Unemployment Numbers May Drive Future Auto Sales

The unemployment numbers released today show some sign that just maybe we may be beginning to see a bit of a turnaround. Certainly the DOW Jones Industrial Average, and frankly all of the indices, have been on fire. The DOW has seen record highs.

This leads to one other thing we know. Auto sales have lagged both in the United States, and big time in Europe. All indicators point to a trend in the United States over the past 5-8 years that says that Americans in particular have been keeping their cars for longer periods of time.

When the economy stinks, who the heck can take the chance to buy a new car? Just drive what you have and run with it.

In fact, if you'd have invested in many of the auto parts companies like O'Reilly, for example, you'd have seen some pretty nice gains. People keeping their cars longer means they'll need parts to keep them running in tip top shape.

Which brings me back to the automakers. If and when, and I really think it is more a matter of when than if, the economy really starts to get some of its legs back, I think the very first thing the average American is going to do is replace their old car.

Sure, houses are nice, and the housing market has been having a pretty good run as well lately. But cars are still at the heart of every single American that drives. A new car is a treat. And if jobs numbers begin to improve, and people feel more secure in the jobs they have, and especially if the economy begins to provide less uncertainty as to where it's headed, Americans will park a shiny new car in their driveway.

It's a high ticket item, but it's not as high a ticket item as a house is. And the interest rates are still running relatively low, making any deal at the dealership even more enticing.

I am focusing on American automakers as well in this idea. I like Ford a lot. Mostly because Ford is the smaller of the Big Three US automakers, and because they have streamlined their business massively, and I think they have the most to gain with market share. Not to mention they are making some pretty nice cars.

Why American as well? I think there is a growing amount of interest in this country to buy American. We are beginning to see many more efforts by retailers to stock their shelves with American made goods. Walmart recently said it would add $50 billion over the next 10 years of American made goods. Big home improvement chains like Menards, which are all over the Midwest states, especially around Minnesota, Illinois, and Wisconsin, has been on a rampage stocking their stores with American made and regularly offering American made sale prices and incentives.

I just think that more Americans are becoming aware that in order to really seat this country back into a good economic situation, we are going to have to start putting factories back on line, and in turn Americans will have better employment choices in sectors of manufacturing, which historically paid good wages and benefits to the average American. The fact that you can have a good paying job without the need for a college degree is also a plus since more Americans working and making good money no matter their status means many more dollars will flow in the real economy, and ultimately into these American businesses.

Ford Motor Company is my top pick. But I think if you invest in any automaker right now, in 12-24 months, you'll see substantial gains. Maybe the dip in unemployment is just a short term fluke. Or it is something that signals a turnaround. Either way, I don't see this economic downturn as being a permanent thing, and like I said before, the very first treat when all is good will be a shiny new car.

And that's why I think the automakers are good buy right now.

Full disclosure: Jim Bauer currently has stock in the Ford Motor Company.

Buying American Made Is Easier Than You Think

Every time I bring up the idea of buying more American made goods in order to help supply more cash to the American economy, and encourage businesses to identify demand for goods made in America, and essentially increase efforts to manufacture their products here, and provide more jobs to Americans who still are hard pressed to find meaningful work that pays workers good wages, I get met with dissent.

"Things cost too much to make it here," people say. "American companies cannot compete with lower wages in other countries."

I tend to find these accusations to be false. It sounds good. It's certainly what we have been led to believe by not only the companies who make things, but the government has touted this often as well, and always like to bring up the idea that this is a global economy, and that commerce with other countries is vitally important to the American economy and her people.

Yet the largest employer in the United States is currently Walmart, unemployment remains at considerably high levels, median income is down by nearly $4,000 per year per American, and for the last 30 or so years wages in America for the average worker has either declined, or been stagnant. The middle class is on their death bed, and the gap between the rich and the poor is ever widening.

The fact is that there are still things made in America, and they don't necessarily cost more than goods made elsewhere. It just takes a little extra time to look for things made here. Among some things still made in America, aside certain makes and models of automobiles, are socks, outdoor grills, water heaters, dishwashers and other appliances, plastic containers, glassware, cutlery, shoes, and many other items that people generally have a use for.

Consider something here that I find interesting. That is that there are approximately 300 million people living in America. If each and every American bought just $365 worth of American made goods, this would pour approximately $109.5 billion dollars into U.S. manufacturing. Not only would this provide an incentive for American companies, and even foreign companies, to do business here and employ Americans, but this would also assume that more money would be able to be collected by the IRS. More people working, making higher wages, and essentially having more buying power in the real economy means less people on the dole, less requirement for the government to engage in social programs which cost taxpayers huge dollar amounts, and at the end of the day this means more people able to afford any premiums that may be associated with American made versus foreign made goods.

In America it was fine at one time to think about benefits of globalization. Unfortunately I think we are seeing the proof is in the pudding that what globalization has largely done has been to cost Americans much needed work, benefits, and higher wages, and has forced Americans more than ever to struggle through their own financial woes with less ability to provide for their families and pursue their dreams, desires, and goals.

It's just $365 a year in American made goods. This generates $109.5 billion of revenue for American manufacturing. I think getting to a point where we think more and more about the importance of making things here, the more opportunity Americans will have to have to find American made products, and the easier it will be to slowly inch our way back up to doubling, and even tripling these numbers pouring into the American manufacturing sector of our economy.

Tax the Rich?

It's an idea that looks great on paper, and certainly the masses enjoy the idea of taking money out of the pockets of the rich. While the vote in the recent reelection for President Barack Obama was not a clear mandate for higher taxes, the Obama administration is definitely interested in continuing its pursuit of diminishing the wealth of the most wealthy people in the country. In fact, he recently announced that he wants to raise $1.6 trillion in new tax revenues, which is double the amount he originally said he wanted.

The question is who ultimately pays the tax? I think the answer is very clear. It's not the rich.

In order to understand how taxes affect everyone and not just the rich, one has to keep in mind what businesses do when they have to incur higher costs to run their businesses. Higher taxes are costs.

While it is not a direct comparison, I can use my rental property as an example of what happens when the cost of owning and operating that property increases. As a part of the rent I offer my tenants "free" heat. I put the word free in parenthesis because whether or not the heat is truly free is a bit of sleight of hand, is it not? So long as my rental property produces cash flow, the actual cost of the heat is being paid by the tenant. So, what happens when the cost of my heat bill goes up? Of course this cost is ultimately passed on to the tenant in the form of higher rent.

The same applies to the cost to insure my property, or the cost of repairs to the property. You can also apply this to higher costs incurred through higher property taxes. All of these costs are ultimately passed on to the tenant in the form of higher rent as well. Perhaps the costs are not immediately passed on. But at some point they must be, otherwise I have no reason to own the property.

I've made the point before that businesses do not pay their overhead. In fact, they recoup their overhead.

In addition, it's important to note that any money that the government collects from the private sector are essentially removed from the real economy. I've heard many people on the left argue that dollars collected in tax revenues are simply spent by the government, and that those monies ultimately wind up in the economy as a whole inevitably.

The problem with this thinking is that it is not exactly true. Consider that much of the dollars that the government collects must go to repaying debts and interest we owe on those debts. That means that a lot of the money goes to other governments we've borrowed money from—China would be one of the larger ones. We also spend hundreds of billions of dollars a year in foreign aid. Again, that money does not necessarily return to our own economy. The money essentially just disappears.

At the end of the day higher taxes on the rich and on businesses means less money will be spent on investing in new company startups. It means less money will be spent on research and development, and on capital expenditures. It means less money will be available to hire more workers, or provide pay raises. It means less money will be available to pay, for example, certain benefits like healthcare for their workers. It means less money will be available to make matching contributions to their worker's 401k plans. It means less money will be spent on marketing that helps their businesses to grow.

And let's not forget the first example I made about investment. Less money will be in the real economy for people to help companies obtain the funds they need to expand the business. All of this leads to higher unemployment, less job creation, and higher prices for all of the goods and services that the middle class, and the poor buy.

When it comes to taxes, people really need to see the forest for the trees. Sticking it to the rich is sticking it to ourselves, and there really is no way of getting around that. If President Obama does not cut spending, and reduce taxes across the board, the people who will be hit the hardest are the very people who he says he wants to help.

Protesting A Smoke Shop In Milwaukee?

I find myself a little perplexed why someone would want to protest a smoke shop opening? But that's exactly what happens to be planned by Alderman Joe Davis and State Senator Lena Taylor in Milwaukee today. According to Davis, he says that residents are concerned over the growing number of tobacco outlets in the neighborhood. In a statement he also said, "This application will not only change the use of the building, but will also change the environment of the surrounding community." The proposed establishment is home to what was formerly a fast food restaurant.

I have to admit I'm not sure exactly what Davis means. A smoke shop may not be the most desired use of the building. But does he mean to say that a smoke shop, as opposed to a fast food restaurant, would bring in an undesirable element? How exactly does a smoke shop change the environment and the surrounding community? And does opening a smoke shop encourage people to light up?

I think this happens to be just another clear example of our government officials having too much time on their hands. The city of Milwaukee has myriad issues that need to be dealt with such as high levels of unemployment, high crime, and high poverty, yet we spend time protesting a smoke shop? Granted, a smoke shop won't create as many jobs as perhaps may have been created by reusing the building for serving food or some other purpose. But that's not the point. The point is that to my mind the building is probably vacant. Being located at N. 76th St. it's not in the best of neighborhoods. A smoke shop going in is still better than having a vacant building. And again, with so many problems of greater impact facing the city of Milwaukee, this is simply a non-issue if there ever was one.

Might I only point out that there are also a high number of payday loan stores in this neighborhood, and no one seems to want to tackle that issue. Payday loans are probably more damaging to people who use them than anything that smoke shop is going to be selling

The Trayvon Martin Murder Is Tragic, But Isolated

Let's be clear that the Trayvon Martin shooting is a tragedy. But let's also be clear that it is largely an isolated incident, and a crime fueled by one man's deranged view of the world. I think we can look at many statistics that would show that white on black crime is far from an epidemic. What the big problem is, looking at the bigger picture, is black on black crime. Far more black people kill black people than white people do. So why then is this case the one that President Obama wishes to speak out on? Beyond that, where are the Jesse Jacksons and Al Sharptons of the world when black on black crime is commited?

Come to think of it, has Barack Obama ever really touched on this subject of black on black violence? Has he ever made non-racially motivated violence an issue?

I happen to think that President Obama bringing up this case is inappropriate and divisive and serves only to create racial tension. It serves to breathe new life into a problem that really does not exist to the extent that people like President Obama, Jesse Jackson, and Al Sharpton wish to infer.

There is a thought that President Obama chose to talk on this case because he wishes to also infer some correlation between how he is viewed as president, and to suggest that some of his lagging poll numbers may have more to do with racial motivation than his actual performance as president.

I feel for Trayvon Martin and his family. I think he died without cause or reason, and any time that happens, whether you happen be black or white, or irrespective of what color the person was who was holding the gun, it is always at least a senseless tragedy. I think that George Zimmerman should be prosecuted to the full extent of the law. But I also happen to think that if we are going to single out cases like this one, we should also be looking at the much bigger picture. We need to be looking at the much bigger reality that more black people are killing each other than white people are killing black people. This fact should be far more outrageous than the Trayvon Martin case. If the president wants to talk about senseless killing, he should start with the real issue instead of making it seem as though racially motivated murder is the bigger problem.