While I have been busy kvetching about the weather, another payrolls report has snuck up on us. Estimates are for a 200,000 increase in nonfarm payrolls, the most since November, according to the median forecast of 90 economists surveyed by Bloomberg.

But really, I have to ask: Why do you care?

As I have relentlessly drummed into your heads, the Employment Situation report is “the single most over-hyped, over-analyzed, over-emphasized, least-understood economic releases known to mankind.” It is also of very little utility for investors, a mostly meaningless exercise, the exception being when a long-standing employment trend begins to reverse, something that occurs a few times in a decade.

Perhaps, on this philosophical Friday, we should be thinking why you as an investor spend so much time focusing on it. Unless you run a cable-news network and need ’round-the-clock filler, why should the monthly variations in a deeply flawed (but not useless) model matter to you?

This is a deep philosophical question most investors are not happy answering. There seems to be a belief that “I should be doing something, right?”

No, you shouldn’t. For the most part, you should be doing as little as possible. “Nothing” is a good start. Can you just sit there and do nothing for a while? See how long you can do nothing.

The advantage of nothing is that you, as an investor, trader, forecaster or strategist add very little. Indeed, you probably are a negative. Every time you do something, you add costs, tax bills, commissions, expenses. If what you did was only neutral, if you did no harm, then that vigorish would tip most of your activities into the red.

But you should be so lucky as to do no harm. Most of what you do is a negative — and that is before we add up the costs.

Now before you start sending in e-mails and tweets, I am not speaking to you specifically, you the residents of Lake Wobegon where, as Garrison Keillor put it, “all the women are strong, the men are good looking, and all the children are above average.” Yes, everyone who reads this is above average. You are all alpha-generating machines, none of whom engage in trading activities merely to create the illusion of value. Your activities are just fine.

Which brings us back to the Employment Situation report, out at 8:30 this morning. Why should this preliminary, soon-to-be-revised, eventually re-benchmarked single data point in a never ending series matter to your portfolios? That is the question you should be pondering.

Do you want to do something? You have all weekend to do whatever you want.

But today?

Try doing nothing.


Originally published here


Category: Apprenticed Investor, Employment, Investing

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

3 Responses to “NFP Day? Try Doing Nothing”

  1. Concerned Neighbour says:

    The real question is why should anyone care about any data point at all in this environment? Certain all-powerful institutions have implicitly dictated there is only way for “markets” to move. Given that, the endless struggle by our eminent financial media to attribute day to day movements in “markets” to the news flow is more comical than ever.

    • VennData says:

      OK CN, give us back the inhalant. We told you no more sniffing glue.

      “… Certain all-powerful institutions have implicitly dictated there is only way for “markets” to move…”

      ROFL. You should have a comedy show.

      Oh the market’s down 1% today? Where are your secret reptilian aliens who control all today? Lunchbreak?

      • Concerned Neighbour says:

        So the known manipulation in the LIBOR, metals, housing, and other “markets”, the dominance of HFT and other algorithmic trading, the overabundance of near free money, the repeated stated intent of these institutions, the last 500 S&P points straight up since the announcement of “emergency”, “temporary” QE in perpetuity, etc. has not convinced you. Fascinating.