Tuesday earnings reports okay thus far, although stock buybacks be clouding the picture. IBM reports poor earnings (again) hitting tech as oil and materials jump, confounding pundits.
WASHINGTON, April 19, 2016 – We’ll try to keep things short today since Tuesday’s stock market action has us confused once again, although that’s been par for the course since roughly the beginning of 2015. Stocks opened flat, then jumped significantly, only to sink back into the red in late morning trading. As of 1 p.m. EDT, the Dow and the S&P 500 are up slightly, while the NASDAQ is pinned in the red, off some 30 points as we write this column.
Having an impact on tech was tech giant IBM, which, as has been the usual case lately, posted disappointing quarterly numbers. It beat predicted earnings figures, but it continues to see its gross revenues decline—not exactly a sign of growth.
Other bits of market news, when taken together, give investors a mixed picture.
Builders and pundits alike have been glibly attributing this to a national “labor shortage.” It’s an obvious bid to support any and all of the ruinous amnesty “solutions” every politician except Donald Trump has been spouting lately, which amount to the importation of wage-busting cheap labor, the better to make the rich richer.
Even as arguments rage, the Obama administration relentlessly and unlawfully allows millions of illegal aliens to flood the U.S. Once here, these illegals are carefully being relocated to Republican-dominated districts around the country, the better to transform the U.S., as soon as possible, into a one-party socialist state. It’s an evil, rotten charade. But this alone is not likely the real issue with the housing starts.
The real reason behind sluggish homebuilding could be something more interesting, economically at least. CNBC reports the opinions on this topic by Goldman Sachs analysts in a recent industry report: “‘Economics 101 would suggest that, if labor shortages did in fact exist, upward pressure on wages would be more pronounced and payroll growth would be anemic,’ the report said. ‘Therefore, the evidence from the industry-level employment and wage data does not support the existence of labor shortages in the construction sector…’ Instead they point to delays in permit issuing and land scarcity.”
CNBC cites an additional report:
A survey of 100 builders nationwide by John Burns Real Estate Consulting backs that thesis. They asked about costs that didn’t exist 10 years ago, and found high levels of builder frustration, not just from labor, but from cost overruns stemming from new regulations for house erosion control, energy codes and fire sprinklers. They also cited understaffed planning and permit offices as well as utility company delays.
“New regulations to protect the environment and to shore up local city finances have made it extremely difficult for home builders to build affordable homes,” the Burns analysts wrote. “Now, more than ever, the demand for affordable entry-level housing will need to be met by the resale market, since new homes have become permanently more expensive to build. We were overwhelmed by the reply as well as the builders’ level of frustration.”
So much for the Obama administration’s dedication to the growth of American industry. The growth of Democrat-dominated precincts and congressional districts is clearly more important.
On other fronts, China surprised today by establishing its very own “gold fix,” something that juiced the price of gold Tuesday morning pushing it back up from its Monday-long decline. The Chinese have also announced they’re going to buy plenty of silver, jacking up the price of that metal as well as many other hitherto moribund commodities.
In a moderately related vein, other materials have been getting a boost. And, if you were lucky enough to catch the early interest in the nearly dead American steel sector, you’d already been riding a huge, positive wave as these stocks—particularly the best American steel company, Nucor (symbol: NUE), which has been smokin’ hot.
We’ll skip the trading tips today. Our picks are mostly looking good, but things seem a bit frothy here and we’d like to step back a bit and see where stocks and industry groups are likely to head next.Click here for reuse options!
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