The Women Workers of Pittsburgh

Not surprisingly I caught the headline in the PG looking at some national numbers on the labor force: Women lost more jobs in economic recovery.

What was that “except in Pittsburgh” thing?

Some years ago we looked as comprehensively as we could at the impact of gender in the history of Pittsburgh’s labor force, but that was all completed before the recent recession sank in; it could use updating at some point. What I am slow noticing is something pretty extraordinary. Since William Trent arrived at the point that would become Pittsburgh, the labor force of the region has has a labor force dominated by men. For a long time that was true everywhere, but the disproportion of men in the labor force persisted here long after things changed nationally.  Through recent decades, Pittsburgh had a labor force more dominated by men than just about any other metro area of the continental US.

Until now?

This is what I quickly compile for the breakdown by gender of the employed workforce in the Pittsburgh MSA in recent years and the most recent data does indeed show more women workers than men. This shows the average employment by quarter for the Pittsburgh MSA broken down by gender.

So even if it is a recession impact, which is part of it, I doubt that is the big picture long-term trend we ought to take note of. The quote in the article today points out correctly that women are the majority of state and local workers. The bigger factoid is that for Pittsburgh of late, at least for non-summer months women are the majority of workers period. Even if true for just a single month, it is a shift that was once inconceivable in Pittsburgh.  Wow.

David Skarica: Emerging Markets on Upswing

David Skarica Gold is in the midst of a 20-year upward climb, according to The Great Super Cycle Author David Skarica. In this exclusive interview with The Gold Report, he points out the emerging market small caps that could profit from global economic swings.

The Gold Report: In a February interview with The Gold Report, you said, “We’re in the midst of a 15- to 20-year mega-supercycle for gold and gold equities.” You predicted $1,500/oz. gold prices and that gold would move higher through 2015 or 2020. Do you still believe that to be the case?

David Skarica: $1,500 was hit. Yes, nothing has changed my long-term view. These cycles usually move in 15- to 20-year periods. If you look at gold bottoming in 2001 or 1998, depending on your view, you can see we at the very least will move higher in 2013 and more probably into 2015 to 2020. The fundamentals back it up as the problems with unfunded liabilities and the U.S. deficit will continue to put long-term pressure on the dollar and upward pressure on gold.

TGR: In that interview and your book, The Great Super Cycle: Profit from the Coming Inflation Tidal Wave and Dollar Devaluation, you predicted out-of-control inflation due to pressure from overseas bond vigilantes. Do you see signs that that has begun and what does that mean for gold prices?

DS: We are seeing inflation. However, we have yet to see big spikes in interest rates. On the inflation front, the U.S. government is probably the biggest group of liars in the world when it comes to reporting inflation. If you look inside the metrics, the calculations they use are all designed to keep inflation as low as possible. Housing also has not been adjusted for the recent bust and is very over weighted in the Index. It is about the only thing not going up at the moment. In addition, the U.S. is about the only country in the world that just uses core prices. I find it interesting at the moment that everywhere in the world from China to India to the U.K. to the Eurozone is reporting higher inflation, but the U.S. has no inflation worries! Gap recently had terrible earnings due to increases in costs from commodities and costs that the Chinese had to pass on.

However, the problem on the rate front is that the Federal Reserve is manipulating the market through their QE program. They are the majority of the long-term bond market and a bit of the short-term bond market. Even when QE2 ends, they will just rotate the $1.2 trillion of securities they put into the market the past two years back into the bond market. I call it QE infinity. That money is never coming out. Now, at some point rates will spike as debt approaches near-Greece levels. However, because they have bought so many of their own bonds, it looks like reality will take longer than I initially thought to hit, but it will have an impact eventually.

TGR: What impact will economic instability in Europe, the Arab Spring and the specter of a new IMF chair have on gold prices?

DS: Firstly, let me get something out of the way. The United States is a bigger economic basket case than Europe. The entire European debt crisis is way overblown. Places like Portugal, Ireland and Greece are tiny. They would be the equivalent of Rhode Island and Alabama going under; that wouldn’t exactly take down the U.S. economy. In addition, Europe has such a bloated social welfare system that it can easily cut these expenditures. Also, Europeans, unlike Americans, are willing to pay taxes for government services. However, Europe’s policy of printing money to take care of some of these problems is another positive factor for gold.

Conflict in the Middle East is positive because gold is a flight to safety during times of turmoil. Also, problems in the Middle East cause oil to go out, which is inflationary and positive for gold.

The new IMF chair is irrelevant; one empty suit replaces another.

TGR: In recent trading, gold and the dollar both trended higher, how does that fit with your model that gold gains when the dollar tanks?

DS: Gold can trade up with the dollar. It did in 2005. The problem we have at the moment is no paper currencies are very solid. The dollar’s recent gains have more to do with Euro weakness. When people overblow the Euro debt crisis, the result is a rush to gold. The same dynamic can cause the dollar to rally up against the Euro. In the long term, the big trend for the gold cycle is the U.S. debt crisis and the printing of money to inflate its way out. Even if the dollar doesn’t eventually drop against the Euro, it will devalue against real assets such as gold, oil and other commodities.

TGR: In your blog,, you talk about the cycles that impact gold prices. Where are we in the current cycle and what can we expect next?

DS: The next part of the cycle is going to be very interesting, in my opinion. Because of the 2008 market and gold price crash the fact that everything rebounded together from 2009 to 2011, people think that gold moves with the market. However, I really think the next bear market in U.S. stocks will be caused by the weakening of the dollar and inflationary pressures. Therefore, I expect a situation where bonds go down in price, stocks overall go down in price and gold and gold stocks go up. In addition, I think that once people see that precious metals are the only game in town, this will allow the sector to attract more money.

TGR: In that February interview, you were bullish on small caps in general. What companies are you watching now in that space?

DS: I really like Tinka Resources Ltd. (TSX.V:TK; Fkft:TLD; Pksheets:TKRFF), a small exploration company in Peru that is in the midst of drilling. I was in Peru last August and met with the head geologist—a real old-school Peruvian who spent the 1980s risking his life by prospecting in the middle of a brutal revolution. Today, the stock trades around $0.50.

I also like Pebble Creek Mining Ltd. (TSX.V:PEB). They are developing their Indian copper project in the Himalayas. Things have gone slowly and they have had some management problems. However, the stock trades at $0.10 and there is virtually no downside, especially in a company that is expecting to go into production in the coming years.

TGR: You talked about Aberdeen International Inc.’s (TSX:AAB) role as a merchant bank that allows investors to have exposure to a number of gold and resource companies. Is their stock price representing their value yet?

DS: The blunt answer is no. Aberdeen continues to trade at a huge discount to their net asset value (NAV). The stock is trading at $0.80 as I write and the last report had their NAV at $1.37. So, you are getting the stock at around 60% of what it is actually worth. In addition, they recently announced a biannual dividend of $0.01 a share. That may not sound like a big deal. However at $0.80, that is a yield of 2.5%. So, you can buy a great company at a 60% discount to its NAV, which has huge upside potential and get more than what you get on 10-year U.S. Treasury bond in terms of yield.

TGR: Any other tips on companies to look at that might take advantage of the macroeconomic cycles pressuring stock prices?

DS: I would really look at Peruvian or Indian stocks here. Both have been whacked for different reasons. India gets hit because of worries over inflation and rising rates. Peru is neglected because of worries over the recent election where the socialist candidate was leading. However, it looks like Fujimori, the right-of-center, more business-friendly candidate, is now neck and neck in the runoff polls. If she wins, Peruvian stocks will probably rise quickly from their current levels.

I think one thing you have to understand is these emerging markets are growing fast and are leveraging, not deleveraging, like western economies. I was in Peru last summer and the growth there was amazing. I plan on visiting India in 2012. The India Fund (NYSE:IFN) and Ishares MSCI All Peru Capped Index Fund (MXPECAPD:EPU) are simple ways to play these economies.

At the tender age of 18, David Skarica became the youngest person on record to pass the Canadian Securities Course. Skarica, a Canadian and British citizen, is the author of Stock Market Panic! How to Prosper in the Coming Bear Market (1998), which provided thought-provoking arguments on why a great bull market would end in the most vicious bear market of all history. He is also the author of The Contrarian Who Saved the World, which explains how markets work. His new book, The Great Super Cycle: Profit from the Coming Inflation Tidal Wave and Dollar Devaluation, was published by John Wiley & Sons in November 2010.

In 1998, Skarica started Addicted to Profits, a newsletter focused on technical analysis and psychology of markets. From 2001 to 2003, ranked Addicted to Profits third out of over 300 newsletters in terms of performance. He is also the editor of Gold Stock Adviser and The International Contrarian services, which focus on gold and global investing. Dave has also been a contributing editor to Canadian MoneySaver and Investor’s Digest of Canada.

Has preventative health care become code for paternalism?

‘The Taskforce says that prevention is everyone’s business – and we call on the state, territory and local governments, on non-government and peak organisations, health professionals and practitioners, communities, families and on individuals to contribute towards making Australia the healthiest country by 2020.’ (Extract from ‘Taking Preventative Action’, the federal government’s response to the Report of the National Preventative Health Taskforce).

I find the sentiments in the quoted passage objectionable for two reasons. First, preventative health care is not ‘everyone’s business’. Individual adults have primary responsibility for their own preventative health care because no-one is better able to exercise that responsibility than they are. Individuals who are persuaded that preventative health care is a collective responsibility could be expected to look increasingly to the various levels of government, non-government organisations, health professionals and practitioners, communities and families – everyone except themselves – to accept responsibility for what they eat, drink and inhale.

Second, the goal of making Australia the healthiest country by 2020 is being put forward as though it is self-evidently desirable collective good that should be pursued by any and every means available to everyone. The goal is not self-evidently desirable. Individual health is not a collective good. And the end does not justify the means that are being proposed to pursue it.

If you delve behind the spin about making Australia the healthiest country by 2020, the underlying goal seems to be to raise average life expectancy in Australia to the highest level in the world by reducing the incidence of chronic disease. What does this entail? It would be hard to object to the goal of enabling individual Australians to reduce their risk of chronic disease. The problem is that the government’s strategy is more about achieving national goals than providing better opportunities for individuals – more about behaviour modification than about ‘enabling’ individuals to reduce their health risks.

The government claims that analysis of ‘the drivers of preventable chronic disease demonstrates that a small number of modifiable risk factors are responsible for the greatest share of the burden’. The behavioural risk factors led by obesity, tobacco and alcohol apparently account for nearly one-third of Australia’s total burden of disease and injury. The chronic conditions for which some of these factors are implicated include heart disease, stroke, kidney disease, arthritis, osteoporosis, lung cancer, colorectal cancer, depression and oral health problems.

Since these risk factors stem from individual lifestyles it is obviously desirable for individuals to be aware of them. There may be a role for governments in provision of this information. Perhaps governments should also be involved in helping people in various ways to live more healthy lifestyles. It is questionable how far governments should go down this path, but it is difficult to object to modest efforts by governments to improve opportunities for people to live healthier lifestyles.

However, rather than helping people to help themselves the federal government has chosen the path of Skinnerian behaviour modification. It has chosen to drive changes in behaviour through what it describes as the ‘world’s strongest tobacco crackdown’. (This is one instance when I hope the government doesn’t actually mean what it says – some people in Bhutan have apparently been jailed recently for possession of more than small amounts of tobacco products.) The government’s strategy also involves ‘changing the culture of binge drinking’ and ‘tackling obesity’, but in this post I will focus on smoking.

Some of the tactics being used in the tobacco crackdown involve information and persuasion but there is also an element of punishment involved. The tobacco excise has been increased to over $10 for a packet of 30 cigarettes and legislation is proposed to require cigarettes to be sold in plain packaging. It seems to me that this amounts to persecution of smokers and their families. It will reduce the amount of household budgets available to be spent on other products and encourage some to avoid excise by obtaining tobacco from illegal sources.

As a former smoker, I am probably more strongly against smoking than most people who have never smoked. I encourage other people to quit smoking and discourage young people from taking up the habit. But having given up smoking several times, I know how hard this can be. Governments have no basis on which to judge that people are not in their right mind if they consider that the pleasures they might obtain from additional years of life are not worth the pain of giving up smoking.

In my view this question of whether smokers are capable of judging what is in their own best interests is at the crux of the matter. The politicians and bureaucrats who seek to modify the behaviour of smokers may see themselves as enhancing the capability of these people to have lives that they ‘have reason to value’, in accordance with well-being criteria proposed by Amartya Sen. If so, their attitudes highlight a major problem with Sen’s approach. Governments have no business deciding what kinds of lives individuals have reason to value.

Enrolling into a drug rehab program can be the hardest thing to do but it can save a life.

Economic Events on May 31, 2011

At 9:00 AM EDT, the monthly S&P/Case-Shiller home price index report will be released.  Given that most economists don’t expect the overall U.S. economy to improve until housing prices end their decline, the market will be watching this number closely.

At 9:45 AM EDT, the Chicago PMI Index for May will be announced.  The consensus index value is 63, which is 4.6 points lower than last month, but is still well above the break-even level at 50.

At 10:00 AM EDT, the monthly report on Consumer Confidence for May will be released.  The consensus index level is 66.5, which would be a 1.1 point increase from April’s number.

Also at 10:00 AM EDT, the State Street Investor Confidence Index will be released, which looks at changes in the amount of equities held in the portfolios of institutional investors.

At 3:00 PM EDT, the Farm Prices report for April will be released, giving investors and economists an indication of the direction of food prices in the coming months.