THIS IS MY 103RD BLOG ON UNDERSTANDING MONEY
TOOLS
In this blog I am going to start by covering recent world
financial news, and then speculate on common sense resolves. Repeating, my basic premise is always
“cause and effect”. Use this
information for your “money tools”.
I will start with the broad statement that the American
public in general is naïve, non-carrying or dumb. I should give them more credit, but credit is hard to
find. The reasons for my comments
come from my travels around the world. In other countries people make a concerted effort to stay on
top of their national politics as well as what is happening in the rest of the
world/world events, not with the people here.
It is increasingly difficult to make a distinction between
fact and fiction with what comes out of the media and government. With a
presidential election year we are finding slanted facts, and media that should
be objective taking definite sides.
Let’s look first as to what I can determine as real
financial facts. Consumerism
worldwide is down; people are not buying as expected and projected. As I have been watching world
transportations for over a year it is not a surprise to me to see that South
Korean Hanjin shipping, one of the largest world shippers, in bankruptcy protection. This parallels the problems with other
major shippers like Sundt, Hyundai and Maersk. Maersk is splitting their company into two divisions.
Usually this is done to either sell
assets or place troubled assets in bankruptcy/reorganization structure. Our retail sales, most recent negative
.5% when excluding auto sales, which are financed mainly by manufacturers. Smells of recession.
What do we have? The middle class, the buyers in the world,
have pulled in their appetite for consumption. We see this so well in America as our growth has diminished
to a realistic and tepid 1.1% from a governmental projected 2.25% early this
year. I see the trend continuing
with the Generation Z kids being born year 2000 and after desiring more
technology, but simpler way of life. The latter years of the Millennials being
35 to let’s say 40 year’s of age are still more materialistic like the baby
boomers, but younger people have changed desires for style of living. Demographics are changing.
Rather than ramble at this point I am going to highlight
major concerning facts:
- World
debt, debt, debt. A lot of it
corporate and not being paid off as with countries like Greece, Italy, Spain,
Puerto Rico, Brazil, Argentina, Venezuela and the third world. Zero interest rates were to assist and
now look like nightmares.
- Auto
sales for August substantially down.
Ford Motor sales down 9% with the average manufacturer negative 5%. Ford is moving their smaller car
manufacturing out of the USA; most recently to Mexico. Mexico doesn’t have the OSHA safety
mandates, legal issues and an average worker pay is $3.50 per hour.
- State
and local pensions are “under funded/upside down” $1.9 trillion. Managers of
pensions need to restructure their paradigms/projections from their expectations
of 6-8% returns. The Fed Pensions
can rely on the government to print money, state and local governments can
not. Don’t expect the monthly
pension checks you were promised year’s ago!
- Walmart
stores laying off 7,000 jobs bringing higher wage people from the “backroom” to
the front of the stores at low paying minimum wage.
- Technology
is projected to lay off 100,000 workers, salivating to employ HB-1 foreign
workers at a fraction the price.
- Driverless
autos, buses, and eventually trucks predicted to cost 4 million jobs.
- I
have a doctor friend head of a department in the Phoenix, AZ, area who
estimates that 60% of the new hiring is HB-1 workers mainly from Pakistan and
India.
- McDonald’s
laying off accountants and hiring HB-1 employees. I didn’t know there was a scarcity of accountants in the
USA!
- Incomes
were stated to rise 5.2% for the middle income, however that was the first
increase in wages since 2007, and we are still way behind the average factory
worker hourly pay, even from 35 years ago.
- Two
weeks ago the Federal Reserve Bank had a meeting in Jackson Hole, Wyoming,
along with their 12 Federal Reserve Districts. I doubt if any increase of Fed interest rate will happen
before elections, perhaps in December. (Watch out bond holders!) Although the Feds would love to get us
off Keynesian policies and more onto a realistic free market, they know that
any increase in rates will throw us into a recession; the stock markets and
perhaps real estate, will take a dive.
The Feds discussed two possibilities for a recovery of recession that I
thought interesting. One was
negative interest rates. Don’t
screw around like Japan and Switzerland are doing very ineffectively but force
people to buy things and go negative rates 5% or more for holding money in banks.
(This is one reason worldwide that companies building home safes/vaults are
doing exceptionally well at the moment.
Also, countries are looking at doing away with large paper currency,
like our $100 bill, so that it would take a lot of paper to fill a safe with
small denominations!) The second
thing the Fed discussed was buying in the debt (bonds) of US corporations. Yes,
instead of another Quantitative Easing just become a Fascist country and become
quasi partners with corporate America.
At the moment, the S&P 500 companies are averaging an outgo of money
of 112% negative to earnings. That doesn’t mean all companies are in dire
straights but many are. They are
trying to hold dividend payouts to support stock prices and maintain bond
payments, while their earnings are dwindling. American corporate bankruptcies
have increased 50% over the last fiscal year.
Okay, I could keep going with stats, none of which are to be
proud of, but let me draw logical conclusions to all of this. With our enormous public and private
debt, second only to Japan, there are only three possible resolves I see;
restructure debt with world creditors, default on debt and bonds (which we
won’t do) and kick the can down the road until we implode (debt and growth are
inverse in relationship to one another!)
The big push right now is globalization. Who is behind this? Big corporations and big money. They want cheaper labor. Do you think
for one second they sincerely care about people in third world countries when
most don’t care about their fellow citizens? The only way globalization could stand a chance of working
is if the top 1% wealthy gave up their money and assets as they control over
50% of the world’s assets. They would share, and that isn’t going to happen. 1%
of the world’s population that we are talking about is 70 million. What are we going to do with the rest
of the world’s 6.93 billion people?
We are talking future robotic factories, driverless cars, buses, trains,
trucks and then perhaps airplanes.
With any resolve to all the billions of unemployed people not needed I
can only see three possibilities, none of which are a pretty picture. One as history has always proven is a
major world war, two would be selective breeding controlled by the wealthy for
the most intelligent and genetically capable or three, a man-made, worldwide
disease with no cure to eliminate most of the world’s population.
(I think we are playing a very risky game building up
nuclear weapons near the Russian border. We are the key player in NATO and the
UN. We would never permit such an
encroachment if Russia did this to our border. Look at Cuba.)
I think big corporations and money have shot the “golden
goose”. If you don’t pay higher
wages, our people can’t afford the goods produced by the big companies! Read up on Henry Ford!
With all of this said, I think I will go have a scotch! Everything is cause and effect and we
have caused these messes.
