Alright, it’s been way too long since I brewed something… So...
Let’s get to work.
The Context:
October Jobs Report.
It seems that companies have added about 271,000 jobs in October. This
sudden surge in the number of jobs added has been the fastest rate change yet
and as an effect has sent the unemployment rate to 5% which is the lowest level
since April 2008.
Ok, what does that mean?
Well, according to Economics, inflation rises as
unemployment goes down. I know sounds strange at first because we are used to
associating negatives with negatives… but Economics thinks otherwise.. for
every good, there is bad. Hence, as more and more people get employed, they
have money to spend, and as their spending ability increases, so does the
demand for things and hence price rise or inflation. Tada!
All right ok we understood that employment increases
inflation, what’s next?
Coming to that; USA’s central bank rate has been practically
0% for almost a decade now... 8-8.5 years actually. So now they want to
increase that. Now maybe you’re thinking, wait increase bank rate or as its
popularly called Fed rate in USA, wouldn't it increase the cost of loans? That would
make it harder for people to get their hands on more money, that’s bad, why
does USA want to do that??
Weeeelllll…. Inflation in USA has also come to about 0% and
now that there’s a sudden drop in unemployment, this inflation will go up and
they don’t want that to happen. Simple right? Wrong! Nothing is ever simple!
Think about it, if
inflation goes from 0 to 0.5 or even 1% what’s the big deal? Growth and
inflation are directly proportional, so if inflation rises (up to a certain
extent, not like Zimbabwe) it means somewhere you are making growth. So the
story of wanting to keep inflation under check is bogus.
Wow, ok boss, so what does all this mean then? Why do they
really want to increase the fed rate?
I’ll tell you… because they want to look good.
For a stable economy, the Bank rate needs to be respectable,
well at least not 0. Japan’s central bank rate has been at zero for almost 15
years, and everyone knows Japan is a saturated economy. They don’t want the
same to happen to USA.
Alright… We get it now... so they want to give the Fed rate
a hike because they want to look good and look like they made a recovery from the
2008-09 crash. But if this make believe stunt is what they want to do, then why
didn’t they do this earlier?
Good question. Frankly, I believe they are doing this because
of the presidential elections. However, this post is about a conspiracy theory.
Now, where’s the theory??
The Theory
We know what the context is, how Recession, Recovery, Fed
Rate, Inflation, Growth and Unemployment are related to each other. And we also
know that unless Obama and his govt. show some proof of recovery, it will be
really hard to get a third term for the Democrats. So, there’s but one option
to show this for sure, increase the fed rate.
This might choke cash flow in the system but! And I mean a
serious But! This fed cut is not to choke or pour money into the common man of
USA, but it is to show the outsiders that USA is on track for recovery. We must
note that people are really wry of the situation. Japan is in a recession, China
is looking unstable, and India is still volatile. Everyone else is anyway
insignificant. So investors will put their money into USA.
But sir, what about the employment? The govt. can’t simply
cook it up, how did nearly 200 thousand new jobs come up within a month??
Ask yourself that question again! How did nearly 200
thousand jobs come up within a month?? Come on!!
I looked it up; the October jobs report a little and I found
and I quote
“White-collar businesses added 78,000 profession jobs. Health
care added 45,000 positions. Retailers took on 44,000 new workers, and
restaurants hired 42,000 people.”
I’m not chasing after everyone, but I got curious at the restaurants
and so did a little more digging. About three companies did 80% of this 42000.
And surprisingly, these three are Pizza Hut, Taco Bell and KFC. All three
belong to the same parent organization of Yum Brands, Inc.
Now about this Yum Brands, Inc.
Yum Brands stock tanked 11% in October. They said it’s
because the company didn’t meet the analyst's expected quarterly revenue...
seriously? 11% because it missed “analyst estimates”?? Ok I'll believe even that…
But listen… The quarterly revenue actually grew by 2.2% and increased the
"adjusted earnings" by 14%.
Now the stock, even after recovery is at 5% below last year’s
price, but the earnings are high and they just hired 42000 people!!
Here’s where I come in... US wanted to hike the fed rate so
bad... But they couldn’t just do it.. Neither could they leave it at 0 and be
another Japan... sooo.. They called some of the big guys... like Yum and a few
others… and said, look guys, you need to hire more people.
We just saw, that the sales revenue of Yum isn’t that great,
the stocks tanked 11% but still its profits are awesome. How?? Think!
Universities and Hospitals are known all too well for Govt. indulgence... Sooo…
I’m just thinking… somehow someone made a big donation or an “adjustment”
leading to a growth in numbers, then the hiring boom and hence creating a
clean, unsuspecting and natual green signal for the fed rate hike.
But the question is … will you buy this natural green signal???
Is it all that natural in the first place? Will you invest in USA after knowing
this??? Or is Obama really looking for investment in America and the American
people or is it all just to get money for a short term till the elections are
over??
