Mish's Global Economic Trend Analysis

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French Unemployment At New Record Highs: Whom Do They Blame? Posted: 02 May 2015 07:28 PM PDT While ECB president Mario Draghi brags his economic policy of negative interest rates is working, I ask for whom? On April 23, 2015 I noted Spain's Unemployment Rate Increases to 23.7%; 114,300 Jobs Vanish in First Quarter, Public Sector Jobs Rise. Let's now turn our attention to France. December 24, 2014 BBC: French jobless total at new record high January 28, 2015 France24: French unemployment hits new record high in December March 6, 2014 UPI: Unemployment in France hits 16-year-high; still rising France Unemployment Rate Flashback January 27, 2014 Mish: France Unemployment Hits New Record High; Hollande's November Pledge Reviewed In November, French president Francois Hollande announced he had met his electoral pledge to halt the rise in joblessness by the end of 2013. No one with any economic sense believed it. Today in the face of a new record high unemployment rate, Hollande says unemployment has "stabilised". Whom Do The French Blame? Via translation from Les Echos, May 2, 2015: Poll shows 75% of French Do Not Expect Improvement in Unemployment until 2017. Recent unemployment figures reached a new record in March with 3.51 million of job seekers in mainland France without activity. Three quarters of respondents think that unemployment will not decrease by the end of the five year term of Francois Hollande, according to a poll for Odoxa iTELE and Le Parisien published on Friday. As for the main cause of unemployment, 34% of the French blame "companies that prefer to increase their profits rather than hiring" while 31% blame "government inefficiency". 21% blame "blockages in French society" and 14% "unfavorable economic conditions". Question for Draghi I have a question for Mario Draghi: Is this what it means to have your negative interest rate policies "work"? One cannot blame the ECB for French nonsense. Yet, one can blame the ECB for stupidity in attempting to solve via economic policy, something that cannot possibly be solved that way. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Miracle Twinkies Comeback Posted: 02 May 2015 10:50 AM PDT I have written about Twinkies three times before. Recall that in November of 2012, Hostess, the owner of Twinkies, Ding Dongs, Ho-Ho's and other sweet treats gave an ultimatum to 15,000 union workers to accept pay cuts or get fired and lose their pensions as well. Flashback November 15, 2012: Hostess to Liquidate if Bakers' Strike Continues Through Thursday; End of Twinkies Hours Away? It's do or die for 18,000 Hostess workers including 5,000 in the bakers' union. Only fools would voluntarily vote for liquidation, but with the clock ticking down to mere hours to come to agreement, it appears the fools will win the day. The bakers' union would rather have no job than reduced wages. Lovely. Good luck finding another job in this environment. I have little sympathy for those who voluntarily walk away from their jobs in these trying times. However, this is probably not the end of Twinkies, Ding-Dongs, or Ho-Ho's. Not that anyone needs to be eating such non-nutritional junk food, but those names and recipes will likely be sold and produced elsewhere, probably at a lower cost to consumers, especially if the buyer does not have to deal with the bakers' union. Flashback November 18, 2012: Chris Christie Provides Perfect Setup for Saturday Night Live At a recent news conference, Christie was asked a question about Twinkies. He responded ... "Really, seriously, you're not asking me about Hostess Twinkies are ya? What's the next question? I'm on Saturday Night Live enough. You think you're getting me behind this microphone having me talk about Twinkies? This is a setup man, I know it." The bottom line is the union would not give into demands and  the company filed a motion last Friday to liquidate. Shutting down the company will mean the loss of 18,500 jobs (less any jobs picked up by buyers of brands Twinkies, Ding-Dongs, Wonder Bread, Ho-Ho's etc.) There is plenty of blame to go around, including untenable wages and benefits, leveraged debt, untenable management salaries etc. Flashback November 22, 2012: Hostess Fires 15,000 Workers in Liquidation; Twinkies Silliness From Readers The first step in liquidation will be the firing of 15,000 workers including the closure of 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes and 570 bakery outlet stores. At least a dozen readers sent emails in response to my previous two posts on Twinkies. One misguided soul from the Netherlands wrote "Your article on the bankruptcy of Hostess is so extremely biased. I am NOT surprised because you're ALWAYS bashing the unions." Miracle Comeback Now that we have the backdrop out of the way, please consider Twinkie's Miracle Comeback: The Untold, Inside Story of a $2 Billion Feast Walk in the door of Hostess Brands' flagship bakery in Emporia, Kansas and your first thought is: What a dump. The former front office for the bakery that pumps out classic American treats like golden Twinkies and swirl-topped Cup Cakes is a series of dank, near-empty rooms with scuffed, oatmeal-color linoleum floors, water-stained ceiling panels and a jumble of mismatched office furniture that looks like it was picked up off the curb. This grim wing of the Hostess plant is a leftover from the old Hostess–the one that debt, pension costs and mismanagement shuttered in 2012. But throw on a hairnet and pass on to the newly rehabilitated factory floor, and it makes sense why billionaire C. Dean Metropoulos, Apollo Global senior partner Andy Jhawar and Kansas Governor Sam Brownback are standing here, breathing in the sticky sweet air on a foggy April morning. The new factory is bright and clean. Tight rows of Twinkies m arch along the $20 million Auto Bake system with the precision of Soviet soldiers in a May Day parade. Yellow robotic arms, which look like they should be welding Teslas rather than boxing Twinkies, stack snacks with hypnotic rhythm. This 500-person plant produces more than 1 million Twinkies a day, 400 million a year. That's 80% of Hostess' total  output–output that under the old regime required 14 plants and 9,000 employees. And it's about to get more efficient: Metropoulos and Jhawar just installed a second Auto–Bake system, this one for Cup Cakes, and the governor is here to cut the ribbon. Now, just two years after buying the shuttered company, they sit atop what will likely be a $2 billion win. "They've worked magic with their business concept and have made Hostess one of the most efficient and effective companies in the entire food industry," says Joseph Gatto, a partner at Perella Weinberg, who brokered the sale to Metropoulos and Apollo. "People walk up and thank me for bringing back Twinkies," says Metropoulos, who has previously rebuilt brands like Bumble Bee Tuna, Chef Boyardee and Pabst Blue Ribbon. "No one ever thanked me for saving Vlasic pickles." The problem should now be pretty clear to everyone: mismanagement coupled with inane union work rules and benefits. I thought the problem was clear in November 2012. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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