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A Real Morale Booster on Jobs?Whiskey & Gunpowder Reuters is reporting "HP to Slash Work Force by About 10%": " 'They've gotten themselves in fighting shape here,' said Caris & Co. analyst Mark Stahlman, adding that it dispels uncertainty, which had been frustrating for some in HP's engineering culture. 'I think this is going to give a big boost to morale internally,' he said." Enquiring minds might be asking some of the following questions: 1. When was the last time firing
14,500 people boosted morale? Perhaps HP was jealous of the big morale boost at IBM and Sanyo. IBM is cutting about 14,000 jobs, mainly in Europe. Sanyo announced layoffs of 14,000 jobs earlier this month. Is 14,000 the magic number? Reports like these are bound to be good news for Wal-Mart: 1. There are another 14,500
potential Wal-Mart greeters searching for jobs. Seriously, mergers, outsourcing, and other consolidations are costing the United States hundreds of thousands of jobs. Massive amounts of announced layoffs in the banking and telecom industries will start kicking in the second half of the year. Eventually, this will spill over and affect housing just as it has in the United Kingdom and Australia. Some consumer discretionary spending is already taking a huge hit. It will be affecting even more jobs as we go forward. Let's Take a Look at the RV GlutCoachmen will eliminate 12.5% of its salaried positions and 10% of its hourly work force, according to this article in the South Bend Tribune: "The announcement marks a sharp departure from rosy projections offered at the start of the year by the Elkhart-based recreational vehicle and systems-built home manufacturer. "'The RV industry has been pretty slow and the housing market in the Midwest has been slow,' said Jeff Tryka, Coachmen's director of investor relations. "Michiana RV, which calls itself the largest Midwest dealer of Coachmen recreational vehicles, has an unusually high inventory. High dealer inventories forced Coachmen to implement a cost-cutting program that eliminated more than 10% of the company's work force. "'This is a dip, and it was predicted,' [general manager Lenny] Martynowicz said. 'But did anybody listen? No, everybody built more plants, and dealers took on more inventory.' "'We're confident the market will turn around,' Tryka said." I am very confident that it won't. Caddman on The Motley Fool had this commentary to offer: "RVs are one of the first discretionary items to not buy when reducing spending. Notice how movie and concert ticket sales are also down this summer. Totally discretionary..." I agree. Let's see how discretionary
spending holds up in the second half of the year. I bet not well.
Let's now look ahead and see what data there are to support home renovation jobs. I See a Renovators' Nightmare Conventional wisdom says that trade jobs related to housing will remain strong even if new home construction takes a tumble. I guess the theory is that people will have to maintain their houses and will be putting more into them, as opposed to buying new houses. These things are hard to debate with the "housing will never die" crowd, so sometimes you just have to wait for a practical example. I just found one. The Sydney Morning Herald is reporting a "Renovators' Nightmare for Builders": "Sydney's infatuation with home improvements has abruptly ended, as evidence grows that the end of the housing boom is hitting the city's economy. "The value of home renovations in NSW has plunged $120 million in just three months, or more than 20% -- the largest fall in dollar terms since the Bureau of Statistics began collecting records in 1974. "The number of home building starts in the state also fell, as did the total value of building work in the March quarter. "Architects, seen as bellwethers for the building industry and the broader economy, said yesterday that their workloads had held up nationally but fallen by a third in Sydney since the peak of the boom two years ago." We have already seen consumer spending and home sales drop like a rock in both the United Kingdom and Australia. One argument currently floating around in the United States is that we aren't making any more land. The last time I checked, they were not making land in London anymore either. Japan has not made any land recently, but that did not stop prices from falling for 18 consecutive years. The United Kingdom has just about finished year one of a housing bust, and Australia is well into year two. Already, U.K. retailers are clamoring for lower interest rates to prop up consumer spending. The first of probably many rates cuts in the United Kingdom is likely in August. I doubt it will do any good. Consumers are just plain tapped out, and job losses are mounting. The U.K. "Consumer Spending Express Train" has left the station. It is now heading south. It may be years before it heads back north. Look for Sydney to lead. I suspect we will soon be hearing about "Renovators' Nightmares" in the United Kingdom, followed by the United States, of course. A liquidity trap is coming your way soon. Meanwhile, back in the United States, consumers merrily go about their business buying homes sight unseen. Check out this article in Newsweek Business: "In the last year Stocker...has also bought rentals in Alabama and Florida; he hopes to buy at least 10 altogether. 'Next year I plan to buy a motorcycle and take a tour of my properties,' he says, since he's never seen any of them." These Johnny-come-latelys accumulating condos and houses sight unseen will soon be in for a rude awakening. Professional investors are for the most part gone, but amateurs are still bidding up properties even with inventories of unsold homes skyrocketing in Boston, California, Las Vegas, and other places. Eighty percent of the condos in Florida are now being sold to "investors." The writing's on the wall, if anyone would bother to stop and read it. Mish, What's the Very Latest in "Creative Morale Boosting"? That is very good question. Thanks for asking. For those that think outsourcing has reached its pinnacle, think again. There are still plenty of ways that prove that anything that can be outsourced will be outsourced. For the very latest in Creative Outsourcing, please take a look at SeaCode, from a Computerworld article "For SeaCode, Offshoring Means 3 Miles off the Coast," sutitled "Founders Promise 'the Price of India With the Proximity of the United States'": "What San Diego-based startup SeaCode Inc. plans to do is nothing if not novel: anchor a cruise ship three miles off the coast of Los Angeles, fill it with up to 600 programmers from around the world, eliminate visa restrictions, and make it easy for customers to visit the site via water taxi. The two men behind the venture -- Roger Green, who describes himself as an IT and outsourcing veteran, and IT consultant David Cook, whose job history includes a stint as a ship captain -- recently discussed their plan in an interview with Computerworld." PAST on my board on Silicon
Investor had this to say: "Ten years ago, while in Washington
State and after observing logs being loaded on an oceangoing
barge, I was told that the logs were destined for a Japanese
factory ship that was located 3 miles at sea, where Japanese
labor would turn the logs into plywood for immediate return to
American markets at American prices. Very profitable way of doing
business." Investment Demand for Gold According to this article in The Economic Times (of India), "It's Official: Indians Simply Love Gold." Let's take a look: "India's share of global gold demand is about 1 1/2 times that of the United States, though its GDP is only 1/20 that of the United States. 'With its high rate of gold consumption, India accounts for 18% of the annual global gold demand, while its share of global GDP on nominal dollar GDP is only 1.6%,' market watchers add. No! The real question is why nearly every analyst is impressed by financial assets in a slowing worldwide economy, enormous debt overhangs, and tremendous overcapacity to boot. That is the real question. Looking ahead, I can't say I blame them. Let's consider some of the choices: "As per World Gold Council estimates, Indian households own about 15,000 tonnes of gold, accounting for about 10% of the worldwide stock. At current market values, gold accounts for 10-15% of the Indian household balance sheet. "The real question is why isn't the average Indian household impressed by financial assets? Analysts say it points toward gaps in broader policy framework, including the government's expenditure mix."
It sure seems to me that they made a reasonable choice. Perhaps it is not the best, but at least it is a reasonable one. Not so, according to the author: "Gold holdings among Indian households at current market value is about 2.5 times the current equity stock holding of $80 billion. While the share of gold in household savings declined during 2000-02 to 5%, it has been on the rise once again during the past two years, and stood at 8-10% during the quarter ended March '05. Gee, let's invest in "productive business assets" so we can add to the worldwide glut of goods that no one really needs. Doesn't anyone see the enormous overcapacity and lack of pricing power in almost all manufactured goods? According to an article by the Australasian Investment Review, China is now the world's fourth largest consumer of gold. However, the article "GOLDEN Moment" by China Daily claims that China is the world's third biggest gold consumer, after India and the United States: "'Consumption on the mainland is expected to maintain the growth momentum this year as a result of China's steady economic growth and bullish gold prices,' says [the World Gold Council's Albert Cheng. "The WGC forecasts that growth in China's total consumption to be around 30-35% in the next five years, with growth in retail investment expected to outstrip institutional investment and jewelry consumption." Gold.org highlights consumer demand trends in individual countries as follows: "But this love for bling bling comes at a pretty steep cost. If instead of investing its annual savings in gold, India were to invest this in productive business assets, its annual GDP growth would be higher by about 0.3-0.4% "'The cumulative GDP value lost by parking $200 billion worth savings over the years in this unproductive asset is huge,' say industry experts. 'With no domestic gold mining, the purchase of gold also means spending precious foreign exchange earnings.'" Asia India
Let's separate out the gold investment figures from the above text and look at year-over-year trends: India +100% It sure seems to me that the United States has a lot of potential catching up to do when it comes to investment demand.
China
Japan
Middle East and Turkey UAE
Saudi Arabia
Turkey
United States and Europe U.S.
Europe
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