Temp Staffing Rises Virtuous (Bullish) Circle Continues

Temp Staffing

“Davidson” submits

The ASA Staffing Index is a favorite of mine because it comes out weekly The ASA has been a good indicator for future broad employment trends, economic activity and importantly for us as investors it provides guidance for the general direction of markets.

This week the CAB(Chemical Activity Barometer) was released at a 6yr peak with previous months revised higher. This indicator measures chemical production in the US, goes back to 1919 and has a proven record of forecasting turns in economic activity, i.e. economic lows and peaks. A higher CAB in this report is a good indication that economic activity is expanding and equity markets have historically moved higher in response. See the CAB chart and link.

Temp Staffing 2

Remember, markets ($SPY) are mostly a psychological response to investor perceptions of economic trends. Only at the major lows, do markets reflect prices based on long term business values. This is because it is the buying activity of Value Investors causes market lows.

Stock and bond prices reflect investor perceptions of underlying business activity. Market prices DO NOT CONTROL ECONOMIC ACTIVITY! The reverse is true, but one can only see this by looking longer term.

My expectation continues to be that we have 5yrs-7yrs left in the current economic cycle and that housing and construction are the components just making their presence felt.

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About the Author

Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a RealMoney.com contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.

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