Blog Posts by Jeff Macke

Nearly 500,000 people quit looking for work in March, bring the percentage of Americans participating in the labor market to the lowest level since 1979.

In a hideous monthly labor report, that single data point may be the worst of the lot. Then again there's a lot of competition for that dubious honor. Construction employment growth slowed and retail jobs gave back all of the 25,000 gained in February, suggesting the consumer is staying home rather than going out and spending money.

The data was a gut punch for the bulls, but Jim Paulsen, chief investment strategist at Wells Capital Management, says it wasn't as horrible as the stock market reaction would lead you to believe. "It certainly was a miss," concedes Paulsen in the attached clip. "But I do think there are some decent things in the report." Here's what he likes:

* The economy created 88,000 jobs in March but 61,000 jobs were added to prior data via revisions. That puts the total number at 150,000, still shy of expectations, but better than the headline suggests

* The monthly data is volatile but 500,000 jobs were created in the first quarter, which is "not a disaster," says Paulsen.

* Average workweek climbed in March

* Temporary jobs, considered a precursor to future employment, went higher

Beyond that even a optimist like Paulsen runs out of positives. "I'm not going to paint it over, it's a disappointing report and it's going to have an impact on the financial markets." The question is how big an impact it will be. Paulsen isn't just whistling past the graveyard in terms of one month worth of data being the end of the world.

The hits just keep coming for Apple (AAPL). In the last five days the company has been downgraded by Goldman Sachs (GS) and seen Best Buy (BBY) open Samsung stores withing a store. In the off chance shareholders weren't insulted enough, word leaked that Apple's new HQ would cost almost $2 billion more than Apple spent on R&D in 2012. The deluge of bad news has dropped the stock by more than 5% this week but also brought out hoards of ironic buyers getting long the stock precisely because others are most skeptical.

Count Eric Jackson of Ironfire Capital among the Apple bulls. "The big thing is that a lot of these analysts have thrown in the towel," he says. It's no longer a secret that Samsung is a competitor in smartphones. Apple's challenges in releasing game-changing new products like the iPhone or iPad have been beaten to death.

What the bears and timid investors are forgetting is that Apple shares have been beaten up plenty of times during their near 6000% ten-year rally. Looking through the price charts over that time, Jackson notes there have been plenty of periods where shares have declined or done a whole lot of nothing for 6 to 10 months.

"They've been here before and they've always come through; I expect the same thing eventually," Jackson asserts.

How do you find the next Steve Jobs? You make it easy for that person to find you, according to Nolan Bushnell, author of the new book Finding the Next Steve Jobs. Bushnell should know — Steve Jobs came to work for him at Atari in 1974.

There isn't really a "Steve Jobs-type." Creativity, by its nature, is rare, and a company of disruptive people would be chaos. "The reality is you only need a few," Bushnell says in the attached video. "The true outliers... you don't want more than half a dozen." Once you find one of the rare few there's always a place to put them.

The gift of these standouts is that they aren't satisfied with the way things are. Intolerance toward the status quo is what forces them to change the world. Bushnell says, "Too many people want to get risks out of the system. That's the wrong way to go. You want to do things that are risky because that's where you get the innovation."

Bushnell says the public company getting it right today is Google (GOOG). Not content to stick with their search engine advertising cash cow, Google is looking for its next act in unlikely places. There's nothing intuitive about Google developing glasses that are connected to the Internet, operating systems for mobile phones or self-driving cars, yet the company is trying them all. The fact that many such initiatives will fail isn't just OK, it's actually the whole point.

[Update: With stocks down sharply in early trading the CBOE Volatility Index (VIX) gained as much as 12% peaking at 15.65. This piece was originally run on Thursday, April 4th. ]

The S&P 500 lost 1% Wednesday, and judging by the 11% gain in the CBOE Volatility Index (^VIX), traders think there's more to go on the downside. Then again based on VIX buyers' record over the last few months, the spike in fear might mean it's time to get on the other side of the trade.

Ryan Detrick, senior technical strategist at Schaeffer's Investment Research, says traders have been jumping into the VIX for months with disappointing results. "We've seen consistent open interest records in the VIX really every month since last year," he says. Despite all this buying, volatility has fallen more than 20% in 2013 while the S&P has gained almost 10%.

At yesterday's close of 14.21, volatility seems like a sign of complacency but history says otherwise. "If you look back in the '90s, for almost 6 years the VIX consistently was beneath 20; then you look back to last decade, for almost 4 years the VIX was beneath 20." Detrick thinks another extended slump in volatility could be in the cards.

The S&P 500 VIX Short Term Futures ETF (VXX) is down more than 90% since inception yet Detrick still sees massive inflows as everyone on earth insists on calling a top in the market and a bottom on volatility. As Detrick says in the attached clip, when the masses are leaning in one way it's usually a good idea to take the other side of the trade.

After a greater than 9% rally in just three months, it's getting hard to find reasons to stay long stocks. That's why Breakout invited Ryan Detrick of Schaeffer's Investment Research back to make the other side of the argument.

Detrick has put forth three reasons why a pullback may not be as obvious as you think:

1) April is seasonally strong

Detrick has broken down the numbers, and April is rather surprisingly the strongest month for markets over the last five and 10 year periods. Going even deeper over the last 20 and 30 years, April is the first and second strongest month of the year on average.

"This is one stat, but seasonality wise we know 'sell in May and go away' is kind of the last hurrah. But April's strong, so don't fight it is our opinion."

2) Nearly one-third of the public is expecting a correction

Detrick says the closely watched Investor's Intelligence poll shows that greater than 30% of those surveyed are looking for a correction — a meaningfully bullish sign since 2009. "People just keep tripping on themselves to try and pick a top here, and that's not usually how tops form. Tops form on euphoria," he says.

Shares of social media outcasts Zynga (ZNGA) are moving higher after the company opened the virtual doors on two UK-based gambling websites. The move gives Zynga a potential revenue source to replace its collapsing Farmville gaming business and lost revenues from Facebook (FB).

Zynga's new sites are among about 10 million places to gamble, grouses Breakout co-host Matt Nesto. "It's not like this is something that's new to Brits, but it is new to Zynga."

CEO Mark Pincus has long maintained that online gambling is a massive opportunity for the company. It better be because Zynga has seen a talent exodus at an executive level that's left Pincus all but alone in the executive suite. The latest exit was Dan Porter, the former CEO of OMGPOP, who left yesterday barely a year after Zynga purchased the makers of Draw Something for a reported $200 million.

Almost half of Zynga's roughly $2.6 billion market cap consists of $1.28 billion in cash, suggesting investors aren't placing a ton of faith in their casino initiative or much of anything else the company has been doing.

Empires die due to a lack of ambition. With no more worlds to conquer, lassitude and infighting stymie real discourse and a willingness to take chances. Our flat economy is symbolic of our collective will, and the U.S. is a B- nation in a world of flunkies. "Good enough" is the new upward mobility.

Ben Stein joined Breakout to discuss two recent fistfights that nearly shut down D.C. The first had to do with relatively minor tax increases for the wealthy. The other had to do with a proposal to raise the minimum wage, which would increase the price of doing business without improving the lot of the supposed beneficiaries.

"We have gotten to the point that the discussion of taxes is just a joke," Stein scoffs. In his lifetime he's watched the top tax rate fall from 90% (when he was a kid) to 70% (when he was writing speeches for Nixon) to a situation where no one actually pays the listed tax rate — but the government still shuts down over the prospect of a 3% or 4% hike for the wealthy.

"Really, high-income people can afford to pay a lot more taxes," he shouts, in a naked betrayal of his class. Of course they could, but no one is willing to dump cash into a system that never seems to kick anything back in the form of services.

Our conversation over an appropriate minimum wage is just as absurd. For a second-term, liberal President to say with a straight face that he's seeking a minimum wage that "lifts families out of poverty" and then propose a rate that does nothing of the sort, isn't just oily governance, it's evidence of a rotting society.

As the S&P 500 continues to hit resistance near its record closing high of 1,565.15 set on October 9, 2007, investors are spending a lot of time talking about where stocks are relative to all time highs. But the dirty truth is they don't matter at all. Not even a little bit. It's fun to think about where you were last time the major stock indexes were at these levels, but it shouldn't have any more bearing on your life than the outcome of your NCAA pool.

The loquacious and unusually well-coiffured Lee Munson, chief investment officer at Portfolio LLC and author of Rigged Money, joined Breakout to run through three of the nearly infinite reasons not to make too much of where the market is relative to history.

1) The Dow Jones Industrial Average is irrelevant, and the S&P 500 isn't much better

"It bothers me immensely that people even care about what the Dow does," rages Munson. The Dow is 30 companies selected by an editorial team. The selection process is like Papal elections without the smoke. No one really knows what goes on behind the scenes.

The S&P 500 is the index of record for the pros but it doesn't do a much better job of keeping precise score. Over the last 3 years about 40 companies have been swapped in and out of the S&P 500. If you go back into the meat of the crisis when financial companies were simply disappearing at a stunning rate, the problem becomes worse.

Using an index as an absolute market measure is like tracking your height without regard to what kind of shoes you're wearing.