Big Cuts = Big Profits = Big Problems
Top line profits from GE, Alcoa and other are looking rosier than rose bush, but there are thorns in that there bush! In past recessions, the business cycle was pretty straight forward. Businesses cut expenses (employees, product lines, wasteful production), they got lean and profitable, then started hiring new employees with those fat balance sheets.
The question - will this time be different. The answer is "YES" (and that's not a good thing).
A little history here is quite important. From 2002-2007 employment growth in the U.S. was very limited as compared with GDP growth. What's caused that phenomenon was cheap foreign labor. In the past factory labor had to compete with cheaper labor around the world, today technology is giving corporations the ability to export service sector jobs (call centers, claim processing, computer programming, etc) and when you couple the cheaper labor with zero business regulations, it's hard to fault the CEO's for shipping jobs overseas.
In reality, the above can SLOW growth, not eliminate it. Today there is something more sinister at play - the enormous U.S. Debt albatross and new regulations. Where is America going to get the revenue to pay back its debt? No one is getting elected by promising to tax the people, so corporations are looking like the easy target and they know it. They are hording cash.
The continuing regulatory hurdles being created by the Obama administration (and previously be Bush) are making business EASIER for large corporations. They can hire unproductive employees to filter through the thousands of pages of nonsense (I'm sorry, consumer protections), because they have the cash to do so. It's the small businesses (the men/women creating 70% of all new jobs) that find themselves unable to compete with their limited resources.
And this is the crux of the profit problems. CNBC and other financial outlets LOVE to tell you about GE's profits, but you never hear about a little company like SEECO who employes 60 people or EBS who employs 12 people. Yet it's these little company's whose profits are the key to 70% of our job growth. Increasing regulations will make it easier for the bigger company's to compete with smaller company's and decrease job growth in this country.
To right America's economic ship, we need to seriously cut regulations and end deficit spending. I'm betting against either of these from happening and that's why I'm bearish on the market (bearish the Wilshire 5000, not the DOW)