Is our economy really that good?
Posted by xzhang on July 31, 2009
The stock market went up sharply recently. Lots of people, Â especially my friends are all talking about it and thinking about putting new money in. Â For me, I just don’t believe the recovery will happen in such a rapid way.
Yes, some companies do have good earnings. Lots of them report earnings with dropped revenue and profit however exceeded expectations, people liked it and price went up. Come on, that is not the whole story.
Why do I say that? Lots of companies cut expenses, laid off working force and/or sold some assets. That will affect balance sheet, so the profit for this quarter seems much better. However that won’t last long. With 9.5% workers looking for a job, I really don’t believe the economy will have a ‘V’ type reversal. 14-15 million unemployed people are looking for a job. God, how many people are in US? that is a big number. The economy will never recover fully without enough working people.
The consumer is the key to our economy. If lots of people don’t have a job and income, do you think they will continue to spend their savings? If people spend less, what will happen to companies that target the consumer? Then what will happen to companies providing service to those companies? etc…
Look into house market, people did see increased transactions. However it came with a drop in price which offset all.
My thought is always simple. Everybody, especially normal people want to buy stock. Don’t do it. Â If they want to sell, hold it or even buy more. It sounds crazy, but it works.
ellisgl said,
I think we are seeing a rebound definitely. But, this rebound has a upcoming road block. Baby Boomers. Next year we will see the start of the baby boomer retirements starting. My prediction for the next couple years:
1.) RV and Travel sales should go up. Might want to look at oil, alt energies and travel company stocks.
2.) Medical spending will start climb to astronomical records. Medicare and Medicaid services are going to be hit hard. Insurance companies and doctors will look to make the most of it – this is why we need to work on calming this. With this note, if you have extra cash, spend it on medical stocks.
3.) New jobs will “appear” since companies will start “getting rid of” the older generation. But how many will start over extending employee’s and/or outsourcing.
4.) Later on there will be a lot of real estate for sale, another bottoming out of the real estate market? Youth want new and not want to deal with fixing up older houses since they are over extended from their work responsibilities.
5.) We might see another new age in technology since a lot of this baby boomers will be retired. Lets hope, since we have not really seen anything super awesome since the 70’s, 80’s & 90’s. The 70’s & 80’s with digital electronics and computers, 90’s with stabilization of the computer/electronics industries, but with the boom of the computer networking sector, with the push of ARPA net, er “The Internet” in 1995 to the mass public. The 2000’s we haven’t anything that brought that kind of impact.
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