With the US of A under new management, employers seem to have found new Hope that this Change will be good for the bottom-line. And what’s good for a company’s profits is good for employees. So why not play along and put some of their money into our own pockets…
Stock of the Day:
BUY AGNC at its current price of $18.94.
—by J. Christoph Amberger
Baltimore, Md., 1/6/2017: Truth be told, I don’t trust employment numbers. I trust consumer confidence numbers even less.
In view of the former, the concept of economic class and employment have undergone a Nietzschean inversion of values over the past 8 years.
(When a president proclaims that the “Middle Class”—whatever this may be these days—is directly correlated to paying $15 per hour to a Walmart greeter, something is off in the calculation: Based on formerly middle class work weeks at 5 times 8 hours, times 52 weeks in the year, you get an annual gross income of $31,200.00. Good luck being middle class on that!)
The government survey underlying the unemployment rates, on the other hand, seems to be as dated as my old Motorola flip phone. It includes about 60,000 eligible households, that’s c. 110,000 individuals, who are grouped into approximately 2,000 geographic areas or sampling units. That works out (purely arithmetically) to an average 55 people per unit. The Census Bureau then designs and selects a sample of about 800 of these geographic areas to represent each state—a mathematical total of 44,000 people.
Or about 0.133% of the US population.
People are considered employed if they did any work at all for pay or profit during the survey reference week. This includes all part-time and temporary work, as well as regular full-time, year-round employment. Individuals also are counted as employed if they have a job at which they did not work during the survey week, whether they were paid or not, because they were “on vacation, ill, experiencing child care problems, on maternity or paternity leave, taking care of some other family or personal obligation, involved in a labor dispute, prevented from working by bad weather”.
Their statement is not indicative at all relating to the quality of their employment: A temp working a Big Box counter for $6 an hour for 10 hours before having to skedaddle to sweep floors at an office billing for another 6 hours is just as employed as the government employee compiling the unemployment numbers at $50,000 plus benefits, or the newsletter publisher pulling in $220k per week selling you the chance to be uphold to a higher priced product.
Consumer Confidence also is a fickle thing. Mostly because it’s all in the mind, people tend to be idiots, and confidence is no match for reality checks.
Still, I think that after 8 years of treading water looking for “good jobs in renewable energies” to lift our economic life preservers, there is positive change in the air.
Sucker for a Dividend
I think there is a good direct way to make hay on positive sentiment.
And I think an instrument vaguely reminiscent of the last days of the Bush era may just be the right thing:
AGNC Investment Corp. (NASDAQ:AGNC), formerly American Capital Agency Corp., is an internally managed real estate investment trust (REIT).
They primarily leverage agency mortgage-backed securities, mostly residential mortgage pass-through securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by a government-sponsored enterprise, such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), or by the United States Government agency, such as the Government National Mortgage Association (Ginnie Mae).
Only 10% of its assets are in AAA non-agency and commercial mortgage-backed securities.
If that sounds like the seeds of the mortgage crisis, you’re right on target. (If it sounds like gibberish to you, watch the movie The Great Short.) But I like to be contrarian. Or contrary, as my wife says.
Actually, she calls it “curmudgeonly”…
But what about housing starts? What about rising mortgage interest?
Sure, home groundbreakings fell by 18.7% at a seasonally adjusted annual rate of 1.09 million in November. Building permits for construction fell 4.7% at a rate of 1.2 million. And rising interest rates?
Puh-lease! The minuscule fluctuations in rates we’ve been watching oscillating around the bargain-basement mortgage rates over the past decade have no effect at all on home buyers. (This is a statement of experience and personal conviction, not of academic “consensus”.) If anything, expectation of higher rates accelerates the decision-making process!
Homebuilders’ confidence in market conditions has surged to an 11-year high since the election. I take their confidence with less grains of salt than the run-of the-mill consumer’s confidence. After all they’re running a business and have collectively been around the block the one or other time.
I say BUY AGNC at its current price of $18.94 (that’s today’s price at which I will mark its entry into our portfolio). And get ready to collect monthly dividends of currently $0.18 a share. Looking at the stock’s performance over the past 3 years, I think we may get close to a double in the stock price within the next 18 months, and have a nice and possibly rising income stream as well.