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By: Adrian Mastracci
North Shore News
Business Section, “Loose Change”
Sunday, November 2, 2003
Canada’s economic recovery depends heavily
on the US economy. Let’s consider the
big picture for our southern neighbour.
Some healthier data is surfacing for the US
economy. Improvements in the Gross Domestic
Product and better corporate earnings are two
examples. On the other hand, precious jobs
are slipping away overseas daily.
Cost issues have not gone away for businesses.
Companies are still looking to reduce expenses.
One popular way is to outsource jobs to lower
cost centres. Both China and India are the
benefactors of such job shifts. They have become
economic powerhouses in just 4 to 5 years.
We read headlines such as Verizon Communications,
the large US regional telephone company, expecting
to make 4,000 to 5,000 more job reductions
in 2003 to cut costs. Further, 1 out of every
10 tech jobs in the US is projected to shift
overseas.
While this reduces costs, the troubling sign
is that jobs exported from the US are not coming
back anytime soon. It may well be a permanent
loss. Canada is also affected.
In the last 30 months, US businesses have
slashed over 2.5 million jobs. About 575,000
jobs have been lost since the start of 2003
alone.
Another 45,000 jobs were shed by US companies
in August and more Americans stopped looking
for work. Approximately 9.1 million Americans
are now unemployed.
Many have called it a jobless recovery. I
prefer to call it the “job loss” recovery.
It raises the question of how long consumers
can keep spending without a job market upturn.
The cost of energy could also be an anchor.
Oil and natural gas prices are still high.
They affect virtually every product being produced.
North America desperately wants jobs. However,
consumers are reluctant to pay the price for
the homegrown products and services.
Some important choices and decisions will
have to be made soon. Low prices can persist,
but some much needed jobs will migrate offshore.
Alternatively, some prices can be raised and
more jobs kept at home. Either way, there is
a cost to bear.
Uncertain economic climates foster continued
volatility for portfolios. In view of this,
what can be done to protect the precious nestegg?
This approach assists:
- Revisit the asset mix and the amount of
risk being incurred.
- Examine the quality and
suitability of the current investment
selections.
- Calculate the portfolio losses and consider
what to do about them.
- Review the tax friendliness and all the
costs associated with the investments.
- Rebalance portfolios, especially those
top heavy with bonds or equities.
Fine tuning investment policies and strategies
is always helpful and often necessary. The
first question is whether they are appropriate
for the portfolio in light of the goals being
pursued.
In short, North America needs job growth.
Right now, some inflation and higher business
spending would be positive for the economy.
Not to mention for investment portfolios.
The current economic climate is different
from our past experiences. Fine tuning the
portfolio reduces the bumpiness from volatile
markets.
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