Were there any silver linings to last Friday’s terrible jobs report?
Is it finally time to stop envying the performance of hedge funds?
Should billionaire Bill Gates start worrying about being de-listed from the Forbes 400 list?
And does anyone really expect volatility to return with a vengeance in 2014?
We’re tackling all these questions (and a little more) in this week’s edition of Friday Charts.
Need a Job? Head to Texas or North Dakota
Last week, the Bureau of Labor Statistics revealed that the economy only added 74,000 jobs in December.
Panic ensued. Why? Because it represented a big, Jesse Barfield-style swing and a miss. Economists expected close to 200,000 new jobs for the month.
But the report wasn’t a complete nightmare. And I’m not just saying that because I’m the “glass is half full” guy.
As I’ve shared before, boom times are here for one sector in the U.S. economy – energy. And the latest jobs report confirms it.
Total direct oil and gas industry employment reached 504 million jobs in December. That’s up 55% since 2007.
As Dr. Mark Perry of the American Enterprise Institute notes, the sector has been adding about one new job every four minutes – for the last two years.
Go ahead. Call it an energy revolution. Then start figuring out how to invest in it by following my colleague and friend, Karim Rahemtulla.
I Pity the Hedge Fund Fool
For the fifth year in a row, the average hedge fund failed to outperform the S&P 500 Index. Not by a slim margin, either. But by 23 full percentage points.
The Bloomberg Hedge Fund Aggregate Index rose 7% in 2013, compared to a 30% rise for the S&P 500.
Yet a staggering $2.5 trillion – equal to the GDP of France – is invested in hedge funds. Yes, we should pity the fools!
The drubbing got so bad, in fact, that hedge fund managers apparently decided to admit defeat. Instead of trying to beat the market, their funds are “becoming” the market.
In the last year, the correlation between hedge funds and the S&P 500 hit nearly 90%.
Still got hedge fund envy? Save yourself the underperformance and expense by investing in a cheap, exchange-traded fund like the SPDR S&P 500 Fund (SPY). From an investment standpoint, the two are virtually identical.
No Resurrection Here
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Bill Gates is the richest man in the world. No doubt, he’s a smart guy. But even if he returned to be the CEO of Microsoft (MSFT), I don’t think he could overcome this epic crash.
“Global PC shipments suffered the worst decline in PC market history [in 2013],” according to tech research firm, Gartner.
Total shipments dropped 10%.
That’s terrible news for computer companies like Microsoft – and, in turn, Mr. Gates. (He still owns a massive stake in the company.)
While he might never lose his billionaire status completely, a few demotions in the rankings might be on the horizon.
A Contrarian Take on Volatility
During the throes of the financial crisis, daily swings of 2% for the S&P 500 were the norm.
By comparison, 2013 was a ho-hum year for volatility, with the market swinging 0.55% higher or lower on any given day.
That volatility is going to return with a vengeance in 2014, though.
Open call options on the VIX Volatility Index (^VIX) stand at 7.4 million, according to a recent tweet from Ryan Detrick, Senior Technical Strategist at Schaeffer’s Investment Research.
(In case you didn’t get the memo, we’re on Twitter, too.)
The volume of bullish bets on volatility is a stone’s throw away from the record high hit last March. Translation: There’s a lot of groupthink going on.
In this situation, I can’t help but bring up Humphrey B. Neill’s famous line, “When everybody thinks alike, everyone is likely to be wrong.” We’ll find out soon enough.
That’s it for today. Before you go, though, let us know what you think about volatility, hedge fund envy and the boom times in the oil and gas sector here.
Ahead of the tape,