Why Robots Are Actually Fueling Job Growth
In today’s Market Talk, Amber Lancaster, Ian Dyer and I discuss:
- The biggest earnings and economic reports coming out this week.
- A new approach to diagnosing life-threatening infections.
- What rising oil prices mean for inflation.
- The company that’s using 3D printing to disrupt the aerospace industry.
April 15, 2019
Amber Lancaster: Welcome to this week’s Market Talk. I’m Amber Lancaster, joined by Paul Mampilly and Ian Dyer. Each week we look forward to sharing our viewpoints with you, our readers, and giving insight into what’s on our radar.
Today’s outlook is for the week of April 15, 2019. I’ll begin by sharing with you what I’m watching and then we’ll hear from Ian and Paul. Today I’ll cover three major topics. The first will be my take on the U.S. economic data on the earnings release front. The second will be my story of the week. The third will be the latest numbers on our Disruptification Index.
On the economic data front, this week will be a four-day trading week in the U.S. stock market due to the Good Friday holiday on April 19. Despite an abbreviated week, this week will be full of pertinent economic data releases. The most notable release we’ll keep an eye on is retail sales on Thursday.
The median forecast of economists surveyed by Bloomberg are calling for a 1% gain, followed by a slight decline in February which was mostly attributed to cooler weather and a downtick in building material sales. Since then, we saw a stronger than expected uptick in March vehicle sales.
This shows U.S. consumers are positive on buying large-ticket items and February’s retail sales decline was overstated. Take a look at this chart. According to data from AutoData, auto sales reached a seasonally adjusted annual rate of 17.5 million in March, up from 16.6 million in February.
This is the highest reading in three months. It’s also worth noting that, since its recent low in 2009, U.S. auto sales are up 93%. So, in all, U.S. consumers continue to spur growth in the U.S. economy and we anticipate retail sales will reflect this data in upcoming releases.
Now here are the other key economic releases in this condensed week ahead. As you can see in this graphic, industrial production’s month-over-month reading will be released on Tuesday, April 16, at 9:15 a.m. On Wednesday, April 17, February’s trade balance report will be released at 8:30 a.m. and wholesale inventory month-over-month reading for February will be released at 10 a.m.
As previously mentioned, retail sales advanced month-over-month for March will be released on Thursday at 8:30 a.m. Also on Thursday, we’ll have a March print for the Leading Index at 10 a.m. Rounding out this week, we have housing starts for March released on Friday at 8:30 a.m.
It’s also a big week for earnings releases. Check out this list of earnings releases for this week of top U.S. securities. We’ll see releases from 51 companies in total, just through Thursday. Those companies include Johnson & Johnson, Bank of America, UnitedHealth, IBM and Pepsi Co.
My story of the week focuses on a company that’s described as the leading provider of automated multiplex molecular diagnostic testing systems. The company, GenMark Diagnostics, is making news because it’s on an FDA-approval winning streak that’s worth noting.
Today, the company announced it has received FDA 510(k) market clearance for its ePlex Blood Culture Identification Gram-Negative Panel (BCID-GN). An example of this panel is seen in this image. This is the third ePlex BCID to receive FDA clearance during the past four months.
Now, what makes ePlex so special?
Say, for instance, you or a loved one is rushed to the emergency room with symptoms that appear to be sepsis. Sepsis is a potentially life-threatening condition caused by the body’s response to an infection. GenMark’s proprietary ePlex system aims to help clinicians identify bacterial and fungal organisms as well as antibiotic-resistant genes within approximately 1.5 hours of blood positivity.
This allows treatment decisions by doctors to occur days earlier than with conventional methods. Per the company, GenMark’s ePlex is designed to optimize laboratory efficiencies and address a broad range of infectious disease testing including respiratory, bloodstream and gastrointestinal infections.
Turning to our Disruptification Index, this chart and graphic shows it continues to do well year to date. As of Friday, April 12, close, the Index is up 25% versus 13% on the Dow and 16% on the S&P 500.
Lastly, I’m going to end my segment by saying happy Tax Day to those of us who are paying a tax bill today. I have a set of nice freebies and treats for you. Check out this screenshot from USA Today. They have a list of nearly 40 freebies being offered by local restaurants, stores and travel sites today. You can find this list by searching for “Tax Day freebies” on the USA Today website.
That’s it for me. Ian, what are you watching?
Ian Dyer: Thanks, Amber.
On a macro scale, I want to go over a couple things that happened last week. On Thursday, the PPI number came out. This measures the price of goods and services that companies are charging. This was up 0.6% in March.
This can usually be tied to some sort of inflation forecast. However, a big part of this number comes from food and energy. With oil up about 14% over the past month, we don’t believe this is going to have any huge impact on inflation.
Overall, inflation has stayed pretty flat around 2%, give or take 0.1-0.2%, over the past couple years. This is a remaining a healthy environment. Low inflation means interest rates will remain low, which means there’s a healthy home-buying market. We’re still seeing big wage growth at 3.2%, which is the highest we’ve seen since the 2008 crash.
Things are looking really good. People are making more money at a faster rate and the prices of things are going up. We don’t believe this PPI number is going to have much affect on inflation at all. With the consumer staying healthy and the real estate market staying healthy as well, this is turning out to be a great year so far for the economy.
On Friday, it got even better with the jobless claims number at 196,000. This is the lowest number for any week since 1969. It’s about 50 years since we had a number that low. Of course, back then there were a lot fewer people in the workforce. That makes this even better. The jobs market is healthy, the consumer remains healthy with high wages and the real estate market — with low inflation and low rates — is going to continue to be healthy as well.
For the week, in terms of disruption, I want to talk about the current state of robotics. 2018 was a huge year, especially in the U.S. where we brought in a record 35,880 robots to work in the United States. In the meantime, unemployment fell from 4.1% to 3.7%. We created 2.7 million jobs in the past year.
While there’s been a lot of speculation and a lot of forecast recently about robots ruining the workforce and causing a crash in the economy, we’ve seen the complete opposite so far. Of those 2.7 million jobs, 1.6 million were in key industries like manufacturing, construction, education and healthcare.
These were the biggest four job growth industries we saw over the past year. Right now, on the flipside there is a decline in the number of retail workers. There’s been about a two-year downtrend in this. There’s a supply crunch. These companies really can’t find steady work.
This is an area where robotics can really thrive. We’ve seen Walmart recently state they are adding 4,000 robots to their stores to do typical, mundane tasks like polish the floors and scan and sort inventory. This is a good sign because that means that people are getting a higher choice in what they want to do.
We’re not seeing jobs being filled in things like polishing floors when people don’t really want that job. We’re seeing people get their pick of what they want to do in this economy. The jobs market is remaining very healthy.
There was a recent survey taken by thousands of companies all over the world by a group called Manpower Group. 87% of those companies said they are looking to expand or maintain their current level of workforce because of automation.
Automation is not taking jobs, it’s actually increasing them. Companies are finding ways to have their people work alongside robots, rather than having their jobs taken. These companies are really progressive and innovative. They are finding ways to grow despite the increase in automation. And 83% of these companies also said they are…taking people who already work there and are teaching them skills the robots can’t learn, while the robots do administrative tasks or things it takes people a little longer to do.
It’s more efficient because they have computers doing human’s jobs where the people are moving into more specialized roles that require more critical thinking and management. Rather than being displaced, we are just finding new jobs for workers. There’s a shift rather than an uprising from the robots overthrowing the things how we know them.
Despite all the forecasts that say this is going to happen, we see the complete opposite so far. We see robotics and automation as actually a good thing in the jobs market because it can clear room for higher-potential jobs and more specialized skills that people can learn and do these jobs alongside the robots.
That’s all I have for this week. Paul?
Paul Mampilly: Thanks, Ian.
Those are all great points. Everything you are saying I also see in my newsfeed with respect to farming. Some of the same challenges are there and robotics and automation is coming into farming in such a big way. Farmers can’t hire a big enough labor force to do it, so they are investing in robots and automation in a big way. Anyone who currently wants to work in farming has to know how to work with these robots.
I’m going to start this week as I do every week, with a macro perspective and some opinions with what’s going on with this mix of politics, finance and money. I was very interested by seeing this headline this morning that says President Trump says the Dow should really be up over 5,000 to 10,000 points if it wasn’t for what the Federal Reserve did last year.
That’s an interesting perspective that President Trump brings. Really, there’s no way to know this. For sure, it’s now clear the Federal Reserve was on the verge of making a very large mistake. They were planning to raise interest rates all the way up to…4% or even a bit higher when there was no inflation.
They would have slowed the economy down for no reason at all. Thankfully they had the guts and courage to change their minds. That’s a good thing. That plays into the second thing that’s milling around which is who should sit on the board of the Federal Reserve.
There’s a debate going around that President Trump’s nominees — Stephen Moore and Herman Cain — as to whether or not they are qualified to sit on the board or whether this should be something that is exclusive for elite economists. Given the poor track record of the Federal Reserve, they have largely been involved in pretty much every financial crisis or accident by raising interest rates too much in the last 20-25 years or prior to that raised interest rates too late to stop inflation.
Their record is fairly poor. From my perspective, having a businessman’s perspective, like Herman Cain…I believe would actually help. Just having a purely theoretical viewpoint representing the Fed has been really bad for us, as a country. Having people who represent regular people.
Financings costs of houses, cars need to be taken into account, versus just some theoretical models into what is supposed to happen. I have no real strong view as to who should sit, nonetheless it’s good for us to have a debate. I appreciate that this debate is going on.
With respect to the stock market, as Amber brought up, an unbelievable number of companies are reporting. This morning Goldman Sachs and Citibank both reported their numbers. These are companies we here at Bold Profits are largely uninterested in. They just help make up the mood of the market, however, in terms of what actually goes on there is less of interest to us.
More importantly, what I did see this morning, which was really a great sign that lends itself to many things we talk about here, is that there were three deals today. A company called Waste Management is buying a company called Advanced Disposal Services for $4.9 billion. That’s a 20% pop for the company that’s being acquired.
A company called Catalent is buying a company called Paragon for $1.2 billion. Electronics for Imaging is being taken over by a private equity company. The total value of these deals is nearly $10 billion. That tells you one thing: There is confidence in this economy for people to put down big money.
One of the reasons why you are seeing at least two of these deals is disruption. Disruption does require you to invest. Robots do cost money upfront. Companies that are too late or don’t have the resources to invest are choosing to merge so they can pool their resources and make the capital investments so they can prepare themselves for what is happening right now.
I’m interested in IPOs. I’ve been saying for some time that IPOs are going to be a bigger and bigger deal for the markets because of the fact that over the last 20 years we have seen a number of stocks — essentially half. It used to be more than 9,000 at the peak in 2000 and today there is just over half of that. Which means there is a ready market for these IPOs.
We’ve seen Lyft go public. Yes, I do know it’s below its IPO price. That’s not unusual. That’s not a big deal. That’s just the demand and supply that happens with every IPO. This week, Pinterest is supposed to go public. Uber released its filing. This is the big, huge wad of paper that they dump at the Securities and Exchange Commission that tells you everything about the company.
It made for some interesting reading. In fact, at our Friday investment discussion, Amber and Ian and our larger team were talking about the kinds of numbers Uber is throwing around. They are talking about between all the businesses they are involved in, at being a $12 trillion opportunity. I have to say in my entire time, I have never seen any IPO — not Google’s IPO, not Facebook’s IPO — ever put their addressable market at $12 trillion.
In success mode, Uber could be a gigantic company. They could dominate transportation, they could dominate food delivery, they could dominate any other businesses related to this. I believe the Uber IPO is going to be a big deal. It’s set to come as a company that’s going to be valued at $100 billion.
This is another thing that’s really different from IPOs today versus 1990 — the size of them. $100 billion would make it the second-largest IPO in terms of valuation after Facebook, which came at about $106 billion. I believe Google came in at $80 billion. The size of these companies is just really enormous.
Also last week I mentioned what I called the Amazon of Africa, Jumia Technologies. Well that came public and the stock shot up 76% — boom! — just like that. PagerDuty, which is a lesser known company, this is a big data artificial intelligence company that also came public up 60% last week.
PagerDuty is the kind of company that goes under the radar. However, this is a company that is collecting data and is something we would use. PagerDuty in its IPO prospectus has pieces of information was to how they add value to a business. They had this nugget which is that if a website doesn’t load up quickly for a business on a smartphone, 53% of people will abandon it within three seconds.
This really tells you if you are losing customers it could be related to something you are not thinking about. It also had this nugget that said 32% of people ditch a business after one bad experience. The way they got all this data was by having in excess of 10,000 customers taking all that data, compiling it and creating information out of it.
This is the essence of disruption. There’s going to be more companies like this that are going to be valuable. Watch out, we may have an exciting announcement on IPOs in four to six weeks. Watch out for that.
Popular companies in the news. Netflix is going to be announcing its earnings this week, that’s always a big deal. Apple is being downgraded by a ton of Wall Street firms. They’re telling you what we’ve been telling you — that their base business is in decline. Whatever they want to tell you about services, they are going to struggle to make anything of it if their base business is not doing well.
Tesla’s Model 3 is now the world’s best electric vehicle. This is about two years in and they have sold more electric vehicles than anyone else that has been in this business. This is a really good sign.
In my reading this week I came across some interesting stuff. If you watched my Bold Profits Daily last Tuesday I mentioned 3D printing and recommended an ETF that will get you into this opportunity. I thought this story was really great, but I didn’t have it in time for that video.
Honeywell, which is a large company involved in aerospace and industrial automation of various sorts…they have a football-field-sized complex filled with 3D printers. Just imagine a gigantic room just filled with 3D printers. Seems sort of otherworldly. This is related to their aerospace business. It produces aerospace parts.
The reason Honeywell has this is that they are hoping to have as many as 250 parts going into planes and avionics, and all kinds of aerospace businesses that are going to be made by 3D printers. Even though it costs Honeywell up front, they have found is because of the speed at which they can make the parts it actually increases their cash flow.
They found that they would lose a customer if they had to wait 90 days to make a part or correct a part or go through their traditional process. As a result, Honeywell’s cash flow margins are rising. They are the best they’ve been in years.
In other words, there is a real business case for disruption. A real business case for all the megatrends we tell you about — Internet of Things, block chain, artificial intelligence, all of it.
Last thing I want to talk about: crypto. Bitcoin had a little bit of a dip, went down below $5,000 just for a few days and now is back up. I believe that we are in the beginnings of what I think is going to be a massive bull market for crypto, bitcoin and others.
I saw something today that really tells me why. I saw a news story that said 94% of endowments — endowments are these large funds that universities like Harvard and others have. They invest money for not-for-profit organizations and organizations like that. 94% of them are allocating to crypto. We’re talking about hundreds of billions of dollars that is slowly putting money into crypto as an asset class.
That is why the crypto market, I believe, has bottomed. There are big buyers who are willing to buy.
So, I do want to remind you, if you like what you’re watching, like this video, subscribe, share with your friends. Come back again to watch it.
Back to you again, Amber.
Amber: Thank you, Paul and thank you, Ian. Fascinating information as always. Thank you to our watchers for tuning in this week. We hope you have a wonderful week and we’ll see you again next week. Until then, take care.
Conventional wisdom tells us that robots and automation are stealing jobs from workers. However, recent data tells us that’s clearly not the case.
Today, a record number of robots are being used in businesses across the U.S. Yet on Friday, it was reported that jobless claims dropped to 196,000 — the lowest number for any week in the past 50 years.
That’s because robots aren’t taking people’s jobs. What we’re really seeing is employees working alongside robots. And 87% of companies said they’re looking to maintain or expand their workforce because of automation.
This shift also creates an incredible opportunity for workers because robots are doing the more tedious, time-consuming tasks. This lets employees move into more specialized roles requiring creativity and critical thinking.
We also talk about:
- Today’s Tax Day! There are plenty of deals and freebies you can take advantage of, such as $1 margaritas at Applebee’s or free document-shredding at Office Depot.
- The hottest initial public offerings (IPOs) debuting soon. One to look out for is Uber, valued at $100 billion, making it the second-largest IPO in history after Facebook.
- Bitcoin is now back up over the $5,000 mark. We discuss why we’re in the beginnings of a massive bull market for bitcoin and other cryptocurrencies.
Editor, Profits Unlimited