An article today titled ‘The growing case for a (U.S.) jobless recovery’ discusses recovery in the context of companies currently holding off hiring as profit outlooks improve.  This in circumstances where “firms probably have the capacity to expand production without hiring new workers (or increasing worker productivity). All these firms have to do is give more hours to existing workers, who have indicated they would be plenty eager to have them. Good for them—and good for GDP growth—but not much help on the employment front”.  The article concludes “Of course, none of this is proof positive that we (the U.S.) are in for a “jobless recovery,” but, to me (the author of the article), the odds appear to be increasing”.

The concept of a ‘jobless (economic) recovery’ having any long-term ‘legs’ makes absolutely no sense to me.  The economic and potential social ramifications of having a large percentage of an employable population out of work, out of social benefits, and with nothing but time on their hands has to result (or so I believe) in reduced retail sales, reduced domestic production of goods still manufactured in the U.S., reduced government revenues, increased U.S. National Debt, and ultimately the potential of serious social disruption.  In my view there should be far less rhetoric about ‘theoretical economic recovery’, and far more meaningful discussion about how the currently U.S. unemployed can be put back to work.  I think the consequences of continued high levels of U.S. unemployed for any length of time going forward may be brutal.

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I think an article yesterday titled ‘Canadian investors put advisor relations first’ should be read by everyone who invests directly or indirectly in the world’s stock equity markets.  The article, which summarizes a survey conducted by Maritz Research Canada reports the survey concludes “customer experience attributes” represented 58% of the average person’s satisfaction with their investment firm, compared to just 42% for investment performance. Rob Daniel, Managing Director of Maritz is quoted as saying “The big finding is that in the midst of all the market uncertainty, what’s driving loyalty is not so much the product, it comes from good customer experience attributes.  Investors are desperate for relationships with investment advisors that help them feel more comfortable” – this after stock market results of the past 12 months.

It strikes me this finding about (at least Canadian) investors is indicative of a real issue around ‘investors reliance’ on their investment advisors, and indirectly firms they work with.  I consider the apparent willingness of many investors to delegate responsibility for their investments to others wrong-headed and financially dangerous for them – particularly going forward in the current and prospective economic environment.  I strongly believe investors ought to assume far more responsibility for researching and selecting equity investments based on their own analysis than they have in the past.  I also strongly believe that investors who take the time and effort necessary to do meaningful equities research and make (or seriously contribute to) decisions as to which stocks their ‘precious capital’ are invested in will have far more investment success going forward than those who simply take the easy route, deal with an Investment Advisor to some large degree because of an interpersonal relationship, and don’t take responsibility for their own investment decisions.  As an investor remember that no one likely cares as much about your ‘precious capital’ as you do.

It is this very view of mine that causes me to spend all the time I do developing StockResearchPortal.com.  I plan to continue doing just that.  Over the course of the next few months we will be introducing many new features to StockResearchPortal.com that we believe will better enable investors interested in the Resources Sectors to make, and/or contribute to, making better Resource related investment decisions than they otherwise will be able to.

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The Washington Post carried a brief story today titled ‘By the Numbers’ which said that it is estimated that 40 million U.S. households have limited or no access to banks or credit – and that the estimated median household income for those households was $26,390, about half the U.S. national median household income.  Considering there were approximately 116 million total U.S. households in March, 2007 (U.S. Government Statistics) there likely are just under 120 million total U.S. households today.  Accordingly if the reported statistics are correct about 1/3 of all U.S. households have limited or no access to credit today.

In a second article yesterday titled ‘U.S. recession over, unemployment seen at 10 percent’ reports a survey of 44 professional forecasters says “the worst U.S. recession since the Great Depression has ended, but weak household spending as the labor market struggles to create jobs will slow the pace of the economy’s recovery, according to a survey released on Monday”, but that “While the economy is believed to have rebounded in the third quarter, analysts believe that ordinary Americans will probably not see much difference as unemployment will remain high well into 2010, restraining consumption”.

Given that a return to growth in GDP (Gross Domestic Product) is the technical ‘economist speak’ for what constitutes recovery, the U.S. indeed may technically now be in economic recovery – at least for the time being.  That said, if 1/3 of U.S. households are limited in, or unable to get, credit it seems highly unlikely that said recovery will be strong, or perhaps even sustainable in forthcoming fiscal quarters.  The U.S. consumer juggernaut, which is what I think supported world economic growth through the 1999 – 2007 period is, at least in my view, unlikely to return to its former levels of spending any time soon.

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An article today titled ‘China Wants a Global Currency? Here’s How’ by Dr. Peter Morici, Professor of International Business at the University of Maryland, gives a brief history of how and why the U.S.$ has ended up where it is against other currencies – notably the Yuan, and why he thinks the countries (read China) that are now petitioning for a new World Reserve Currency should ‘look inward’.  I recommend you click here and read the article.

I see the article as being a useful read, but don’t see things quite the way Dr. Morici does.  After reading the article I added the following comment to it:

I found this article to be a well written and thoughtful commentary on how things have gotten to where they are. The question I have of Dr. Morici is: Exactly what U.S. goods and services does he see ‘China and others’ purchasing that would allow the ‘U.S. economy to grow robustly’? It seems to me that U.S. manufacturing jobs lost are unlikely to be recovered given the ‘country comparative’ wage discrepancies, and ’service offerings’ are unlikely to be exportable over time as exportable services are based on knowledge offerings that can be replicated in developing countries.

This comment captures my concerns with Dr. Morici’s conclusion that “If China and others want that problem (holding dollars that chronically fall in value against other currencies) fixed, they need to abandon currency manipulation and let their populations purchase more U.S. goods and services.  The U.S. economy would grow robustly, federal borrowing would subside and the threat of too many dollars compromising the dollar’s role in international finance would vanish”.  I see this conclusion as inconsistent with what I see as:

•    the reality that past U.S. Administration policies and decisions have resulted in a significant continuing erosion of U.S. economic power vis a vis the developing countries, particularly after the turn of this century; and,

•    U.S. economic power inevitably further eroding over time given ongoing geo-economic realignment, and the different underlying ideologies of its principle trading partners.

Comments on this post, particularly disagreements with my views, will be appreciated.

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I apologize to readers who may have wondered whether I had simply stopped posting.  I haven’t.  My wife and I have been on holiday for the past three weeks, and I simply haven’t found the time to review articles and research things in my typical fashion.  I’m now back and you can expect a continuous flow of posts for the foreseeable future.

Interesting times!  A Bloomberg article today titled ‘Gold, ‘Off The Charts’, May Target $1,500: Technical Analysis’ says that “Investors should hold onto long positions in gold as bullion has “significant upside potential” to reach as high as $1,500 an ounce, Barclays Capital said, citing trading patterns”.  The article quotes Jordan Kotick, global head of technical analysis at Barclays Capital, as saying “Channel resistance currently is at $1,370; history suggests a run at $1,500” and “Taking it a step at a time, in the coming weeks, we view consolidation above $1,020 as extremely positive, targeting $1,050 initially, and $1,120”.

Notwithstanding I have been on holiday, over the past 3 weeks I have been saying to people I expected gold to move up significantly in price in a short period after holding around $1,000 for a while.  Yesterday gold did just that, and it appears this morning there may be more price increase to come in the near term.  I don’t know how much of this is ‘herd mentality’ getting the price ahead of itself, and how much is the result of serious ‘safe-haven’ concerns by investors.  I will be looking closely at this over the next few days and weeks and will comment when I ‘get back into the detail and know more’.  For now, it strikes me as oxymoronic that the Dow continues to go up in the face of the rise in gold prices, but perhaps I am missing something that people smarter than I see.

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