No and then Chicken Little shows up with dire projections, depressing outlooks and missed opportunities...
The fact is that companies from CSX to INTC are beating estimates and raising projections. The economy is healing. Companies are doing OK and the stock market is going up. But don*t take my word for it, just look at your portfolio.
Mortgage rates are at record lows and if your are in the market, now is a better time to buy a house than any time since the early/mid 90s. If you have a job, now is not a bad time to be a consumer in the USA -- the place is ON SALE.
The real problem with our economy is not bad assets hidden on bank balance sheets, nor is it federal/state/local government deficits and insolvency. The problem is job security and job creation. And the imbalance our system has enabled... Billionaire options traders and broke auto workers... Welcome to the USA.
If you are unemployed in the USA, you are screwed. If you are a wage earner, you are in trouble. Inflation will eat at your earning power and your real wage will decline. Your job may go to India or China because that is what big american corporations do; maximize profits in the corporate interest, not preserve jobs or invest domestically for the public good. Welcome to globalization. Thank god the Chinese only earn $200/month... otherwise how could we afford anything? Maybe, just maybe, we are a lucky nation that thought luck would trump hard work and common sense.
But we are not as lucky as Norwegians -- whose socialized energy industry gives them among the highest per capita GDP in the world. And not as lucky as the Swiss, who enjoy the same thanks to a financial services industry that provides a home to dirty money from everywhere. But we are lucky...maybe we need to trade lucky for smart.
If you own equities, you should be in good shape... they are headed higher because the global economy is accelerating. There are decades of global growth to come. The rest of the world is playing catch-up... Unless you have been out-sourced, is that so bad?
Truth be told, I am no expert in tax policy and I do not have a clue what the new health-care bill entails -- except I have the impression that it gives more people, more coverage -- which is good.
I am prepared to acknowledge the possibility that tax and healthcare uncertainty are the reasons that american companies are not hiring... but I don*t really think so. I think companies got scared by the crisis. I think they are concerned about the decline in quality education, work-ethic and discipline in the US work-force. They are salivating at the growth possibilities abroad, using $200/month docile foreign workers... and all of this has killed the appetite for domestic growth -- for now.
Bloomberg reports that 3Q corporate sales grew in many sectors (figures from memory, directionally correct):
Tech - 30%
Energy - 18%
I hear you saying that the economy as a whoile can*t frow if the consumer does not participate. Fine. I agree. I care deeply as an American that our people are under-employed, stressed and cant afford what they used to. But as a stock market investor, I am more interested in finding what is working (sales and profit growth), than in *investing in this market* (your words).
The reasons for growth are also secondary to growth itself:
Doc: <Sales> are still way down from 2006 and 2007. And how much of this is due to governments printing money and how much is due to true economic expansion?
Musk: Of course they are down... you are comparing peak to trough! Govt prints money, corporations sell more product, profits rise, stocks rise, (hopefully, people buy and sell homes, cities and states meet payroll... )what part of this is NOT *true economic expansion*? Even if it is not *true* (because its source is govt spending rather than corporate or consumer spending), as a stock-holder, I will take it.
Doc: Productivity and innovation are what lead to true economic growth, and those two items have been in short supply here lately.
Musk: Higher profits on flat costs is the very definition of productivity... we are in a productivity boom. As for innovation, I see it everywhere and I see it coming mostly, from the USA. Social Networking, Cloud Computing, Cyber-retailing, new hardware, new software, heavy equipment (CAT is growing like a weed)... The innovation that is suffering is: Developing the 3rd derivative of a securitized mortgage or putting middle-class (and lower) people into McMansions stuffed with gear they don*t need, paid for in the future with a loan that grows in size rather than amortizes itself...
DOC: To make an analogy, this is like your house is being foreclosed on, and you get a cash advance on your credit card to save the day. Fine, the bailout worked, but has anything be done to stop what caused the bailouts to be necessary to begin with? Hell no!!
MUSK: A day more in your home is better than a day more in the street.
Nice response, Musk.
<you imply that the Federal response to the crisis has been bad, wrong, evil, crooked, useless... while I am quite certain that things would have been, and would be, far worse without bailouts, QE, fiscal expansion, dollar devaluation, etc.>
To make an analogy, this is like your house is being foreclosed on, and you get a cash advance on your credit card to save the day. Fine, the bailout worked, but has anything be done to stop what caused the bailouts to be necessary to begin with? Hell no!!
<Sales are up across the board from a year ago. US GDP is GROWING. Global output is GROWING.>
But they are still way down from 2006 and 2007. And how much of this is due to governments printing money and how much is due to true economic expansion? Productivity and innovation are what lead to true economic growth, and those two items have been in short supply here lately.
I questioned myself as to why I think this recovery is so hard to buy into. You are right that some of the numbers are better, but my gut is just screaming that this rally is more of a sugar high than meat and potatoes. Then I read Jeff Matthews blog, and I think he nails it.
"If they listened, they’d know that companies aren’t holding back on hiring because business stinks: they’re holding back because they see tax hikes and healthcare cost increases coming, and they’re not sure adding a new FTE is a smart thing to do.
And no amount of “QE2” or QE3, 4, 5 or 6 will change that.
Ah, but who in Washington needs facts to make up their minds?"
I went to a meeting recently, and a CEO of a hospital showed up to give a talk, and he admitted to not knowing what was in the Obamacare law.
A leader is supposed to chart the course for our country and now no one knows where the hell we are going with taxes, health care, and therefore hiring. Our government leaders have put us in a holding pattern, and that is why I just have no faith in this market.
Meredith Whitney and the Broke States: I do not wish to minimize the incompetence and the pain, but the States have been though this before. More wealth via rising stock prices could lead to firming housing values, growing sales volumes, and thus more income to the states... a virtuous cycle.
*Of course, the fed and DOT are trying to devalue the dollar.* Of course, but this is good for the US economy.
*Bottom line Musk is that this is not a free market. It is a rigged one.* I have strongly argued the same... but I think you are implying that the theoretical construct of a free market actually exists in reality, while I do not. Never, nowhere, no-how.
*I don't begrudge people like yourself trying to trade it, but with a few exceptions, I don't think it is one worth investing in.* As an investor, I want to bet on the guys who have the market rigged in their favor. Buy GS. No, the whole market is rigged to go up... buy SPX.
*...the best financial laws ever written n the history of mankind, have been watered down by Wall Street fat cats. * Amen, I am with you there...
*People aren't dumb...* I am really reluctant to say this, but yes, people ARE dumb, I AM DUMB... Sitting tight while the market declines and then sitting on the sidelines while it doubles? I have done this before and am struggling NOT to do it again this time around. Surely, putting money into treasuries when they are at record low yields is not smart unless you think the sky is going to fall. But I don*t think it will. And if it does, I will go short.
GL, Doc. You rock...
Thanks for your thoughts musk.
you kind of made me feel bad for having $ though. i'm 42 and have not had a real job for 11 years . lived in the states from 79 -84 , those were not the good times but i'm afraid people are and will sufer much much more this time. But this is the mother of all jobless recoveries and I understand your point about good times for corporations and that is why i own these huge multinationals , but then we could be wrong and that is why i want to be extra carefull in these times,.gl