Motley Fool Money: 08.07.2009
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Welcome to Motley Fool Money. I'm Chris Ellen. I'm joined by Motley Fool Senior Analyst James Early, Shannon Zimmerman, and Tim Hanson. Guys, happy Friday. Happy Friday to you, Chris. Seth Jason is out this week because he decided that being there for the birth of his first child was somehow more important than being here for this podcast. I mean, can you believe it? What's with the priorities on this guy? Anyway, we've got a lot to get to this week, including things heating up between Google and Apple. AIG reports a quarterly profit. Yes, AIG. China does something that makes Bernie Madoff really, really glad he lives in America. And as always, we'll share three stock ideas. But we begin with Friday's better-than-expected jobs numbers.
The unemployment rate for July fell to 9.4%, down from June's 9.5%. The markets opened up sharply on the news, with the S&P hitting a 10-month high. Shannon, we got talk that the recession is easy. We've even got some talk out there that the recession may already be over. What's the takeaway for investors?
Certainly neither of those. Should I give any more options? Well, I'm going to make up my own option, actually. So it is good news. There's just no getting around that. And that's wonderful. Fewer people are out of work. And that in itself is terrific news. And it's especially good news when you connect that dot to the fact that our economy is powered largely by consumer spending. But we're still within spending distance of 10%. Most economists seem to think that that's the figure that we're going to arrive at by the end of the year. And when consumers are not spending and they're saving more, that's ultimately a good thing for the long haul. But when the economy needs stimulating, that's not helping much of anything.
And so from the investing perspective, you know, people need to take a look at economic and fundamental corporate fundamental reality and compare that to a market that's risen by 40 percent since the March lows. Are there bargains out there to be had? Yes, absolutely. But right now it pays to be choosy and people should cultivate their inner stock snob.
I was about to say that I was going to take a pin and prick Shannon's balloon just a little bit, but I don't think he even inflated his balloon too much with that answer. So let me say one thing, though, and this is knowledge not available elsewhere outside of Motley Fool Money podcast. Actually, it is, but it's still worth covering. There are actually two kinds of unemployment numbers.
What do the July jobs numbers and unemployment rate mean for investors?
There's the regular unemployment number. That was the one that went from 9.5% to 9.4%, where people call around and ask people, do you want a job and do you have one? So it ignores people who might have backed out of the workforce to go to school or to have a baby. There's a separate number. Exactly, a payroll number, where you call employers and ask them, have you added jobs, cut jobs? that number is still down. They lost 247,000 jobs that way. So the numbers still aren't quite as good as people think. I mean, unemployment is way above the long-term average now. It's gotten a little bit better, but it could stay above 9% for five years if the recession lasts that long.
Well, so, I mean, in terms of the numbers, yeah, it definitely was not all good news. I mean, we had worse than expected retail numbers. Same store sales in July fell 5.1%. I mean-
Yeah, that speaks to the whole the issue of consumer spending. You know, again, 70 percent of the economy is powered by consumer spending. When people are holding back and that was reflected in the retail numbers that came out for July. Right. That's not going to simulate the economy. And even though, you know, of course, it is good news that people are fewer people are out of work, depending on which metric you want to use to look at that. People need to have some reality and have some perspective on the reality of the situation and not pop the cork in the champagne quite yet.
James, we got some people out there saying the Cash for Clunkers program is one of the culprits in all this.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:04–2:11
2
What do the July jobs numbers and unemployment rate mean for investors?
2:11–7:26
3
How should investors interpret the difference between the unemployment rate and payroll job losses?
7:26–12:27
4
Did the Cash for Clunkers program artificially boost short‑term employment and retail sales?
12:27–15:16
5
Is AIG's recent quarterly profit a sign the taxpayer rescue is working?
15:16–16:00