Monday, January 26, 2009

Unemployment Everywhere

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

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Just the morning alone the following job cuts were announced:
1. Caterpillar profit falls 32% in Q4, to cut 20,000 jobs.
2. Sprint to eliminate 8,000 jobs.
3. Phillips to cut 6,000 jobs after first loss in 5 years.
4. Home Depot to close Expo and Design business and cut 5,000 jobs.

These companies represent a range of industries showing the current recession/depression is having its impact almost everywhere. The one exception in the news today was McDonald's. Although the headlines said its earning were down, this was only a quirk resulting from tax payments. McDonald's is actually planning on opening 1000 news outlets in the next year, although not necessarily in the U.S. (most reporting failed to mentioned this), since its big growth areas are overseas. Nevertheless, for the moment the very low-paid jobs at McDonald's seem secure. This can not be said about much of the rest of the retail industry (the biggest private sector employer) however. Expect massive job cuts and store closings starting this spring.

The people responsible for the Credit Crisis are still mostly employed (and getting big bonuses as well). One of the recent exceptions in John Thain, the recently fired CEO of the financial cesspool Merrill Lynch. In a leaked memo, Thain claims that Bank of America CEO Ken Lewis knew about $4 billion in accelerated bonus payments to Merrill executives (apparently paid for with taxpayer money from TARP) and Merrill's Q4 losses (something a mentally challenged 5 year old with vision and hearing problems could have figured out, but not the CEO of one the biggest banks in the world). As discussed in this blog several days ago, Ken Lewis extorted the U.S. government to pony up more TARP funds because of these 'unanticipated' issues cropping up and threatened to KO the Merrill takeover if it didn't. John Thain will probably be remembered for his $35,000 toilet - an especially appropriate symbol for where most of U.S taxpayer Wall Street bailout money has gone.

There was 'good' news reported (never confuse reported from the mass media and reality) overseas this morning. Barclay's stock was up as much as 75% because of a big buffer in equity capital and reserves (something that Fannie Mae, Freddie Mac, Bear Stearn's and Lehman also claimed .... just before they went under). I can't say this is not true in Barclay's case because the UK government may have pumped enough money into the bank to make this possible. What I can say, is that traders never learn and can be duped over and over and over again with misinformation from the mass media which it will report over and over and over again and never question no matter how absurd it is.

NEXT: The Canary in the Coal Mine, Foxes Guarding the Chicken Coop

Daryl Montgomery
Organizer,New York Investing meetup

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.

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