The world’s economies are not doing well.That doesn’t mean that some stocks won’t rise. But it will be harder to achieve earnings gains with higher sales, but no problem achieving higher earnings with fewer employees, which is what many companies are now doing. Firing employees is the new fashion, e.g. Intel canning 12,000 employees. When you hear “firings” think higher stock price. A roundup:
+ The US Economy, from Business Insider
The US economy grew at a slower-than-expected rate to start the year, with the first estimate of Q1 GDP showing an annualized growth rate of 0.5%, missing expectations for a 0.7% expansion.
Personal consumption, which accounts for about two-thirds of GDP, was stronger than forecast, rising 1.9% to start the year while household investment was also strong. The weak spots in the economy were private investment, trade, and inventory growth.
Of course, this is just the first of a three-part revision to this quarter’s GDP data and given that 45% of the report is based on surveys or data that will be revised and 14% fo the report is inferred from historical trends, you can kind of see this however you’d like.
In a note to clients following the report, UBS economist Maury Harris noted that since 1980, real GDP growth in the first quarter of the year has been 0.8% lower than year’s other three quarters and since 2000 there’s been a 1.3% downward bias to Q1 GDP.
So, this revision is going to come up. At least according to history, which is, well, all we’ve got.
+ Europe, The 6 Countries That Tell the Story of Europe’s (Still Shaky) Recovery from today’s New York Times:
Eight years after global credit markets began to seize up, causing a round-the-world financial crisis, the economy of Europe’s 19-country euro currency union has only now edged back above its pre-collapse level.
As happened in the United States, the economy in Europe contracted sharply after the credit bubble burst. But unlike the United States, which surpassed its pre-bubble peak in 2011, and Britain which did so in 2013, the eurozone as a whole has stumbled along. And some eurozone countries have fared much worse than others.
Here are some of the bloc’s notable leaders and laggards:
In the eurozone, few countries have displayed the worst effects of the bloc’s eight-year economic struggle more vividly than Spain.
After the onset of the crisis in 2008, Spain’s government and central bank insisted that the country had enough fiscal resilience and banking buffers to weather the storm. By May 2010, however, the government was forced to adopt the first of many austerity budgets.
In mid-2012, with Spain mired deep in recession, Madrid had to ask its eurozone partners for a bailout to rescue Bankia, a giant savings bank that only a year earlier had conducted a seemingly successful initial public offering.
Last year, the pace of the country’s recovery prompted Prime Minister Mariano Rajoy to declare Spain an economic engine of the eurozone. But inconclusive national elections last December left Mr. Rajoy in charge of only a caretaker government – one that recently revised its economic forecasts downward for this year.
When voters return to the polls in June, a big issue will be the country’s continued high unemployment. With a 21 percent jobless rate in the first quarter of this year, Spain was the eurozone’s second-worst jobs generator, after Greece.
And Spain sits anchored in last place in its ability to employ the young; almost half of Spaniards 16 to 24 years old have no jobs.
Germany prospered in recent years by exporting to emerging countries. Now the slowdown in emerging markets is leaving the country vulnerable.
The German economy suffered a sharp downturn in 2009 but snapped back quickly, thanks above all to China. Chinese hunger for German products like cars and machine tools more than compensated for lost sales in the slumping eurozone.
Germany also entered the crisis in a better position than countries like France or Italy because it had already taken politically treacherous steps – like removing obstacles to hiring and firing – in order to improve economic performance. Unemployment in Germany has fallen steadily and is now lower than that the United States.
But there is increasing doubt about whether Germany can continue its run. Growth has slowed in China as well as other markets, including the United States, that are important for German exporters. And German growth has been dampened by the woes of important trading partners like France and Italy.
The collapse of housing prices in Ireland, triggered by unchecked property speculation and low interest rates, wiped out many families’ savings.
Ireland’s fast growth in the 1990s earned it the nickname “Celtic Tiger.” But the 2008 financial crisis revealed that much of that growth had been built on unchecked property speculation, fueled by low interest rates made possible by the European Central Bank.
The fall was swift and painful, as a collapse in housing prices wiped out many families’ savings. Worse, Irish taxpayers were saddled with a tab of 64 billion euros, or about $72 billion, to bail out the country’s banks. (The figure was eventually cut to about ?40 billion after a debt refinancing.)
Deep government spending cuts added to the hardship. Unemployment climbed above 15 percent in February 2012, and some young people in this country of only 4.7 million followed the long Irish tradition of immigrating to more prosperous places.
But the bounce-back was more robust than that in most of the rest of the eurozone, as the Irish economy returned to its pre-2008 level by early 2014. Buoyed by strong trade links with Britain and the United States, both of which have outperformed the eurozone over the last eight years, Ireland is now one of the best-performing members of the euro currency bloc.
Probably no country has benefited more than Italy from stimulus measures the last few years by the European Central Bank.
Because Italy has the third-largest economy in the eurozone after Germany and France, its problems are potentially a bigger threat to the bloc’s stability than those of relatively tiny Greece.
The Italian economy has not grown significantly in years, many of the country’s banks are barely solvent, and government debt as a percentage of gross domestic product is among the highest in the world.
Probably no country has benefited more than Italy from stimulus measures in the last few years by the European Central Bank, which have helped keep government borrowing costs low and have ensured that Italian businesses could still get some credit despite the poor health of the banks.
Matteo Renzi, Italy’s reform-minded prime minister, has been trying to make the country more accommodating to entrepreneurs. Later this year Italians will vote on changes proposed by his party to streamline decision making by the Italian Parliament and to end chronic political instability.
If Mr. Renzi succeeds, economists see hope that Italy – which is strong in sectors like fashion and machinery – could reduce bureaucracy and make other changes that would encourage growth.
Despite several rounds of debt relief, Greece’s economy still suffers from the crushing burden of past excess borrowing.
Even as the world was regrouping from the 2008 meltdown, Greece provoked the eurozone’s own crisis in 2010, when it revealed that it was far deeper in debt than official figures showed. The country has suffered the most from the consequences.
Greek economic output has fallen by more than one-fourth since 2010, more than a quarter of the work force is unemployed and about half of all bank loans are in default. To prevent a run on struggling Greek banks last year, the government imposed restrictions, still in effect, on how much cash citizens could withdraw from their accounts or transfer abroad.
Despite several rounds of debt relief, the economy still suffers from the crushing burden of past excess borrowing.
Recently, there have been signs that the Greek economy has hit bottom. But political instability has made it difficult for the left-wing government of Alexis Tsipras to overcome resistance from vested interests and implement changes needed to improve the climate for business.
Greek leaders are in nearly continuous conflict with other eurozone countries over the terms of aid needed to prevent the economy from collapsing. As a result, there is a persistent danger that Greece could be forced out of the eurozone, threatening the stability of the whole bloc. – Jack Ewing
With a sizable presence in auto making, and aeronautics and power-plant manufacture, not to mention a few of the Continent’s big banks and luxury brands, France has the eurozone’s second-biggest economy, behind Germany’s.
But the French economy has consistently under-performed Germany’s since 2008, which some blame on a tradition of high taxes and labor protections that many businesses find constraining. The Socialist government’s inability to bring unemployment below 10 percent has contributed to President François Hollande’s dismal poll ratings and helped to propel the rise of the far right National Front party.
The government’s recent efforts to make labor laws more business-friendly have led to protests around the country – the so-called Nuit Debout, or “Up All Night” movement, centered on the Place de la République in Paris.
“Things haven’t gotten any better since the crisis,” said William Petit, 57, a retired advertising salesman who has been among the demonstrators. “Today’s young people have no chance.”
Asked if he would consider voting for Marine Le Pen, leader of the far right National Front, Mr. Petit replied, “Why not? We might as well try.”
News this morning:
+ The Middle East mess: Defense Secretary Ashton B. Carter is advising against sending a large, U.S.-led ground force to fight Islamic State militants, while the Syrian city of Aleppo is plunging back into all-out war. Vice President Joseph R Biden Jr. traveled to neighboring Iraq, amid growing concerns of a government collapse there.
+ Universal health coverage? Voters in Colorado will decide in November whether to create a taxpayer-financed public health system that would guarantee coverage for everyone and drop President Obama’s health care policy.
The $38-billion-a-year proposal, to be financed with a tax increase on workers and businesses, would do away with deductibles and would allow patients to choose doctors and specialists without worrying about who is “in network.”
I’m guessing your medical bills would be covered and much of the overhead waste in the system would disappear.
Meantime, look at this disgrace. I go to the Eisenhower Medical Center in Coachella Valley, CA. I have Medicare. I have supplemental coverage. I have everything money can buy for old people. And yet these as*sholes bill me 100% of the $177.59 they got billed.
I won’t pay the $177.59 and they won’t chase me for the money. It will get lost in their bloated bureaucracy. This whole thing gives idiocy a whole new meaning — except my bronchitis got cured. If I had run my business the way these morons run theirs, I would have been broke Day One. Yuch!
So when I tell everyone to dump Apple, nothing happens. But when Carl Icahn tells them he’s sold all his Apple (as he did yesterday), the stock craters.
He sold his Apple because he didn’t like what was happening to Apple in China, where sales have fallen and the Chinese have closed down Apple’s iBooks and iTunes store. (That’s our “reward” for making iPhones in China. Donald is right.) I was down on Apple for different reasons — because I could no longer find anything from Apple I wanted to buy — like a new laptop, with hefty speed and hefty memory. Their laptops are slow, lack power and are way overpriced.
Apple is tanking. Try not to catch a falling knife:
The best Internet sales pitch ever.
The Internet and my inbox are riddled with “End of the World Scenarios” as justification for a “solution” — typically a pricey newsletter/s and access to a magic portfolio.
All this is the investment industry’s oil snake that will cure all investment ills.
Forbes did itself proud by cover-storying a fellow who has invented the “eternal life” pill, but hasn’t actually got a drug that’s been approved by the FDA. (See below.)
There is no FDA in the investment business. Anyone can posit a disaster — like the imminent death of the western world — and position a solution. The cure won’t kill you. Just your savings..
Snake oil investments have been around since they kicked the money lenders out of the temple, and tulip bulbs lost their eternal life — they produced flowers forever. Sweet smelling, endless money.
I’m on this kick because I just spent half an hour listening to the absolute best “End of the World” pitch I’ve ever heard. I mean really good.
It’s from The Sovereign Society and this is it:
I watched it. Click here. Here are a selection of his charts which I clipped as I watched:
Once you’ve paid your subscription money and avoided all pleas to spend more money, you get to the recommended (not very exciting) portfolio:
Now, to Harry Newton’s recommendations: I’m keeping a toe in the market. Stocks and ETFs I like I list in the right-hand column.
I consider my position in the market as defensive, not aggressive. I did have FB, but not AMZN. I don’t own Apple or any energy or any banks. I do like PayPal and I own it. I’m preferring real estate syndications — both commercial and residential. There are booming pockets around the country — Portland, Oregon, Jacksonville, Florida, Savannah, Georgia, and parts of Texas. This market is not easy. The world economy is not easy, but it’s not going to collapse. Warren Buffett was semi-sanguine this morning on his various enterprises, with the exception of coal transport in his railroad, which is way down. This weekend is his annual meeting. And CNBC will have him on from 6:00 AM to 9:00 on Monday morning. He’s always great to watch.
Something miraculous? Or is this simply another of Harry’s irrelephant cartoons?
The Lie Detector robot
A father buys a lie detector robot that slaps people when they lie.
He decides to test it out at dinner one night. The father asks his son what he did that afternoon.
The son says, “I did some schoolwork.”
The robot slaps the son.
The son says, “Ok, Ok. I was at a friend’s house watching movies.”
Dad asks, “What movie did you watch?” Son says, “Toy Story.”
The robot slaps the son.
Son says, “Ok, Ok, we were watching porn.”
Dad says, “What? At your age I didn’t even know what porn was.”
The robot slaps the father.
Mom laughs and says, “Well, he certainly is your son.”
The robot slaps the mother.
Robot for sale.
Harry Newton, , who has a weekend project for all his readers: Take a dish. Fill it with all the pills you take each week – whether medicine or dietary supplements — and look at the pile with horror and dismay. Then google questions like “ill effects of multiple vitamin pills”, “can I take too much calcium,” “what’s wrong with dietary supplements,” etc. Before you take any new pill, be wary of how it might react with all the others you’re taking — whether medicine or dietary supplements. The best “pill” remains: Lose weight, get exercise, eat oodles of vegetables (especially broccoli) and don’t believe what all those “miracle”cures. Can you believe the latest issue of Forbes:
This man doesn’t have a single approved drug. His efficacy tests — does the stuff work — are rudimentary, almost laughable. And some moron is valuing the company at $12 billion. We as Americans want to believe in snake oil. Look at all the ads for pills on TV.
Here’s a short history on snake oil, courtesy Wikipedia:
Chinese laborers on railroad gangs involved in building the First Transcontinental Railroad first gave snake oil, a traditional folk remedy in Traditional Chinese Medicine to treat joint pain such as arthritis and bursitis to their fellow workers. When rubbed on the skin at the painful site, snake oil was claimed to bring relief. This claim was ridiculed by rival medicine salesmen, and in time, snake oil became a generic name for many compounds marketed as panaceas or miraculous remedies whose ingredients were usually secret, unidentified, or mischaracterized and mostly inert or ineffective.
Patent medicines originated in England, where a patent was granted to Richard Stoughton’s Elixir in 1712. Since there was no federal regulation in the United States concerning safety and effectiveness of drugs until the 1906 Food and Drugs Act and various medicine salesmen or manufacturers seldom had enough skills in analytical chemistry to analyze the contents of snake oil, it became the archetype of hoax.
The snake oil peddler became a stock character in Western movies: a traveling “doctor” with dubious credentials, selling fake medicines with boisterous marketing hype, often supported by pseudo-scientific evidence. To increase sales, an accomplice in the crowd (a shill) would often attest to the value of the product in an effort to provoke buying enthusiasm. The “doctor” would leave town before his customers realized they had been cheated. This practice is also called grifting and its practitioners are called grifters.
Dietary supplements are today’s snake oil. Don’t take anything — pills or dietary supplements — without checking the Internet, your friends, other doctors, etc. Be especially wary of what your aging parents are taking. I just heard of one case. A 93-year old lady took her new incontinent pill at 9:00 AM. By 11:30 AM, she’s had a heart attack. She has not recovered and will be a mess for the rest of her , now miserable life.