Peter Yastrow's Blog

CNBC – Monday Morning Trade

Insight on the market action, with Matt Smith, Summit Energy; Andrew Wilkinson, Interactive Brokers; and Peter Yastrow, Yastrow Origer.

Tags: Bears warned

Decision Making 101

Executives, traders, CEO’s are all paid to make decisions. They are expected to look at all of the facts, and determine the best course of action. Weigh the options, consider the probabilities, calculate the expected values and make a decision that will have an impact on the lives of all of the people involved. If a company chooses one vendor over another, not only are all of the people affected at both vendors and our company, but the lives of all of the children and spouses as well. Decision makers are burdened with tremendous responsibility, and must cope with stress and doubt around the clock.

When the future seems more uncertain, decisions become even more difficult. When conditions are in a state of flux, EVEN IF THEY ARE IMPROVING, a decision maker often chooses to wait. Waiting and being patient are valued skills, and when the facts are changing, they are most needed. Starting a course of action, when you know that in a matter of days it might be necessary to stop, and even reverse course would seem reckless and frantic. Therefore decision makers will sit on their hands and do nothing when conditions are changing.

Knowing this:
1.What will happen before a big vote on tax increase ?
2. What will happen before a big vote on tax decreases?
3. What will happen during stimulus package implementation?
4. What will happen when rates are getting slashed?
5. What will happen when rates are getting raised?
6. What will happen before almost anything big gets finalized?

If you answered: We should see economic activity slow – YOU RE RIGHT !

This crippling fact is often why the Government and the Federal Reserve seem to get results that are contra to classic economic dogma. They seem to forget that at the end of the day, the markets, and the economy consists of millions of individuals, all acting rationally, all fearing their own humanity, not wanting to commit an error. They will each choose to wait and see how things unfold.

If our Government wants to help our economy, they should understand that enacting policies has a large cost. Unless the benefits are going to be very large, it is probably best to do nothing. Doing nothing reassures decision makers. Doing nothing lets decision makers plan for the future. Our medical community lives by the Hippocratic Oath; First Do no Harm. I can think of no better motto for our Government to live by.

J.O.Y. to the world

peter

Tags: government intrusion

CNBC – Stocks can rally with negative GDP

Airtime: Thurs. Jul. 15 2010 | 5:34 AM ET
Sorting through the market headlines, with Peter Yastrow, trader.

People Hurt Profits

The problem for everyone right now is the same. How do we make money? Profits are very hard to come by in this highly competitive global economy. Companies can either cut costs, or grow their businesses to increase profits. Cost cutting is certainly never going to stimulate hiring, but how much hiring does a growing company really want to do?

The Jobs Problem is not Bush or Obama’s fault. The issue has more to do with the problems labor faces in this modern industrialized economy. Jobs require more training than ever. People must develop or acquire very specific skill sets in order to work in this more demanding and competitive economy. This highly specialized labor force can earn more money, but must pay more money for education.

The cost of training is not the only problem facing new workers. These workers take a huge risk by specializing. The more specific their job skills, the less transferable they become. Because they need to amass more skills, and become more specialized, our workforce also faces a much higher rate of obsolescence than ever before. This means that our labor force requires more training than ever before, at a higher cost than ever before, but can also be obsolete faster than ever before.

Consider a computer programmer who masters a computer language. If the industry standards evolve, he must retrain in order to remain employable. Teachers, doctors and people at all levels in the work force are required to go to seminars and training sessions on everything from company e-mail to healthcare benefit explanations.

Combine the costs of training new hires, with the absurd healthcare burdens that employers now face, and it really should be no surprise to anyone, even a congressional member, that hiring people is quite risky, and should be avoided whenever possible. Outsourcing, temp hiring, consultants and part timers should all be considered before making the draconian move of actually hiring a person with a salary and benefits.

People are going to need to find ways to make money. However we must not expect some huge hiring boom by large multinational companies, or assume that corporate hiring is going to increase dramatically. Making such assumptions based on prior recessions, or prior periods in history is a mistake. Hiring will remain tepid at best. Jobs are going to remain very scarce. People are expensive to train, expensive to manage, and can become obsolete in a very short time.

This problem is not a result of bad policy, or bleeding hearts. The problem is a product of technological advancement. As our society continues to become more and more advanced our labor force will be increasingly burdened with more costs of training and retraining. Our workers will not be able to compete globally without the proper education, and vocational training. We must anticipate a much bigger degree of frictional unemployment in the modern world.

Joy to the world

peter