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
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The Socialists were routed in the second round of French elections this weekend. The centre-right UMP party led by Nicholas Sarkozy was the clear winner but Marone Le Pen's National Front had it best performance ever at the local level although it did not win any départements.
Friday's release of the publicly available data from the Economic Cycle Research Institute (ECRI) puts its Weekly Leading Index (WLI) at 131.6, up slightly from 131.2 the previous week. The WLI annualized growth indicator (WLIg) is at -3.2, up from the previous week's -3.6 and off its interim low of -4.9 in mid-January.
"The Song Remains the Same"
As I type this, the featured article on the ECRI website remains the February 23rd piece, "The Song Remains the Same" (full report requires a subscription), which illustrates the shrinking GDP growth during the seven business cycle expansions since 1970:
Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene
The replay is now available on BNN's website. For the three part series, click on the links below.
Part 1 is here (discussing the macro outlook for the markets)
Part 2 is here. (discussing our main trading strategies)
Part 3 is here. (reviewing our pick of th...
Well, it didn’t take long for the bulls to jump on their buying opportunity, with a little help from the bulls’ friend in the Fed. In fact, despite huge daily swings in the market averages driven by daily news regarding timing of interest rate hikes, the strength in the dollar, and oil prices, trading actually has been quite rational, honoring technical formations and support levels and dutifully selling overbought conditions and buying when oversold. Yes, the tried and true investing clichés continue to work -- “Don’t fight the Fed,” and “The trend is your friend.”
In this weekly update, I give my view of the cur...
While I'm not going to argue the point about the possibility that Bitcoin drops to $1, or less, (that could happen yet, but not for the reasons you propose) I felt it necessary to point out something you seem to have overlooked.
While it's likely that the US government watching Bitco...
Bullish trades abound in Cypress Semiconductor options today, most notably a massive bull call spread initiated in the July expiry contracts. One strategist appears to have purchased 30,000 of the Jul 16.0 strike calls at a premium of $0.89 each and sold the same number of Jul 19.0 strike calls at a premium of $0.22 apiece. Net premium paid to put on the spread amounts to $0.67 per contract, thus establishing a breakeven share price of $16.67 on the trade. Cypress shares reached a 52-week high of $16.25 back on Friday, March 13th, and would need to rally 4.6% over the current level to exceed the breakeven point of $16.25. The spread generates maximum potential profits of $2.33 per contract in the event that CY shares surge more than 20% in the next four months to reach $19.00 by July expiration. Shar...
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PSW Members - well, what a year for biotechs! The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down! The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months. What could go wrong?
Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.
Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies. A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...
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 email@example.com 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.
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