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Five Things You Need to Know: Force of Habit; Early to Bed; Forex Confirmation; Making Millionaires Out of Billionaires; How Does Buffett Do It?


What you need to know (and what it means)!


Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. Force of Habit

This is the "big day" we've all been waiting for. It's Nonfarm Payrolls Day.

  • In a way, we find it cute; a throwback, really, to the days when employment really mattered to financial markets.
  • Given the birth/death adjustment and the typical two to three standard deviation margin for error based on subsequent revisions, however, the number is actually just a figment of someone's imagination.
  • Today's figment came in at 97,000 new jobs created in February, only slightly lower than the estimates of the estimated number of around 100,000 new jobs created.
  • (Insert shrug here.)
  • Meanwhile, the headline unemployment rate dropped from 4.6% to 4.5%.
  • Upcoming revisions aside, the VH1 "Behind the Music" story, while everybody's "Workin' for the Weekend," can be summed up as follows, Loverboy:
    1. Construction jobs fell by 62,000, the most since 1991
    2. Manufacturing dropped 14,000 jobs
    3. Private-sector payrolls rose by 58,000, a weak number, but very close to the ADP estimate.
  • And seeing that the ADP Employment Report didn't miss as badly as usual, fixed income heavies will likely be watching the ADP release on April 4 a bit more closely.

2. Early to Bed

Ben Franklin reportedly said, "Early to bed, early to rise, makes a man healthy, wealthy and wise." Clearly, he never traded SP futures.

  • We had a little chat with Minyanville Professor Jason Roney this morning about the rally in SP futures off the March 5 lows.
  • Since March 5, the SP futures have tacked on 40 points since the lows.
  • Unfortunately, those following the Franklinian prescription of retiring early to bed would likely be disappointed in the wealth department, at least if they trade the futures.
  • Roney says 32 of the 40 points since the March 5 lows (at the current price of 1423.80) occurred overnight.
  • Bottom Line: New Franklinian quote: Never to bed, so no need to rise, lets a man trade the futures, healthy and in size."

3. Forex Confirmation

A top level Chinese official finally confirmed what everyone already knows, that China will establish an agency to manage its huge forex reserves, the Financial Times reported.

  • Finance Minister Jin Renqing said the new agency would report to the State Council, China's cabinet, and not the finance ministry.
  • "The State Council has already made research into separating the management of normal foreign exchange reserves and a portion allocated for investment," Mr Jin said, according to the FT. "This company is now under construction."
  • Key to understand is that Jin confirmed that the agency would operate under dual charge of managing the reserve prudently and, importantly, profitably.
  • The newspaper said unofficial reports are that approximately 30%, or $300 billion, of the country's total estimated forex reserves will be allocated to the agency to manage.
  • About 75% of China's total forex reserves are estimated to be in U.S. dollar-denominated assets.
  • What other assets might the new agency consider as profitable investment opportunities?
  • No official word or details came from Mr. Jin's announcement, but senior leaders have in the past mentioned such strategic investments as natural resources, oil and copper, and internal infrastructure and social investments.

4. Making Millionaires Out of Billionaires

The annual rankings of the world's richest people by Forbes magazine is out and the results should come as no surprise. Once again checking in at numbers one and two, respectively, are Microsoft's Bill Gates and Berkshire Hathaway's Warren Buffett. Meanwhile, checking in at a surprise number 245,674,213 was yours truly, Kevin Depew.

  • Even more surprising, it turns out that the difference between the world's number one richest person and the world's number 245,674,213th richest person is really pretty small.
  • Bill Gates and I actually have quite a bit in common.
  • For example, just as Bill Gates reportedly finds his role as the number one wealthiest person in the world a burden, a heavy yoke to be taken up daily without the benefit of the poor man's 10-minute work break or respite, so too do I, Kevin Depew, find a similar burden in my place as the 245,674,213th wealthiest person in the world.
  • While it is true that a guy like me has it easy compared to the 245,674,214th or 245,674,215th wealthiest person in the world, I understand what it's like to wake up each morning knowing that yet another day on the hamster mill awaits, another day striving to maintain my place as the 245,674,213th wealthiest man in the world.
  • And for what? What does it all mean? Sometimes, like Bill Gates, I wish I could just give it all away.
  • But then, just like Bill Gates, I realize that if I did give it all away I would be evicted from my Manhattan studio apartment within 30 days. (Still, it would be nice to give something away. Like a used book I don't read anymore. Or perhaps the coffee mug that has been in my desk drawer since last September. Ah, to be free of all my useless personal possessions! If only I would not be homeless as a result!)
  • And just like Bill Gates, I too remember from where I came.
  • In fact, it wasn't so long ago that I remember very clearly what it was like to be the 245,674,214th wealthiest person in the world. Haha, those were the days.
  • In fact, I slipped from 245,674,213 to 245,674,214 just last Saturday after I lost $186 at the OTB on 3rd Avenue and then stopped for a hot dog and a beer at PJ Bernstein's, which actually dropped me down as low as 245,674,218 for a few minutes until the people ranked 245,674,215 through 245,674,217 received a ticket for speeding, bought a weed-eater at Home Depot and paid for three-days of long-term parking at LaGuardia, respectively.
  • Yes, people like us, the co-founder of Microsoft, and the Executive Editor for a widely-read online financial infotainment community, we are two of a kind.
  • We know very well how money comes and goes with just the snap of our fingers.
  • In Bill Gates' case, a snap of the fingers dispatches $100,000,000 to a charitable foundation in Vietnam.
  • In my case, a snap of the fingers causes the waiter at a Vietnamese restaurant to bring me an extra side of peanut sauce, resulting in an extra $1 tip.
  • But the principles are the same. Easy come, easy go.
  • People like us, we understand that one minute we're on top of the world (or in my case, just ahead of the 245,674,214th wealthiest person in the world), the next minute we're standing in line at a pawnshop hocking our father-in-law's watch, but fortunately not actually having to go through with it because at the last minute we remembered the safety $100 bill we keep behind the maxed out Citibank card in our wallets.
  • And then there's the shared thrill of competition. Look out 245,674,197th richest person in the world, whoever you are, I'm hot on your heels!

5. How Does Buffett Do It?

Warren Buffett, the world's number two richest man behind Bill Gates, is well known for his folksy charm and investing savvy. But according to a profile in the Wall Street Journal a couple of years ago, Mr. Buffett relies mostly on gut instinct to run his multi-billion dollar investment behemoth Berkshire Hathaway. So how does he do it? Can the individual investor duplicate Buffett's investing style?

Minyanville decided to find out. For some reason, however, Mr. Buffett insisted we refer to him as Mr. White.

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No positions in stocks mentioned.

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