The U.S. economy is being slowly but surely destroyed and many Americans have no idea that it is happening. That is at least partially due to the fact that most financial news is entirely focused on the short-term. Whenever a key economic statistic goes up the financial markets surge and analysts rejoice. Whenever a key economic statistic goes down the financial markets decline and analysts speak of the potential for a "double-dip" recession. You could literally get whiplash as you watch the financial ping pong ball bounce back and forth between good news and bad news. But focusing on short-term statistics is not the correct way to analyze the U.S. economy. It is the long-term trends that reveal the truth. The reality is that there are certain underlying foundational problems that are destroying the U.S. economy a little bit more every single day.
11 of those foundational problems are discussed below. They are undeniable and they are constantly getting worse. If they are not corrected (and there is no indication that they will be) they will destroy not only our economy but also our entire way of life. The sad truth is that it would be hard to understate just how desperate the situation is for the U.S. economy.
Long-Term Trend #1: The Deindustrialization Of America
The United States is being deindustrialized at a pace that is almost impossible to believe. But now that millions upon millions of people have lost their jobs, more Americans than ever are starting to wake up and believe it.
A recent NBC News/Wall Street Journal poll found that 69 percent of Americans now believe that free trade agreements have cost America jobs. Ten years ago the majority of Americans had great faith in the new "global economy" that we were all being merged into, but now the tide has turned.…
First of all, despite clamping down on immigration, our population grew by 2.6M people last year. Unfortunately, not only did we not create jobs for those 2.6M new people but we lost about 4M jobs so what are these new people going to do? Not only that, but nobody is talking about the another major job issue: People aren’t retiring! They can’t afford to because the economy is bad – that means there are even less job openings… The pimply-faced kid can’t get a job delivering pizza because his grandpa’s doing it.
There are some brilliant pundits who believe cutting retirement benefits will fix our economy. How will that work exactly? Pay old people less money, don’t cover their medical care and what happens? Then they need money. If they need money, they need to work and if they need to work they increase the supply of labor, which reduces wages and leaves all 308,367,109 of us with less money. Oh sorry, not ALL 308,367,109 – just 308,337,109 – the top 30,000 (0.01%) own the business the other 308,337,109 work at and they will be raking it in because labor is roughly 1/3 of the cost of doing business in America and our great and powerful capitalists have already cut their manufacturing costs by shipping all those jobs overseas, where they pay as little as $1 a day for a human life so now, in order to increase their profits (because profits MUST be increased) they have now turned inward to see what they can shave off in America.
How does one decrease the cost of labor in America? Well first, you have to bust the unions. Check. Then you have to create a pressing need for people to work – perhaps give them easy access to credit and then get them to go so deeply into debt that they will have to work until they die to pay them off. Check. It also helps if you push up the cost of living by manipulating commodity prices. Check. Then, take away people’s retirement savings. Check. Lower interest rates to make savings futile and interest income inadequate. Check. And finally, threaten to take away the 12% a year that people have been saving for retirement by labeling Social Security an "entitlement" program – as if it wasn’t money Americans worked their whole lives to save and gave to the government in good…
Robert Reich presents his view of the economy, stock market run-up, job losses, and corporate earnings, which reflect cutting employees rather than growth in production. Given that we have a consumer-driven economy, with consumers being the ones losing jobs, and perhaps their houses, logically, it makes sense that the stock market is at risk for another meeting with value based-pricing some time in the future. Being long now is a bet on liquidity driven gains continuing, regardless of the actual state of the economy. - Ilene
How can the stock market hit new highs at the same time unemployment is hitting new highs? Simple. The market is up because corporate earnings are up. Corporate earnings are up because companies are cutting costs. And the biggest single cost they’re cutting is their payrolls. So they let people go and, presto, their balance sheets look better and their stock prices rise.
In the old-fashioned kind of recession decades ago, big companies laid off people with the expectation of rehiring them when the economy turned up. Then a few recessions back, companies started laying off people for good, never rehiring them even when the economy recovered.
In the Great Recession of 2008-2009, companies are going a step further. They’re using this sharp downturn to cut payrolls even below where they were when times were good. Outsourcing abroad, setting up shop in China and elsewhere, contracting out, replacing people with software and automated machines – they’re doing whatever it takes to get payrolls down so earnings bounce up.
Caterpillar earned $404 million in the third quarter, or 64 cents a share. Analysts had expected only 5 cents. Caterpillar’s stock is up 165 percent since March. How did Caterpillar do it? Not by selling more bulldozers. It did it by cutting over 37,000 jobs.
The result, overall, is an asset-based recovery, not a Main Street recovery. Yes, the economy is growing again, but the surge in productivity is a mirage. Worker output per hour is skyrocketing because companies are generating almost as much output with fewer workers and fewer hours.
The Fed, meanwhile, has become an enabler to all this, making it as cheap as possible for companies to axe their employees. Money costs so little these days it’s easy
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
Quick take: At the end of September the inflation-adjusted S&P 500 index price was 89% above its long-term trend, up from 85% above trend the previous month.
About the only certainty in the stock market is that, over the long haul, over performance turns into under performance and vice versa. Is there a pattern to this movement? Let's apply some simple regression analysis (see footnote below) to the question.
Below is a chart of the S&P Composite stretching back to 1871 based on the real (inflation-adjusted) monthly average of daily closes. I've using a semi-log scale to equalize vertical distances for the same percentage change regardless of the index price range.
The regression trendline drawn through the data clarifies the secular pattern of variance from the trend — those multi-year periods when the marke...
While overnight the massive student protest crowd swelled to as much as 200,000 according to eyewitnesses as today's deadline for their demands that HK Chief Executive Leung Chun-ying resign arrives, the gathering was surprisingly peaceful. That may change at any moment.
BREAKING: Hong Kong police warn of serious consequences if protesters charge government buildings
Exceptionally good news from California today: A federal judge ruled CALpers claim of "Sanctity of Pensions" is invalid. Today's ruling went even further than the bankrupt city of Stockton originally sought in court.
Better than a Bitcoin? The Mexican Libertad is a real coin made out of silver or gold whose value is based on the price of silver or gold. It's tangible, like our coins and paper money, but the value is pegged to its weight in previous metal.
The Libertad is a Mexican coin that was first issued in 1981 in .999 fine gold and then in silver in 1982. Beginning in 1991, the Libertades became the only coins in the world that were issued in the convenient sizes of 1/20, 1/10, 1/4, 1/2, and 1 ounce—again, in both gold and silver. This made them very practical if they were to be used as currency.
The CBOE Vix Index topped 17.0 and the highest level since early-August on Monday morning amid declines in U.S. equities to start the trading week. The volatility index is off its earlier highs to trade 5.0% higher on the session at 15.65 as of 11:30 am ET. Options volume on the VIX is hovering near 360,000 contracts, or just more than 50% of the average daily reading of around 660,000 contracts. Calls are far more active than put options, as evidenced by the call/put ratio up above 4.2 in morning trading, perhaps as some traders position for volatility to stick around.
Large call spreads traded on the VIX today caught our attention as one big optio...
Yes, the market showed significant weakness last week for the first time in quite a while. In fact, the Dow Jones Industrial Average moved triple digits each day. But it was all quite predictable, as I suggested in last week's article, and certainly nothing to worry about. Now the market appears to be poised for a modest technical rebound, and longer term, U.S. equities should be in good shape for a year-end rally. However, I still believe more downside is in order before any new highs are challenged. Moreover, market breadth is important for a sustained bull run, so the challenge for investors will be to put together broader bullish conviction, including the small caps.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, re...
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Ebola is spreading too quickly for Ebola-vaccine makers to conduct typical studies of safety and efficacy on experimental vaccines. Instead, vaccines will be tested for basic safety, but then deployed with protocols devised now in order to test for efficacy essentially on the field. Testing has to be expedited because the situation in West Africa gets worse every day while there are no approved vaccines or other treatments.
The chart below is from a paper in the New England Journal of Medicine showing estimates of the virus's trajectory projecting out to November 1, 2014. If current trends continue...
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Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
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