Posts tagged ‘jobs’

Earnings Showing Speedy Growth

With approximately 2/3 of the S&P 500 companies reporting, Thomson Reuters is reporting not only are 78% of those companies beating analyst expectations, but they are also beating them by a large margin (~16%). The financial sector is still rather volatile and is distorting comparisons, but if you look at the non-financial sector, profit growth is on pace to grow +35% this quarter as compared to +18% last quarter. Earnings are not the only thing growing…so are revenues. After four quarters of revenue declines, sales are on track to rise +11% this quarter (versus +8% last quarter) thanks to almost 80% of the S&P 500 companies reporting revenue growth (rather than declines) in the first quarter of 2010. 

Source: The Wall Street Journal

Signs of Employment Improvement

Unemployment at 9.7% remains stubbornly high, but with corporation’s newfound revenue growth, there are signs companies are becoming more confident in the hiring department as well. Typically the sequence of a business cycle follows the pattern of cutting expenses and increasing layoffs into a recession; building cash at the cycle trough while running leaner expenses and staff; improving productivity with capital expenditures and technology purchases before hiring; and then as the recovery firms up, companies enjoy widening margins with sales growth, resulting in the confidence to hire. Take for example JP Morgan (JPM) mentioned they plan to hire 9,000 workers in the U.S. this year and Intel (INTC) another 1,000 new positions.

Growth is Global

With all the headlines about Greece’s financial woes, one might underestimate the recovery abroad as well. The average earnings growth rate estimates for the G6 stock markets is +41.6% and +21.9% for 2010 and 2011 according to Ed Yardeni, but a majority of the growth is not coming from the Euro zone.

There is still no shortage of issues to worry about, assuming we understand a Utopia does not exist. Besides elevated unemployment, other issues to remain concerned about include: a lack of credit accessibility for small and medium businesses; massive government debt and deficits; and diminishing impacts in the coming quarters from government stimulus and Federal Reserve monetary stimulus.

Regardless of the nervousness, evidence continues to build for a continuation of better than expected earnings. The music will not last forever and eventual stop, but until then, our economy will enjoy the speedier than anticipated earnings growth recovery.

Read Whole Wall Street Journal Article on Earnings (Subscription)

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper. 

*DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds, but at the time of publishing SCM had no direct positions in JPM, INTC, or any security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

May 3, 2010 at 12:59 am Leave a comment

Our Nation’s Keys to Success

Politics is not a subject I love to debate, but unfortunately politics has a significant impact on economics, which I do care about dearly. I’m no expert on the politics of New York City’s Mayor Michael Bloomberg, but in reflecting on the past decade he highlights a few key areas of focus needed to advance our great nation:

“There are two things that we did not work on and, in fact, have gone the wrong direction during the last decade, which will dictate the economy for the next decade, and that’s immigration and education.”

 

I couldn’t agree more. With regard to the country’s stimulus program, we hear so much about shovel-ready projects and infrastructure spending. Rather than centering on the immediate gratification of low-paying job creation and building bridges to nowhere, more resources should be invested in education and recruitment of leading edge human capital. Without a competitive and educated workforce, high-paying 21st Century jobs of the future will be lost and outsourced to global challengers.

Bloomberg emphasizes this point by stating:

“Unless we give our young people the kind of education to compete in the global world, we cannot survive.”

 

Sure, education is a longer-term investment with no immediate pay-off, but in order to become (remain) competitive with other hungry nations, we need to improve our high school education system, which Microsoft Founder and Chairman Bill Gates calls “obsolete”.

National Suicide

I agree with Mayor Bloomberg that the isolationist immigration pendulum has swung too far in the paranoid direction.  The recent airline bombing attempt by Yemeni  Umar Farouk Abdulmutallab only fans the flames of fear more intensely. However, in order to attract the best and brightest, we need to relax immigration policies – at least loosen policies as they pertain to educated, law-abiding citizens who can assist our dynamic growing economy. I have no problems with “cherry-picking” immigrants. The foundation of capitalism is based on attracting and retaining the best cherries. Bloomberg notes the following:

“And immigration, we’re committing what I call national suicide. Somehow or other, after 9/11 we went from reaching out and trying to get the best and the brightest to come here, to trying to keep them out. In fact, we do the stupidest thing, we give them educations and then don’t give them green cards.”

 

If fear of job loss is scaring us from letting foreigners in our country, then we need ask ourselves who will pay for our massive debts, deficits and entitlements (i.e., Social Security and Medicare)? Aging demographics is a huge headwind we face (see demographics article) and a quick glance across the Pacific Ocean to our Japanese allies is proof enough of how destructive the graying of society can become.

Also, many ask the question, “Why should we give American jobs to foreigners?” The reality of the situation is we need a competitve work-force to create a competitive country, which can create more sustainable jobs. How many jobs (and tax-dollars) do you think Google co-founder Sergey Brin (Russian-born) has created for American workers? Or Intel’s former CEO Andy Grove (Hungarian-born); Yahoo’s co-founder Jerry Yang (Taiwanese-born); and Sun Microsystem’s co-founders Vinod Khosla (Indian-born) and Andreas von Bechtolsheim (German-born)? More than a few.

Energy Independence

In his Meet the Press Interview, Bloomberg weaves in another issue dragging down the economy – our dependence on foreign oil.  Importing more than 2/3 of our oil from foreign nations, many of which harbor or sponsor U.S.-hating terrorists, is not a prudent long-term strategy when it involves such a critical and strategic resource.

“We’ve got to get, somehow or other, energy independence. And so regardless of whether you’re a greenie or not, the bottom line is we cannot keep funding our enemies,” Bloomberg adds.

 

As the saying goes, the three most important political issues for re-election are:  1) the economy; 2) the economy; and 3) the economy. Unfortunately, short-term sugar-high stimulus spending may help the economy in the short-run but can wear off quickly if not implemented properly. On the other hand, three key strategic areas of investment will lead to sustainable economic expansion, including education, immigration, and energy independence. With new bitter mid-term Congressional elections waiting for us in 2010, let’s hope the candidates take a lead from Mayor Michael Bloomberg by building on his ideas for a firmer economic foundation in the decade to come.

View Meet The Press Roundtable Interview with Mayor Bloomberg (Minute 2:40)

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper. 

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds and GOOG, but at time of publishing had no direct positions in MSFT, JAVA, YHOO, or INTC. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

January 4, 2010 at 1:24 am 2 comments

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