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Drop in Dow Industrials Perspective August 15, 2013

16 Aug

The Dow (DJI) dropped today by 225.47, or 1.47%. It is currently up 12.67% for the year. Below is a chart of the DJI on a daily basis for the year.

Consider your timeframe whenever entering a position. Below is the DJI on a weekly timeframe.

Looking at a weekly chart, no action being taken (always) is an option. Entering or adding to positions is also a consideration, as the averages have simply dropped to intermediate moving averages. An exit plan would be appropriate for any additional entries in the event the market continues down.

Also, depending upon your perspective, on both a weekly and a daily timeframe these charts suggest that the market is more likely to go down than up. Re-entering the market when the DJI returns to the slower moving average is perhaps a better bet.

Contact your broker or financial advisor for any decision you may choose to make.

God Bless The Queen!

Some High Paying Jobs in the US

5 Aug

If you’re looking to get into a high paying job in the US, you might want to consider becoming a broker of artificial hips. A recent article about a man in need of an artificial hip appeared in the New York Times. The list price for the hip, without a mark-up (list price – yea), was $13,000.

An artificial hip, however, costs only about $350 to manufacture in the United States

In the case of the artificial hip, with a cost of $350, and a resale of $13,000, that is a whopping 96% gross profit%, or a gross profit$ of $12,550. In the US last year, there were 332 hip replacements. If you multiply the 332 times the $12,550 per hip, you get $4.1M.

In the NYT article, that hip replacement quoted to the patient in the US at $13,000 was eventually performed in Europe at a total cost of $13,660. That $13,660 not only included the hip, but “all doctors’ fees, operating room charges, crutches, medicine, a hospital room for five days, a week in rehab and a round-trip ticket from America.”

The bottom line of all the above is if you can get anywhere within the economic food chain that is the US Healthcare industry, you can make a fortune. And, if you want the same healthcare, you can get it outside of the country at a fraction of the price paid domestically.

Companies and Corporations obviously pay their employees using operating profits from their businesses. One only needs to look at the profit margins and average sales per employee to understand where the high paying jobs are located. Examples of a few companies/ organizations are listed below:

Company Example
Official Profit Margin
Revenue
# of Employees
Gross average Sales per Employee
Average Income per Employee
US Dept. of Defense
?
?
3,200,000
?
?
Walmart
3.62%
$469,162,000,000
2,100,000
$223,410.48
$20,744.00
Goldman Sachs
24.00%
$36,290,000,000
33,000
$1,099,696.97
$399,506.00
Dollar General
5.87%
$14,800,000,000
90,000
$164,444.44
$30,282.00

Time to Increase the US GDP Numbers

31 Jul

If you follow the S&P 500, you’ll know that the companies that comprise this list are not the same as those in the 1950’s, or 1930’s, or even last year. As time marches forward, often companies that have lower and lower market caps, among other reasons, are replaced with ones that are rising in value. This has a distorting effect on S&P 500 charts over time. From a practical standpoint, you need to keep the list current to accurately reflect what the current market is like. Also it does not make sense to keep some companies on the list that are no longer viable. (an example)

Well, it appears that the way the government measures the US GDP is in for a similar, but not the same, update. Today, July 31, 2013, the changes will be announced.

    For the first time in four years, the Commerce Department will revise its estimates of U.S. gross domestic product — the value of U.S.-made goods and services — back to 1929. 

For the first time, money spent on R&D and on the Arts will be included in the GDP. It appears the international community had already accepted the changes to increase their respective GDP numbers.

    The biggest share of America’s R&D spending goes to develop new drugs

The government says the difference between that final growth estimate updated annually, and the initial GDP estimate released within a month of a quarter’s end, can be as much as 1.3 percentage points in either direction.

It will be interesting to see how the new numbers impact the national GDP, but this is probably done in an attempt to offset the downgrade in the GDP numbers posted last month. The total impact looks likely to be in the $400B range annually. That works out to be about 2.7% of the $15 Trillion GDP number for 2012.

Two Gauges of the Economy – Unemployment and S&P 500

26 Jul

Printing money by the Federal Reserve and handing it to the bankers is not going to bring economic stability to the US or the world. The single visible impact it has is the creation of a rising stock market which for a lot of people is their only gauge of how well the economy is doing. And on that measure, the S&P 500 is on a rate of return of over 28% for the year, and 34% taken from the last day of 2012.

S&P 500 (SPY)

The market historically is a precursor to the health of the economy as measured by GDP.

“….shows a clear positive correlation between equity returns and GDP over the last ten years ….”

Based on that thesis, the good times have only begun. When you take a look into one other indicator within the US economy, you have to wonder what is happening.

Unemployment

Within the confines of Keynesian economic theory, the jobs are either created by the private sector (in good times), or the public sector (bad times). The rising stock market should be signifying good times, so the unemployment should be dropping, as it is, based upon the Federal government numbers. As the public sector is reducing jobs, the newly created jobs are from the private sector, due to the “good times”. Unfortunately, the only jobs being created in the US today are low paying service sector jobs.

The median household income in America increased from 1945 to 1999, where it went from level to a peak in 2006, into a steady drop into 2013. The US has lost its ability to manufacture products worthy of export due to its lack of international competitiveness, so this trend will never end. (Dr. Paul Craig Roberts: The Failure of Laissez Faire Capitalism and Economic Dissolution of the West )

“When you lose the ability to make things, you lose the ability to invent things.”

The unemployment may be dropping by official numbers, but the purchasing power of the American worker is dropping. It is hard to see this as a driver to higher GDP numbers and a rising stock market. Perhaps there is some credence to the notion that the market is being driven up by the Federal Reserve printing presses.

Corruption Worldwide is on the Rise

10 Jul

We cynically accept the concept that politicians are liars and crooks. Jesse Jackson Jr., is the latest and most publicized politician to plead guilty of “fraud, conspiracy, making false statements, mail fraud, wire fraud, and criminal forfeiture.”


A seemingly well documented list of American Politicians convicted of crimes can be found here. It is interesting to note both the trend and the political party of the convictions, but primarily the list supplies a foundation for that “cynical” concept about politicians, a concept that is widely held. Uselessness is of course, a whole other topic, brought to light by a recent bill to fund a National Park on the Moon.

This week, the ratings agency Standard & Poors told a court, its ratings were “puffery”. S&P published more than 1 Million ratings in 2012, using more than 1400 credit analysts in 23 countries, yet their legal defense in their lawsuit is “…
that nobody could reasonably think that they had a reputation for producing independent and credible ratings“.
The federal government is seeking upwards of $5B in civil penalties from S&P as it relates to the residential mortgage business “bubble”.

“puffery” – –  in effect as worthless as the bullshit from a used-car salesman.

What does the S&P downgrade of Italy’s credit now mean, given their defense in the lawsuit? Is it simply that Italy cannot afford to pay S&P for a higher rating?

We now find that Bribery and Corruption worldwide is growing. One in Four paid a bribe for accessing public institutions and services. And in India, close to 50% of the people surveyed are paying a bribe for educational services. Getting an education and degree for your child is much of an issue in China and it is in the US. Parents rioted when their children were not allowed to cheat on exams.

“We want fairness. There is no fairness if you do not let us cheat.” 

Triple Play Service in the US

26 Jun

Comcast, Verizon Editorials Distort True Picture of U.S. Internet Service, Experts Say

The number of people in the US watching TV OTA (Over the Air) has grown over the last 3 years from 14% to over 19%. The main reason proposed, is the cost of cable. The discussion over cable rates these days cannot be stripped out of internet access rates, as the same company you choose for either, will be providing both.

Triple play (Internet, Cable, and phone) rates in the US are at record highs. The average US cost for these services is $160 per month, as compared to $38, for example, in France. Even though the US “invented” the internet, we now have some of the slowest services in the world. (29th and dropping)

Over the course of the last 20 years, nearly $500 billion has been collected by the telecom companies to (allegedly) bring America into the 21st century with an “Information Superhighway,” says Johnston. That works out ot $3,000 per household to have access to high-speed Internet.

And we hear from Verizon CEO Lowell McAdam in a New York Times Opinion that :

“…..the United States has gained a global leadership position in the marketplace for broadband”

What started when AT&T was busted up to “create competition and lower cost” has done everything but that. Comcast Chief Executive David Cohen says “consumer prices have remained relatively stable“. That is not a sign of a competitive environment.

In the UK, the government required that service providers that were building out their networks to share that build out with competitors for a reasonable price. This process is now being proposed for the entire EU per an article by Wired Magazine.

Pricing in the UK decreased as internet service was deployed, per ofCom (Independent regulator and competition authority for the UK communications industries).

Still in an Uptrend

5 Jun

The stock market has been on a continuous rise since about November of 2012. The rate of increase became even stronger starting in May.

A green line represents the trend line from November for SPY. You can see the divergence beginning in May.

During the last week, SPY has dropped below the 17 period moving average on the chart, but has not yet touched the 53 period moving average. SPY last touched the 53 period moving average on 4/19/2013.

The bottom line for this chart is that the uptrend is still intact.