Optimism is a hard thing to hold onto, especially when factually bad news rips at it. Today the job news is bad, and it is testing my belief that the global economic recovery will rebound in the second half …
With job creation stalled and wages declining, consumers won’t see much gain in incomes. That will limit their ability to spend, which undercuts growth. Consumer spending accounts for about 70 percent of the economy
The above excerpt refers to the no new net jobs created in August, a dismal employment report that is ominous for sure. Yet even in the face of this zero jobs growth reality, I still am holding onto a last sliver of optimism that points to a better September. I have enumerated and explained my reasons before in this column, but, in short order, oil prices will come down and the consumer will continue shopping (as they are now, according to retail reports) right through the “back to school” season and into the holiday season. As always, we will see …
Perhaps the more important aspect of the excerpt above, though, is the “consumers won’t see much gain in incomes” portion of it. This speaks to a much larger issue, one that Ben Bernanke and the Fed fear more than hyperinflation – deflation. Yes, Big Ben’s worry has been, and I am sure continues to be, the stagflation that Japan experienced for some 10 years. Mr. Bernanke is on record that a little inflation is necessary for a healthy economy, and what he means by that is a little inflation in income/wages is necessary for economic growth. The question becomes: What will the Fed do if the August jobs report and the weakness in income growth really scares them? As always, we will see …
So, what gives with tech these days. What happened to the high-flying companies that threw money at innovation like it was 1999? It seems today those companies are acting like bluehairs driving a car way too big for them.
As most investors know, large cap technology companies are piling up mountains of cash – and there is growing pressure on corporate management from the Street to do something with it all. Ultimately, there are only a few options.
One of those options is to pay shareholders with increased dividends. Another is to stop acting like a bluehair driving a really big car and get back to turning the world upside down, technologically speaking. My bet is on the second option, which means growth and rising valuations for the sector. The money has to flow somewhere. Yes, it does …
According to Doug Cote, Chief Market Strategist at ING, “We think the 2nd half is going to be stronger,” this former hedge fund manager says.
It’s nice not being alone …
Trade in the day; Invest in your life …
