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1 Troubling and Persistent Economic Trend

In this segment of The Motley Fool's financials-focused show, Where the Money Is, analysts Matt Koppenheffer, David Hanson, and Morgan Housel take a step back from individual stocks and discuss one troubling macroeconomic trend. The group examines the current level of U.S. citizens receiving unemployment.

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Read/Post Comments (8) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 21, 2013, at 11:23 AM, SkepikI wrote:


  • Report this Comment On August 21, 2013, at 1:15 PM, SkepikI wrote:

    I listened to this video just to be sure I was not just being curmudgeonly. THIS IS AWFUL. the sound quality was bad and uneven. Lots of lame space to waste my time. Morgan, you are usually very good about providing transcripts for us video haters. You and David should be embarrassed at this one..

  • Report this Comment On August 21, 2013, at 2:44 PM, hbofbyu wrote:

    Video takes to long to watch. Hate it.

  • Report this Comment On August 21, 2013, at 6:08 PM, cooncreekcrawler wrote:

    Not everything is perfect, but the video accomplished what it sat out to do---except for a vociferous few, which I disagree with, but would die for their right to do it.

  • Report this Comment On August 21, 2013, at 7:30 PM, Khizhim wrote:

    I'd also like to have a transcript, because this is such an excellent discussion. I'd prefer to have verbatim transcripts of ALL MF videos but I think the video format provides information which can't be obtained from text. I think these three "thirty-something" MF commentators "acquit" themselves extremely well, Housel in particular. I'd been a Housel skeptic, thinking of him as the MF's "resident sage," and holding his youth against him, but I'm glad I had a chance "to see him in action" here. He clearly knows what he's talking about and I'm impressed that he's thought deeply about this important topic. He provides valuable insights. Hanson's sincerity and competence aren't in doubt, and I'm even willing to forgive Koppenheffer's carnival barker bow ties after I watched this mature, substantive, sober discussion. I couldn't care less about image and sound quality, as long as the transmission is clear, but I would like a transcript of each video.

  • Report this Comment On August 22, 2013, at 2:08 AM, gbad00 wrote:

    Yes, please, no more videos without transcripts. I never watch them - they are a waste of my time. I can read, re-read, and absorb the message in a fraction of the time.

  • Report this Comment On August 22, 2013, at 12:26 PM, SkepikI wrote:

    Feeling a little less curmudgeonly today, I can say that I do not bother to criticize videos from other contributors, because I just don't consider them worthy of the time or trouble. The entire reason I bother with you Morgan, is that I usually consider your subjects and CONTENT worth the trouble, and you have been VERY GOOD at providing transcripts. This subject was particularly interesting to me, which is why I bothered to try and listen to the video. I did not get it all, just enough to be irritated and wish I could read it for myself.

    I don't know what MF editors and policy is with respect to videos, or if this is just a David thing (I notice there are more of these when he is involved) BUT it is a serious mistake for MF to not insist on transcripts. More to the point Morgan, your subjects and analysis is generally more than 'fluff' which IMHO does not lend itself to video. A lot of the vacuous 'fluff' that I see about in MF articles is well suited to video because of its nature, and usually I don't bother. Thats not what I am looking for from MF and CERTAINLY not what I have come to expect from you, Morgan.

    Its ok with me if MF wants to attract a certain demographic with video, or even provide a great service to them by hitting their bias for a form of delivery. But for pete's sake, if its a serious subject, do the dang transcript. We will all be better off for it.

  • Report this Comment On August 22, 2013, at 3:06 PM, Thaeger wrote:

    Matt Koppenheffer: ...That wraps it up for the headlines. With Morgan here in house -- one of our macroeconomic experts here at the Fool -- we'll go on to our next segment, Macro-Vision. Morgan, continuing unemployment claims have been dropping pretty precipitously lately. What is going on, and what can investors take away from that change?

    Morgan Housel: Yeah, so some numbers that really surprised me recently when I looked at them. For the past 30 years, the average number of Americans receiving unemployment benefits has been 2.9 million. What do you guys think they are, today? If the 30 year average is 2.9 million, we know unemployment is still high, what do you think those numbers are today?

    Matt Koppenheffer: I'm going to go with about 3 million.

    David Hanson: You said 2.9 million was the average (Morgan: Right.) I'll go 4 million.

    Morgan Housel: Its 2.9. It’s actually a tad below average right now. So we have well above average unemployment, but below average number of Americans on unemployment benefits. When you adjust for population, its significantly below. So it’s a really interesting dynamic that we have right now, of many people unemployed, but a shrinking percentage of those people who are unemployed are receiving any benefits.

    So there are a couple of takeaways from that. One is that the argument that so many Americans are not working because they are just milking unemployment benefits and laying on the couch watching TV can easily be shot down when you see how few of them, especially the long-term unemployed, are actually receiving benefits at all. The vast majority of long-term unemployed (people who've been unemployed for 6 months, or one year or longer) don't receive any benefits right now.

    I think the big takeaway from that is that the scars left over from the Great Recession that we had will very likely last for decades. When you have such a huge portion of the workforce that has been left out of the workforce for 5 years, is receiving no unemployment benefits; that is extremely difficult to recover from, ever. There have been a lot of studies that show this; that decades down the line, you can still measure the impact of long-term unemployed people like this.

    So how that affects banks, and we're talking about; the single most important variable for judging bank defaults is unemployment and income -- whether people have jobs. That makes sense; whether you have a job and income, you can pay your car loan, pay your credit card bill... (Matt: That makes a fair amount of sense). Right, pretty straightforward. But then we have this big portion of the population that has been left out and receiving no unemployment benefits; that's a portion of the population that’s going to have such a hard time recovering.

    I think for banks to see a significant decline in defaults going forward -- they've already seen a (Matt: There's been a big drop already) A very sizable shrinkage in defaults, credit card loans, autoloans, whatnot -- to see more improvement you're going to need significantly lower unemployment or much higher income, and when I look at the numbers of unemployed that are completely left out, it makes me wonder how much more improvement we're going to have.

    Matt Koppenheffer: So, what's the solution?

    Morgan: I think that for millions of Americans the solution is pretty dire. I mean, there's no silver bullet where we can say, "This is how we fix it, this is how we get back to 1999 prosperity." It's difficult, and I'm glad I'm not a politician that has to -make- solutions because I don't think there are any easy solutions.

    Matt Koppenheffer: That is -not- the optimistic view I was hoping for from you, Morgan. David, what's your solution?

    David Hanson: I don't know about a solution, but I guess my question to Morgan would be... It doesn't sound great for those average Americans that don't have jobs, that are unemployed or long-time unemployed; what does it mean for big multinationals here in the U.S. that have a lot of international operations, that are relying less on the U.S. consumer to drive revenue? Does that mean it’s not that big of a deal for companies and stocks; they'll continue to perform because they have the ability to go internationally, get revenue there, makeup for maybe lagging revenue here in the U.S.?

    Morgan Housel: Well I think there's some truth to that, but the one rebuttal is that, just because a company has international exposure doesn't necessarily mean that it's better than the United States. So sure you have companies -- Procter and Gamble, Johnson and Johnson, that do a lot of business in China, in Europe -- all those economies are doing poorly themselves to. Europe, which is in a really bad situation, especially in the southern countries; China is slowing down, Brazil is slowing down, Japan is still a mess; they're doing slightly better, but have been a mess for 20 years. So I would say just because big multinational companies have international exposure, that in itself is not a silver bullet either; that can drag down revenue in the short run, as well.

    Matt Koppenheffer: Except to the extent that they're gaining market share, right? So if those economies aren't growing, but somebody enters a new market and gains market share, that's a way to grow.

    Morgan Housel: Yeah, that's really true for...when you look at the past 20 years the share of profits in the S&P 500 that have come from overseas has really increased from about 10% to more than 30% in the last 20 years.

    Matt Koppenheffer: So, now that Morgan has officially depressed us, lets move on to our new game called "Fool in the Blank..."

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