Paycheck-to-Paycheck
Monday, October 4, 2010 at 11:55PM Hello from Sunny & Hot Phoenix, Arizona,
I've spent the last few days in Phoenix. I've never been to Phoenix and have to say it is an interesting place in that I've never been to a city quite like Phoenix. The only places I can think of that are similar are Las Vegas and Dubai, all three are desert towns.
What is it about flat, desert towns that makes people want to build things miles apart from each other. In Phoenix, a Burger King restaurant may take up, literally, a square mile of space including a giant parking lot in which you couldn't imagine any scenario in which the parking lot could possibly be full. When they built the parking lot that looks bigger than a football field, what were they thinking? "Well, we better just put in 1,000 spaces, just in case 1,000 people decide to go to Burger King all at once."
The next closest restaurant or store is never less than half a mile away. If you don't own a car in Phoenix you would have trouble living a normal life here.
In terms of space utilization Phoenix is the antithesis of Hong Kong - a place where, they say, if all the residents came down from their 60+ story highrises that there wouldn't be enough space in Hong Kong for them all to stand.
During my stay here, however, I had two main thoughts:
1. My inklings on the sunbelt real estate markets receiving a reprieve from foreigners scooping up real estate bargains appears to be spot on here in Phoenix. I went to a local bank to open a bank account and upon mentioning to the banker that I was originally from Canada he commented, "It seems like there is more Canadians than Americans here now. Most of the accounts I open nowadays are for Canadians".
2. Residents of Phoenix had better hope that the price of gas doesn't rise significantly or that their income increases to keep up with the rise, because if gas were to rise to a level where most here couldn't afford to drive their 30 miles to the corner store, I can't see how it would be possible to live here without a car. Not in this heat.
Chances are that real incomes, in general, won't be rising anytime soon. And, in fact, if residents of Phoenix are in line with the American average, they are just 1 or 2 missed paychecks away from not being able to afford to put gas in their cars.
Check out this data from CareerBuilder, who surveys Americans and asks them, "Are you currently living paycheck to paycheck?"
The percentage who said yes was already fairly high in 2007 with 40% of people saying they are living on the edge of financial disaster. But look at the increase in that percentage each and every year since 2007.
The great majority in the US are one layoff or unexpected sickness away from being financially destitute.
The Markets
On Monday the overall US stock markets were down and they took gold stocks with them. I asked our market wizard and Senior Analyst, Ed Bugos for his thoughts. Here is what he had to say:
The Dow Industrials (DJIA) bumped up against the high 10800’s on several occasions intraday over the past nine trading sessions but couldn’t muster a break out. The bullish scenario calls for support at between 10500 and 10700, while a break below 10340 would refute it, technically.
As we’d expect, the gold shares followed the Dow lower today, though the juniors held up well. It was the commodity and mining sectors that weighed on the averages mostly, particularly the paper stocks and the steel and oil services indexes, and the other miners followed.
The agricultural and livestock commodity indexes appear to be under some short term pressure after being on a tear up to mid to late September. The movements in the Dow and commodities was likely related to the bounce in the USD index today, something it hasn’t done for almost a month. So the chalk marks suggest further retracements in equities in the short term.
We’re still ahead of earnings reports. But October tends to be a countertrend month so have some cash ready, and keep an eye out on the above support points in the DJIA. A buy signal there would occur on a break out past 11000.
Meanwhile, early Tuesday morning Japan's central bank has announced it is cutting interest rates to "near zero" and going to set-up a $60 billion fund to buy government bonds. An announcement that promptly sent gold higher, hitting $1,326, up $11 as I write.
Until tomorrow, thanks for reading!
Jeff Berwick
Chief Editor
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