Rex Nutting: Full Frontal Lobotomy Please

From MarketWatch:

“U.S. companies won’t expand their businesses until they are sure the economy will grow, but the economy can’t grow unless businesses hire more workers and invest in new capacity, says Ethan Harris, chief North American economist of Bank of America’s Merrill Lynch unit and the top economic forecaster in July.”

The article continues:

“Harris and his team at Merrill won the July Forecaster of the Month award from MarketWatch, based on their predictions for 10 top U.S. economic indicators released during the month. He also won the contest in February.”

Let’s add a little dose of reality for Rex Nutting (the reporter):

1. Hiring workers does not mean your business will grow.
2. July Forecaster of the Month? Said with a straight face.

Please take Rex Nutting behind the tool shed to have his [blank] beat (figuratively of course) for pushing drivel.

Rex Nutting Needs Lobotomy

---
You might like my 2017 epic release: Trend Following: How to Make a Fortune in Bull, Bear and Black Swan Markets (Fifth Edition). Revised and extended with twice as much content.

19 thoughts on “Rex Nutting: Full Frontal Lobotomy Please

  1. Surely the Catch 22 which Mr Nutting is pointing out is valid.

    If enough US firms were to hire additional staff in order to increase their output, it would improve consumer confidence, as well as putting more money in the public’s pocket. This would, in turn, boost spending and hopefully kickstart the domestic and international economies. But a fragile economy inhibits such investments.

    Unless companies can boost their productivity or there’s a surge in demand for exports (neither of which seems likely), it’s hard to see how else the American economy can grow significantly anytime soon. And it’s also hard to see a way forward. IMHO, even the drastic scenarios outlined in this interview aren’t out of the question: http://www.theenergyreport.com/pub/na/7005.

    Jeff

  2. “U.S. companies won’t expand their businesses until they are sure the economy will grow.”

    Does this mean small business owners sit around and wait for GDP reports before making hiring decisions? Does this implicit assumption strike anyone else as completely absurd?

  3. CY –

    No, the assumption doesn’t strike me as absurd.

    If I owned a widget factory, and I was concerned about the economic outlook, I might well hold fire on expanding my capacity. What would be the point in spending money buying new machinery and recruiting new staff when I’m not currently at full capacity (nor likely to be anytime soon)? Also, I might need that money to keep my business afloat if we enter into a double dip recession.

    However, if the economy were booming, orders were coming in thick and fast, and I had customers waiting impatiently for their widgets to be produced, it might be different.

    It’s a classic Catch 22.

    Jeff

  4. Businesses are here to make money. There are not here to worry about staff totals or whether the economy is doing well or not. If a business will make more money by hiring, it will. If a business will make more money by not hiring, there will no hiring. I personally could care less how many jugs of Clorox are sold or whether the unemployment rate is high or low … cause they sure as hell are no worried about me! Nor do I want them worried about me. It’s a dog eat dog world. Get used to. All this whining is making America look like a bunch of losers.

  5. A post from a reader at Ritholtz:

    “Like it or not, Covel and Vilgrad have valid points. There is a sense of entitlement to the posts here that I find disturbing…as if making 6 figures was, somehow, and American entitlement. It isn’t. And wishing for the “good old days” or thinking that, somehow, any of this has to do with “policy” is just ludicrous.

    This train has been leaving the station for a while now, but it really hit light speed with the advent of the internet. And it isn’t going to change, it’s just going to get worse. There aren’t any “manufacturing” jobs anymore in the way they are romanticized in these posts. Have any of you actually toured a modern car factory? How many people did you see doing manual labor? How many robots? How about stitchers in shoe factories, or are most of those machines software-guided now? How about those assembly lines and robots, software-guided too, aren’t they?

    The days of people being paid $30 an hour to tighten bolts at the GE plant are over because, frankly, it’s cheaper to pay someone in China to do it and ship it back here because, you know the job isn’t worth $30 an hour. That was the state that was temporary and artificial. And if that made the middle class than that was the short-term illusion. I saw this coming from when I was a little kid and my grandfather was at GE. At eight years old I couldn’t figure out how these people who couldn’t speak complete sentences were making all that money sweeping the floors. And the truth was it wasn’t sustainable. Period.

    So now we have all this talk about middle class, and money. The answer is easy and hard at the same time…it’s to get educated. That is the only way out. But Americans have become so entitled, and so deluded that they belong to a class they don’t, and smitten with the notion that they don’t have to do any real work to get that 5000 sq ft house (as if anyone really needs that) that this gut-wrenching change is going to send most of them back down the ladder because they won’t work hard enough to climb. I see it every day when I teach. The entitlement is just amazing.

    None of what was is coming back. Ever. So instead of just pining for the “good old days” why doesn’t anyone attack the real problem which is, how do we prepare kids for more mental-ability jobs and far less hand-ability jobs in the future? How do we, again, instill that hard-work ethic so they study when they are young and reap the career benefits when they grow up? How do we take those kids that aren’t all that bright (yes, they are probably YOUR kids even if you think they’re the smartest thing ever and you force teachers to inflate grades) and get them into well-paying sustainable technology jobs?

    Get over it. Hand-based jobs are dying and machines do them better. The internet has made global wage arbitrage a fact of life. Evolve or go extinct. The world works that way.”

    ***

    Jeff, you are on the wrong train.

  6. Michael –

    I agree that businesses are in the business of maximizing their profits.

    I was simply pointing out that wider economic considerations will influence whether capacity expansion is an sound business decision for a particular company, or a risk which they cannot afford to take. And in turn, whatever decision they take will affect the wider economy.

    And I wasn’t whining – as far as I am concerned, it’s for businesses to decide how to spend their money. I was merely explaining why I agree with Mr Nutting re. the Catch 22 he was referring to, ie no investment = no recovery = no investment.

    Jeff

  7. Jeff-

    My point was that business owners care about their businesses, orders, etc., but probably don’t care about the amorphous “general state of the overall economy.”

  8. CV-

    It would make sense for businesses to look at the wider economic situation when making decisions, for the same reason that you might look at the weather forecast when considering a hiking trip. 🙂

    If you watch CNN and everyone is talking about a double dip recession, you might think ‘Now might not be a good time to invest in extra machinery and staff’.

    Jeff

  9. Couple points:
    We’re all still trying to clear away Keynesian smoke screens.
    “Demand” is buying power, not mental wishes.
    Money has to represent actual goods/services of value – in order to acquire, i.e. trade for them. Money can’t be Fed make-believe.
    And if currency does have intrinsic value – not politically asserted value, then it doesn’t matter how many zeroes a salary/wage contains.
    It matters if the worker is working, & actually earning, gaining his/her buying power via productivity, not losing it via inflation (e.g. 25 cents once bought a gal. of gas, a qt. of milk, a pack of Camel’s, etc.).
    So, currency/banking/accounting “regulations” are the core of the problem.
    Obviously, taxes, add to the burdens on producing businesses.
    Not even cheap overseas labor – talk to actual executives.
    Changing this stuff means actually educating people, not processing them through the “system.”
    This website is at least one helpful agent; good debate, even absent “consensus” on whatever.
    Thanks to Mike & savvy traders.

  10. One last.
    Education?
    Drivel?
    Try reading Prof. Blinder from Princeton, or Prof. Krugman on Say’s Law (ya know, production…), etc.
    Really?
    Personally, I’ve met more actually intelligent guys who do “hand” work (auto/aviation mech’s, carpenters, computer tech’s, machinists, commercial fishermen) who aren’t cursed with an Ivy League diploma.
    They know when they don’t know something to figure it out, & when something doesn’t work, to analyze why, or stop.
    Plus, they don’t ask for handouts.

  11. Covel: You might be a great trader, but it doesn’t look like you know squat about macroeconomics. In case you haven’t noticed, the economy has been very weak. Spending is down. That means every business is chasing fewer orders and is working hard to make money (most of them are doing it by slashing costs to the bone).
    Now, some businesses can grow right now because they’ve built a better mouse trap. Those are the companies that are hiring. It’s your job as a trader, I suppose, to find those companies and invest in them for a few milliseconds to make some sweet profits. Good luck to you!
    But, in the aggregate, businesses are constrained by weak sales. (Just ask them!!!) If sales grew faster, they could expand more, hire more workers and invest in more equipment, and they’d be good customers for THEIR suppliers. It’s as simple as that.
    No one said businesses are literally waiting for the government to report its GDP figures. They are just looking at the front door, and they don’t see a lot of customers coming in. But maybe you think customers are a luxury that growing companies don’t need.

  12. Thanks for stopping by Rex. I don’t know squat because it was pointed out how silly it is to promote a forecaster of the month?

    One clarification: I have not declared myself a ‘great trader’, but I have learned from a few.

  13. Rex said, “It’s your job as a trader, I suppose, to find those companies and invest in them for a few milliseconds to make some sweet profits. Good luck to you.”

    Another dolt who knows absolutely nothing about trading or what traders do, and by the tone of his post is unwilling to learn. Why are you even here? To spout the trite, banal comments about macroeconomics and how business works in the rest of your post?

  14. Jeff: with all due respect, if you’re watching CNN to form your business or trading strategies, you must immediately lie down and take a nap.
    Regards, Jack

  15. Michael,

    Bang on!! And to make matters worse for America’s future…while the US is sitting on its collective asses with its hands out waiting for Santa Claus to make it all better, those of us who do a lot of business in Asia see an absolute monster growing that will eat America alive unless it quickly does what Michael’s talking about…

    More Chinese wrote the CFA exam last year than the rest of the world combined; there are more Chinese students in private school than there are students in the US. I receive most of my daily emails from China mid afternoon my time…that’s 4:00 AM THEIR time and they are up and they are working! They want what we have, and like America in the early 20th century, they are willing to work their asses off to get it.

    Trust me…America had better WAKE UP and WAKE UP fast or the Far East will decalre very firmly that this emperor has absolutely no clothes! (…and no military, and no economy, and no energy, etc., etc., etc.).

Comments are closed.