Wheel

picture credit: firstladies.c-span.org

Both John Deere and Caterpillar have forward P/E’s of more than 20.  CAT has a dividend yield of 3.70%, and DE has a dividend yield of more than 3%.  CAT makes outstanding big iron, with a worldwide market, but I’m still impressed that anyone is willing to buy the stock with a forward P/E north of 20.    The hunt for cash flow continues.

On the economic front, last Friday’s jobs report was most excellent, with the BLS reporting 255,000 new jobs in July.  This compares to a census forecast of 175,000 new jobs.  The official unemployment rate stands at 4.9%.

Looking at the jobs report, we see that the private sector added 217,000 jobs, while governments added 38,000.  Average hourly earnings were up 0.3%, bringing the year over year wage gains to 2.6%.  The average work week increased to 34.5 hours, its highest level since December 2015.

The Federal Open Market Committee, headed by Janet Yellen, once again stood on interest rates, though they hinted at a slight rate increase in their September meeting.  Speaking of interest rates, yield on the ten year Treasury note stands at 1.60%.  This helps explain the popularity of CAT, with its yield of 3.70%.

According to a recent report from the U.S. Census Bureau, home ownership is at its lowest level since 1965, coming in at 62.9%.  Of course, ownership is something of a misnomer for those with a mortgage.  If you doubt that, miss four mortgage payments in a row.  That should help bring clarity.

The U.S Bureau of Economic Analysis reports GDP for our economy.  The Commerce Department recently summarized BEA reports, and said that between 1949 and 1990, our economy grew at more than 4% annually.  The 90’s saw average annual growth of 3.6%, 2001 to 2007 saw average annual growth of 2.8%, and 2009 through Q1 2016 saw average annual growth of 2.1%.  The annual growth rate for the second quarter of 2016 was 1.2%.  This is the part where it is very easy to throw darts at an ever increasing legislative and regulatory burden, as the overall costs of government and compliance at all levels continues to pull dollars from productive activity, and dampen economic results.

Two questions come to mind though.  First, is the way GDP calculated accurate, and reflective of our current economy?  I don’t know, but I do know many experienced professionals have offered reasoned opinions, suggesting that the way we evaluate economic health needs to be completely rethought and rebuilt.  Second, does GDP matter, regardless of how it is calculated, when it comes to the financial health of your household or your business?  In almost all cases, the answer is no. 

Government reporting may give us some general guidance about what is going on.  Don’t allow such information to color your outlook about your own life, and your own personal and business prospects.  Those outcomes remain in your hands.

                        Quotes of the week:

 

“There is an expiry date on blaming your parents for steering you in the wrong direction; the moment you are old enough to take the wheel, responsibility lies with you.”

                                                                                                                                                                                                                              J.K. Rowling

                                                                      photo credit: mollykoe.wordpress.com

“In the long run, we shape our lives, and we shape ourselves.  The process never ends until we die.  And the choices we make are ultimately our own responsibility.”

                                                                                                                                                                                                                                                                                       Eleanor Roosevelt