Third Quarter Economic News Getting
Bleaker
There's an old folk song from the early 60s, The Times They Are
A-changin'.
Then it was a slap by the WWII kids against their parents who were part of
"The Greatest Generation" who wanted to enjoy what it had earned on the
battlefields in peace . The kids were looking for something to rebel against but
had never faced a real hardship of their own so they lashed out at
the lack of tribulation in their life.
Americans do not have to look for that today. In fact the generation
that enjoyed that song and made it a Top 10 hit on the pop charts is probably
longing for a bit more stability--especially financially. The bad news is
rolling in from all sides for the American consumer's future.
Wells Fargo Financial did an in-depth survey of American income and found
that, for 2013, the American consumer is going to have on of the worst years in
the last half century and things are looking even bleaker for 2014.
WF Senior Analyst Gina Martin-Adams' forecast doesn't just put the American
consumer in trouble for the last half of 2013 but also spells trouble for staple
stock investments like tobacco, food and household products. She downgraded the
entire consumer staple sector to "underweight.'(1)
She wrote: "Staples earnings revision momentum dropped at a rate
seven times faster than the S&P 500 over the past three months. We
expect further downward pressure to continue with U.S. consumer disposable
income growth hovering near 50-year lows with commodity prices on the verge of
deflation."
That was shot No. 1 against a long-term recovery from the recession. The
second salvo came from a poll conducted by AP and the NORC Center for Public
Affairs Research, a group with pro-government intervention leanings.(2)
Its survey, released today, found the over-60 crowd is delaying retirement
plans and is also contemplating an after-work life that includes some work time
rather than a complete break from the work force. Back in 1995 this same survey
group expected to retire by age 63. The average retirement age is now expected
to be 66. But a depressing 82 percent of Americans over the age 50 indicated
they will have to supplement their retirement nest eggs by working
after retirement.
This is bad news for the under 30 crowd who are seeking jobs. The expected
job openings will simply not be there in the current economic climate so the
fancy degrees and repayment of the overwhelming student debt (now estimated to
be more than $1.2 trillion) are going to be put on hold.
Olivia Mitchell, a retirement expert who teaches financial planning courses
at Pennsylvania University points to the big decline for the past seven years in
retirement accounts, particularly 401(k)s and the extra effort required
to rebuild those accounts to pre-recession levels. This effort aimed to
recapture original investment levels means America's economy is still not where
it should be at this time if there were a full recovery and that the last six
years have essentially been lost 'profitable' work years for the senior
group.
What wasn't addressed is how much the delay in getting onto that first rung
of the economic ladder is going to clobber the newest generation of workers. It
was this long-term unemployment crisis among the young that precipitated the
euro crisis which is still on-going. Lost years at any time cannot be made up
but no one has set up fundamentally sound charts to show what the situation will
be in another 10 years because the volatility of economic forces is still rising
while there has never been a historical period of similar circumstance to
compare projections to.
At this point all projections are guesswork because the textbooks give the
same basic solution to this type of economic turmoil--reliance on the government
intervention.
We've had six years of unrelenting, ever-accelerating intervention from the
government and the Federal Reserve. It may have stemmed the tide in 2009 but it
has not addressed the long-term problems of over-regulation and over-taxation.
In fact, government intervention has only exacerbated the problems and has
weakened Main Street America.
The only solution for government is to create enough inflation that it can
legitimately claim to be "able to cover its debt" without an steep decline in
Americans' standard of living. Right now, that problem is seemingly impossible
by historical standards.
The effect will be felt on Wall Street first. The third quarter earnings
season is underway and the results are confusing.(3)
America's masses will be inundated with 'good reviews' where companies have
"exceeded analysts' expectations." This is because analysts have been steadily
lowering their projected expectations with the proverbial meat cleaver
throughout the quarter.
All 10 sectors have seen this phenomena. But it is particularly highlighted
by the materials sector (IYM). Overall profit expectations have been trimmed
50% during the past three months for all sectors but in the IYM it has gone from
a 15% projection in July to 1% today--just ahead of the first reports rolling
in.
How bad is the S&P 500 projection picture? If only Bank of America and
Morgan Stanley are dropped from the projections, the overall S&P board drops
to a negative .4% growth for the third quarter. Think of that a moment. Four
full years into Barack Obama's recovery and the dismissal of two banks equates
to a minus 4-10ths a percent economic snapshot.
With inflation from money-printing and debt monetization activities alone,
how bad is the economic picture when they are expected to be better than a
negative .4%?
Reliance on government is proving particularly faulty. Since the leadership
of government cannot even allow military chaplains to bring up the God of the
Bible when talking to their charges, where then do they expect America to go
next? What is third on the list in the economic textbooks?
There aren't any choices listed after reliance on government. The
'Times They Will Be A-Changin'. Whether we like it or not.
"I have sworn on the altar of God eternal hostility
to every form of tyranny over the mind of man."--Thomas
Jefferson
(1)-Talking Numbers, Yahoo Finance, Wells Fargo:
American Consumer Is In Trouble, 10-13-2013
(2)-Associated Press, Half of Older Workers Delay
Retirement Plans, 10-14-2013
(3)-Breakout, Yahoo Finance, 3 Sectors That Will
Blow Your Mind, 10-14-2013
No comments:
Post a Comment