When I was a stock broker I learned a very valuable lesson, I would pick a stock that I felt would go up and when I would share the reasons I felt that it would go up others would respond with reasons they expect it would go down. The same was true of stocks I felt were going to go down, you would hear many reasons why it would go up.
Then I learned a very hard lesson. Bad news would come out and yet the stock market would go up! That is when I learned that bad news for the average person is good news for the people who own companies. For example, if unemployment is going up you would think that is bad news, but not for the stock market, higher unemployment means they can pay less to their workers and have an easier time filling vacancies.
So then what do you do?
You cannot be superficial. You have to look at the news and figure out for yourself what this means.
The biggest news right now is AI (not the war, not inflation, not rising interest rates, not unemployment or bankruptcies). The reason AI is such big news is that it is now possible to replace trainees and incoming workers with AI. This will save companies a lot of money, and so it will result in great efficiencies. It will also mean much higher unemployment. If you have higher unemployment you will also have lower demand for goods, hence there will be even more pressure on businesses to become leaner and more efficient. So the more they adopt AI the more everyone will have to adopt AI. Also if AI is improving at this incredible exponential rate it doesn't matter if it isn't quite as good as a new employee, it will be as good and better in no time at all. Meanwhile every hire you make comes with a variety of risks and potential lawsuits when you no longer need them. All of that will be factored into the equation when hiring.
For example, consider AI who scored in the top 20% of those who take tests in various law exams. Would you prefer someone who scored in the top 5%? Let's consider, the AI will work 168 hours a week, it will perform tasks at a fraction of the time it takes a person to do the same task, and it is improving exponentially, it is very reasonable that in one year it will be scoring in the top 5%. Also this AI scores in the top 20% on medical exams, engineering exams, math exams, accounting exams, etc. How does the guy with the top 5% in law do on these other subjects? Wouldn't you think having a wide variety of expertise to be helpful? Do you really want to hire a new worker with all the problems you might have instead of the AI?
Again, what is very bad news for the student in law school is great news for the law firms. Likewise with truck drivers, uber drivers, factory workers, graphic arts designers, computer programmers and a whole host of other jobs.
You have to think like the personnel department of fortune 500 companies. Regardless how good the education is at a university most people get much of their training while on the job. When I was a teacher it took most teachers 3-5 years to become proficient at their job despite having a graduate degree and having been a student teacher. If this is typical of white collar jobs you have to think of where AI will be in 3-5 years and is it worth training the new employee or would you be better off getting AI now to help with the load for your existing workforce.
When you go into a recession you start with a "hiring freeze" prior to the layoffs. I suspect that is where we are at right now. They are training people in these big firms on how to use AI to maximize efficiency and productivity and very soon they will be implementing a hiring freeze. Again, that may be terrible for the worker or for the college graduate, but it is great for the owner of the company and the stock market. Obviously it is not sustainable as demand will drop.
But that brings up the other lesson, the stock market is like the Indy 500, these companies have the pedal to the metal, they are always borderline crashing and burning. We think war is terrible, but for business it can be great. Biden just got an unlimited checkbook to pay any price for the war in Ukraine, so you know that is great news for contractors that supply the weapons. You may think the open borders with six million illegals is horrible, but it is good news for businesses that employ them. Illegals work for less than those who are here legally, they don't get benefits, and if they complain you simply have ICE deport them. Same thing with inflation, is inflation really that bad for the stock market? Suppose we have 7% inflation and the stock market is up 6%. It looks good, it seems like the stock market is going up, however, in reality inflation has taken everything away. If people were honest they wouldn't talk about the stock market going up without including the inflation rate. For example, the market was up 5% last year while we had 3% inflation so in reality you were up 2%. You will never hear that on MSNBC or any other network.
So then, going back to my job as a stock broker. I sold Sunbeam when Al Dunlap took over because I knew he would fire people, make the company leaner and more profitable in the short term. Obviously long term this could be horrible, but short term is what investors want to see and sure enough the stock rose dramatically in the first few months.
This is the picture we get from the Lord -- the fat cats will be eating and drinking, celebrating and devouring everything in sight, they will be marrying and giving in marriage, you will see them consolidate, become bigger, more efficient, right up to the day the flood comes and destroys them all. None of these businessmen is worried about society as a whole, they are only concerned about their small kingdom and figure the world will take care of itself.
50,000 Retail Stores Closing + Terrible Jobs Report + Stock Market AI Super bubble
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