job creation
What the Latest Job Creation Data Indicate for This Market Sector
By Sasha Cekerevac for Investment Contrarians | May 8, 2013
The latest data on job creation by the Bureau of Labor Statistics (BLS) are interesting for several reasons. While there are some glimmers of hope, there is still much more work that needs to be done.
For April, job creation improved by 165,000, with the 12-month average now at 169,000 per month. The long-term unemployed level continues to be high, although it is decreasing. Currently, there are 4.4 million long-term unemployed, a decrease of 258,000 during the month of April. This lowered the percentage of long-term unemployed to 37.4% of the overall unemployed, down 2.2% for the month. Another important metric is the participation rate, which remained at 63.3% and is at historically low levels.
Clearly, economic growth needs to accelerate for job creation to continue moving upward. The participation rate remains quite low, and the large number of long-term unemployed is stubbornly high.
The market reacted positively, not only from the headline number, but also the extremely large positive revisions to the previous months of job creation data. While economic growth appears to be slowing, jobs data were much stronger than previously reported, with February and March job creation data revised upward by 64,000 and 50,000, respectively, from the initially reported data.
Do these data indicate any sectors worth investing in?
Yes; as the healthcare industry continues with a steady pace of job creation, with 19,000 newly employed in April, this brings the 12-month average for job creation in the healthcare industry to 24,000 per month. As an investor, with economic growth still relatively anemic nationwide, it appears the healthcare industry will continue on its upward trajectory.
The new … Read More
When It Comes to Jobs Numbers, the Market Is Trading on Anything but the Truth
By George Leong for Investment Contrarians | May 7, 2013
Pop the champagne; it’s time to rejoice and toast this month’s jobs numbers, isn’t it? The S&P 500 edged up to another record high above 1,600, while the Dow is seriously eyeing 15,000.
I did think those targets for the two indices were achievable, but not this early in the year.
You can thank the Federal Reserve and the astounding job creation for the high jobs numbers—of course, I’m being sarcastic to a degree.
According to the United States Department of Labor, job creation tallied 165,000 jobs in April, better than the Briefing.com estimate of 135,000. The March reading was also revised upward to 138,000 new jobs from the previous muted reading of 88,000. The 165,000 new jobs is decent, but let’s be realistic: that number is no reason for the S&P 500 to be trading at a record high. The truth of the matter is that we need to see a higher job creation number.
The unemployment rate fell to a four-year low of 7.5%, much better than the Briefing.com estimate of 7.7%. Again, great, but I think the drop has more to do with job seekers leaving the search.
Yes, the job creation numbers are a myth as far as the real strength of the labor market.
The Labor Department estimates there are 11.7 million people unemployed, but in reality, it is probably twice that because many workers have quit looking for work out of frustration.
In fact, a closer examination of the job creation numbers from the Labor Department tells us another story—not what is in the headlines and not what the government wants you to know…. Read More
Did the Federal Reserve Just Signal More Monetary Policy?
By Sasha Cekerevac for Investment Contrarians | May 6, 2013
The latest meeting by the Federal Reserve was quite significant regarding its monetary policy program, and many economists will now need to revise their analyses.
The key sentence in the Fed’s statement was, “The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes.” (Source: Board of Governors of the Federal Reserve System web site, May 1, 2013, last accessed May 2, 2013.)
Why is this so significant? For the past few months, many economists and analysts have been expecting that the Federal Reserve would begin to discuss when it would be appropriate to begin reducing its aggressive monetary policy program, specifically the monthly $85.0 billion bond-buying level.
Many were thinking that at this meeting the Federal Reserve would indicate that at some point in the future it would begin reducing its aggressive monetary policy stance. While the Fed did indicate that it might be prepared to reduce bond buying and lower monetary policy measures, this is the first mention in its press releases that an increase is possible.
In my opinion, this indicates that the Federal Reserve now believes that additional monetary policy might be necessary, whereas we all had been hoping that the U.S. economy would begin to improve. Clearly, the recent data has shown otherwise.
Job creation remains very weak, and various sectors, such as manufacturing, do not indicate that they will increase their level of production anytime soon. Internationally, we are also seeing continued weakness in many countries, which can only put downward pressure on our own economy.
With … Read More
Latest Retail Data Sending Warning to Investors
By Sasha Cekerevac for Investment Contrarians | Apr 17, 2013
With the market hitting all-time highs, many investors are wondering how investor sentiment can be so positive when job creation is still not as strong as it should be. This divergence between the financial markets and the real economy cannot last forever.
Investor sentiment has been propped up by the Federal Reserve, which is trying to prime and ignite the U.S. economy. While job creation is certainly better now than it was a few years ago, there is still much more work that needs to be accomplished.
One very visible sign that the economy is not running at 100% capacity was the recently released retail sales data. For March, retail sales decreased by 0.4%, although this did follow a very strong February that showed a one-percent gain. A survey of 85 economists by Bloomberg had a median forecast of zero (unchanged) from March. (Source: Kowalski, A., “Retail Sales in U.S. Declined by Most in Nine Months,” Bloomberg, April 12, 2013.)
Job creation obviously plays a very important role when it comes to retail sales. And remember that like most developed nations, a vast majority of the U.S. economy is based on consumer spending.
In this case, investor sentiment might have become too bullish on retail-oriented stocks. If job creation does not accelerate, we could see a further impact on discretionary spending, which would break down investor sentiment throughout this year.
However, this recent retail sales data might have been a blip, as the trend is still fairly strong. Remember that one data point does not make a trend. Following stronger-than-expected data earlier in the year, a pullback was expected due … Read More
Why Earnings Outlooks Are More Important Than This Quarter’s Results
By Sasha Cekerevac for Investment Contrarians | Apr 12, 2013
With the financial reporting season underway, one of the most important considerations is not the most recent quarter’s earnings results, but the earnings outlook companies are giving for the remainder of the year.
One market sector that I like to watch is the retail area that sells to the average American, as this helps give a clear picture of the underlying fundamentals of the U.S. economy.
Family Dollar Stores, Inc. (NYSE/FDO) just released its earnings outlook for the remainder of the year, and it was far below what analysts had expected. In January of this year, Family Dollar offered an expected earnings outlook for fiscal 2013 of approximately $4.20 per share; this has now been reduced to $3.93 a share. (Source: Burritt, C., “Family Dollar Cuts Profit Forecast as Shoppers Cut Back,” Bloomberg, April 10, 2013.)
During the second quarter, Family Dollar reported that same-store sales increased by 2.9%, for stores open longer than 13 months, also coming in below estimates. This company is interesting, as the lower-income market sector is showing continued weakness.
The significant decline for the earnings outlook of each company tells me that all of this quantitative stimulus is doing little to help the average American, as this market sector is not showing any signs of improving.
The lack of job creation and the increase in the number of people pulling out of the jobs market are now having a direct impact on the market sector that caters to millions of people. With continued economic weakness, there is little hope that the earnings outlook will improve anytime soon.
It is actually quite shocking, considering the trillions … Read More
How Central Banks’ Easy Solution Could Devastate the Global Economy
By Sasha Cekerevac for Investment Contrarians | Apr 10, 2013
Central banks around the world have opened the floodgates with massive levels of quantitative easing in an effort to try to stimulate their respective economies. Turning on the quantitative easing tap is easy; putting the genie back in the bottle will be extremely difficult for central banks globally.
I am not alone in sharing this opinion, as the governor of Denmark’s central bank, Lars Rohde, has voiced similar concerns. In a recent interview, Rohde stated, “The risk is we stay in this climate too long and that the carpet bombing of liquidity spurs inflation… How do we exit this without killing whatever nascent recovery there might be at that time?” (Source: Levring, P. and Schwartzkopff, F., “Liquidity Carpet Bombs Fueling Asset Bubbles, Rohde Says,” Bloomberg, April 8, 2013.)
While central banks around the world are using quantitative easing in an effort to revive the global economy, the long-term consequences, as I’ve mentioned before, could prove to be extremely costly. I certainly welcome the honesty that Denmark’s central bank’s governor is displaying in voicing his concerns about how all of this quantitative easing might have serious long-term risks.
With Japan just now unveiling a massive new quantitative easing program in addition to the Federal Reserve’s asset purchase program, the floodgates continue to be wide open. However, central banks around the world have embarked on an aggressive quantitative easing policy since the great recession began, yet little has changed in terms of global unemployment.
Many nations around the world still suffer from extremely high levels of unemployment. It appears that quantitative easing did have an impact in certain asset prices, namely stocks … Read More
Rise in Stock Market Failing to Help the Jewelry Sector
By Sasha Cekerevac for Investment Contrarians | Mar 27, 2013
One of the most often stated arguments for the current aggressive monetary stance by the Federal Reserve has been that if asset prices can begin to recover, this will help the overall economy.
With the spectacular rise in the stock market over the past couple of years, it would be natural to think that many Americans have seen an increase in their wealth, leading to an increase in corporate earnings for companies that cater to people who might be investors.
The jewelry market sector is a good indication of this sentiment for clients who might have seen their wealth increase through asset appreciation. However, corporate earnings in this market sector do not appear to follow this logic.
Tiffany & Co. (NYSE/TIF) recently came out with its corporate earnings, which revealed some interesting information regarding the jewelry market sector.
For the Americas, total sales rose only two percent, with its flagship New York store seeing a three percent drop in sales. The New York store for Tiffany makes up approximately eight percent of the company’s total business. Tiffany’s stores in Japan, another country that has seen a recent rise in the stock market due to an aggressive monetary policy stance, also witnessed sales declining by six percent. (Source: Warner, M. and Talley, K., “Tiffany Projects a Rough Start but a Brighter Finish for Its Year,” Wall Street Journal, March 24, 2013.)
While it is true that Tiffany’s Asia-Pacific division did well, as sales rose 13%, the real question is: if this recent rise in the stock market in America, which has been far larger than many had predicted, is failing to … Read More
New Data Says You Likely Can’t Afford to Retire
By Sasha Cekerevac for Investment Contrarians | Mar 22, 2013
As the stock market in America continues to move upward into elevated territory, the Federal Reserve and its monetary policy program of creating an abundance of liquidity and cash in the financial system deserve much of the credit.
However, the average American has not participated in this giant creation of wealth over the last few years and they are extremely concerned about their future retirement plans.
The problem with the Federal Reserve’s monetary policy program is that it cannot solve inherent structural issues prevalent in America today. Monetary policy initiatives can help only a certain section of America, namely the financial markets.
Many Americans over the last few years have seen wages stagnate while costs continue rising. This has left the average American with far less money available to invest, if at all. The net result is that millions of Americans do not have any investment in the stock market, leaving them to sit on the sidelines of the recent boom created by the Federal Reserve through its monetary policy initiatives.
Additionally, many retirees have their money in bonds. Because of the Federal Reserve’s monetary policy program of keeping interest rates low and aggressively buying bonds, this has left real yields extremely low; in some cases, they’re essentially nothing.
This means that retirees who do have some cash available to invest in a relatively safe investment can’t generate any income, because the Federal Reserve is so aggressive in its monetary policy stance.
According to the Employee Benefit Research Institute (EBRI), a survey reported that 57% of American workers had less than $25,000 in total household investments and savings, not including … Read More
Dow Jones Hitting 15,000 a Real Possibility Thanks to the Fed?
By George Leong for Investment Contrarians | Mar 22, 2013
The Federal Reserve is intent on keeping this Fed-induced stock market rally intact for perhaps another few years.
At the Federal Reserve monthly meeting this past Wednesday, the Federal Reserve reconfirmed its program of maintaining near-zero interest rates and its $85.0 billion monthly bond-buying strategy. As I recently discussed, the environment of low rates will offer little choice for investors who have to weigh low-yielding fixed-income investments against stocks. In other words, the equities market will continue to be driven, at least in part, by the cheap money. This will be great for the people who have the funds, but it will be horrific for those with lower income and who may be dependent on income from their investments. But for the government it’s great news, especially when it’s carrying so much debt—well, the government can thank the Federal Reserve.
Faced with the uncertainties in the jobs market and job creation, the Federal Reserve suggested it would maintain its record-low interest rates until the country’s unemployment rate falls to 6.5%. The problem is that the Federal Reserve predicts this will not occur until sometime in 2015, so that’s another two years of easy money and the building up of massive national debt. Remember what I said about the sequestration cuts and how they are well below the interest paid on the debt? Imagine the payments when interest rates ratchet higher! It’s not going to be pretty. The Federal Reserve has created this situation, which could inevitably blow up.
In reality, achieving an unemployment rate of 6.5% may not happen until after 2015, based on current job generation. According to the … Read More
Stocks Priced to Perfection; Is a Sell-Off in the Works?
By Sasha Cekerevac for Investment Contrarians | Mar 14, 2013
One of the more common economic topics to be discussed recently has been the possibility of a global economic recovery. The lack of job creation is not only a problem for America, but it’s also a problem globally. The economic recovery has been extremely slow for many parts of the world, leading to an international void in job creation.
Recent data have offered contradictory information regarding the possibility of a global economic recovery. But what worries me is that after so many years following the Great Recession and after trillions of dollars in monetary stimulus, the world still cannot achieve an economic recovery, and millions remain unemployed due to a lack of job creation.
Recent data from France show that industrial production fell far more in January than was expected. Expectations for France’s industrial production in January estimated a 0.2% drop; yet it came in at -1.2% from December, according to Insee, France’s national statistics office. (Source: Deen, M. and Riecher, S., “French industrial output tumbles as recession looms,” Bloomberg Businessweek, March 11, 2013.)
For the three months ended January 31, 2012, factory output fell by 4.6% in France. This is a serious decline, and it clearly shows a lack of economic growth. Job creation is nowhere in sight, as unemployment in France was 10.6% in the fourth quarter—a 13-year high.
Why does this matter for Americans?
Of course, America is not France; however, recent policy decisions here worry me tremendously. In fact, it’s the lack of policy decisions that worry me. Washington is quick to raise taxes, as were the French, yet they can’t make structural reforms that can … Read More
Investor Warning: Job Creation Data Fuelled by Cheap Money
By Sasha Cekerevac for Investment Contrarians | Mar 11, 2013
The latest monthly employment data had a positive headline; a stronger than expected job creation number. However, looking at the core information, there remain significant concerns regarding the U.S. economic recovery and job creation specifically.
For February, job creation for non-farm related payrolls totaled 236,000. This number was far higher than expected, giving a boost to the stock market. (Source: “Employment situation summary,” Bureau of Labor Statistics, March 8, 2013, accessed March 8, 2013.)
One might tend to think the economic recovery is going full steam ahead. I would urge caution, however.
To begin with, job creation data from the Bureau of Labor Statistics is notorious for large revisions. This latest report shows just how volatile this job creation data really is.
The Bureau of Labor Statistics has revised job creation data for January from 157,000, down to only 119,000. That is a huge revision in percentage terms, creating difficulties when calculating whether or not an economic recovery is occurring.
My biggest worry for a sustained economic recovery is the continued decline in the participation rate. This is the number of people who are active in the employment market. People who have given up looking for work drop out of this data, which is why this level continues to decline.
The current seasonally adjusted participation rate of working age people is 63.5%. This is the lowest level since September 1981. (Source: “Payrolls Surge as U.S. Jobless Rate Falls to Five-Year Low,” Bloomberg, March 8, 2013, accessed March 8, 2013.)
This means that a huge amount of people have given up looking for work and are not active participants in the … Read More
Potential Economic Threat: American Pessimism Grows as Politicians Bicker
By Sasha Cekerevac for Investment Contrarians | Feb 1, 2013
One of the most difficult concepts for both retail and professional investors and analysts is the incorporation of transitory or one-time events into information regarding economic growth and job creation.
What do I mean? There are many moving parts in the economy. Not all data can be compared on an equivalent basis. Even year-over-year data comparisons should incorporate far more variables.
As an example, recent data on both economic growth and job creation over the past six months have confused many professionals due to the many uncertainties affecting consumers and businesses.
We had the election, the fiscal cliff debate, and heated arguments by politicians on major structural issues, all of which created confusion with the data.
For the last six months, we have constantly heard from businesses that they were worried about the impact of the fiscal cliff. Many stated they were reluctant to expand their business; this sentiment can lead to a lower level of job creation, which would affect economic growth.
Is it reasonable to compare this latest set of data to the previous year’s data? What about the year before that? Clearly, the last six months were far different than the same time period last year. And since we can’t reasonably calculate how an individual or business would have acted without these uncertainties being present, data must be interpreted much more cautiously.
An example of interpreting behind the data is the recent release by The Conference Board of its Consumer Confidence Index for January, which declined to 58.6 from 66.7 in December. This was far lower than the median forecast in a Bloomberg survey of 64.0. January’s … Read More
Crucial Insight into the Latest Data on Manufacturing
By Sasha Cekerevac for Investment Contrarians | Jan 22, 2013
One of the most frustrating things for economists around the world has been the lack of economic growth and job creation. The real estate bust in America has had a cascading effect on the economy. The real estate crash and many market sectors were interrelated, causing economic growth to not only stall, but also decline significantly, leading to massive layoffs.
While there have been some positive signs that the housing and automotive sectors are starting to rebound, job creation has only been moderate. Economic growth needs to accelerate for a substantial amount of job creation to develop.
Some of the latest data regarding manufacturing certainly are not a positive step toward economic growth or job creation.
The Federal Reserve Bank of New York recently issued its general economic index, which fell to -7.8 in January, down from a revised -7.3 in December. This is the sixth month of contraction in the New York area. Not only was this number set lower than the previous month, but it also missed expectations substantially. Fifty-four economists surveyed by Bloomberg had a median estimate of zero. (Source: Woellert, W., “Manufacturing in New York Region Contracts for Sixth Month,” Bloomberg, January 15, 2013.)
While manufacturing accounts for only 12% of the U.S. economy, it is still a substantial component of economic growth and job creation.
These data were followed by the Federal Reserve Bank of Philadelphia’s January 2013 Business Outlook Survey. The survey of manufacturing conditions declined to -5.8 in January from 4.6 in December. New orders declined to -4.3 from a December reading of 4.9. Labor conditions further deteriorated to an index of -5.2 … Read More
What’s Needed for Higher Wages?
By Sasha Cekerevac for Investment Contrarians | Jan 14, 2013
Sometimes it is interesting to get a different perspective by looking at other nations around the world and how they are dealing with their economies.
The U.S. economy is certainly not booming, although the latest data have shown some contradictory indications. On the one hand, job creation is not occurring at an extremely fast pace; however, there are signs of an economic recovery in certain sectors, including housing, vehicle sales, and energy.
Germany, on the other hand, has had a lot of success, even though its neighbors have been embroiled in a large amount of economic stress due to their financial crisis. The economic recovery of Germany goes back many years, with structural reforms, made over a decade ago, that have prepared its economy to be extremely competitive internationally. The decrease in the euro has only helped the country’s economic recovery.
According to the German Federal Statistics Office, exports for the first 11 months during 2012 grew 4.3% to $1.3 trillion. This includes a 10.4% increase in exports to non-European Union (EU) countries. In another report, conducted by the Federation of German Wholesale, Foreign Trade and Services, export growth is expected to increase by five percent in 2013. (Source: “Booming Sales Beyond Europe German Exports Seen Hitting New Record in 2012,” Der Spiegel, January 8 2013.)
These are record levels of exports for Germany. Clearly, that nation has been able to engineer a decent economic recovery in spite of its weaker European partners. Job creation throughout the financial crisis has been quite strong, as Germany currently employees over 41 million citizens, the highest level ever recorded.
Much of the problem … Read More
Are American Policies Shutting the Door on Economic Growth?
By Sasha Cekerevac for Investment Contrarians | Dec 20, 2012
One of the main drivers for economic growth and, ultimately, job creation is innovation. New companies designing innovative products and technologies have always been the main drivers of economic growth. This economic growth will naturally lead to job creation. This should be the goal for every government, to stimulate and incentivize companies and people to innovate and start businesses.
America, however, seems to be going in the opposite direction. In the past, one of the biggest advantages for America has been that the nation was a magnet for talented immigrants who come to this country and build new products, innovative technologies, and, ultimately, businesses, which all results in job creation. This has been the basis of America’s success since the beginning.
An interesting fact: 40% of companies in the Fortune 500 were founded by immigrants and their children. However, America has been creating large obstacles and hurdles for talented immigrants to come to this nation and build businesses. As an example, visas for skilled workers are now at approximately 65,000 per year, down by half over the past decade. (Source: “The Chilecon Valley Challenge,” The Economist, October 13, 2012, last accessed December 15, 2012.)
An in-depth report by The Economist cited several examples of difficulties for immigrant businesspeople. One company called Fame Express, a creator of games for Facebook, Inc. (NASDAQ/FB), had a successful business, employing people within America and paying over $250,000 in taxes over two years. However, its management’s visa application was denied, and it was forced to move back to India. This is the exact opposite of job creation, taking a successful business and pushing it off … Read More
Why the Fiscal Cliff Is Impacting Consumer Spending
By George Leong for Investment Contrarians | Dec 17, 2012
The fiscal cliff is causing a drag on the economy and, in particular, consumers’ desire to spend, due to the uncertainty of how the budgetary cuts and tax increases will impact income. If the fiscal cliff is allowed to proceed—and it will to some degree—the reality is that taxes will rise. I’m not sure if the middle class and those who earn less than $250,000 will be spared, but I do feel there will be a compromise made on the income tax increases.
In the meantime, consumers are likely to be hesitant to spend in the retail sector. The headline retail sales reading rose 0.3% in November, which was below the Briefing.com 0.6% estimate but up from -0.3% in October. The ex-auto reading was flat, lower than the Briefing.com 0.2% estimate. While the November numbers don’t translate into December, I’m sensing the uncertainty of the fiscal cliff will impact consumer spending in this key shopping season for the retail sector.
We are heading into the heart of the holiday shopping season. I’m sure the retail sector is anxiously praying for consumers to spend. A strong shopping season in the retail sector will also go a long way to helping the economic recovery, while also giving the stock market good news.
The two recent jobs reports added some optimism to the retail sector; albeit, I doubt it will be enough to drive consumers to the malls and online to spend. We need to see progressive and stronger job creation going forward to instill some confidence in shoppers. In the best-case scenario, if job creation rises, this would likely translate into higher … Read More
Why You Shouldn’t Get Too Excited About the Jobs Picture
By George Leong for Investment Contrarians | Dec 10, 2012
The labor picture remains precarious. On one hand, Citigroup, Inc. (NYSE/C) announced it was cutting 11,000 jobs worldwide, as the financial services sector continues to be hard hit; while on the other hand, Apple Inc. (NASDAQ/AAPL) announced it would produce at least one of its computer products in the United States.
Wall Street was relieved last Friday after the much-anticipated jobs readings offered much-needed hope that job creation in America continues to be on track.
Job growth is showing signs of wanting to edge higher, as the unemployment rate made a surprising decline to 7.7% in November; 146,000 workers managed to find full-time work, which was well above the 80,000 jobs estimated by Briefing.com.
And while I’m pleasantly surprised with the drop in the unemployment rate and continued job creation, the decline in the unemployment rate was attributed to fewer people looking for work, according to the Labor Department. Many people during Hurricane Sandy did not search for work.
Let’s take a closer look at the unemployment rate based on data from the Bureau of Labor Statistics. The November reading was the lowest reading since a 7.3% unemployment rate in December 2008, but the number remains well below the four-percent level we saw during 2006 and 2007. On the plus side, the unemployment rate has improved from the recession high of 10.0% in October 2009, which was the highest level since the 10.8% during the December 1982 recession.
The trend of the unemployment rate shows the improvement since August 2011, when over nine percent of Americans were officially unemployed.
It took close to five years for the unemployment rate to … Read More
What U.S. Politicians Can Learn from France’s Crazy Policy Initiatives
By Sasha Cekerevac for Investment Contrarians | Nov 29, 2012
Since the Great Recession, the U.S. has been struggling in its ability to generate job creation and sustain an economic recovery. There are numerous reasons for the lack of job creation; some are theories, and some are based on actual experiences. I like to look at other countries that are also struggling with a weak economic recovery and learn from their mistakes, as well as their policies and initiatives that are preventing job creation.
One country from which America can learn a great deal about how not to create an economic recovery is France, due to its completely clueless policy initiatives. I have heard a lot of strange and ridiculous ideas about what’s best for an economic recovery, but the rhetoric emanating from France’s political leaders takes the cake.
To begin with, France is encountering an extremely weak economic recovery, with no chance of job creation anytime soon. In fact, the latest data for job creation in October reported that the number of people unemployed in France is the highest in over 14 years. This is the 18th consecutive monthly increase in France’s unemployment rate. (Source: “French Jobless Total Hits 14-Year High,” CNBC, November 28, 2012.)
Not only is the economic recovery failing to ignite, but France is also moving away from any possibility of job creation in the near future. The newly elected French President, Francois Hollande, a hard socialist, has enacted policies that will only make job creation that much more difficult, since he and his party have a strong anti-business sentiment.
So with the French economic recovery being extremely weak, one would think that the government would … Read More
Will This Industry Lead American Economic Growth for the Next Decade?
By Sasha Cekerevac for Investment Contrarians | Nov 20, 2012
The U.S. is still recovering from the Great Recession, which has substantially lowered America’s economic growth levels. This lack of economic growth is preventing job creation and leading to a persistent and sustained elevated level of unemployment. In spite of the current weak economy and the ineptitude of politicians to take concrete actions in building a solid economic foundation, I believe that one of the main drivers for economic growth over the next several decades will be a derivative of oil prices.
Let me explain. While politicians bicker on both sides, American ingenuity has led the world in technological innovation when it comes to energy extraction; so much so, that the International Energy Agency (IEA) has just come out with a report stating that by 2017, the United States will be the top oil producer in the world, replacing Saudi Arabia. In that same report, by 2015, the U.S. will be the top gas producer in the world. When people around the world think about gas and oil prices, they will look to America as the world leader in technological innovation that is driving this commodity sector. (Source: “U.S. to overtake Saudi as top oil producer—IEA,” Reuters, November 12, 2012.)
Economic growth is spurred by many factors. Two of the most important factors are the competitive advantage worldwide and technological advancements. The increase in oil prices we’ve seen over the past couple of decades has led American firms to develop world-leading, technologically sophisticated methods of extracting both oil and natural gas from beneath the ground. This has resulted in massive increases of both oil and natural gas production in America…. Read More
U.S. Politicians Need to Pay Attention—Jobs Will Be Created Overseas if Things Don’t Change
By Sasha Cekerevac for Investment Contrarians | Nov 16, 2012
There is no question that the level of job creation currently in America is quite poor. While we have seen some improvement from the depths of the great recession, much more work needs to be done, not only for job creation, but also for a fundamental restructuring of the U.S. economy.
One point that every American, including the politicians, needs to be aware of is that the U.S. is part of the global economy. We cannot have job creation in isolation; we need to understand how America and its businesses fit into the global economy first.
The CEO of Cisco Systems, Inc. (NASDAQ/CSCO), John Chambers, has been quite vocal for the business community in terms of how tax policy is impacting domestic job creation. During Cisco’s current earnings quarter, in which the company did report solid numbers that beat expectations, what was interesting to me were his comments regarding job creation and how the company sees the global economy.
To begin with, 82% of Cisco’s large cash pile, which is approximately $45.0 billion, is not in America. The extremely high corporate tax rates are preventing this firm from being able to bring these funds into America to help job creation domestically. As Chambers states in an interview with Maria Bartiromo on CNBC, the company is looking around the world for the most attractive areas to conduct business. He specifically points out that Cisco will be spending its money in Canada, because that country has better corporate tax rates and is generally an easier place to conduct business. (Source: “Cisco’s Chambers: If No US Compromise We Will Invest Overseas,” video interview, … Read More
Dear Mr. President: Now It’s Time to Deliver on Your Promises
By George Leong for Investment Contrarians | Nov 7, 2012
By the time you are reading this, either Barack Obama or Mitt Romney will have won the race to be the 45th President of the United States.
Yet I will remind the winner that there’s not much time to rejoice in the victory, as there’s plenty of work ahead, which will dictate the direction of America over the next four years in relation to debt, job creation, economic growth, and foreign policy.
Whoever has won, they need to work on job creation at a much stronger rate than the current pace. All those promises that were made during the election campaign must now be acted upon. We need to create strong job creation and sustained jobs growth, while lowering the unemployment rate. The Federal Reserve is cautious about job creation into 2013. Obama and Romney have different strategies for lowering the unemployment rate and increasing job creation. But the reality is that unless Americans are put back to work, the economic recovery will likely stall and add to a possible financial crisis.
The most immediate concern for the next president will be what to do about the pending fiscal cliff on January 1, 2013, which calls for $607.0 billion in automatic budget cuts to avert a financial crisis. The Congressional Budget Office (CBO) recently warned that the U.S. economy could contract in 2013 if the spending cuts are allowed, which would impact job creation. (Source: Congressional Budget Office, last accessed November 6, 2012.) I expect the same.
At a round table meeting of the Group of Twenty Finance Ministers and Central Bank Governors (G-20), there was talk of the U.S. … Read More
Why the Next U.S. President Is Facing a Mess
By George Leong for Investment Contrarians | Nov 5, 2012
The election is finally here. We are all excited to see who will be the 45th President of the United States.
President Obama wants to stay at the White House, while challenger Mitt Romney wants to evict him. Whoever is the winner, there will be a slew of challenges for him to deal with. It may not be as bad as four years ago when the newly minted President Obama faced a massive subprime financial crisis, government bailouts of the big banks and auto sector, and a great recession, but there are still major obstacles to deal with.
If Obama holds on, you can expect a push to remedy the healthcare system and make it more efficient and cost-effective under the program coined “Obamacare.” Healthcare cost control is important as a means to control the mounting national debt and avoid a financial crisis. Over $752.0 billion is spent annually on Medicare/Medicaid, which is the second-biggest area of spending for the government following Social Security. (Source: U.S. Debt Clock, last accessed November 2, 2012.) Failure to rein in costs could create a financial crisis.
The $16.0-trillion national debt could grow to a whopping $22.7 trillion by the end of the next President’s term in 2016 if nothing is done, based on the current pace. (Source: U.S. Debt Clock, last accessed November 2, 2012.) This could lead to a financial crisis. By 2016, annual spending on Medicare/Medicaid could reach over $940.0 trillion if costs continue to rise and drive a financial crisis in health care. Social security in 2016 could surpass $1.1 trillion annually, and this is not sustainable. Those who are … Read More
Could These Sneaky Taxes Bring Down the U.S. Debt?
By John Whitefoot for Investment Contrarians | Nov 1, 2012
Nothing motivates like fear. Barack Obama won the U.S. presidential election on November 4, 2008, and gun sales surged. For the week of November 3, 2008, the Federal Bureau of Investigation (FBI) received more than 374,000 requests for background checks on gun purchasers, a 49.0% increase over the same period in 2007. (Source: “Gun sales surge after Obama’s election,” CNN, November 11, 2008.)
The surge was attributed to fears that a Democratic president and Democratic-controlled Congress would restrict firearm ownership. Similar surges accompanied the election of Bill Clinton, the last Democratic president.
Fast-forward to 2012 and it’s déjà vu. In August, firearm sales checks were up 27.8% year-over-year to 1.04 million. (Source: “August sees 27.8% increase in firearms sales checks,” Buckeye Firearms Association, September 6, 2012.) In September, they were up 14.7% to 1.07 million. This marks the 28th straight month that the National Instant Criminal Background Check System (NICS) figures have increased year-over-year. (Source: “September 2012 NSSF-Adjusted NICS Background Checks Up 14.7 Percent,” National Shooting Sports Foundation, last accessed October 26, 2012.)
In fact, gun ownership is near a 20-year high, generating $4.0 billion in commercial gun and ammunition sales. With an estimated 300 million guns, America is the most heavily armed nation in the world. (Source: “Behind America’s Gun Boom: Inside the Comeback At Sturm, Ruger,” Forbes October 17, 2012.)
Is there any truth to support a Second-Amendment crisis under Obama?
Since 2008, the few times Obama has done anything related to guns, it has been to expand the rights of gun owners. He signed a law that allows people to bring their guns into national parks (source: … Read More
Many Wildcards That Could Throw a Wrench into the Economy
By George Leong for Investment Contrarians | Oct 30, 2012
In a week’s time, we will know who the next President of the United States will be; this will be critical, giving us an indication of where America is heading as far as policy and the impact on the economic recovery. The latest poll by CNN has the race to the White House in a dead heat, with Governor Mitt Romney slightly ahead at 48% of the votes and President Obama at 47%. In the key Ohio race, support for Obama has fallen from 52% on October 2 to the current 48%, according to CNN.
At this point, based on my unbiased view, I don’t really care who wins, but I do want something to be done about job creation, the $16.2 trillion in U.S. debt, and the pending “fiscal cliff.”
Whether you are a Democrat or a Republican, there is a commonality: we need to get the country fixed and get it going on the correct path to the economic recovery and jobs for all. The unemployment rate fell below eight percent in September, but the reading is well below the four percent level we saw in 2006 and 2007. The unemployment rate has improved from the recession high of 10.0% in October 2009, but needs to work its way lower for a sustained economic recovery.
What concerns me is the current lack of focus on the pending fiscal cliff on January 1, when the terms of the Budget Control Act of 2011 are scheduled to go into effect, resulting in automatic spending cuts across the board and tax increases that will threaten the economic recovery.
Of course, there … Read More
Income Inequality: Why It’s Rising and How to Stop It
By Sasha Cekerevac for Investment Contrarians | Oct 23, 2012
During the current elections not only in America but around the world, there is a common theme that is emerging and that is the problem of a lack in job creation and an increase in income inequality. In many countries, including America, the disparity between the rich and the poor continues to grow. Along with this widening gap, there is a large difference between the viewpoints on how best to stop it or even to begin to shrink it; and along with this disparity, there is a decrease in consumer confidence, as the middle class increasingly shrinks in size.
While the left-leaning political parties around the world favor income redistribution in the absence of job creation to boost consumer confidence, the right-leaning political parties favor incentives for business support and creation. The question I ask is: are there any historical precedents that might help illuminate the current situation?
I believe the current lack of job creation and the widening gap between the rich and the poor that we’ve seen over the last 20 years is a direct result of the technological revolution. Historically, we can look back to the Industrial Revolution, which saw new ways of economic operation displace many workers and changes to the structure of the world impact the average citizen. As much as blacksmiths were hard-working persons 100 years ago, the introduction of the automobile put their jobs into obsolescence. Job creation for blacksmiths tanked along with consumer confidence for those affected by the decline in that industry.
One way to understand the lack of job creation within the manufacturing sector is to look at the total … Read More
What Obama Can Learn from Belarus About Running an Economy
By Sasha Cekerevac for Investment Contrarians | Oct 18, 2012
When it comes to job creation, the key is to drive economic growth. With the current presidential election unfolding, we not only get to hear about what candidates plan to do over the next four years, but we can also see a historical record of what each party has done. To be honest, both parties have their faults. What surprises me, though, is that President Obama talks about his administration’s ability to be a factor in job creation when there is plenty of evidence around the world that suggests the administration appears to be on the wrong track.
I firmly believe that economic growth stems from supporting businesses, which leads to job creation. Supporting businesses is crucial, considering they’re doing the hiring. Looking at polls of business leaders around the nation, many are worried and concerned about the future; it’s no surprise that there’s a lack of job creation. You will constantly see that business owners are uncertain regarding regulations (including health care) and the “fiscal cliff.”
I do believe both political parties are responsible for not dealing with the fiscal cliff issue. It is unconscionable to me that they can’t come to an agreement and are holding the American public hostage for their political maneuvering. I believe the fiscal cliff is a huge issue holding back economic growth for both large and small businesses, and there is no reason why it should be left to the last minute.
However, for long-term economic growth one should look at what drives business and job creation. Instead of discussing an opinion, let’s look at some facts. The tiny nation of Belarus is … Read More
Warning: How the Market’s Lying to You
By George Leong for Investment Contrarians | Sep 19, 2012
Small-caps were stellar in the first two weeks of September, with the Russell 2000 advancing an impressive—yet perhaps overzealous—6.4%. The broader market, along with blue chips and technology issues, has also shown great strides. For the year, technology and small-cap stocks are leading the pack, with the NASDAQ and Russell 2000 up 22.2% and 16.6%, respectively. These are the biggest gains in years, but I question their validity.
The S&P 500 is at multi-year highs, but every time I look at the long-term technical chart of the index, I’m concerned. Since 2000, there have been two major tops at above 1,400, and the current bull market rally from March 2009 appears to be heading for a third top.
The Federal Reserve-driven rally has been behind the buying, along with some perceived calm in the eurozone, with the recently announced bond-buying program by the European Central Bank (ECB). I continue to see risk in the U.S., eurozone, and China. In China, in particular, we are seeing a decline in consumer spending, which is worrisome because it’s the Chinese government’s prime focus. China is spending on additional stimulus, but the consumer needs to get involved.
Global delivery bellwether stock FedEx Corporation (NYSE/FDX) issued a deep cut in its guidance for fiscal 2013 due to the deterioration of the global economy. This was the second time FedEx cut its guidance, and with the company being a barometer on the global business environment, the news is a concern, raising a red flag as a signal to those who believe all is good.
In my view, I’m not getting dragged in by the rally. I … Read More
How to Solve the Unemployment Problem in America
By Sasha Cekerevac for Investment Contrarians | Aug 2, 2012
Since the beginning of the economic downturn, all eyes have been focused on the unemployment rate. Still hovering at over eight percent, with an even higher rate of underemployed and those who have given up looking for work, serious questions have been raised on how to increase job creation.
A new report by the Government Accountability Office states that the federal government has spent $18.0 billion on 47 different job-training and search programs for 2009, the latest period available. This is, I believe, a good idea in theory, but very poor execution. As we’ve seen, the unemployment rate remains stubbornly high, and job creation is still extremely low. With so much money spent on job creation, why is the unemployment rate so high?
First of all, the track record for job creation is not well known because of poor record-keeping techniques by the government. But this overshadows a much larger problem when it comes to job creation, and that is how the government allocates capital into specific job categories. According to the Labor Department, for one of the largest programs for job creation, only 38% of unemployed people who went through the retraining system obtained jobs for which they were trained. Translated, this means a misallocation of resources.
Trying to reduce the unemployment rate is extremely important for the economy. However, I don’t believe that government bureaucrats can actually determine which jobs and industries need workers. I believe the companies themselves know far more about the employment situation than the government. It’s a simple concept, especially since job creation ultimately comes from the private sector.
I think retraining is crucial … Read More
American Kids Continue to Fall Behind
By Sasha Cekerevac for Investment Contrarians | Jul 3, 2012
If we look at any economic power in the world since the beginning of time, there are several underlying truths that remain pivotal to the future of economic growth. Most would say military power is the key. However, it’s important point to note that it takes money to fund the military and economic growth to generate money. If we look back at the British Empire, the Roman Empire, and the current American empire, all were strong in a military sense, which came at a high cost. The funds needed were based on continued economic growth, which at its base stems from job creation. However, if we look at what the next several decades hold for America, I am worried that the next generation of kids won’t be up to the task of generating economic growth like the previous generations.
A recent 2011 National Assessment of Education Progress report shows that only 32% of students are proficient in science. This is a shockingly low number. Part of the blame can be laid on budget cutbacks due to the “No Child Left Behind” law that focuses primarily on math and reading skills. While these skills are obviously very important, having well-balanced American kids graduating provides a much stronger workforce to generate economic growth. We can’t simply be a workforce of people who can read and can’t do anything else. It would severely limit the economic growth potential and cap the level of job creation. This would also mean America would have to rely increasingly on foreign nations, like China, that have huge numbers of scientists, mathematicians and engineers graduating.
If we look … Read More
Crazy Socialist Ideas Are Not the Way to Economic Growth
By Sasha Cekerevac for Investment Contrarians | Jun 8, 2012
The latest French election saw a rise in socialism, as new President Francois Hollande set out tough, left-leaning ideas on how to generate economic growth. The French president has some of the same misleading and erroneous ideas for how best to generate job creation and economic growth. The problem with socialists is that they prefer to punish success in the name of job creation, whereas I prefer to offer incentives to create economic growth. Be aware that this is not something that happens just “over there.” This weak level of job creation is causing politicians all over the world to think of all kinds of wacky ideas to try to stimulate economic growth. Most of them are completely insane and will serve only to damage the economy, possibly permanently.
Hollande thinks that part of the solution to all of the economic growth problems stems from rich payments to CEOs. His proposal is for French state-owned firms to have a salary cap in which the executive pay may not be higher than 20 times that of the lowest-paid employee. This will mean large pay cuts to most, if not all, of the state-run firms’ CEOs. Okay, you might say, why is this a bad thing? Economic growth comes from the incentive to work hard. This hard work should have rewards.
Will this new rule help average salaries? Nope—just the opposite, for several reasons. First of all, if this is enacted only on state-run firms, then all of the top people will leave and go to the private sector. This will leave only the worst managers to run these state-run firms, which … Read More
National Debt
Follow Us
Search
Recent Articles
