Ominous futures this morning. Are companies 'Going Galt'?

Coal, utilities destroyed. Big layoffs, underemployment on the way.

WASHINGTON, November 13, 2012 – The futures don’t look so hot this morning before the opening bell. As of 8:50 a.m. EST, Dow futures are down nearly 70 points. S&P and NASDAQ futures look pretty much as bad, down nearly 9 and 20 points respectively. 

While yesterday’s action seemed relatively benign, it wasn’t, as lots of sectors were getting hammered but, due to low semi-holiday volume, this wasn’t readily apparent. Our utilities got hit so hard we had to exit via percentage stops, and we’ll probably need to pare back what energy and banking issues we still have today. 

The “fiscal cliff” again is the looming issue on the front burner. Euro-instability doesn’t help, either. But one other thing that’s begun to surface—after the election of course—is the inevitable resumption of the Democrats’ twin pincer movement on American businesses and employees. And those are, should you need a reminder, the Administration’s continuing War on Coal, in the context of its War on Fossil Fuels; and the looming effects of Obamacare on business bottom lines. 

As we’ve already mentioned, utilities are getting smithereened, this in spite of spectacular yields. Prior to this, coal stocks took a beating. All this negative activity is tied in with the War on Coal, waged somewhat by proxy by EPA rulemaking regulators run amok. Although the once burning issue of “global warming” “climate change” has in our view been completely discredited by the academic world’s collective “email-gate,” the Warmists are proceeding ahead anyway toward a utopia where energy is produced by anything but fossil fuels at a cost nobody except the leftist utopian masters can afford. 

This has been throwing increasing numbers of workers out of work in both the coal and utilities industries as dozens of productive coal-burning plants are shuttered. Their employees get pink slips. And likewise, as underutilized coal mines get shut down, their employees get pink slips, too.

In addition, layoff notices are either going out or being prepared to go out in the defense industry (fiscal cliff layoffs on the way) and a variety of other industries, with the latter due to the punitive mandates of Obamacare, which is forcing huge premium increases on employers—increases that are tough to get out of.

In fact, the only way to escape these costs, which will kill the bottom line and make American products uncompetitive, is to let go of enough employees to steady the bottom line. Businesses are, in their own way, increasingly “Going Galt” by reducing their collective footprint in an economic environment that increasingly fails to reward risk-taking.

An alternative way of dealing with Obamacare’s outrageous costs is to cut workers back to part-time, i.e., less than 30 hours a week. That exempts most employers from the Obamacare mandates, at least for these employees. Wonder how the reduced hours and no health coverage will work out for these employees? Just take a guess. 

Unemployment, underemployment. It’s on the verge of becoming a staple of American life. For Americans who’ve just voted to maintain the status quo, no less. Let’s consign this for now to the “What were they thinking?” department.

Want numbers? Here, at least in part, is the horrific unemployment litany thus far as enumerated in this morning’s Investors Business Daily

“The National Manufacturers Association forecasts 6 million layoffs and an 11% unemployment rate as a result of Obama’s pending tax hikes and regulatory siege. 

“Starting with Pepsi, some 4,000 layoffs have been announced in the wake of the election. 

“Boeing has announced it will lay off 10% of its white collar work force, costing thousands of jobs. Caterpillar is laying off 100 as it shuts a plant in Minnesota.

The coal industry is particularly hard hit and its executives have made clear they believe Obama’s war on coal is responsible. Murray Energy is laying off 54 people at American Coal in Ohio and 102 at Utah American Energy. Teco is laying off 90 in Kentucky. 

“Similarly, medical companies are shedding workers as ObamaCare forces them to pay new taxes. Boston Scientific is laying off 1,400 and moving manufacturing to China. Abbott Labs is laying off 700. Bristol Myers Squibb is letting 480 go. The Center for Hospice and Palliative Care is giving pink slips to 40. St. Jude Medical is laying off 300. CVPH Medical Center is cutting 17.

“And what about the hipster companies thought to be in favor with the Obama administration? 

“Groupon is laying off 600. New Energy is letting go of 40 in Indiana. Career Education is letting 900 walk and closing 23 campuses. Exide Technologies, a recycler, announced Thursday it will pink slip 150 in Pennsylvania. Research In Motion will give 200 in Texas their walking papers…

“The reality is, the re-election of Obama means a punitive environment for the private sector that hasn’t been addressed. Obama’s pretty words aside, it’s no surprise that so many are just leaving — voting with their feet in more ways than one.” 

The effects of this are already being felt in the markets as we’ve just indicated above. According to permabear Marc Faber, “The market is going down because corporate profits will begin to disappoint, the global economy will hardly grow next year or even contract, and that is the reason why stocks, from the highs of September of 1,470 on the S&P, will drop at least 20 percent, in my view.” More hope and change, we’d guess. 

In short, fiscal cliff aside, tectonic shifts in the workplace have been set in motion by both Obamacare and the brownshirts at EPA. Unemployment numbers will start to tick higher once again, perhaps with a brief pause due to seasonal employment in November and December.

Both individuals and companies will begin to experience the benefits of the failed Administration and Congress they’ve inexplicably re-elected. We have to wonder at this point whether voters in this country have entirely forgotten the inevitable links between cause and effect. If so, they’ll soon be finding out. And fiscal cliff or no, the markets already seem to be pointing in this direction. 

Let’s continue to reduce positions and put on or maintain the shorts we discussed at the bottom of yesterday’s column. We continue to live in perilous times and have to adjust our objectives down from making money to preserving capital.

 

Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate. He is currently long IAU, SMN, QID, FAZ, and SH and continues to hold medium term corporate and municipal bonds.

Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.

Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.

References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.

 

Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.

Follow Terry on Twitter @terryp17

 


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Terry Ponick

Now writing on investing, politics, music, movies and theater for the Washington Times Communities, Terry was formerly the longtime music and culture critic for the Washington Times print edition (1994-2009) before moving online with Communities in 2010.  

 

 

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