part 1: trimtabs liquidity theory and the equities markets part 2: what the u.s. government...

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Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline Schnapp, Sr. Research Analyst http://www.trimtabs.com

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Page 1: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

Part 1: TrimTabs Liquidity Theory and the Equities Markets

Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and

Why We Should Care! Madeline Schnapp, Sr. Research Analyst

http://www.trimtabs.com

Page 2: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

The Stock Market

Cash Stock

“The purpose of the equity market is

to separate investors from their cash.”

Charles Biderman

Page 3: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

The Stock Market

Cash

Stock

Market Direction

=

Page 4: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

The Stock Market

Cash

Stock

Market Direction

=

Page 5: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

There are 3 types of Liquidity

Liquidity

L1 L2 L3

Page 6: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

L1

L1 = the Net value of shares available to investors

Insider SellingNew Offerings

Cash BuybacksCash Takeovers

Page 7: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

L1 – “Float”

Insider SellingNew Offerings

Cash BuybacksCash Takeovers

Page 8: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

L1 – “Float”

Insider SellingNew Offerings

Cash BuybacksCash Takeovers

Page 9: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

L1 – Net Liquidity

-150000

-100000

-50000

0

50000

100000

150000

200000

250000

300000

Net

Liq

uid

ity -

Millio

ns o

f $

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

Dec-95Dec-96Dec-97Dec-98Dec-99Dec-00Dec-01Dec-02Dec-03Dec-04

L1 - Bullish

L1 - Bearish

Page 10: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

L2 = U.S. Equity Fund Flow

Page 11: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

L2 – U.S. Equity Fund Flow

-50

0

50

100

150

200

250

300

Flo

w i

n B

illi

on

s o

f $

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

Page 12: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

L1 and L2 - 1999 thru 2003

-100

-50

0

50

100

150

200

250

300

Billio

ns o

f $

1999 2000 2001 2002 2003

Year

US Equity Fund Flows, L2

L1

Page 13: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

S&P 500 vs. Model Portfolio Value

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

Month

S&

P 5

00 I

nd

ex C

lose

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

$1,100,000

$1,200,000

$1,300,000

$1,400,000

$1,500,000

Po

rtfo

lio

Valu

e i

n $

S&P 500 Index Close

Portfolio Value ($)

Page 14: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

What the U.S. Government Doesn’t Know it Doesn’t Know and

Why We Should Care!

Part II

Page 15: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

Cash

$$

Wages and SalariesEmployment

Page 16: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

Wages and Salaries

The BEA Way

The TrimTabs Way

Page 17: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-04

BEA 1st Release

TrimTabs Personal Income

Page 18: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-04

BEA 1st Release

BEA 2nd Release

TrimTabs Personal Income

Page 19: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-04

BEA 1st Release

BEA 2nd Release

BEA 3rd Release

TrimTabs Personal Income

Page 20: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

BEA Income Data vs.Tax Witholding Data 1990 through 2004

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%BEA Income

Tax Withholding Data

Page 21: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

Employment

The BLS Way

The TrimTabs Way

Page 22: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

104000

106000

108000

110000

112000

114000

116000

118000

1994

Page 23: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

104000

106000

108000

110000

112000

114000

116000

118000

19941994

Page 24: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

110000

115000

120000

125000

130000

135000

1994

1995

1996

1997

1998

1999

2000

Page 25: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

125000

127000

129000

131000

133000

135000

1999

2000

2001

2002

2003

Page 26: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

128000

128500

129000

129500

130000

130500

131000

131500

132000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2002

2003

2004

Page 27: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

BLS vs. TrimTabs Employment

-400

-300

-200

-100

0

100

200

300

400

500

600

Month

Th

ou

san

ds o

f W

ork

ers

BLS Employment Increase/Decrease

TrimTabs Employment Increase/Decrease

Page 28: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

Weekly Unemployment Claims

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

Date

S&

P 5

00 I

nd

ex C

lose

250000

275000

300000

325000

350000

375000

400000

425000

450000

475000

500000

Nu

mb

er

of

Cla

ims

S&P 500 Close

Weekly Unemployment InsuranceClaims - 4 Week Moving Average

Page 29: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

TrimTabs Online Jobs Postings Index

0

10

20

30

40

50

60

70

80

90

100

110

120

Week

Inde

x Va

lue

Online Job Postings Index

Page 30: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

80

90

100

110

120

130

Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-04

Month

Em

plo

ymen

t In

dex

Monster Employment Index

Page 31: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

2004

2002

20001900

2000

2100

2200

2300

2400

2500

2600

2700

2800

2900

Th

ou

san

ds

of

Em

plo

yees 2000

2001

2002

2003

April 2004

Temporary Help Services

Page 32: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

•Money Supply•Sentiment•Debt

Other Indicators

Page 33: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

2004 Turning Out To Be A Good Year

• Low Interest Rates• Tax Cuts

• $61 Billion 2003• $149 Billion 2004• $88 Billion 2005• $21 Billion 2006

• Deficit Spending

Page 34: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

U.S. Budget Deficits/Surpluses1987 through 2004 (p)

-600000

-500000

-400000

-300000

-200000

-100000

0

100000

200000

300000

Page 35: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

TrimTabs Financial Research

http://www.trimtabs.com

Page 36: Part 1: TrimTabs Liquidity Theory and the Equities Markets Part 2: What the U.S. Government Doesn’t Know it Doesn’t Know and Why We Should Care! Madeline

Questions?