In the same vein, the amount of discouraged workers swelled from 865,000 to 968,000, an increase of 12 percent. Those working part-time for economic reasons surged 181,000 to more than 7.8 million.

“In the weakest recovery since the Great Depression, more than four-fifths of the reduction in unemployment has been accomplished by a dropping adult labor force participation rate — essentially persuading adults they don’t need a job, or the job they could find is not worth having,” said University of Maryland economist Peter Morici.

Wall Street does not like what it sees in these numbers and the stock market is slumping as a result. Combine this with announcements this week that in April manufacturing in the U.S. slowed more than expected and workforce productivity fell, along with GM’s and retailers’ disappointing earnings reports, and you can make a case that the Federal Reserve may consider additional measures (Quantitative Easing 3 – QE3), to keep interest rates low and try and boost the economy in the coming months.

Please note, I am not advocating more “quantitative” easing by the Fed, all I am saying is that when you look at the true U.S. employment picture, coupled with the problems in Europe (see below), then it is very conceivable that the Fed will come to the rescue later this year, which traditionally has been a rallying point for stocks. 

Banks: What should we expect out of them? 

The following is an excerpt from a speech that James Grant, author and creator of Grant’s Interest Rate Observer (an independent journal on the financial markets), gave to the New York Federal Reserve Bank on March 12, 2012 and as it appears in today’s Wall Street Journal. I believe Mr. Grant really drives home what needs to be done with our banking system, and especially the “Too Big To Fail Banks.” I strongly encouraged you to click through to this short but very poignant commentary. 

http://online.wsj.com/article_email/SB10001424052702304746604577380330245899936-lMyQjAxMTAyMDAwNDEwNDQyWj.html?mod=wsj_share_email 

The problems in Europe are far from over – The results of the upcoming Greek elections may be described in three words; temporary, volatile and uncertain   

The following is a summary of what was reported in today’s Wall Street Journal regarding Greece and its impact on the Europe Union and respective stock markets.

Greece’s election on Sunday is expected to usher in such political instability that officials from the country’s major parties are planning another possible election within months. That, in turn, could threaten the viability of Greece’s latest bailout package from the European Union (EU) and the International Monetary Fund (IMF) and aggravate the euro zone’s financial woes.

As part of the prior bailout package, the EU and IMF required budget / spending cuts that are to begin in June and will require politically painful decisions, such as closing unprofitable state enterprises and laying off swaths of public-sector employees, finance-ministry officials say.

If Greece doesn’t have a sufficiently stable government by June, to push through controversial cuts, Europe and the IMF are likely to suspend aid payments needed to cover the Greek government’s operating costs, potentially escalating the political and social crisis in the country.

Mounting political instability in Greece would add further uncertainty to the euro zone’s financial and economic crisis, in which a growing number of European leaders are being ousted by parties or voters against a backdrop of public anger over austerity and recession.

To give you a good image of how uncertain and volatile the situation is in Greece, after two years of government cutbacks brought on by Greece’s debt crisis, the signs of social decay are everywhere in Athens and the mood in the capital is despondent. As a matter of fact, downtown Athens today is described as a shadow of its former self. Its streets, formerly once lined with crowded elegant stores and vibrant cafés, are now scarred by shuttered shop fronts, crime, homelessness and periodic rioting.

Businesses are closing at a record pace, and unemployment in the greater Athens area has soared to more than 23%, above the national average. Regular demonstrations have frightened away tourists, and thousands of the city’s hotels and retailers are teetering on the verge of bankruptcy.

Beyond the social turmoil, this new reality presents a particular political problem in that unhappy citizens are going to consider voting for fringe parties of the right (neo-Nazis) and left (Marxists).

For example, the current government, in response to the decline of the city’s center, has implemented increased police patrols, a three-year rebuilding plan and fresh promises to relocate thousands of illegal immigrants to detention camps around the country. But for many Athenians, those promises seem as this is too little, too late.

However, one of these new parties running in the upcoming election has an economic manifesto that includes foregoing all debt repayments, forming “special teams” to investigate corrupt practices, arresting and imprisoning politicians and state servants found guilty of economic mismanagement, nationalizing banks, and returning “to traditional family values.”

Bottom line, Greece is a very small country, but it can have a huge impact if the elections go awry and some fringe elements are elected resulting in all current bailout agreements with the EU and IMF in jeopardy or completely thrown out. Honestly, no one knows the outcome, but I can understand why Germany, the fiscally prudent and economic powerhouse of Europe, has had its fill with Greece and finally says no more (i.e., we’re done bailing your butt out). It would be a very painful economic event in the short-term, but could be the best economic medicine for the rest of the E.U. and global stock markets long-term. 

Reasons to be optimistic about America 

After all the depressing news I previously dumped on you, I thought it would be helpful to give you some “glass is half-full” commentary. Yes, the economic glass may be looking half-empty at times, in the short-term, but the comments listed below are indicative of America’s strength and economic vibrancy long-term. As such, I agree with Warren Buffett, Jeremy Siegel and other investment and economic professionals who have consistently stated not to bet against America in the long run.   

The Daily Ticker is a financial blog that covers business stories of the day — the economy, investing, corporate leadership and politics. Commentators with the Daily Ticker went to Los Angeles to attend the Milken Institute’s annual Global Conference, where many of the world’s most influential investors, economists, CEOs, innovators and policymakers met to discuss some of the most imminent and dire problems facing America and the world. 

For a change of pace, the commentators asked guests to tell them what makes them most optimistic about the America today. They received a wide-range of responses, but many added one caveat to their answer: the hindrance of political dysfunction in Washington and its negative drag on prosperity in America.

Here’s what they said: 

Niall Ferguson
Professor, Harvard University

“The thing that makes me optimistic about the United States is technology and the ability of the United States still to be at the cutting edge. But of course that is quite geographically localized. That is a Silicon Valley story.” 

T. Boone Pickens
Founder, BP Capital

“It’s energy. I mean, today the United States has the cheapest energy in the world. We got the cheapest oil. We got the cheapest gas. And we got the cheapest gasoline.” 

Mitch Daniels
Governor, Indiana

“The resilience of the American economy over time. We still give birth to more new businesses than other places [and] that we still have a core of innovation.”

Raghuram Rajan
Professor, University of Chicago

“I think the strength of corporations [and] how much cleaning up they have done of their balance sheets, their work force and improving productivity is a hidden upside for the U.S. economy. If we can realize that over the years to come, I think there is substantial potential for growth.” 

James Barth
Senior Finance Fellow, Milken Institute

“I would agree (with Rajan) but I think that strength depends upon eliminating a lot of uncertainty. I think that’s the biggest barrier right now to the growth and after all it is an election year and one would expect a lot of uncertainty. There’s much more than there needs to be.” 

Richard Fisher
Dallas Federal Reserve President

“We are growing our population. We have an enormous Hispanic population that’s coming in. We are still the magnet for anybody that wants to work hard in the world. And we create, and we innovate, and we are masters of creative destruction. As long as government won’t interfere with that adjustment, and let the American genius go to work, we’ll win.”

Quotes 

“A good reputation is better than fame.”

                        Louis Dedek, poet and academic

“Beware of best friends presenting you gifts at your 50th birthday celebration!”

                        Tony Moeller, ambushed and now AARP eligible 

Tony Moeller, CPA

Integrity Investment Advisors
12721 Metcalf, #202
Overland Park, KS 66213
tmoeller@iia-kc.com
913-897-2074
 

The information listed in this commentary is a compilation of various publicly available sources and is for informational purposes only.  It is not a recommendation or solicitation of any particular investment or strategy.  A risk of loss is involved with investments in the stock and bond markets.  

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