From Mark Hulbert at MarketWatch.com:
Is it a stock market, or a market of stocks?
The market has been unusually selective of late, with an abnormally large percentage of stocks hitting new 52-week lows even as the S&P 500 was itself recording new highs.
At first glance, that would suggest that stock picking is more important than ever. Not so, according to several academic researchers.
The typical stock always tends to move in lock step with the overall market, they say. That reality is just being masked by the bull market’s strength.
If they are right, it means you are kidding yourself if you think there are greater-than-normal odds of beating the market when picking individual stocks.
Buying and holding a broad-market index fund remains the best course of action for most investors....
Stocks — at any time and with no warning — could once again begin moving in lock step with the overall market.
As a result, stock selection has no greater odds of success now than at any other time.
And those odds are depressingly low, according to Terrance Odean, a finance professor at the University of California, Berkeley.
Research he and others have conducted, he says, suggests that “less than 1% of individuals who trade frequently can consistently outperform the market through skill."
"Over the long run, the rest would be better off investing in low-cost index funds benchmarked to the broad market.”
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Link: http://www.marketwatch.com/story/forget-stock-picking-stick-with-the-indexes-2013-09-27
Sunday, September 29, 2013
Obama administration killing jobs pointlessly
From the New York Post:
...The Obama administration is prepared to sacrifice your jobs even when it can’t show any benefit to the United States.
The environmental laws of the 1970s aimed to clean up America’s air and waters. They were about curbing local pollution and making the environment better for Americans.
Cutting carbon-dioxide emissions is completely different. Unless the rest of the world joins in, it’s pointless for America to act by itself. Remember, we’re talking about global warming.
Acting alone, the sacrifice of blue-collar jobs is entirely about political symbolism and appeasing wealthy green activists.
...And without an effective international agreement, there are no benefits. Any cuts in emissions from the EPA’s war on coal will be outweighed by the fast-growing carbon footprints of developing nations.
...Today, even as Obama’s EPA starts to shut down US coal plants, China is building around 40 coal-fired power plants a year. Coal provides India with over half its electricity. Even green Germany is burning more coal and its emissions of carbon dioxide have been increasing.
President Bill Clinton also aimed to save the planet from global warming — but he was pragmatic. His efforts were in the context of the Kyoto Protocol, which US negotiators crafted with escape hatches so the United States could buy its way out if the “solution” threatened the economy.
By contrast, Obama is acting unilaterally when the prospects of a global accord to cap emissions are as distant as ever.
Politically, the president can afford the pain. He has fought his last election, so is not directly threatened by the economic sacrifice he wants Americans to make.
But the effect of the EPA regulations may well be to ensure that many others in his party are also enjoying their final term in elective office when they can’t explain why Americans should lose their jobs for a cause that makes no sense.
----
Link: http://nypost.com/2013/09/26/obama-administration-killing-jobs-pointlessly/
...The Obama administration is prepared to sacrifice your jobs even when it can’t show any benefit to the United States.
The environmental laws of the 1970s aimed to clean up America’s air and waters. They were about curbing local pollution and making the environment better for Americans.
Cutting carbon-dioxide emissions is completely different. Unless the rest of the world joins in, it’s pointless for America to act by itself. Remember, we’re talking about global warming.
Acting alone, the sacrifice of blue-collar jobs is entirely about political symbolism and appeasing wealthy green activists.
...And without an effective international agreement, there are no benefits. Any cuts in emissions from the EPA’s war on coal will be outweighed by the fast-growing carbon footprints of developing nations.
...Today, even as Obama’s EPA starts to shut down US coal plants, China is building around 40 coal-fired power plants a year. Coal provides India with over half its electricity. Even green Germany is burning more coal and its emissions of carbon dioxide have been increasing.
President Bill Clinton also aimed to save the planet from global warming — but he was pragmatic. His efforts were in the context of the Kyoto Protocol, which US negotiators crafted with escape hatches so the United States could buy its way out if the “solution” threatened the economy.
By contrast, Obama is acting unilaterally when the prospects of a global accord to cap emissions are as distant as ever.
Politically, the president can afford the pain. He has fought his last election, so is not directly threatened by the economic sacrifice he wants Americans to make.
But the effect of the EPA regulations may well be to ensure that many others in his party are also enjoying their final term in elective office when they can’t explain why Americans should lose their jobs for a cause that makes no sense.
----
Link: http://nypost.com/2013/09/26/obama-administration-killing-jobs-pointlessly/
Saturday, September 21, 2013
Washington Post: U.S. disability rolls swell in a rough economy
From the Washington Post online:
The fast expansion of disability ... is part of a national trend that has seen the number of former workers receiving benefits soar from just over 5 million to 8.8 million between 2000 and 2012. An additional 2.1 million dependent children and spouses also receive benefits.
The crush of new recipients is putting unsustainable financial pressure on the program. Federal officials project that the program will exhaust its trust fund by 2016 — 20 years before the trust fund that supports Social Security’s old-age benefits is projected to run dry.
The growth of the disability rolls has accelerated since the recession hit in 2007. As the labor market tightened, workers with disabilities that employers previously accommodated on the job — painful hips, mental disorders, weak hearts — were often the first to go. Finding new work often proved difficult, causing many to turn to the disability rolls for support.
The migration of so many people from work to the disability rolls is raising concern among lawmakers in Congress that the program is being stretched beyond its original intent of providing a safety net for former workers whose medical problems make them unable to work.
Last week, the Government Accountability Office found that the program made $1.3 billion in potentially improper payments to people who had jobs when they were supposedly disabled. The allegedly improper payments represent less than 1 percent of disability payments....
----
Link: http://www.washingtonpost.com/business/economy/us-disability-rolls-swell-in-a-rough-economy/2013/09/20/
The fast expansion of disability ... is part of a national trend that has seen the number of former workers receiving benefits soar from just over 5 million to 8.8 million between 2000 and 2012. An additional 2.1 million dependent children and spouses also receive benefits.
The crush of new recipients is putting unsustainable financial pressure on the program. Federal officials project that the program will exhaust its trust fund by 2016 — 20 years before the trust fund that supports Social Security’s old-age benefits is projected to run dry.
The growth of the disability rolls has accelerated since the recession hit in 2007. As the labor market tightened, workers with disabilities that employers previously accommodated on the job — painful hips, mental disorders, weak hearts — were often the first to go. Finding new work often proved difficult, causing many to turn to the disability rolls for support.
The migration of so many people from work to the disability rolls is raising concern among lawmakers in Congress that the program is being stretched beyond its original intent of providing a safety net for former workers whose medical problems make them unable to work.
Last week, the Government Accountability Office found that the program made $1.3 billion in potentially improper payments to people who had jobs when they were supposedly disabled. The allegedly improper payments represent less than 1 percent of disability payments....
----
Link: http://www.washingtonpost.com/business/economy/us-disability-rolls-swell-in-a-rough-economy/2013/09/20/
Saturday, September 14, 2013
Job Security Never Better, but that's Bad News
From Donald Luskin writing for Investors Business Daily:
When is job security a bad thing? Right now.
Believe it or not, for all the scare-mongering about downsizing, outsourcing and Walmartizing, job security has never been stronger. But all it really indicates is that the U.S. labor market is the least dynamic it's ever been.
To be sure, it's counterintuitive that job security is so strong when 11.3 million Americans are still officially unemployed — 3.7 million more than at the peak of the last business cycle expansion in 2007. But it's true.
Today an employed person faces only a 2% probability of losing his job in a given month, according to data from the Department of Labor. That probability has never been lower.
But job security for the employed doesn't help the unemployed.
Today an unemployed person enjoys only a 26% probability of becoming employed in a given month. That's some improvement over the horrifying 19% probability the jobless faced at the worst of the Great Recession. But it's now more than four years since that recession officially ended.
At this stage in the previous two expansions, an unemployed person had at least a 40% chance of getting work. In earlier expansions it was even better.
The labor market is frozen now, with joblessness just as secure as employment. Yes, today you are less likely to lose your job than at any time since records started being kept in 1948. But if you don't have a job, you're very unlikely to get one.
In one sense it's a vicious circle. When it is so difficult to find a job, no one will risk leaving the job he has. And with no one willing to leave his job, there are fewer openings to accommodate the unemployed.
A healthy labor market is one in which there is a dynamic interplay of employment and unemployment, where human capital rapidly transfers itself to where it is most valuable in a classic process of creative destruction.
But this is a vicious circle we can break any time we wish. All we have to do is reverse the policy errors that exacerbate and prolong it by destroying supply-side incentives — for those who supply their labor, and for those who supply the jobs.
On the labor-supply side, of the 11.3 million unemployed, 1.5 million are receiving special extended unemployment benefits. While surely not princely, these benefits defer from months to years the crunch-time that forces recipients to seek taxable work rather than enjoy tax-free leisure.
The end in January of the two-year "holiday" exempting half the employee share of Social Security taxes was a brutal tax hike on every working American. For the median earner, it's a hit of more than 2% of take-home pay. It's another disincentive for the unemployed to seek taxable work.
At the same time, on the job-supply side, the hike in January in the tax rate on dividends and capital gains undermines the after-tax rewards that compensate capitalists for taking the risks that lead to job creation.
ObamaCare — and its arbitrary on-again off-again implementation — adds both costs and uncertainty to employment, especially for smaller businesses that historically have accounted for a substantial majority of new jobs.
The Dodd-Frank bill, and the new Consumer Financial Protection Bureau it spawned, promise years of uncertainty about how credit intermediation will be regulated, exerting a chilling effect on the capital markets that finance job creation.
Federal Reserve policy is exerting its own chilling effects — notwithstanding Ben Bernanke's repeated claims that the labor market is improving. The Fed's unconventional operations may be supporting risk-taking in securities markets, but they have done little to restore commercial and industrial bank lending that directly finance job creation, especially among small businesses.
Now uncertain and loudly debated prospects for unwinding those operations imply a risky trial-and-error process by an institution known for error even in the best of times.
The most tragic drag on the dynamism of the labor market is energy regulation, which is inhibiting the rapid adoption and proliferation of revolutionary new shale oil and gas extraction technologies.
It's not just a matter of the thousands of semi-skilled jobs that go uncreated in the energy sector itself, while the Obama administration wastes taxpayer money on "clean energy" boondoggles like Solyndra and delays construction of the Keystone pipeline.
Today growth of all kinds — including job creation — is inhibited by oil and gasoline prices, which on average over the last 10 years have been the highest in history, even on an inflation-adjusted basis. Unlocking America's shale wealth could return energy prices to the low growth-conducive levels enjoyed throughout most of the booming 1980s and 1990s.
So let's not take false comfort from the recent headlines, like those about new claims for jobless benefits stabilizing at pre-recession levels. The last thing we should want now is for the labor market to stabilize, with 11.3 million still unemployed, and no indication they will get employed anytime soon.
It's time to stop paying people not to work, taxing them more when they do and creating tax and regulatory barriers to the risk-taking and innovation that make job creation possible.
• Luskin is chief investment officer of Trend Macrolytics LLC, a strategic consultant to institutional investors.
----
Link: http://news.investors.com/ibd-editorials-viewpoint/091313-671007-labor-market-is-frozen-unemployed-cant-find-work.htm
When is job security a bad thing? Right now.
Believe it or not, for all the scare-mongering about downsizing, outsourcing and Walmartizing, job security has never been stronger. But all it really indicates is that the U.S. labor market is the least dynamic it's ever been.
To be sure, it's counterintuitive that job security is so strong when 11.3 million Americans are still officially unemployed — 3.7 million more than at the peak of the last business cycle expansion in 2007. But it's true.
Today an employed person faces only a 2% probability of losing his job in a given month, according to data from the Department of Labor. That probability has never been lower.
But job security for the employed doesn't help the unemployed.
Today an unemployed person enjoys only a 26% probability of becoming employed in a given month. That's some improvement over the horrifying 19% probability the jobless faced at the worst of the Great Recession. But it's now more than four years since that recession officially ended.
At this stage in the previous two expansions, an unemployed person had at least a 40% chance of getting work. In earlier expansions it was even better.
The labor market is frozen now, with joblessness just as secure as employment. Yes, today you are less likely to lose your job than at any time since records started being kept in 1948. But if you don't have a job, you're very unlikely to get one.
In one sense it's a vicious circle. When it is so difficult to find a job, no one will risk leaving the job he has. And with no one willing to leave his job, there are fewer openings to accommodate the unemployed.
A healthy labor market is one in which there is a dynamic interplay of employment and unemployment, where human capital rapidly transfers itself to where it is most valuable in a classic process of creative destruction.
But this is a vicious circle we can break any time we wish. All we have to do is reverse the policy errors that exacerbate and prolong it by destroying supply-side incentives — for those who supply their labor, and for those who supply the jobs.
On the labor-supply side, of the 11.3 million unemployed, 1.5 million are receiving special extended unemployment benefits. While surely not princely, these benefits defer from months to years the crunch-time that forces recipients to seek taxable work rather than enjoy tax-free leisure.
The end in January of the two-year "holiday" exempting half the employee share of Social Security taxes was a brutal tax hike on every working American. For the median earner, it's a hit of more than 2% of take-home pay. It's another disincentive for the unemployed to seek taxable work.
At the same time, on the job-supply side, the hike in January in the tax rate on dividends and capital gains undermines the after-tax rewards that compensate capitalists for taking the risks that lead to job creation.
ObamaCare — and its arbitrary on-again off-again implementation — adds both costs and uncertainty to employment, especially for smaller businesses that historically have accounted for a substantial majority of new jobs.
The Dodd-Frank bill, and the new Consumer Financial Protection Bureau it spawned, promise years of uncertainty about how credit intermediation will be regulated, exerting a chilling effect on the capital markets that finance job creation.
Federal Reserve policy is exerting its own chilling effects — notwithstanding Ben Bernanke's repeated claims that the labor market is improving. The Fed's unconventional operations may be supporting risk-taking in securities markets, but they have done little to restore commercial and industrial bank lending that directly finance job creation, especially among small businesses.
Now uncertain and loudly debated prospects for unwinding those operations imply a risky trial-and-error process by an institution known for error even in the best of times.
The most tragic drag on the dynamism of the labor market is energy regulation, which is inhibiting the rapid adoption and proliferation of revolutionary new shale oil and gas extraction technologies.
It's not just a matter of the thousands of semi-skilled jobs that go uncreated in the energy sector itself, while the Obama administration wastes taxpayer money on "clean energy" boondoggles like Solyndra and delays construction of the Keystone pipeline.
Today growth of all kinds — including job creation — is inhibited by oil and gasoline prices, which on average over the last 10 years have been the highest in history, even on an inflation-adjusted basis. Unlocking America's shale wealth could return energy prices to the low growth-conducive levels enjoyed throughout most of the booming 1980s and 1990s.
So let's not take false comfort from the recent headlines, like those about new claims for jobless benefits stabilizing at pre-recession levels. The last thing we should want now is for the labor market to stabilize, with 11.3 million still unemployed, and no indication they will get employed anytime soon.
It's time to stop paying people not to work, taxing them more when they do and creating tax and regulatory barriers to the risk-taking and innovation that make job creation possible.
• Luskin is chief investment officer of Trend Macrolytics LLC, a strategic consultant to institutional investors.
----
Link: http://news.investors.com/ibd-editorials-viewpoint/091313-671007-labor-market-is-frozen-unemployed-cant-find-work.htm
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