DISCLAIMER: THE FOLLOWING "Cost of Freedom Recap" CONTAINS STRONG OPINIONS WHICH ARE NOT A REFLECTION OF THE OPINIONS OF FOX NEWS AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE WHEN MAKING PERSONAL INVESTMENT DECISIONS. IT IS FOX NEWS' POLICY THAT CONTRIBUTORS DISCLOSE POSITIONS THEY HOLD IN STOCKS THEY DISCUSS, THOUGH POSITIONS MAY CHANGE. READERS OF "Cost of Freedom Recap" MUST TAKE RESPONSIBILITY FOR THEIR OWN INVESTMENT DECISIONS.
Recession fears mount as latest data points to slowdown
HARRY DENT: Because of the sixty percent or so we have two economies. We’ve got the everyday household with middle and lower incomes who’ve never come out of recession, their wages have been stagnating and falling they’ve had to take more part time jobs instead of full time. Many are underwater in their mortgages and their unemployment rates are more like nine to ten percent. The flipside, the top twenty percent with college degrees their unemployment is four percent they’ve been actually gaining in jobs and they control about eighty five percent of the financial assets outside of real estate and that’s what the fed has been able to bubble back up with all this artificial stimulus. We don’t think this is going to last, but the top twenty percent is doing as good as ever, shopping at Gucci’s most people are in a recession feel like they’re in a recession and never really did come out after 2009.
SUSAN OCHS: You know what, we had a good jobs number this week and there’s no denying that. A hundred and seventy two thousand private sector jobs created, and that is a really strong number it’s not correcting the trend completely but it’s getting us into a good place. Twenty five thousand of those are manufacturing jobs, that’s also starting to come back a little bit. It doesn’t happen overnight but there’s no denying that this is a good trend. I would say on the unemployment rate, I can hear Toby guffawing, on the unemployment rate it didn’t actually tick up a full percentage point. It went from 8.22 to 8.25 so we’re rounding up to 8.3, but it’s really actually a very small increase that’s more rounding.
TOBIN SMITH: Saying that 8.25 is really a stretch to 8.3, now that’s a stretch. Now look it, here’s the big problem. The problem is that if you take the unemployed number and the underemployed and that’s really how we should look at the economy, because if people are not really fully participating in the economy then to them guess what, it feels like a recession. That’s where we’re at right now. We’re actually at a point where we have twenty percent, unemployment and underemployment in the state of California. The largest state, the largest GDP state. That’s a near depression. I hate to agree with Harry because I do about every twenty years. We are in a point that we’ve not hit the circle. By the way, Susan love ya. A hundred and fifty thousand jobs is a strong recovery, are you kidding me? We need three hundred thousand to get – we would need three hundred thousand for the next four and a half years to get to six percent unemployment. So let’s not kid ourselves.
JONAS MAX FERRIS: We may be transitioning to a permanently high plateau on unemployment. There’s a lot of countries that never go much under eight percent. France has had eight percent and higher unemployment basically forever. And by the way there are countries with low unemployment like Japan that have been in economic stagnation for thirty, twenty at least years and their unemployment is never above six percent. That is really the only data point that is bad in this economy and it might not change a whole lot, or we might have to get used to it. I kind of agree with some of the points that Harry’s making. There is definitely a part of this economy, I know he sounds like John Edwards with the two economies, but there is definitely a part that is not seeing the boom times, but everyone who is unemployed or got a pay cut is going to think that we’re in a recession, but the bottom line is that the stock market is not saying that we’re in a recession. The economy is bigger than it’s ever been in America and corporate earnings are higher than it’s ever been in America. That is not a recession. You could be complaining that you don’t get a cut of that pie that you want, but the bottom line is that we’re not yet in a recession.
GARY B. SMITH: I’m probably a little too relaxed today to hit the high C; I’m just kind of making mental notes along the way when each of the people were talking. Harry said the top twenty percent are doing well. I don’t even think that the top twenty percent are doing that well to be honest. Susan how can you say that we’ve had over three years of above eight percent when Obama said we’d be at clearly said we’d be at six percent by now is good news. That is uber spin right there. I do agree with Jonas we might be in this permanent eight percent. I hope we’re not headed more towards Europe, toward Greece you know which is edging closer to twenty percent unemployment, but that maybe the way. The bottom line though is that I don’t think we’re going to enter a recession. It feels awful now, but we’ve been in kind of this awful mode for awhile. I think in order for us to get worse right now, housing prices would have to go into another slump, they flat line. Consumer spending would really have to drop off the cliff, that’s flat line. Unemployment would have to start getting back up towards ten percent.
TSA, AFGE Union agree on labor contract to cover 45k workers
TOBIN SMITH: Well, of course it’s just a simple math. Remember the union’s job is to be the cartel to actually raise the salaries and benefits of these guys, and look how well they did for GM. They raised their prices so high that GM basically went bankrupt and guess what. We cut their salary and GM made a lot of money, so if we wanted to make money from TSA which we don’t, we want more safety and we want faster lines we would actually have it privatized, but that’s another story.
SUSAN OCHS: No, not at all. Security issues are specifically excluded from this deal. This not about the work that they’re doing, this is about like vacation hours and work shifts, and actually we haven’t seen the actual deal yet but it also looks like wages also are not included in this deal. So you’re not going to see higher prices if anything you’re going to see happier TSA employees which is good for everybody.
JONAS MAX FERRIS: Yeah, because they’re not going to strike before Thanksgiving I’m sure. Look, when the government took over the private screening system and made them government workers you’re basically asking to be unionized because government workers have higher rates.
GARY B. SMITH: Well, Brenda as what usually happens with us as Toby points out, when a monopoly or cartel gets involved you have more inefficiency and you have higher costs period. You know Susan might argue well it’s not wages well it’s certainly be benefits. We’ve seen that in every industry they’ve come in. Can anyone say that government employees, public schools teachers are inefficient? No, everyone would say or most people would say anyways they are highly paid, their benefits are astronomical compared to the private sector and they’re inefficient. Same with GM, same with airline pilots, same with every sector that union come in. That’s their job, of course! They want people to work less and get paid more. You’re going to see the same thing with TSA. I don’t necessarily want them happier for crying out loud. I just want them doing their job.
HARRY DENT: No, no of course not. Every industry and function that’s been unionized has put its industry in difficulty, and it does raise prices. Unions have been declining for decades because of this. When they started it was useful, but now they have too much power. My suggestion for unions, if you don’t want to become dinosaurs negotiate with your members to come up with the greatest productivity gains for management and your institutions and then negotiate some of those gains with your members. Members, be a win-win solution or you’re dead.
GM to sponsor English soccer team for $559M
GARY B SMITH: Exactly, Brenda. You know back in the good old days I didn’t care what GM did. They could waste their money however they want and it didn’t matter to me. I wasn’t invested in the company. Now as a taxpayer, I am so you know number one this whole five hundred and fifty nine million dollars we’re spending to sponsor Manchester United, I’d like to see that cost benefit in that. They really think they’re going to sell five hundred and fifty nine million dollars worth of vehicles? I mean, I think everyone at this point knows what GM is. You know the name recognition thing I think that’s done, they can move on from that. The bigger issue I have is the sponsorship of the Chevy Volt. The thing is a dud, whether it should have been a dud or not it turned out to be a dud, it sold as well as the Edsel, and by us sponsoring this we’re actually working at the – against, the companies that also manufacturing here like Honda & Toyota so we’re just wasting a lot of money and we’ll never get it back we need to move on.
HARRY DENT: No, I don’t because demographics tell us otherwise as well. Housing peaks early in the cycle, age thirty-seven to forty-two. It’s this simple. Predictable people doing predictable things, auto’s peak between forty-six and fifty-one, we’ve seen a rebound in autos recently. We should be near the end of that. Auto’s are going to take a similar slide to housing many years ago, and we’re not going to see auto’s turn out for a long time so if General Motors has not paid us back now, they’re not going to pay us back two or three years from now.
SUSCAN OCHS: Absolutely, it’s the same debate that’s going on in Europe. It’s austerity versus growth. You’ve got to spend a little bit of money to get some revenue to get those sales juiced again, and GM is still the number one auto maker in China and if you’re looking for growth that’s a place I’d place my bets.
JONAS MAX FERRIS: First of all we have the stock go up like we did the other day, we’re going to get our money back. At fifty dollars a share we’re pretty much going to get our money back just on that alone.
TOBIN SMITH: The big issue is I’m not going to play democratic expert or advertising guru like Gary B is, I’m just going to say this. The last American company that sponsored Manchester United was AIG. Okay, so I rest my case.
GARY B. SMITH: Toyota (TM)
HARRY DENT: (SH)
JONAS MAX FERRIS: Facebook (FB)
TOBIN SMITH: McDonald’s (MCD)