Massive Clearance: The US Jobs Fire Sale
Hot, hot, hot.
There’s no other way to describe the US economy right now.
Certainly, the fuss over Italy last week is receding quickly.
The NASDAQ Composite index has broken through into all-time new highs again. This sentiment and momentum is likely to keep filtering out to the rest of the world.
Where to start with the bullish signals?
Well, the US jobs market is as good a place as any.
The US Department of Labor says the nation now has more job openings than unemployed people. This is the first time this has occurred since records began in 2000.
Meanwhile, the jobless rate is 3.8%. The market is so tight in fact that one recruitment firm is advising clients not to be fussy when it comes to factoring in criminal history or education levels.
Blue jeans, bad attitude and long hair doesn’t matter — if you want a job, it’s yours.
Certainly, if you can drive, you’re in very good shape. The demand for freight and trucks is off the scale.
Trucking companies have doubled orders from the same time last year. They can’t get enough big rigs on the road.
200,000 trucks are on back order. That’s eight months’ worth of production. And that’s before you learn there’s a shortage of drivers.
A similar pressure is coming to bear on the US housing market.
Lumber prices are at record highs. Short supply and huge demand has pushed demand to US$588 per 1,000 board feet.
To put that in context, the lumber price has only exceeded US$400 three times in 30 years.
Meanwhile, we also have China saying it’ll write a cheque for nearly US$70 billion worth of US imports if the Trump administration scraps its planned tariffs on Chinese goods entering America.
We don’t know how this dynamic will play out, but Trump’s gambit appears to be working in favour of USA, Inc.
There’s potential for a lot of US oil and LNG especially to head to China. The Asian LNG trade is booming right now, and US natural gas production is thriving.
Traditionally, global gas markets were highly regional in nature. But there’s the possibility that the Henry Hub (US) gas spot price becomes the global benchmark.
The US is already exporting LNG all over the world. The only thing holding it back is that more investment is needed in export terminals and pipelines.
Yet the US isn’t alone in experiencing good times.
The Wall Street Journal reports that China’s economy expanded faster than expected in the first quarter.
Now, you have every right to be sceptical of economic data coming out of China. But my favourite bellwether on China, Alibaba Group Holding Ltd [NYSE:BABA], is up 26% since the low it made in December last year. It’s now just below its all-time high.
You can think of Alibaba as the ‘Amazon’ of Asia.
Don’t forget Amazon.com, Inc. [NASDAQ:AMZN] either. It’s still flying high despite the naysayers and bears saying it’s overvalued and overpriced. One Amazon share will set you back US$1,696 — a record high.
US corporations ‘all in’ on Eastern Europe
This staggering wealth creation is also showing up in Eastern Europe of all places.
There’s an industrial property boom unfolding in countries like Poland and the Czech Republic as warehouses and distribution centres get built at record pace.
Eastern Europe offers lower costs for firms like Amazon. But these nations are also close enough to service the wealthy and large markets of Germany and France. In fact, Amazon has five centres on the Polish-German border, and plans to add more in the future.
US investment in Poland appears to be especially strong. Warsaw, the Polish capital, is seeing big US corporations swallow the available office space.
I can’t be bearish about the outlook for the world and markets in general with these kinds of developments taking place.
All this suggests to me is that inflationary pressure is going to keep building in the global economy. Already, higher oil prices are beginning to filter through the supply chain.
My view is that fund managers and institutional investors are going to start positioning for this in the commodity markets. ‘Hard’ assets should benefit from a strong economy, while also hedging the inflation risk for fund managers.
Meanwhile, the major miners are cashed up and need to start replacing their reserve base. The setup is right there to make the commodity markets heat up in a big way.
This is likely to happen just as US stocks go into their final melt-up phase of a historical bull market.
Strap yourself in for the ride ahead.
The roller coaster is still in the ascent phase.