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December 17, 2013 ? Quote of the Day
I don?t know that the retail investor matters anymore. They didn?t come back to the market after the 2000 crash. The idea that the individual investor believes in the stock market now is challenged. We have a market that is increasingly institutional investors trading back and forth with each other?, said Dan Greenhouse, chief global strategist at BTIG.
Rampant Wage Inflation Strikes China
I rely on hundreds of ?moles? around the world whose job it is to watch a single, but important indicator for the world economy. One of them checks for me the want ads in the manufacturing mega city of Shenzhen, China, and what he told me last week was alarming.
Wage demands by Chinese workers have been skyrocketing this year. The biggest increases have been at the low end of the spectrum, where migrant workers from the provinces are earning up to 40% more than a year ago. Wage settlements of 20% or more for trained workers are common. One factory that gave staff only a 10% increase saw many of them fail to return after the recent Chinese lunar New Year.
Of course China?s blistering 8% GDP growth is the cause, which has pushed inflation well beyond the government?s 4% target. So the cost of living in the Middle Kingdom is rising dramatically. The problem has been particularly severe with imported commodities, such as in food. Hence, the increased demands.
This is important for the rest of us because low wages have been the cornerstone of the Chinese economic miracle. In just the last decade, average monthly Chinese wages have climbed from the bottom rung to the middle tier. That seriously erodes the country?s cost advantage, which has gained it such enormous shares in foreign markets, like the US. Take away the country?s price advantages, and demand will wither, slowing growth globally.
What will they be demanding next? Collective bargaining rights? In the meantime, keep checking those Craig?s List entries for Shanghai.
Average Monthly Salary
$3,099 Yokohama, Japan
$1,220 Seoul, South Korea
$888 Taipei, Taiwan
$235 Shenzhen, China
$148 Jakarta, Indonesia
$100 Ho Chi Minh City, Vietnam
$47 Dhaka, Bangladesh
Barchart.com's Chart of the Day - DigitalGlobe (DGI) for Dec 16, 2013
The Chart of the Day is DigitalGlobe (DGI). I found the stock after sorting the New High List for frequency, skipping over the stocks that did not have positive returns for the last week and month and also reviewed the charts using the Flipchart feature. Since the Trend Spotter signed a buy on 11/1 the stock is up 22.58%
It is a global provider of commercial high-resolution earth imagery products and services. The company's products include DigitalGlobe System, QuickBird satellite, ImageAtlas; and GlobeXplorer. DigitalGlobe System offers collection and archival of geospatial information data and QuickBird satellite, which provides commercial resolution imaging systems. It operates a constellation of high resolution earth imaging satellites, possesses a growing aerial imagery network and offers a comprehensive geoinformation product store - DigitalGlobe.com - that allows quick access and order a wide variety of imagery and derivative information products. They conduct business through two segments: 1 - defense and intelligence, and 2 - commercial.
Monday links: permabear massacre
?Tis the season. Check out Brenda Jubin?s favorite books for 2013 at Reading the Markets including Building Reliable Trading Systems: Tradable Strategies That Perform as they Backtest and Meet Your Risk-Reward Goals by Keith Fitschen.
Quote of the day
Joshua Brown, ?I sure hope the US stock market pauses or corrects soon ? because otherwise it?s going to be a complete and total permabear massacre.? (The Reformed Broker)
Chart of the day
Productivity (and stocks) Jump; Honda (HMC) Recalls Acura
Stocks were headed higher on Monday morning after non-farm productivity increased at its highest rate in almost four years for the third-quarter in the US. The Labor Department announced that productivity was up 3% during the quarter, following a 1.8% rise in the second-quarter. A level this high has not been seen since the fourth-quarter of 2009. This large increase was partially attributed to a 4.7% gain in output. The data released surpassed analysts expectations of a 2.8% gain for the index. Productivity takes into account the hourly output per worker. In the same report the Labor Department said that unit labor costs were down at 1.4% rate during the same quarter. This measures the labor-related cost for a given unit of output. This is more than double the drop analysts were expecting. During the fourth-quarter last year, there was a 2% gain for the index. Despite the seemingly positive information, the broader data is showing slower productivity growth. There was only a mere 0.3% increase in productivity over last year at this time. This is largely attributed to a slowing investment in equipment and machinery by business?s in recent years. Oxford Economics had this to say in a note to clients, ?Businesses are finding it increasingly difficult to squeeze more output out of their existing workforce.?
Honda Motor Co (HMC) announced that they would be recalling nearly 7,750 Acura?s due to a possible loose bolt problem. The company said that their Acura RLX sedan?s that were sold in the United States and Canada will need to be recalled so they can replace rear suspension bolts that may have been improperly tightened. HMC said that any of the eight bolts that secure the rear suspension of their 2014 models could loosen over time and fall out which could cause a disruption to the vehicles alignment and increase the risk of a crash. They said to date they have not been made aware of any crashes due to the problem. The notifications for recalls will begin being sent out in January.
The new target of the budget cuts has been announced and it will be pensions of federal employees. The federal workers pensions are quite generous when compared to those employees who work in the private sector but not for long. For federal employees that were hired after 2012, changes are being made. In order to cover their pensions, employees hired starting January of this coming year will begin paying 4.4% of their pay to help cover their pensions. Those hired in 2013 will pay 3.1% and any employees prior to that will pay 0.8%. Jackie Simon, policy director for the American Federation for Government Employees, who represents nearly 630,000 federal employees, said, ?It?s insane they should be expected to fund government. It?s a big country. The burden should be spread more broadly.?
That?s all for the day.
All the best,
Jack Aubrey, Oakshire Financial
Forget Nike: Get 30% Upside With This Apparel 'Startup' Instead
Technology is all around us and in everything: our homes, cars, offices -- and even in our clothing.
Apparel companies are looking more and more like technology companies these days. Wearable technology has become one of the fastest-growing markets over the past year, with apparel companies pushing the limits on recording our physical activity and then transforming it into useful data.
One of the fastest-growing and most innovative companies in the apparel space, Under Armour (NYSE: UA) is at the forefront of this trend. Under Armour has the insight of real-life athletes, the look of an apparel company and the feel of a tech company.
Under Armour's products are sold to a number of teams and athletes, from colleges to the pros. The company's founder, Kevin Plank, came up with the idea of performance apparel during the mid-1990s as the special teams captain of the University of Maryland football team.
When you look under the hood, Under Armour operates a little like a tech startup, hosting contests to improve its products and hiring more developers to build and improve their technology. And even though Under Armour has a well-recognized brand by now, it's still a growth story.
Its market cap is $8.9 billion, a small fraction of Nike's (NYSE: NKE) $69 billion. But in addition to the growing market for wearable apparel, Under Armour still has a huge growth opportunity overseas, seeing as almost 95% of its revenue comes from North America.
Sundown at the Permabear Alamo
I sure hope the US stock market pauses or corrects soon ? because otherwise it?s going to be a complete and total permabear massacre.
China is stabilizing. Europe is growing ? peripheral Europe is growing! Japan is percolating. US manufacturing is back above pre-recession levels and household net worth is too. American politicians are introducing bipartisan budget deals. Iran is talking peace. The gold investment complex is collapsing.
None of this was supposed to happen! It was all meant to unravel. WTF?
The pessimists have been absolutely routed this year, it?s becoming uncomfortable to watch. Their intellectual leaders are abandoning the cause or, worse, switching sides. None of their formulas or equations are working, they?re just losing more people more money every month. Those who answer to clients have run out of excuses, they?re now lashing out at everyone else to make themselves feel better.
Because they can?t have been wrong, just early ? and it?s not their fault anyhow. It?s the Fed?s fault, or the fault of other financial commentators or the fault of foreign central banks.
But they?re sticking to their ?process? ? and don?t you ever dare question their process, no matter how poorly it works and for how long.
I am not incorrect for four years running - the entire world is incorrect. You?ll see.
Surely this can?t continue for much longer, can it? I hope not.
May the fates order a ceasefire on the Permabear Alamo, and soon.
