Why You Should Ignore The Doomsday Stock Market Predictions

The stock market has not been pretty as of late.  All three major US indexes are in or have at some point recently dropped into correction territory, which is noted as a 10% drop.  Some stock market predictions are coming out that are driven by pure fear.

The bulls that drove the stock market to more than double over the last few years have taken a break, and the bears have been more than happy to step in and finally be right.  However, I think that there are some who are way off the mark.

Is This 2008-2009 All Over Again?

There are many out there who will happily tell you that the stock market is headed for another crash like the one that happened in 2008-2009 when the markets lost over half their value in about an 18 month period.

They claim that the Fed artificially propped up stock prices over the past few years.  They warn that the market will return to those pre-prop levels.

Some claim that the global economy is so dire that the entire world is going to crash and burn any day!

Others just say that we’re in a bubble and it’s going to burst!

To all of that and any related thesis about an imminent market crash, I am very skeptical. Let me explain why.

Here are four reasons that I don’t think the market is headed for a crash.

There are no signs of a foreclosure crisis on the horizon

Remember the early 2000’s, when prices in just about every neighborhood were skyrocketing?  10% increases in mb-201312billscoinshome values a year?  No problem.  People could buy a home and be comfortable that they’d turn a profit in as little as a couple of months.  However, as we now know this was all built on a house of cards caused by bankers giving out loans that they should never have been doing.

Look around today.  While home prices have largely recovered, the volume isn’t there.  There’s less houses being sold.  This is a good thing.  It means people are actually buying and selling because they need to, which removes most of the speculation that drove the previous rise and fall.  While there are flippers out there, the practice is much less common and you have to actually know what you’re doing to make it work.

In other words, this is a fairly normal housing market that has solid footing, and while values could flatten or even decline, the crash in prices and spike in foreclosures seems very low risk.

Banks aren’t built on a muddy foundation

Remember the images of Lehman Brothers closing?  People walking out carrying boxes.  A giant building suddenly with no purpose.  A company that had handled and been responsible for trillions of dollars and in business for well over a century suddenly….gone?  We all saw the images and they hit home.  The fact is, while Lehman was the only major casualty of the giant banks, it could have gone further.

Luckily it didn’t.

When it all shook out, it turns out that very few banks were in great shape.  Most had gotten so consumed with the housing mess that it could have all come tumbling down.  Lehman wasn’t fortunate enough to get another chance, but many still did.

And the results show today.

Banks now must routinely go through stress tests, where a simulated economic disaster takes place, and banks must show that they have the liquidity and the financial strength to weather the storms.  When these stress tests first rolled out, very few banks passed.  Now, all the major banks have showed strength and routinely passed stress tests.

Is every bank guaranteed to survive some economic event that might happen? Of course not.  But, the industry as a whole is now must stronger and is not at risk of collapsing at any moment.

Unemployment numbers are solid

One argument that the mega-bears use is to point out that economic recovery is slowing.  This is true, but when you compare it to a few years ago, is this really a big surprise? We were just coming out of the biggest economic catstrophe in 80 years, so when things started going in the right direction, it was no surprise that things started picking up quickly.

Unemployment stands at just over 5% today.  That’s the lowest in years, and while employment gains are shrinking, I believe that it’s because of what the numbers show, that many people have jobs.

Many people will counter that argument by stating that the unemployment number is flawed, because many people simply dropped out of the workforce.  To me,  by empirical evidence alone, it’s pretty clear that more people are back to work these days.  I just don’t see the Facebook posts of people sitting at home looking for work.  I have automatic alerts about jobs in my area for my profession, and I see the number of opportunities getting bigger in number.  The current unemployment numbers don’t indicate a problem.

On top of that, I also think that the fact that unemployment has grown slowly and steadily over the last few years is a reason for strength right now.  Many past recoveries saw job numbers grow very quickly after a recession, only to see the large gains get undone at the first sign of trouble.  I believe in our current economy, employers have added jobs as they are truly needed, and the risk of them quickly unwinding the hires of the past few years is low.

Other countries do not drive us (though they can ride shotgun)

But….but…..China….and….Greece……yeah….they go down, we go down.

Isn’t that what many fear mongers have been preaching over the last year?  Every time China slows or Greece slows, the market goes into panic mode and the perma-bears pat themselves on the back in satisfaction.


The fact is that while we now have a global economy where things in other countries will impact us from a financial perspective, we still drive our own economy.

Let’s think about this?  The last time the situation in Greece came about, the stock market lost more value than the entire annual GDP of Greece!  Again, I understand the situation was no laughing matter, but perspective sometimes gets lost, and those who want to see doom and gloom will latch onto any little bit of news and make it seem like the entire country was going to basically fall into the ocean and all economic activity would cease.

Greece, China, and other countries will all have issues.  Will they impact us?  Sure.  But are they going to blow our economy out of the water?

Not likely.

So what does it all mean?

Am I here to tell you that the stock market shouldn’t have fallen?  No.  Am I hear to tell you that it won’t fall more?  No.  In fact, I could be completely wrong about everything I’ve said.  Maybe the market will tank.

But, I don’t think it will.  I’m keeping my portfolio aligned with that opinion (and that’s all it is).

I don’t see the perma-bulls getting hold anytime soon.  Will the Dow hit 20,000 this year?  Probably not (though wouldn’t that be nice!).  But will it go under 10,000 like many seem to love to call for?  I just don’t see it happening.

There will likely be a lot of volatility.  I think right now this is caused more by the market sensing fear and trying to shake out the weak hands.  Unfortunately, if this is true, a lot of people will get shaken out, suffering losses, and then they’ll miss out on the upside again.

That’s what the fat cats on Wall Street loves to do to the retail investor.

Before you make a big market move, make sure you look past whatever people are saying.  Everybody has their own agenda, and it may not match yours.  Understand for yourself what’s going on.  Make your decisions from there.

You might be right and you might be wrong, but at least you won’t be trusting someone else.  Because let’s face it, all those ‘someone elses’ don’t have the best interests in mind for your money despite what they say.

Readers, what do you think? Is the market headed for a crash or a rise or somewhere in between?  I’d love to hear your predictions and thoughts on what’s driving the market these days.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

US Heading For Economic Problems If Literacy Levels Stay Low

Although the idea that the United States is no longer leading the world in education is not news for most people, few Americans realize how low its ranking has dropped compared to other developed countries.

A report by the Education Testing Service (ETS) outlines how the drop in educational standards is much worse than most people imagine. This review analyzes information gathered by the Programme for the International Assessment of Adult Competencies (PIAAC) and the Organisation for Economic Cooperation and Development (OECD).

According to the report, America’s Skills Challenge: Millennials and the Future:

Recent research reveals an apparent paradox for U.S. millennials (born after 1980, ages 16–34): while they may be on track to be our most educated generation ever, they consistently score below many of their international peers in literacy, numeracy and problem solving in technology-rich environments. As a country, simply providing more education may not be the answer. There needs to be a greater focus on skills — not just educational attainment — or we are likely to experience adverse consequences that could undermine the fabric of our democracy and community. For example, for people who are hoping to find careers in PR and marketing, they will need to focus just as much on public speaking, extemporaneous and persuasive writing as they do social media techniques, graphic design and web sales.

The Paradox

The irony of this looming crisis is that the United States still has the knowledge and experience to offer its citizens a broad education. What’s more, for much of the first half of the last century it was far ahead of Europe when it came to educational leadership.

In the last century, it became clear that the United States needed more skilled workers to benefit from the industrial revolution. The consensus was that a high school education would be sufficient for the country to become a global economic powerhouse.

The nation rallied to this call with some decisive action. High school enrollment rose from 11 percent to 75 percent from 1900 to 1950. By the middle of the fifties, the rate of students in high school was double that of Europe. In 1944, when Britain was pushing the Education Act to give British children secondary school education, President Roosevelt was already initiating the GI Bill that would allow veterans to go to college tuition-free.

This remarkable history of educational achievement makes America’s educational crisis even more bewildering. Today, even working adults who did not get a chance to go to college or did not get the opportunity to go to graduate school, can sign up for accelerated degree programs at liberal art colleges like the Gwynedd Mercy Online Programs. Americans can now attend college classes in their pajamas after a hard day’s work simply by turning on their computers! Earning a degree that can launch your future without runining your present with time constraints and debt is a no brainer!

At present, the United States trails behind South Korea, Japan, Singapore, Hong Kong, Finland, United Kingdom, Canada, Netherlands, Ireland, and Poland in “cognitive skills and educational attainment.”

The world has not only caught up with the United States, but it is now leaving it behind. Starting in the 1970s, graduation rates from 4 year colleges fell dramatically, and over the last generation, the United States has fallen behind many Asian and European countries when it comes to an educated population.

The Looming Crisis

This falling level of literacy is a critical situation because the demand for educated workers continues to increase every single year. Fast paced technology and increasing globalization is pushing the world forward. By the year 2020, as many as five million jobs will go untaken because there will not be enough qualified people to do the work. In the 20th  century, a high school diploma was enough to secure a middle class life in manufacturing and retail work, but these jobs will be largely automated. Automation has already begun replacing labor in factories.

ACT, a nonprofit organization that focuses on building a link between education and workplace success, has a report called “Help Wanted: Many Youth Lack Education for Modern Workplace.” The research paper summarizes the consequences of low educational attainment on young workers:

“Based on current completion rates, 24 percent of current high school freshmen are unlikely to complete high school and another 27 percent will earn a high school diploma but not pursue postsecondary education. While 65 percent of HSDGs continue directly on to college, few of these students persist to earn college degrees. This evidence suggests that the influx of new workers entering the labor force will do little to meet growing demand for high skilled labor. Rather, low educational attainment will leave many young workers with high unemployment rates, chronically low wages, and low wage growth.”

What Does This Mean for Hopeful Marketing and PR Pros?

All of this focus on educational achievement might seem strange, especially since the Marketing and PR industry is far more focused on contacts and ideas than it is on degrees and classroom achievements. Still, completing a degree and mastering some communication skills are two of the best things you can do if you want to further your career. Why? Many of the clients you will be marketing and promoting probably will have these high level educations and you will have an easier time helping them achieve their goals if you can work on their level. This is particularly important if you are hoping to work with clients in the tech or educational fields.

Learning as much as you can is always going to be an asset. And focusing your studies on the areas in which you are hoping to find clients is a great way to set yourself apart from your competitors who will likely still be focusing on the portfolios of “sample” campaigns they built in their undergrad classes. It is especially helpful when you are a new graduate who hasn’t had the time to make many contacts or do much networking.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Are Cheeseburgers Worth As Much As Babies?

I have been reading a lot about the protests going on, apparently throughout the United States, where fast food workers want to make a minimum of $15 per hour.  Last week here in Detroit, a bunch of workers protested, and 25-30 got arrested after they took to the streets…literally, by blocking traffic on major thoroughfares during the morning rush hour.

I have to be perfectly blunt on where I stand with this issue, and it’s not at all with the workers.  Before you paint me as some heartless scumbag, let me outline my reasons.

  1. You lost me when you shut down traffic – If workers wanted to gather and demonstrate to get media attention, fine.  But when they shut down traffic, sorry, you lost me.  The people whom they were blocking traffic for were regular people just trying to get to their jobs.  And, the demonstrators made it so that they couldn’t.  Innocent people with no skin in the game became collateral damage to those looking to make a point that could have been made without negatively affecting other people.  I equate this to people in traffic that pull out in front of other people before traffic clears, because they don’t want to wait a spot.  You shouldn’t make your problem other people’s problem.
  2. A real world comparison – Somebody I know worked at a day care facility taking care of a room full of toddler age children.  She worked there for seven years and was barely making $11 per hour.  She left that job to go to one that paid closer to $15, which she got only after negotiating.  Sorry, but you’ll never convince me that taking care of children all day, being instrumental in their development, and overseeing their well being for a huge chunk of their young lives is worthy of less compensation than working in a fast food environment.
  3. The market does not and can not bear $15 – If fast food companies could not find enough qualified people to work at lower wages, then the wages would go up. Pure and simple.  But, since they can find plenty of applicants to work at lower wages, free market theory indicates that there’s no rational economic reason for $15 to be paid.
  4. Paying $15 would mean job losses – Simple cause and effect tells me this: If fast food minimum wages went up to $15, prices would go up.  If prices go up, people would buy less fast food.  If people bought less fast food, restaurants would close.  If restaurants close, workers lose their job.  Bottom line, there’s no way the market could simply absorb these costs without a portion of workers going from what they make today to zero.
  5. No company has a responsibility to provide employees with a standard of living – The basic premise behind the $15 number is that the current minimum wage is not high enough for a worker to support themselves.  I don’t dispute that.  In fact, simple math tells me it’s true.  But, where is it the responsibility of the fast food companies to provide this?  Call me heartless, but the fact of the matter is that any company is expected to provide fair wages for the work performed.  That’s what I get.  While it so happens that I do make enough to support my family, what if that changed?  What if there was an illness and we couldn’t afford treatment on my salary?  Do I have a right to march in and demand more money?  Of course not.  What if my wife and I decided to take after the Duggan’s and shoot for 19 kids?  Would I go into my bosses office after each birth and demand a raise?  No.  That’s silly.

The point is that while $10 per hour (roughly the minimum wage) is peanuts compared to some of the costs, I don’t think that simply demanding an industry specific artificial prop is the answer.  There are other ways that each person has to work through and take personal responsibility for making the decisions about:

  • Reduce expenses – I’d be interested to see how many of the protesters have smart phones with high data plans with which they go to social media to propegate their ’cause’.
  • Side hustle – There are other ways to make money when you’re not at work.  Cut grass, shovel snow, clean windows, write a blog, or any other number of things.
  • Second jobs – When I hear stories about my parents and grandparents generations, there are multiple stories of people who worked multiple jobs.  It’s hard, it can be grueling, but it’s what people have done when the first job isn’t enough.

Personally, I hearken the whole thing to the Occupy Wall Street movement of a few years ago, as the common theme is trying to take ones problems and project them to others in order to gain a solution, rather than working the solution themselves.  I just can’t get behind that especially when it involves, you know, blocking traffic.

Readers, what do you think about the whole uprising going on for $15 per hour wages?


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Today’s Job Market Is The New Norm

Every morning I read through the Seeking Alpha headlines and click through to various posts that catch my eye.  Last week, I was browsing and saw “Steady And Disappointing – July Jobs” and decided to give it a read.

As I was reading through the article, I got a sense that people still do fully understand the fact that the job market has fundamentally changed since the last recession.

The Cycle Of The Job Market Pre-2008

I’ve been in the job market full time for about 18 years.  I’ve seen a few recessions, and have worked through enough companies that have gone through some sort of cost cutting measures, so that I got a sense of how the job market worked.  It was a pretty standard cycle, and I’ll pick things up in what was the best part and go from there:

  • Full Profit and Job Growth – Profits would go up, and companies would expand jobs and wages, as more jobs meant more work which contributed to the bottom line.
  • Declining Profits, Continued Job Growth – The economy would start slowing down,  but there was always a lag, so job growth would continue.  The difference resulted in declining profit margins.
  • Continued Declining Profits, No Growth – Companies would finally start recognizing the slowdown in the macro economy and would cease hiring and likely freeze wages.
  • Job Cuts, Profitability in Free Fall (maybe even losses) – Recognizing that there were too many employees to justify slowing sales, layoffs would commence.  Jobs would be cut and the bleeding on the bottom line would hopefully be stopped.  If companies were lucky, they just had narrow losses, but in some cases, they would be in the red.  This would, of course, factor into how many jobs were lost.
  • Stabilized Profits, No Growth – No more jobs are added here, but the idea is to stop the bleeding, otherwise further cuts are required.  If things are stable and the economy as a whole hits bottom, the recovery can start.
  • Improving Bottom Line, Moderate Growth – Eventually things pick up and growth starts occurring.  Jobs start to get added in key areas.
  • Full Profit and Job Growth – The circle is complete.  If things went well, sales were soaring, profits had recovered, and headcount was back up.

That’s the way things were.  But, with the last recession, things changed.

The Post-2008 Job Market

The model I described above worked pretty regularly, but the 2008 recession was so severe, and other factors came into play (which I’ll get to in a minute), that the cycle was broken.

Effectively what happened is that companies went through the cycle where they hit rock bottom, but the panic set in when things didn’t get better.  The 2008-09 recession was one that broke the cycle and it forced companies to drastically changed.

And they did.

When the cycle didn’t get broken, companies fundamentally changed their business models.  They restructured their operations.  They got more efficient.  They restructured or eliminated debt.  They shed business practices that they had previously been able to keep on even though they weren’t hugely profitable.

A lot of companies didn’t do this or were unable to do this. Most of those companies are gone today.

The ones that made it found that their changing business practices led them back to profitability.

And this time, companies learned that job growth was not key to getting back to profitability.  Yes, jobs were needed, but by becoming more lean, more efficient, more focused, and more driven to innovation, they could get their profitability back without bring back employees en masse, as had been pretty standard practice.

This is going to sound harsh, but the thought pattern emerged was “Why bring employees back if we don’t need to?”

As an employee, that’s scary.  We all want to see everybody with jobs, with great jobs that we love that give us big raises every  year.  For a good portion of my career to date, that’s what I was used to.  My friends and I, we all grew, we all got raises, we all knew that if one door closed, there was another somewhere that was waiting to be opened.

It was secure.  It was comfortable.  It couldn’t last.

Not after 2008.

But, I don’t think everybody really gets that.  Max Wolff, the author of the article I linked to, writes in one paragraph:

“We are now 4 years into an impressive profit and asset price recovery.  Our leading indexes have recently been setting new highs.  The Q2 earning season…was strong again.”

With that in mind, I was thinking that he ‘got it’ and understood that this is the new reality and why it is.  But the cracks appeared when, in the next paragraph he says:

“The economy we have been rebuilding is not generating job opportunities sufficient to steadily increase labor force participation…..This means that many more folks are left behind than are included in the recovery.”

I started shaking my head when I read that.  Here he acknowledges that profits have recovered, that leading indexes are showing strength, and that corporate earnings were strong.  Then, he laments asking why jobs haven’t followed suit.

Answer: Because they don’t need to.

Question: If companies are hitting all the high notes with the employees that they have, what motivation is there to create more jobs?

Answer to that question: There isn’t any.  I’ll repeat that, there isn’t one reason in the world that companies should hire more if they’re hitting all of their goals and objectives, have solid balance sheets, and have debt under control.

Look at most of your strong performing companies, and you’ll find that by and large, those things hold true.  They also hold a benefit that I’ve mentioned before, and will outline again, that being that the profitability and balance sheet standing as things exist today provide a more fundamentally strong economy than existed prior to previous recessions.  This means that while the robustness may not be there that many economists and job seekers are looking for, I also believe that the economy is much more insulated from the potential of future recessions and the impact that they could have.

The Next Driver of Job and Wage Growth

What will drive job growth next is opportunity.  The marketplace will have to create opportunity above and beyond what we have today.  That could be through new technology, new or additional needs in the certain sectors above what we have today, or any number of reasons.

When I read articles like this, I almost get the sense that many out there think that job and wage growth is something that is not only desired, but expected.  Almost like companies owe the marketplace more jobs and higher wages.

Unfortunately, that’s not the case.  Companies owe it to themselves and their shareholders to be profitable.  If they can do that with less jobs than they had provided in the past, then that’s what they are going to do.  If this means that you think that the economy is broken or hasn’t fully recovered, that’s fine.

But, until something fundamentally shifts, I don’t think this is going to change. There is no magic fairy dust that the marketplace is going to suddenly provide.  Hopefully this gets recognized, and we can stop reading articles about how today’s job market equates to a weak or unsteady economy.  The two simply are not correlated as many would suggest.

Readers, what are your thoughts on the job market and the current state of the economy? Do you agree that the old way of equating economic strength with the job market is no longer valid?  Discuss below.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.