Doom and Gloom - All About Jobs

More doom and gloom from Barron's:

A tally by the International Labor Organization shows the world will have to add 80 million jobs over 2012 and 2013 just to get back to where employment was in 2007. The reckoning is that the developed nations need to generate 27.2 million jobs in the next two years to return to normal. But the likelihood is that only 2.5 million will materialize, or a woefully shocking 25 million fewer than necessary.

As for the developing nations, even though they've been growing somewhat more aggressively than their more developed counterparts, their employment prospects aren't exactly coruscating, either. They'll have something in the neighborhood of 53 million slots to fill in the next couple of years, but the projection is for the addition of 38 million jobs, or 15 million shy of that mark.

Joseph Quinlan, chief market strategist of U.S. Trust offers this commentary:

"millions of dissatisfied and idle workers are a combustible political-economic variable that will keep politicians and investors on edge for the foreseeable future. Nothing saps the confidence or the animal spirits of consumers, businesses and investors more than the ugly images of rioters in the streets."


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Quote: Hot Peppers

Heard today:

"As my grandpa used to say, that's the thing about a good hot pepper. You get to enjoy it three times."


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Austerity Measures

From Barron's:

Albert Edwards, head of Societe Generale's strategy team, passes along this observation from the bank's interest-rate group:
"As an example of how long it could take to work through a massive austerity program, it was only in 2010 that Germany made the last payment required by the Treaty of Versailles from 1919, which called for reparations of what would be the equivalent of €325bn in today's currency. Back then, the treaty was not particularly popular with the German population [not unlike the current reaction of Greek citizens to Greece's austerity program]. Following the treaty, the German parliamentary republic [the so-called Weimar Republic] fell into a massive crisis and disintegrated quickly. The rest is history. One of the lessons learned is that a nation can only be pushed so far and positive incentives need to be set to guarantee cooperation. After World War II, a different strategy was applied with the Marshall Plan."


Markets. Business. Life. by LoneRngr (screen name) is licensed under a Creative Commons Attribution 2.5 Canada License. Based on a work at marketsbusinesslife.blogspot.com.Permissions beyond the scope of this license may be available at http://marketsbusinesslife.blogspot.com/.

The Case of Sino-Forest

It has been a few days now since the Sino-Forest "take-down" and we can conclude a few interesting things. Certainly the report hit at the heart of investors' fears over China companies, and despite the sensational language contained enough validity to motivate people to act (by selling shares). I personally think that the timing was everything, as the report was released into a market that was already weak, thus allowing the obscure firm, Muddy Waters, to move markets. Where do we go from here? I think that this will prompt more attacks by short sellers, given how profitable this operation was to date. Ultimately this is good for the markets, as tough as it is for the company under scrutiny. Dissenting opinions encourage discussion, and in this case, forced the company to disclose GPS co-ordinates and proof of ownership for facilities visited. This is one of those rare, market defining moments that will forever change the way people do business. Whether it proves to be a fraud or not (I think it is highly unlikely that the entire business is a fraud, even though there may later prove to be some exaggeration along the way), investors will learn to be dissenting and always question what is put in front of them. Research firms will be scrutinized (perhaps registered?) to determine legitimacy going forward. Muddy Waters may have picked the wrong firm to target, as with a billion dollars in cash one can hire a lot of lawyers. Incidentally, if the shares outstanding are to be trusted (likely, since it's a Canadian transfer agent), and the cash is to be trusted (likely, since this is under intense scrutiny and held in international banks), then $1bn divided by ~250mm shares outstanding is ~$4/share in cash, plus value for the business. It's a shame that the markets take a shoot first, ask questions later approach. (whatever happened to innocent until proven guilty?) It makes for interesting viewing to say the least - I only wish I was making money one way or another! (short or long!)

Disclosure: no positions



Markets. Business. Life. by LoneRngr (screen name) is licensed under a Creative Commons Attribution 2.5 Canada License. Based on a work at marketsbusinesslife.blogspot.com.Permissions beyond the scope of this license may be available at http://marketsbusinesslife.blogspot.com/.