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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

Category: Stock market
April 11, 2014 at 10:25 AM

Vote: The tech stock meltdown

The Nasdaq suffered its worst selloff since 2011 on Thursday. It’s down again today. There are a few exceptions: Microsoft is doing OK. But most tech stocks are selling off. As I write, Amazon.com shares are down 1.8 percent. The situation is not limited to tech — markets worldwide suffered a severe collapse overnight — but…

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0 Comments | More in Stock market

January 27, 2014 at 11:08 AM

A world of worry for the stock market

So much for the “economy will improve in 2014 (really!)” stories. The stock market is struggling to avoid another big sell-off today. But bargain hunters are facing the downdraft of jitters over emerging markets. As their stock markets crash and fear gathers about Chinese manufacturing and debt, it will be more difficult to continue the…

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0 Comments | More in Stock market | Topics: Emerging markets, Fed tapering

December 4, 2013 at 10:55 AM

Explaining the Obama market rally

A reader writes, under the heading: “Care to explain the reasons for the dramatic rise in the stock market indices since 1/01/13?:

Low federal minimum wage? Low minimum wage affects only a very, very small segment of all people employed in this country, and even smaller portion of the number of people casting votes for president in 2012.

Leftist’s goal is something close to equality of outcomes.  Not mathematical equality, but something closer to equality of outcomes.

Are you aware of any instances where machines are being yarded-out in order to make room for more employees? Higher minimum wage advocates are complaining about symptoms, paying no attention to causes of inequality.  The pickle that the (so-called) machinists are in vividly demonstrates what higher wage costs do; drive employment away.  The desire for higher profits on the part of shareholders is a given, and not easily satisfied.

The pickle that the City of Detroit is in can be attributed to a few things, higher employment costs being one of them, street gangs and unbelievable violent crime rates being others. “Rent-seeking” in Detroit was and probably still is rampant. Want to be elected in Detroit?  Promise a fat pension, then face no consequences when unable to deliver 30 years down the road.

The Pension Benefit Guarantee Corporation will not be required to help.

How do you like long dead liberal politicians now?

The assembly line, improved upon by Henry Ford, cut unit labor required to build an automobile by about 90%.

Cutting recruitment and training costs more than made up for increases in hourly labor rates. H. Ford was not a shining example of an altruist.

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June 21, 2013 at 10:34 AM

Vote: Are you prepared for retirement?

This week the National Institute on Retirement Security released a report showing that 90 percent of working-age households aren’t saving enough for retirement. About 45 percent have nothing saved. The result is a retirement savings gap between $6.8 trillion and $14 trillion. For those near retirement, the median retirement account balance is $12,000, and for all households it totals $3,000.

The findings confirm that the American Dream of retiring comfortably after a lifetime of work will be impossible for many. Based on 401(k)–type account and IRA balances alone, some 92 percent of working households do not meet conservative retirement savings targets for their age and income. Even when counting their entire net worth, 65 percent still fall short.

This is not exactly new-news. The baby boomers were the first generation to be forced into 401(k)s instead of pensions, and all too often they were given little schooling about the mechanics or stakes of this dramatic change. The new benefits were hostage to the stock market and the participants were completely on their own. Company matching contributions became more rare. In addition, changes in the economy such as globalization and the decimation of unions left huge portions of the workforce without any job-related retirement benefits at all, even as overall wages were stagnating. Much wealth was lost in the housing crash. This squeeze is worse for younger workers facing lower wages and high college debt. To make matter worse, politicians keep wanting to cut “entitlements,” including Social Security that is essential to senior citizens (it would be better to call them what they are: Earned benefits). And if we’re expected to work until we die, there have to be jobs and employers willing to hire older workers.

In a heavily unequal America, the top 20 percent or so will do fine. What about you? (Honor system: Answer if you are not retired already, having benefited from the middle class at its zenith).

Read on for some of the important stories you might have missed.

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0 Comments | More in Retirement, Stock market, Student loans

April 5, 2013 at 10:00 AM

Vote: Pause or correction in the stock market?

Today’s “disappointing” jobs report shouldn’t be a surprise. Corporations are sitting on record cash, but not using it to add jobs. Most of the gambling in the $600 trillion derivatives market is all about rent-seeking, not creating jobs. Poor earnings and falling wealth for average Americans translates into weaker demand. So does government austerity. As I write, the Dow Jones Industrial Average is down about 110 points and the S&P 500 off about 1 percent. The stock rally has had more to do with abundant money from the Federal Reserve than the underlying condition of the real economy or dangers overseas (the eurozone, Syria, North Korea).

So what happens now?

Read on for the top links of the week and the haiku:

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0 Comments | More in Investing, Stock market

March 19, 2013 at 10:44 AM

The Alpo Generation

The Wall Street Journal reports today, “Workers and employers in the U.S. are bracing for a retirement crisis, even as the stock market sits near highs and the economy shows signs of improvement.” According to a report by the Employee Benefit Research Institute, 57 percent of workers surveyed had less than $25,000 in total household savings and investments (excluding their homes), up from 49 percent with so little in 2008. According to the report, “Retirement savings may be taking a back seat to more immediate financial concerns: Just 2 percent of workers and 4 percent of retirees identify saving or planning for retirement as the most pressing financial issue facing most Americans today. Both workers and retirees are most likely to identify job uncertainty (30 percent of workers and 27 percent of retirees) and making ends meet (12 percent each).” Only 18 percent were very confident they would have a financially secure retirement.

This is only the latest evidence of the challenges facing large numbers of aging Americans. This is the first generation that will retire heavily dependent on the social experiment called 401(k)s — and they’re proving to be a disaster. In 2010, the median household retirement account balance for those between 55 and 64 was only $120,000. And that’s if they have a 401(k) or set up an IRA in an era of diminishing wages and benefits: One third of households don’t have a retirement account of any kind. The average monthly Social Security benefit of $1,230 won’t go far.

The Great Recession destroyed 40 percent of Americans’ personal wealth — unless you’re in the 1 percent — and, as the Washington Post reported:

For the first time since the New Deal, a majority of Americans are headed toward a retirement in which they will be financially worse off than their parents, jeopardizing a long era of improved living standards for the nation’s elderly, according to a growing consensus of new research.

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0 Comments | More in Poverty, Retirement, Stock market, Working America

March 14, 2013 at 10:14 AM

How high can the Dow go?

A trader  works on the floor of the New York Stock Exchange on Wednesday (Photo by  Richard Drew/AP)

A trader works on the floor of the New York Stock Exchange on Wednesday (Photo by Richard Drew/AP)

If the Dow Jones Industrial Average closes higher today, it will mark the longest winning streak since November 1996. We’ve discussed before why the Dow is a highly flawed measure of the overall economy and even the stock market, but it still gets attention. What could possibly go wrong?

1. It’s not a November 1996 economy, when unemployment was low, average Americans were seeing improved wages compared to the declines experienced since the late 1970s and the economy was highly dynamic. If you lost your job one day, you likely had another the next day. NAFTA had not begun its giant sucking sound. China was not in the World Trade Organization, playing by its own rules. The economy was not as financialized as today and banks were still relatively highly regulated. Americans were not nearly as in debt.

2. The market has been seized by lemming mentality and valuations are starting to detach from reality. Sure, some stocks are undervalued, but others are not. Bonds are producing little return, hence the allure of stocks — that could change.

3. Shocks will sink this market in a Wall Street minute. Among the potential black swans: North Korea really does it this time; China’s property bubble pops; growing dissatisfaction with Beijing’s response to pollution and inequality leads to civil unrest; a miscalculation in Asia leads to a hot confrontation between China and Japan (or Vietnam or the Philippines); the eurozone crisis heats up again; the Middle East blows up; Pakistan spins out of control; a terrorist attack.

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