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Wal-Mart was the "big" story this week. A good number of media outlets reported that Wal-Mart was looking at adding
a luxury component to there
US stores. Pretty soon, shoppers will now be able to eat sushi and buy $500 dollar wine as they shop for their typical household goods.
It is
ironic, however, that a much bigger
Wal-Mart story did not garner as much media attention.
In a sense, it shows the US centric focus on the economy. Nonetheless, the recent news that Wal-Mart is looking at
adding 150,000 employees
in China over the next 5 years does hold some
significance. First, it reaffirms the fact that
the Chinese consumer economy is both
growing and still in its early stages. Twenty years ago, your
average Chinese citizen made just enough money to cover their basic household expenses. Today, they are looking at purchasing cell phones, computers, and televisions. Tomorrow, they will trade
in their bicycles for cars.
Second, this expected demand for consumer goods will lead
to a continued demand for
commodities. Although most people have focused on the industrialization aspect of
this commodity bull market, the demand
for commodities due to increased
demand in consumer products
will also contribute to higher commodity prices. There are 1.3 billion consumers
in China and another 1.1
billion consumers in India.
Most of these consumers
do not have the basic household
goods that are associated with western economies. The main reason for this is that they
cannot afford it. However, as China and India continue to industrialize,
a wealthier and educated working class will be created.
In turn, this working class will now have the disposable income to purchase goods that you can
find at your local Wal-Mart.
Unemployment numbers also came out this week. The
department of Labor reported that 302,000 workers applied for jobless claims last week. This was a decline of 11,000 from the previous
week. According to the labor department,
jobs were created in
construction, retail, financial
services, and healthcare sectors. As a result, most pundits point out to the strengthening job market as signs of a strong economy. What some fail
to point out, however, is
the manufacturing sector continued to lose jobs.
It is
true that a job is a job no matter which sector that it is
in. However, the fact that the
United States has become
a service sector economy is worrisome. Rising interest rates will inevitably affect a good number
of these sectors that posted gains over the last week. Construction jobs will likely decline as we experience a housing slowdown; retail jobs will suffer as consumers curb their spending
due to higher mortgage payments; and financial services typically do
not thrive in a recessionary
environment where investors typically shy away from
the markets and other investments.
And so, although jobless claims dropped in the last several weeks, I expect higher unemployment in years to come.
Part of the reason for this eventual rise in unemployment, is that we have exported most of our manufacturing jobs abroad. In the past, the United
States was a manufacturing
economy. Electronics, wood furnishings, apparel all where made in manufacturing plants across America. Today, we import all of these goods. Hence, our record trade deficit. If you don't believe me, just walk around
your home. Notice the products that you have in your home. Where are they made? China? Mexico?
Japan? Italy? Most likely, they are not made in the USA
If you are interested in learning more about the
commodity bull market, I urge to pre-order my forthcoming book, "Commodities for Every
Portfolio: How To Profit from the Long-Term Commodity Boom".
Emanuel Balarie
Senior Market Strategist
Wisdom Financial, Inc.
Direct toll free: 866-465-0017
International: 949-548-2021
Emanuel Balarie is the Senior Market Strategist at Wisdom
Financial. As an expert on foreign markets, foreign currencies, and the
precious metals industry, Mr. Balarie often speaks
at public engagements and his research is regularly published in investment
newsletters. You can find out more about Mr. Balarie
and his services at www.wisdomfinancilinc.com
The risk
of loss in trading commodity futures contracts can be substantial. You should
therefore carefully consider whether such trading is suitable for you in
light of your financial condition.
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