beyond Xs and Os" Offers Lessons Beyond Business and Sports

One of the great things about strong leaders is that their vision, talents and insights tends to cross disciplines. There are examples of this throughout history - President Eisenhower was well regarded as a leader during his time as a athlete; experience that translated to the military and eventually politics.

Often times, individuals from the world of sports and business in particular find themselves sharing more in common than they might have expected. When two such individuals and leaders in their respective disciplines come together, the result is the valuable insight offered in the book, Beyond Xs and Os: What I Learned About Friendship and Success from a College Football Legend.

The book is authored by Tom Berthel, CEO and Founder of Berthel Fisher & Company and Hayden Fry, the legendary former college football coach (SMU, North Texas State, Iowa) and College Football Hall of Famer.

For those who work in the investment community, Berthel Fisher & Company is a well known and respected name. I am a Registered Representative for the firm's subsidiary independent broker/dealer, Berthel Fisher & Company Financial Services, Inc. which was founded some 25 years ago.

Hayden Fry's resume is well-known: three Big Ten titles, three Rose Bowl appearances, 14 bowl games, three times Big Ten Coach of the Year and a career record of 232–178–10. A former United States Marine, he's well known as a driven leader and strategist.


As summary of the book is available via Amazon:

"...the wisdom Fry bestowed on him [Berthel] through their mutual friendship taught Berthel invaluable lessons in leadership, motivation, and what it takes to be a winner in business and in life. These are the lessons that form the core of Beyond Xs and Os. In the book, Tom Berthel recounts the many lessons he learned from Coach Fry—some but not all related to football—and explains how they helped shape his life and business."

Suffice it to say, the book is not only an enjoyable read, it offers real advice and direction for anyone, regardless of your job or goals.

One of the themes they cover is trust. Tom offers the examples of investment representatives he's worked with and why, whatever their core philosophy, trust is the most important common denominator. From page 52:

"...even though their specific business practices vary, their messages are consistent, 'Be the sort of person that people trust with their money'."

I' m honored that one of the "representatives" Tom Berthel is talking about is yours truly. Tom's assertions that, "transparency is more important than ever," and that "people want to know where their money is and who has control of it" should be guiding principles for everyone in the investment community today.

If you have room left on your Summer reading list, add Beyond Xs and Os today.

July 2010 Unemployment Points to Lower Market Valuation and Deflationary Depression

Unemployment continues to challenge the recovery

After reading the July Unemployment Report released this morning from the Bureau of Labor Statistics a couple of things are clear: the accounting is inaccurate, at best, and the economic recovery has not arrived.

First, the June 2010 employment number was revised to 221,000, a difference of 96,000 less than the original estimate. One can only wonder what the revision to the July number will look like!

Additionally, the U-3 unemployment number remained unchanged at 9.5 percent. Less than positive news for the economy and market.

Remember though, as I mentioned in my previous unemployment post, the better measure of unemployment to follow is the U-6 data (the total unemployed, plus all persons marginally attached to the labor force, plus total employed part time or economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.)

U-6 is further defined as:

"...persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule." - Source: Bureau of Labor Statistics

The U-6 number remains below its April 2010 peak of 17.1 percent, but unchanged from June 2010 at 16.5 percent. If you look at the U-6 Data as a more accurate measure of the unemployment situation (and I do), the prognosis for the economic recovery looks even less positive.

Second, no increases in employment for the past several months coupled with Federal Reserve Policy of almost zero interest rates is a continuing indication that the worst is yet to come.

The economy is floundering along on its last fumes supported by governmental policies that are simply not doing the job. To get an accurate picture of the economy's direction today's unemployment release should be combined with other indicators released during the past few weeks, including the Conference Board Confidence Index (which declined from a revised 54.3 in June to 50.4 in July as reported on July 27) and the release of the Commerce Department's sharp downward revision to May sales numbers of new U.S. single-family homes (to 267,000 units, the second lowest since records started in 1963.) In aggregate, these measures support the predictions that we are headed for an expected market cycle low into 2013 and a deflationary depression scenario.

Given this backdrop, investors may be facing lower stock market valuations adjusted to reflect the reality of the coming economic environment of slower or negative growth. Investors should prepare for this, and look for opportunity in, this reality.

Putting the Pieces Together: Looking at the collection of indicators essential to understanding the market's true direction

Economic indicators and statistics of all shapes and sizes are essential for investors, analysts and economists, both for understanding the current market environment, as well as predicting the future direction of the market and economy.

Yet all too often, these indicators and stats are viewed as islands unto themselves, and not put into context. It's important to look at the total picture, rather than get excited about a single improvement or percentage increase. This is especially true in the current economic storm.

There is some optimism surrounding several companies recently reporting in-line results and issuing higher guidance. While this can be seen as an overall positive for investors, the focus should remain on the big picture and the overall shift in consumer optimism to a more conservative posture. This may very well continue for many years to come. Case in point: This morning, the Conference Board released its confidence index which fell to 50.4 percent from a revised 54.3 percent in June.

Add to this the Commerce Department's sharp downward revision to May sales numbers of new U.S. single-family homes to 267,000 units, the second lowest since records started in 1963. With such a low level of units, it’s puzzling why so many people are getting excited about the reported sales jump of 23.6 percent to a 330,000 unit annual rate - numbers that are dismal at best.

Finally, this morning, gold is breaking down to lower levels, a signal to watch closely as it gives further confirmation of a deflationary depression that will continue to reflect weakness in the economy.

Putting the pieces together from the latest data into a big picture look at the market indicates continued weakness and a strong potential for a prolonged social shift in spending. The net result is dampened economic growth until excess spending, leveraging and speculation from the past 10 to 20 years burns out its cycle.

In future posts, I'll be discussing the areas of opportunity for investors against this backdrop, and how to potentially find profit in the economic storm.

Challenges for FX/Forex/Currency Asset Class: More coverage from FX-Week USA Conference

Risk.net covers FX-Week USA and challenges for  FX asset class

Risk Magazine and website Risk.net, the digital publisher of "financial risk management news and analysis," recently shared insights from last week's FX-Week USA Conference. This includes great coverage of the panel discussion I participated in regarding the rise of FX/Forex/currencies as an asset class - and the challenges it still faces.

Author Farah Khalique captured the robust discussion of the panel in her story. One of the central themes the panel covered during the conference was the asset class' biggest challenge - counterparty issues. She aptly captured my and others comments in her story.

Highlights include:

•  Opportunity in the economic storm: Investors have been burned by other, more traditional asset classes, and are looking for new areas of opportunity. The FX industry has this potential for institutions and retail investors. As a fellow panelist, Udi Sela, foreign exchange and cross-asset suite product manager at SuperDerivatives, is quoted as saying in the story, exchange-traded funds (ETFs) are a potential, growth area, "in particular betting on growth markets versus developed markets through the use of Bric and EM baskets." 

• Counterparty risk needs to be addressed: The panel hit on a common theme in terms of risk and that was counterparty risk in the FX industry.As I shared with the panel, and Khalique quotes in her story, the growth of the FX industry will mean that,“every country will have an exchange of some sort that everyone will have to clear through.”

Expansion of FX /Forex/Currency Asset Class: Panel discussion at FX-Week USA Conference

Even as they continue to recover from the "economic storm" of the past few years, investors have still sought out new investment opportunities and asset classes in today's market. This is essential to the eventual economic recovery and to ensuring that investor of all shapes and sizes access the profits available in today's market.

The FX/forex/currency market: The next big asset class?

On Tuesday, I participated in a panel discussion at the FX-Week USA Conference in New York. One of the key areas of agreement for the panel was the emergence of forex/currencies as a, "distinct asset class," and an area of opportunity for investors.

The Wall Street Journal Online/Dow Jones covered the event and the panel discussion and some of my comments. Their coverage includes some of my insights from the discussion, including the observations that the foreign exchange market and currencies, "have typically been ignored by retail investors and some money managers."

I see this as becoming the exception rather than the rule, however, as investors look to profit from previously untapped asset classes like this. This could make the FX/forex/currency industry, "the next huge asset class," for retail investors. Why? They are jumping ship from more traditional asset classes that have caused them nothing but pain over the past few years. Investors are rethinking conventional investing and looking for new opportunities.

You can read more about the panel discussion in the article online. Questions and comments are also welcome here.

Looking Ahead and the State of the Economy: Appearances for the week of July 11

Perhaps an unintended consequence of the economic turmoil of the past few years has been the return and rise of the educated investor. The reason is simple, investors learned the hard way that they need to understand how and why their money is being invested and allocated.

But while investors may be more cautious about risk, they still understand its in integral part of asset growth and profit. That is why so many of them are looking to new sources of information to learn and understand more, and make educated choices.

This week I'll be sharing my insight and thoughts about growth and profit with some these investors at at two venues - I've included information below for those that are interested. Topics will include the current state of the economy and markets, areas of opportunity, insights from my upcoming book and more specific topics like the FX industry.

• On Tuesday, July 13, I'll join a panel discussion of the future of the FX industry at the FX – Week USA Conference at the New York Marriott Marquis, 1535 Broadway, New York. If you plan to attend, please join us for the session from 9:30 am - 10:20 am EST. The conference is well worth attending This is the seventh year FX-Week, "the industry's exclusive newsletter for foreign exchange and money market professionals," has hosted the conference and its well worth attending. I'll also share my thoughts from the conference later this week on the blog.
  

• On Friday, July 16, I'll be talking about the current market climate and the state of the economy with Nevada's #1 talk radio station KMZQ in Las Vegas from 6:00 am - 7:00 am PST (9:00 am - 10:00 am EST.) You can also listen live at  www.670theq.com, and I'd love to take your questions.

Deflationary Pressure: U-6 Household Data essential to accurate economic predictions

Source: Wikipedia

The U.S. Unemployment Rate was released this morning from the Bureau of Labor Statistics - its widely recognized as a market mover depending on the basis point increase or decrease from month-to-month. The report focuses on the U-3 Household Data measurement which, at first review, paints a positive picture for unemployment, improving to 9.5 percent unemployment in June 2010 versus 9.7 percent in May 2010.

But in my analysis, the market may be relying on the wrong statistic when deciding on the current and future outlook for the economy. We view the more important rate as the U-6 Household Data measurement,  which includes persons marginally attached to the labor force + total employed part-time for economic reasons, as a percent of the civilian labor force + all persons marginally attached to the labor force.

The report itself explains in a footnote:  

Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have to settle for a part-time schedule.

So the U-6 Rate tends to capture a more complete view of the unemployment situtation, one of the key roadblocks for the economic recovery. The U-6 Rate was reported as 16.5 percent for June 2010, a marginal decrease from 16.6 percent in May 2010. An improvement, yes, but still a significantly high percentage of the workforce and clearly not a ringing endorsement for the economic recovery.

What's more, the U-6 Rate could be in for large increases over the next few years. Based on my projection that the economy is in the early stages of a Deflationary Depression, I project the U-6 rate could climb as high as 25% or higher by 2013.

Investors need to keep a close eye on the economic recovery in the coming months and years - and plan accordingly. This means looking for new asset allocation strategies and drawing profits from less traditional investment sources. I'll be discussing more in upcoming posts.