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Well, it’s New Year’s Eve. And it has been a heck of a ride this year. The Major indexes gained more than 10% while the economy remained soft, unemployment high, and inflation low. Home sales continue to remain soft despite the quickening pace in December as potential buyers reacted to the increased availability of foreclosures at cheap prices and an unexpected spike in mortgage rates. Car sales have reached a more stable sales rate of around 9 million per year, up from the lows of 2008 and 2009 but still well behind the giddy pre-recession levels of 12 million plus.
Corporate profits are up, although the rate of increase is slowing considerably compared to 2009. No one seems to expect profitability to surge ahead until consumer demand picks up. It is hard to grow the bottom line unless the top line grows as well. With a stagnant top line, expenses have a way of rising and gnawing away profits. So top line growth is essential, which means employment growth is essential.
Crude oil prices have been jumping around like crazy and I’m not certain I know why. Part of the reason is that it is priced in dollars and each time the dollar looses value the price of oil reflects that value change. Part of the reason is political, not just at home but all over the world, since we are a nation that imports most of the oil we consume. A strong dollar means cheap gasoline while a weaker dollar makes our products more competitive overseas. It is a tightrope to be sure. The more products we sell overseas the more jobs we create at home. The more gasoline costs the less available to buy other consumers goods weakening the job market. It is a real conundrum.
For those who are counting on their 401(k) for retirement, 10% growth should feel pretty good. For most people, they are probably back to where they were in 2008. 2011 they will need to make up for lost growth in 2009 and 2010, or about 24% to fully recover from the recession. That may prove quite difficult to do.
With the mid-term elections behind us, we need to remain vigilant as the new Congress is seated. The next two years must show a real commitment to reducing the deficit. New spending must be paid for with new taxes. This will by necessity mean severe limits on new spending or significant increases in taxes. Both sides of the aisle need to get onboard with this. Yes there are different priorities and approaches, but both sides need to be willing to do a little horse trading to give the American people what they need IN THE LONG TERM. WE need a few good men and women who are willing to put their jobs on the line to do the right thing. They will be the true patriots. The others will be the career Politian’s who care only about themselves.
While I am not opposed to unemployment benefits, 99 weeks is not a safety net, it becomes a way of life. I have a friend in the retail business who reports that the people that respond to her job offers come in simply to get their card signed saying that they applied, but don’t really want the $8.00/hour clerks job. She is searching for employees who want to work and is having trouble finding them.
I’ll post more on Monday, with my predictions for the new year.
Party hardy, but stay safe. If you’re going out, have a designated driver.
Happy New Year!!
