WASHINGTON, April 20, 2016 – The Obama administration’s myth of an impressive, Democrat-led economic recovery including loads of high-paying middle-class-supporting jobs took another blow Tuesday when tech manufacturing giant Intel (symbol: INTC) announced, after the closing bell, that it would soon be trimming a whopping 11 percent of its employees, some 12,000 jobs in all.
The high-tech creator and manufacturer of microprocessors for PCs and many other devices, which has offices and manufacturing plants located across the globe, didn’t provide precise details concerning when or where the job cuts would occur. But it’s certain that a substantial number of the company’s generally high-wage jobs will be slashed in the U.S.
With employee costs relentlessly rising in this country, due not to nonexistent wage increases but instead to increased government regulation and rising per-employee expenses largely stemming from Obamacare, the general tendency in American industries over the last several years has been to cut American jobs, either outsourcing them abroad or replacing workers with robots and robotics when feasible.
According to CNBC, “Most employees affected by the restructuring will be notified over the next 60 days, something that’s not been taken lightly, executives told analysts on an earnings call. The technology company also said the chief financial officer Stacy Smith would leave his post to lead sales.
“‘We know that [this restructuring] is a very difficult thing, we know that there will be employees that are impacted by this and so it was a tough decision, but I think it’s the right decision,’ Smith told CNBC’s ‘Closing Bell’ Tuesday. ‘We want to be able to have the conversation with the employees and we will roll that out more publicly over the coming weeks and months.’”
Having been laid off several times during his own mostly tech-based career, BTW, the Maven always enjoys the phony “compassion” publicly expressed by grossly overpaid corporate management toward employees whose livelihoods are being destroyed largely by that corporate management’s lack of foresight with regard to business trends and R&D.
In this case, the “conversation with the employees” will go something like this, particularly in Techworld: “Nothing personal, Joe, but here’s your pink slip. Box up your personal items, and these guards will escort you out of the building. Best of luck, and have a nice day.”
Ironically, Intel also reported Q1 earnings that handily beat estimates. The company earned 54 cents per share on $13.8B in adjusted sales, vs. combined analyst estimates of 48 cents and $13.83B. In line with an interesting corporate trend, Intel’s reported numbers were “non-GAAP,” a phenomenon explained more fully by ETF Digest’s Dave Fry in his April 19 market recap.
In short, GAAP numbers are those generated by “Generally Accepted Accounting Practices.” Hence the acronym. Non-GAAP numbers, to oversimplify somewhat, use little accounting tricks internally to massage corporate numbers for public reporting purposes.
In recent years, this subtle and difficult-for-the-layman-to-understand accounting legerdemain has been deployed to goose corporate numbers slightly to the upside. Combined with share buybacks, which allow effectively declining per-share earnings to look like earnings increases when divided against fewer and fewer shares, it’s just another way the public gets deceived, even as it reinforces the Obama administration’s ongoing fairy tale of a robust economic recovery.
Not surprisingly, INTC looks to drop some 2 to 3 percent after the Wednesday morning bell. Anticipation of Intel’s news might also have partially been to blame for yesterday’s miserable performance of tech stocks in the more exclusive and tech-oriented S&P 100 index as well as the tech-heavy NASDAQ.
After an inexplicable price pop Tuesday in the price of both Brent and West Texas Intermediate crude, both are backtracking a bit in Wednesday futures, down 58 cents and 79 cents respectively at 8:25 a.m. EDT. Brent currently hovers around $43.49 bbl., while WTI is about $40.34 bbl.
As for stocks themselves, pre-market Dow futures are close to flatline at 8:25, likely due to Dow components like IBM (which recently reported poor numbers) and, of course, Intel. The S&P 500 and the NASDAQ are doing somewhat better, futures-wise. But it looks like a fairly flat opening Wednesday, after which anything goes, which is par for the course these days.
Today’s trading tips
We’re still holding fire. Markets are trying to break through longtime tops as bulls attempt to drive us to a new, higher trading range. But those tops were barely penetrated yesterday, so today’s and tomorrow’s trading action could give us a better picture as to where we might be going next.
We’ll hold onto our existing portfolios for now and don’t anticipate any moves today, at least thus far. Throughout the Obama administration’s two spirit-crushing terms, we’ve generally found that buying on really bad market days and selling on irrationally exuberant days tends to be the best policy.
Thus far, Wednesday looks tepid and iffy. So rather than make a mistake, we’ll continue to hold our approximately one-third position in cash, waiting for that trumpet call to head for the stock bargain bin.