Dow Jones is up

[heironymouspasparagus]

I don' t think the day to day Dow means very much, but longer trends mean everything.  And the trend has been very good.

I kind of feel like the good results we are seeing for the last few years are in part due to the original general stimulus - a little something done to help us, but even more due to the fact that he stopped doing the things that previous regimes were doing to hurt us.  That right there goes a long way toward helping.

Similar to what happened when Billy Bob was around - he was unable to do much to hurt us, so we did very well.

Even with the litany of things I don't like about Obama, he is still better than the previous and most of the current list of pretenders, er, uh, contenders....

[TulsaRufnex]

[we vs us]

That's some solid Helvetica.

[Gaspar]

Profits are way up.  President Obama has turned out to be a very Wall Street friendly president.  There is a much narrower competitive landscape.  Thousands of small companies continue to vanish or be purchased.  This leaves the larger players, the ones traded, in a far better position to direct capital away from marketing and R&D and still maintain impressive revenue increases.  Additionally, the number of banks is also diminished, and those that remain are more than happy to lend to the top 30 industrial companies instead of taking the gamble on a startup.

In the last few months we have watched our 3 largest competitors close down shop or in one case sell to a conglomerate who gutted their product line.  We only have one direct competitor now, where we used to have 5 or 6 a few years ago.  Our profits are way up, but not because our customers are buying more.  They are way up because we have far less competition.

The threat level companies face from emerging competition is very low right now.  Employees are cheap.  Even highly skilled and pedigreed employees can be acquired for a fraction of their typical asking wage.  Contract work is also very cheap, and attractive because it offers an out from the uncertainty of new healthcare regulation.  We've contracted 3 new developers and only hired one.  What we used to pay by the hour for contract development is almost half.

Watching the industrial indexes (DOW)  is not an accurate indicator of economic growth, it is an indicator of profit among around 30 traded companies, and the confidence of their creditors.  Most of us have skin in that game, and are very happy when the market rises because we see our investments rise.  The actual money in our pockets is very rarely affected, unless our primary income is as a trader or big banker.

I am thrilled that the market is up.  I almost doubled my assets over the last 3 years through the purchase and sale of gold.  I am back in the market and well diversified in many of the same companies I used to invest in, but I am also aware of the volatility of the market right now.  Even the big companies are like a pack of chihuahuas, any loud sound, and they scatter in every direction and pee the rug.

[Townsend]

Anybody read all of that?^^^

[Conan71]

Actually I did, and it's a great layman's analysis of why the market is up and what is becoming the permanent landscape of American jobs.  We are going to have to get used to the idea that there will be fewer jobs and lower wages for those competing to get jobs.

[Gaspar]

Actually I did, and it's a great layman's analysis of why the market is up and what is becoming the permanent landscape of American jobs.  We are going to have to get used to the idea that there will be fewer jobs and lower wages for those competing to get jobs.

Also remember that higher energy costs are also going to make entry and emergence of new businesses more prohibitive.  The big players aren't completely insulated from this, but they have the ability to pass 100% of that cost to the consumer.  A luxury that in many cases the smaller business man does not possess and remain price competitive.

We are living a Soros/Buffett dream.  Far less of those pesky startups and IPOs to compete with.  It's a Rolls-Royce market.

[dbacks fan]

Anybody read all of that?^^^

I did as well, and if you look at what drove the market to some degree yesterday was the report on the sress test of the the banks and that was led by a rise in JP Morgan/Chase IIRC. Citigroup took a hit because they don't have the required 5% reserve capital (they have 4.3% I think I heard) so people thinking that the banks are on good ground went that direction. Just my $.02 on why is that the banks were given an infusion of capital during the meltdown, and they have held on to the money and are not loaning to businesses and individuals so they have cash reserves and with the bank to bank interest rates at near zero they have little payout in interest.

[Gaspar]

I did as well, and if you look at what drove the market to some degree yesterday was the report on the sress test of the the banks and that was led by a rise in JP Morgan/Chase IIRC. Citigroup took a hit because they don't have the required 5% reserve capital (they have 4.3% I think I heard) so people thinking that the banks are on good ground went that direction. Just my $.02 on why is that the banks were given an infusion of capital during the meltdown, and they have held on to the money and are not loaning to businesses and individuals so they have cash reserves and with the bank to bank interest rates at near zero they have little payout in interest.

They also still have the government incentive to hold those reserves.  I think it's something like 1/4 of a point.  That's guaranteed revenue for doing nothing. A bank with significant reserve can sit back, make a healthy profit and pay big bonuses without even. . .well. . .being a bank. 

[Gaspar]

Yep, I was right.  It's still there.  .25% bailout cash for not lifting a finger to lend.  Freekin sweet deal.
http://articles.businessinsider.com/2012-03-12/news/31146859_1_financial-crisis-banks-lending-money

[heironymouspasparagus]

Anybody read all of that?^^^

Yes.  Covers it all. 

As for permanent landscape, Conan, I would say it is permanent at least until the next big change.  My generation (boomers) are dropping like flies, so as we die out, the landscape will change again.  Maybe as soon as 5 or 10 years.  Maybe longer. 

[we vs us]

I agree by and large, too.  I especially feel that the major indices don't have a particularly strong connection to the economy at large any more (if they ever really did), and can't be used as more than a coincidental gauge of health.  What they say to me is that large publicly traded companies are making strong profits and sharing them with shareholders.  It's only a comment on (un)employment, supply and demand, and energy pricing insofar as they relate to $$ flowthrough to investors.  If any and all of these possible negatives are minimized and profit doesn't suffer, then they don't show up on the indices.  Or at least not significantly.

Regarding small business attrition:  that's what happens during all downturns.  The weak are weeded out and the strong consolidate their positions.  To varying degrees, obviously, but that's the gist.  Congrats, Gassy, if you're still standing.  That means that as the recovery gets rolling you'll be in the catbird seat.  

[heironymouspasparagus]

I agree by and large, too.  I especially feel that the major indices don't have a particularly strong connection to the economy at large any more (if they ever really did), and can't be used as more than a coincidental gauge of health.  What they say to me is that large publicly traded companies are making strong profits and sharing them with shareholders.  It's only a comment on (un)employment, supply and demand, and energy pricing insofar as they relate to $$ flowthrough to investors.  If any and all of these possible negatives are minimized and profit doesn't suffer, then they don't show up on the indices.  Or at least not significantly.

Regarding small business attrition:  that's what happens during all downturns.  The weak are weeded out and the strong consolidate their positions.  To varying degrees, obviously, but that's the gist.  Congrats, Gassy, if you're still standing.  That means that as the recovery gets rolling you'll be in the catbird seat.  

Some parts of my company benefited a great deal with the fallout of the small automotive suppliers a couple years ago.  Bought some and saw a few go away.

[Conan71]

The industry I work in has been dominated by mom & pops.  The largest amongst sales and service organizations is maybe 100 employees, most common is a workforce of 20 to 30.  Not so much a matter of the weaker dying out or being bought out amongst our peers, it's more an issue of lack of succession, as most of our peer businesses have been family-owned and operated.  My boss is a fourth generation boiler maker.  His grandfather started in the industry back in the late 1800's.  That's a common thread in our peer group.

The gist of what I'm seeing across the U.S. in my industry: Grandpa started the company back in the 1940's, dad came into the business built it, now he's retired or retiring, and the third generation is running the business.  His kids went to college, they are working on the coasts and have no interest in mechanical contracting nor commercial heating and cooling sales & engineering.  There's no one in the family to succeed the third generation.  Third generation has discovered the Florida Keys and figures he could live on $3 to 10 million for the rest of his life.  Conglomerates which started as one or two family-owned businesses merging are now consuming more and more of the family type operations.

We just had the best year on record for our company. I've managed to re-direct the focus of our business as trends change and being able to detect where we can find the sort of projects we want.  We also push design/build type projects, where other companies just want to sell equipment.  We've also had some customers find us out of the blue as I hear from some of our newer customers that they are leery of larger conglomerates as it seems to have raised the cost of doing business for them.  

Koch/John Zink has bought several of the major players in the combustion industry in the last few years.  That's limited competition and led to less price competition.  We can't really match technology on the largest end of that product spectrum, but we can be way competitive in the middle and lower end.  In other words, there are customers who will have to deal with a company like John Zink, Zeeco, or Calidus (Honeywell) out of project necessity as the vendors we represent don't bother with that market.  

[nathanm]

Actually I did, and it's a great layman's analysis of why the market is up and what is becoming the permanent landscape of American jobs.  We are going to have to get used to the idea that there will be fewer jobs and lower wages for those competing to get jobs.

Yes, the sky was also falling in 1994.

I don't disagree with the facts, obviously, but it's pretty clearly what happens in/after every recession. The little guys will almost always have a harder time finding financing than the huge established players and so they're a lot more susceptible to the ebb and flow of the economy. It's part of that creative destruction that capitalism brings us.