 |
 |
Dallas, TX
June 21, 2010, 08:00 EST |
 |
Dr. Joe Duarte's Market I.Q. |
 |
 |
|
|
 |
The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors
|
|
The End Of Work Part 2: The Mainstream Catches Up To Reality
|
|
|
 |
 |
What's Hot Today: |  |
|
|
U.S. stock index futures were pointing to a higher opening on Monday.
Asia and Europe moved higher. The Euro pulled back some. Look for the
S & P 500 to close above its "W" bottom to validate this advance
further. We have added more potential long positions to our lists over
the weekend.
News For Thought
Oil industry insider: U.S. energy system is "broken." Expect long
lines and blackouts. According to Dallas Morning News: 'John
Hofmeister, the former Shell executive who made this prediction at a
World Affairs Council breakfast on Friday, said he's the optimist. Some
of his energy industry friends expect worse, he said. "Within a decade
I predict the energy abyss looks like brownouts, blackouts and gas lines," Hofmeister
said. "Our federal government, when it comes to energy and the environment,
is dysfunctional, it's broken, and it's unfixable in its current form."'
According to the report: 'Hofmeister, the former chief executive of Shell
Oil Co., is promoting his new book, Why We Hate the Oil Companies. He
also has created a nonprofit group called Citizens for Affordable Energy.
The Houston resident has a solution to the country's energy problems.
He wants the U.S. government to get out of the energy business. He would
shift oversight of energy and the environment to an independent agency,
similar to the Federal Reserve.'
"Pain Pills" get blamed for rising numbers of E.R. visits, raising health
care costs. According to Health.U.S.News.com: "Prescription painkiller
abuse is mounting, according to a new report from the Centers for Disease Control
and Prevention and the Substance Abuse and Mental Health Services Administration.
Hospital emergency rooms are treating more than twice the number of cases they
did a few years ago, researchers found. One of the most abused pain medicines,
OxyContin, led to about 105,000 ER visits in 2008, up 152 percent from visits
in 2004, HealthDay reports. Experts are concerned about the trend and its impact
on public health."
China exchange rate adjustment has fine print. According to The
Wall Street Journal: 'China pledged over the weekend to make its exchange rate
more flexible, but quickly damped the idea that the move would trigger a dramatic
revaluation of the yuan by saying it would make the adjustment "gradually."'
According to the report: 'The decision by the world's third-largest economy follows
heavy pressure by the U.S. and other members of the Group of 20 major economies.
It could eventually boost the spending power of China's own consumers, easing
the strains with other nations caused by its long reliance on cheap exports.
That would be an important milestone on the path to a rebalancing of the global
economy, which in the last few years has strained under a massive trade and capital
imbalance between the U.S. and its major trading partners."
Spain: Housing is experiencing a forced fire sale. According to
The Wall Street Journal: " Spain has one of the world's most-troubled housing
markets, yet some buyers are suddenly able to get mortgages with 100% financing,
and developers are building new homes on empty lots despite a huge glut." The
Journal reports that the reason behind the unconventional behavior is that " Spain's
banks took possession of a large inventory of homes, buildings and land two years
ago, forgiving the debt in hopes of heading off defaults. The plan was to resell
the properties when the market bounced back and evade the worst impact of the
looming housing crisis. But Spain's housing market has only gotten worse, and
now the bill is coming due as the banks labor under the weight of an estimated
€59.7 billion ($73.8 billion) in real-estate assets on their books. Under pressure
to make further markdowns on the assets by their main regulator, the Bank of
Spain, many banks are now scrambling to unload the properties as quickly as possible." |
|
|
The End Of Work Part 2: The Mainstream Catches Up To Reality
|
|
 |
|
Report: Recovery Likely To Take Until 2014
|
 |
|
|
The U.S. economic recovery may not be fully completed
until 2014, according to a report in Investor's Business Daily. What's
more important is that this phenomenon is nothing new, as each subsequent
recovery from an economic downturn since 1981 has taken progressively longer.
According to the report: "It took 28 months for employment to return to its pre-recession
peak following the 1981 downturn; 32 months after the 1990 slump; and 47 months
after the 2001 recession," which means that "Today’s jobs slump, already at 29
months, could last five years or more, analysts say. Employers are expected to
stay cautious amid a sluggish economic recovery."
To be sure, this time around there is plenty of fear about Washington's policies,
such as higher taxes, and other potential unknowns, such as "cap and trade," a
costly health care reform package, and a general shift in foreign policy, to
take the blame. But there is much more to this than just this administration's
policies. This is a trend that has been in place for several decades now, and
is centered around two major concepts: the rise in automation, and the increase
reliance on jobs being shipped overseas in order to cut costs and increase corporate
profits.
The report notes: "Job losses were especially harsh in the last recession: Employment
plunged as much as 6.1% from the December 2007 peak, the worst since the Great
Depression. But the U.S. economy has struggled to erase even shallow job losses.
In the 2001 recession and aftermath, employment never fell more than 2%, yet
it took nearly four years to get back to its old highs."
In fact, here is where the cat finally comes out of the bag: 'Stronger productivity
gains in recent decades have let firms make do with less, analysts say. “Once
companies are producing as much as they were prior to the recession they’ll need
fewer workers,” said Sophia Koropeckyj, a labor economist at Moody’s Econ omy.com
. And many jobs have been lost or shifted overseas.'
If you put numbers to the concept, it gets even worse. According to the report,
if you take out the job gains from temporary census workers, the U.S. has added
a mere 500,000 jobs in 2010. What's more startling is that it would take 8 million
jobs " just to get back to the December 2007 peak, when the recession started."
And there is a connection between employment and GDP. The report notes: "Employment
shrank 6.1% from peak to trough in the current recession as GDP fell 3.8%. By
contrast, employment shrank just 3.1% in the 1981-82 downturn, just a bit more
than the 2.9% GDP contraction. However, while the 2001 jobs slump of 2% was relatively
mild, it came on a scant 0.3% drop in GDP."
The report lists the littany of reasons why the economy remains sluggish, including
high deficits, the threat of higher taxes, and most imporant, the permanent loss
of jobs, noting "weekly jobless claims remain above the level that would suggest
net hiring" as small businesses continue to have trouble getting credit.
To us, what is most troubling is that companies are making money, with fewer
workers as they sit on record high amounts of cash. That seems to be the best
of all worlds if you're a corporate CFO, low costs, high reserves, and a profitable
business. It's a bean counter's Nirvana.
Conclusion
On June 7, in this space, we penned a column titled "The End of Work," in which
we noted: "In an early 1990s book titled "The End of Work," futurist Jeremy Rifkin
put forth an interesting concept. Automation would lead to where we are today.
And it looks as if he's pretty much right on the money. It's not so much that
robots have put people out of work, which is part of the story. It's that so
called "productivity" where workers seem to be doing more with less effort is
only part of the picture. Millions of jobs have actually disappeared forever,
being replaced by machines and the lack of a transitioning mechanism."
Indeed, as corporations decrease the number of workers on their payrolls, they
seed the profits of the future by decreasing the carrying costs of employees,
salaries, health care and other benefits, and retirement liabilities. In other
words, the corporations can run leaner and meaner, and can squeeze profits out
of leaner sales during hard times.
The government has elected to give out handouts in the form of Medicaid, Medicare
to those under retirement age, and by extending unemployment insurance. Now it
has expanded health care coverage in ways that are still uncertain, and has run
up a huge tab with the social safety net.
What's missing is something to create more workers. Without work, crime rises,
and innovation lags, leading to a potential world of social disorder as the number
of those in the have not column overwhelms those in the have column. Eventually,
this trend will lead to a point of no return, where there won't be enough workers
to pay taxes which support the social safety net, and the society will fall apart.
It happened for a while in Argentina as the government there had one of its many
meltdowns, as cities divided into neighborhoods that would use their own currency
for internal commerce and barter for trade with other neighborhoods.
And it can happen in America, where people have guns, technology, and ways to
get fuel and food from one place to another via a huge interstate highway system.
Just grab a copy of any Mad Max title at your local video store, if there are
any of those left, or download a copy online, unless of course the FTC or the
president shuts down the Internet because they're afraid that you may actually
know what's going on.
Otherwise, all we have to look forward to are higher taxes, worse medical care,
and a really crappy standard of living. That's not exactly what Ayn Rand had
in mind with regard to the way free markets are suppposed to work.
We'll be on Twitter
some time today before the market closes with some updated comments.
Know when to sell and how to make money when the market falls. Get
a detailed trading plan in your pocket. Read Dr. Duarte's All
NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for
All Seasons. Also Available As Kindle Books. |
|
|
|
|
Market Moves - Stock Of The Day
|
|
|
|
Powershares QQQQ (Nasdaq: QQQQ) Rises As Homebuilders ETF (NYSE: XHB)
|
|
|
|
|
Chart Courtesy of StockCharts.com
The Powershares QQQQ (Nasdaq: QQQQ) looks to be ready to
extend its rally, but the Homebuilders ETF (NYSE: XHB)
looks ready to fall of a cliff. That's because Wall Street
is betting that the current jobless trend will continue
and expand over the next several years.
Chart Courtesy of StockCharts.com
At first glance, that makes little sense. Homebuilders
have been at the center of the economy for decades as houses
drive commerce in the U.S.
So why is the QQQQ rallying as XHB falters? The simple answer is clear. Money
is moving into the QQQQ and out of XHB. But there's more to it than that. And
the answer is at the center of what lies ahead for the U.S. economy over the
next several years.
Wall Street, whatever else it is, is best for smelling the emerging megatrend.
In the 1980s, it smelled the great advances in drug development, and the drug
stocks soared for a decade. In the 90s, Wall Street smelled the Internet, and
that sector blossomed.
And now, it's smelling the transition from a worker led economy to a corporate
led economy. Houses are built by people, bought and maintained by people. And
people are losing their jobs, and may not ever regain them. That means fewer
houses being built, and a different set of economic ripples.
Corporations have fewer liabilities as they've jettisonned millions of workers
and the expense associated with them. The QQQQ is home to the largest 100 technology
and related companies on the Nasdaq. Apple, Google, Microsoft, Intel, and other
automation heavy, and technology producing companies dot the landscape.
These are companies that increase productivity, and allow other companies to
multiply the output of other corporations as well as producing machines that
will eventually replace more workers in the future. That's why the money is going
into the QQQQ, because Wall Street has spotted a trend. And unless something
changes, Wall Street seems to have gotten it right.
At some point, Wall Street will get it wrong, as the trend peters out. But, to
us, it looks as if this trend is just getting started.
Follow Dr. Duarte on Twitter |
|
|
|
| |
|
|
