Since the third quarter of 2012, we’ve seen the earnings growth of companies in the U.S. economy sharply decline; we’ve also seen corporate revenue growth come to a halt. But public companies working in the U.S. economy have found a way to engineer higher earnings without really selling more goods or services; they’ve introduced a record number of stock buyback programs to boost their per-share profits.
Nice trick, these stock buyback programs, but the grim reality is that profits and revenue growth for corporate America are meager at best, and company executives are still concerned about the U.S. economy. Hence, public companies are stockpiling their cash as opposed to investing it (in anything else but stock buybacks it seems, a phenomenon that does not create economic growth).
At the same time, most levels of government continue to add debt, making the financial stability of future generations questionable. Who will eventually pay for the $17.0 trillion in debt our federal government has accumulated? As always, it will be the tax payer who will be on the hook, further shattering any hope of long-term economic growth for the U.S. economy.
In the current U.S. economy, average “Joe American” is on food stamps or some other form of government assistance because the Great Recession set him back that far; and unlike the Wall Street crowd and those connected to the Street, he hasn’t been able to recover. His job isn’t paying him more, but his cost of living continues to rise.
In America, there has always been one solution to lackluster “economic growth” in the U.S. economy.
It’s the resilience and innovation of entrepreneurship that has saved the U.S. economy time and time again. The locomotive was a great invention, cars were a better innovation, and cars that run on batteries are an even better technology.
In the U.S. economy, newspapers were a great way of delivering the news to the masses; the radio delivered the news more quickly; and TV not only delivered the news, but it also entertained. The Internet is the news medium of today, both because it’s quicker and because you can choose the information and entertainment you want to see and when you want to see it.
American ingenuity is alive and well in the U.S. economy, but the new technologies of the “change-makers” are not financially benefiting the masses anymore or creating economic growth. When Henry Ford created the first assembly line, he eventually created millions of jobs in the U.S. economy. This translated into a robust period of economic growth, in which workers bought homes, filled them with furniture and appliances, had kids, and spent money.
The future for America, as I see it, is more poor people dependent on the government; persistently high real unemployment, because the technology revolution has taken away the jobs; and huge profit opportunities for the technology change-makers.
We all heard the news this week that the Washington Post, a legendary newspaper in the U.S. economy, will be bought by Jeff Bezos, co-founder of Amazon.com, Inc. (NASDAQ/AMZN), a multi-billion-dollar company. Bezos bought the newspaper company for $250 million. Note: this is not a purchase by Amazon.com, but rather by Bezos himself. (Source: Washington Post, August 5, 2013.)
As I see it, the reality of the matter is that Bezos paid $250 billion for a sinking ship. The Washington Post has a significant amount of liabilities, and ad revenues at the company have been rapidly declining.
Print media is in deep trouble in the U.S. economy. Everything these days is going digital. So what did Bezos really buy? He bought editorial content. My bet is that the editorial content Bezos bought will be delivered digitally in the not-so-distant future and that the actual newspaper will eventually stop its print editions, which will equate to big job losses—and more pressure on economic growth.
You have to love technology. But since the “dot-com” boom of 1999, technological advancement has resulted in more job cuts than hires in the U.S. economy. Just look at the last jobs report released by the U.S. Department of Commerce. (See “The Worst Jobs Report in Four Months Does One Thing.”) The majority of jobs created today are in the low-paying restaurant and retail sectors—something that doesn’t equate to real economic growth.
So what does an investor do about the technology revolution in the U.S. economy—a revolution that is actually bad for the U.S. economy because it takes jobs away from it and causes economic growth to stagger?
As the saying goes, if you can’t beat them, join them. Buy into new technology.
Tesla Motors, Inc. (NASDAQ/TSLA) is an electric car company that manufactures cars using robots in Palo Alto, California. The company delivered 5,150 of its “Model S” in the second quarter of this year, resulting in revenues of $405 million, up from only $27.0 million in the same period one year earlier.
Talk about American ingenuity. Tesla’s Model S received the highest rating ever for a car from Consumer Reports. This is a perfect example of a technology company revitalizing the auto sector of the U.S. economy, not making the cars with lots of people, but with lots of robots. The company has brought a unique product to the market—something that lets the U.S. compete in the global economy dominated by cheap labor.
Bezos revolutionized the book industry with Amazon.com at the cost of unknown job losses as book stores, publishers, printers, and book wholesalers in the U.S. economy closed due to the digitization of print.
The mass manufacturing of cars in the U.S. economy stopped years ago. Tesla is revolutionizing an industry where jobs have already been lost.
And if Amazon.com reached $300.00 a share, maybe $134.00 a share for Tesla stock isn’t a bad price—maybe it’s even a way to “join” the technology game-changers.