Readers will have to excuse my tone this week, but I’m just plain mad, for reasons that will be apparent to you shortly.
Friends, what we are seeing now is the beginning of what may be (at least for awhile) one of the biggest jobless recoveries in American history. Unfortunately layoffs are continuing across almost every sector, but they are now spreading to even the highest rungs of the corporate ladder.
While 2008 and 2009 were dismal years for blue collar workers, recent layoffs are affecting management and so-called ‘key employees’ just as heavily as less skilled laborers. This isn’t to say that companies aren’t busy as of late. In fact, many companies have been forced to call employees in for overtime.
This evidence is coming out of many sectors that are key indicators of economic activity, such as rail freight. The Dow Jones Transportation Average is one of the most-closely followed stock market indicators in the world for precisely this reason.
Unlike the Dow Jones Industrial Average, which is an excellent gauge of the profitability outlook for some of this nation’s largest firms, Dow Transports provide a much better pulse of economic activity in this country on the ground floor.
From the ground floor to the top floor, companies are beginning to spur their operations. Thankfully, unlike years past, they are choosing to leverage their people rather than their balance sheets. Why service the debt when you can’t put it to work for you?
In other words, why would they have any demand to borrow money when they can’t earn any interest on their borrowings? Quite the contrary, companies are lately building up massive cash positions, which they are now using to streamline operations, consolidate facilities or, in some cases, buyout competitors.
For this reason, much more is being required of the now-slimmed-down management teams in this country. Companies need to move key players quickly and efficiently, evidenced by a recent rise in corporate aviation purchases (e.g.: light business jets).
Global warming aside, corporations are putting significantly less emphasis on ‘going green’ and are much more focused on efficient operations (as they should be). It is no longer considered a good use of a CEO’s time to wait hours to pass through security before getting on a commercial flight.
In short, it is plain at this point in time that companies are doing all they can to cut costs and maximize revenue with each opportunity they are presented. The biggest problem left facing business is that 53rd card in the deck: the Joker in Washington.
The weakness that remains in the economy is not due to finance or economics, but to the cloud of uncertainty hanging over possible policy changes in Washington.
Each and every one of the proposals coming out of the White House has far-reaching implications for business in this country, and it is apparent that this nation’s leading businesses are smart enough not to commit the assets to expand our bring back workers until they have a better idea of how things will play out.
Oh how our words can come back to haunt us. Both Rahm Emanuel and Hilary Clinton are on the record as saying that they don’t want to waste a good crisis. Now it seems they are bound and determined not to let this latest crisis end until they’re sure they’ve taken full advantage.
Now, I certainly can’t speak to the feelings of readers, colleagues, or fellow market commentators, but I can tell you that I am not happy about what I see happening in Washington. The blatant irresponsibility with which the US Government has been run by the 545 who are truly accountable (1 President, 9 Supreme Court Justices, 100 Senators, 435 Representatives) is absolutely astounding (Reese, 1995).
My own feelings are best summarized by a quote from Howard Beale in the 1976 movie Network, “I’m mad as hell and I’m not going to take this anymore!”
This blog is written weekly by Dock David Treece, a registered investment advisor with Treece Investment Advisory Corp. It is meant to share insight of investment professionals, including Dock David and his father, Dock, and brother, Ben, with the public at large. The hope is that the knowledge shared will help individuals to better navigate the investment world.