Sorry, Tom, I understood a contradiction in Your 2 statements. Maybe it is a misunderstanding.
1. "it (the stock market brake down) portends better days for retirees on fixed incomes and the average man in the street."
2. "it will hit almost everyone to some extend via their retirement or pension vehicles."
I fully agree with Your 2. statement.
No worries,
Apologies if I misread you.
It is difficult for me to really predict like I used to because I have been away from the really high powered trading side of things for a few years and much has changed. A lot fewer companies are public now, plus you have absurdly low interest rates, a further flight of jobs overseas- and now reaching into accounting, legal and other professional jobs, and trading volumes have been very low until last year. Also the firm landscape has changed- there are LOT fewer registered broker-dealers actively in the equities markets. This alone creates a certain disconnect for me.
Now as to specific examples in brief,
1. Amazon- great results (or relative to the past), CEO richest man in the world, and yet I personally have received a number of items in the mail that are obviously bootlegged, authors are fighting over royalties and there are growing numbers of articles about all of the Amazon workers who are making substandard wages and traveling to meet local demand. Also look at how they have handled their USPS and UPS contracts. Shameful.
2. Apple- the whole point of technological advances (not just tech- but generally) is to create an improved product at a lower price. This is the natural standard. They are turning out products with great frequency, and at a higher cost, and the quality of the hardware is going downhill. I have an iPhone Classic (came out 2 years ago.) The case on the new iPhone I have for work does not even fit together properly and it rattles. It is junk.
3. Real estate- NYC, notably the Upper East Side, investors are buying up property and renewal rates on long term commercial leases are unsustainable. It is not just bad stores going out of business, but also long time grocery stores and restaurants that do a good business but cannot survive when the rent goes up 200% or more. If you go to NYC right now, you will see an astonishing number of vacant commercial spaces. It is worse than 2008 and 2009. Given how leveraged many real estate investment vehicles are, many do not even have the ability to reduce rents to market levels and sustain their debt. For now they are holding out and waiting for a stronger market- but in the mean time stores go out of business.
4. As you many have seen in the news, it is a very bad time for large retail stores- especially in the garment business. But a lot of the smaller boutiques are doing incredibly well. If you watch Kickstarter, a number of companies making $200+ jeans in the US have been able to crowd-fund six figures +. I am seeing this in other industries too- where startups and smaller companies are doing well. The 2008 bailouts disrupted the classic business cycle- but they did not delay its impact.
5. Residential rental real estate- this market has become very unstable. Here in Texas- and notably in Austin and Dallas- I have seen a few upscale complexes change hands many times in recent years. And in some cases, residents find themselves in a real mess- at one place I used to live in Austin they all got eviction notices the DAY the new company took over with the claim they were late on their utilities. It was untrue- the new company had changed utility management firms and there was a dispute over whether the old or new company was supposed to collect the prior month's utilities. They also let the place fall into disrepair- badly. A year later, new owner and things are better. But for now, you never know when someone like Trump's son-in-law is going to take over your apartment complex and treat you like garbage, no matter how fancy a place you rent.
6. Interest rates- many retirees, wisely based on history, shift their entire savings- or most of it- into CDs and other highly secure interest bearing instruments at retirement. Low interest rates have devastated their estimated income streams.
7. Higher wages and higher demand- which we need right now- will spur inflation and thus by default have an enormous downward impact on stock valuations. In 2012 I did a turnaround operation for a high yield bond firm that was in trouble because interest rates were so low that investors were willing to accept yields of 5-6% on junk bonds. That is how bad things have gotten here.
I will stop there- so many more examples I can give, but I hope this paints a picture. What we have are a number of extraordinary phenomena that need to correct themselves, and depending on where you are- you will be helped or hurt.
In 2008 with the bailouts and interest rate drops, many good people who did the right thing and saved their money or did not overdo it on mortgages got hurt. Many who did the wrong thing got bailed out- and those who are living on credit got bailed out in the sense that interest rates, and thus the cost of refinancing of debt opportunities, got reduced.
With what I am predicting, someone who is heavily in the markets will lose out. Someone who is in a home with an exotic mortgage is going to lose out (and those mortgages- no down payment, ARMs etc are all back now and being aggressively marketed).
Someone who is not in the markets, who is renting, or who took out a sensible mortgage is likely to gain. Low income workers are likely to gain- and quite a bit.
And many of us will feel some good and some bad. But fundamentally with the 2008 crash a situation was created that allowed for a massive increase in the divide of wealth in this country, and Presidential Administrations reaching back to the Reagan years have been far too much in bed with large business at the expense of a balance of all interests.
That has to change. We will all pay for it- but I think the bubbles that are about to burst are going to most greatly hurt the wealthy investing class, as well as those who are increasingly relying on labor and tax benefits outside the US.
The latter will come in the next election is my expectation. I think Hillary lost because she was seen as a Wall Street groupie. A good friend of mine said it best when he said Hillary Clinton doesn't care if the janitor at Goldman Sachs is earning a living wage- she cares about whether Goldman Sachs has enough female partners. Whether or not that is true, that was the general perception that I think hurt her most.
Unfortunately for Hillary, there are a lot more janitors in this country than there are Goldman Sachs partners.
It won't take long (and hasn't already in some cases) for Trump supporters to see that he neither grasps or cares about the plight of working class America (well, some of them- as long as they think there is a chance Roe v. Wade will get overturned, many will support him or anyone else no matter what else that person believes or does.)
And in 2020 that leaves us back where we started on the political scene- which party is going to finally stop bedding with big business every night? In the mean time, the free market will have its due. I am just sorry that so many working class Americans who do not have time to wait will have to wait until it happens.
Sorry for the long post- this has all been driving me nuts for a while now.
