1/2 M Jobs Lost in Month. Stocks Rally? Really?

US employers slashed 533,000 jobs in November, according to the most recent Nonfarm Payrolls report, released this morning by the Dept. Of Labor.

While that figure alone may be mind-boggling, being that it was the largest one-month job loss since 1974 (when we went off the gold standard), the number crunchers at Labor provided more proof of just how sloppy and contrived government figures have been.

Employers cut 403,000 jobs in September, versus 284,000 previously estimated. Another 320,000 were chopped in October, compared with an initial estimate of 240,000.

It's becoming increasingly clear that Bush administration operatives were hell-bent on keeping a lid on the depth of economic destruction leading up to the election. Not only have we learned - on Monday - that the US has been in a recession since December of 2007 (despite "official" GDP figures for the 1st and 2nd quarters of 2008 showing growth), but now we have revisions of 199,000 more jobs lost in the two months just prior to the election.

It's a good thing these people are on the way out. Maybe we can restore some faith in government with a new administration that gives us the straight story, and that's a big maybe.

Dow 8,635.42, +259.18 (3.09%)
NASDAQ 1,509.31, +63.75 (4.41%)
S&P 500 876.07, +30.85 (3.65%)
NYSE Composite 5,401.25, +168.99 (3.23%)

As expected, stocks started out the day on the downside and spent most of the session in the red, until about 2:30 pm. At that point, following a 250-point rally that brought the Dow Jones Industrials to break-even, stocks went straight up. It seems the good, old, tried-and-true pumping tactics of the PPT have not gone the way of the buggy whip and the typewriter.

With stocks taking the worst jobs news in decades so much in stride that they would rally, one has to believe that today's action is about as temporary as a prostitute's decency. Stocks, by almost any measure, have much further to fall. The rosy pictures painted by economists fail to understand the dynamics of the global economic tsunami which has swept in via the corrupt banking and capital-creation system.

Figure the Dow at 5,000, the S&P at 500 and the NASDAQ around 1000 before this is all over.

If those figures sound too harsh, take a gander at any long-range linear charts of the indices in question to discover just how overvalued stocks had become since 1982. Then try to understand the concept of "mean reversion" in which the indices will revert to old habits and ranges. We've been involved in the largest economic fiction ever devised, which began in the 70s when we went off the gold standard, and increased in complexity through Reaganomics, was exploited through the Clinton years and finally exposed and degraded during the Bush II administration.

Of course, nobody believed me when I predicted - last year - that the Dow would plummet below 10,000. Heck, i hardly believed it when it actually happened. Now, I understand just how correct I was and have gotten over the shock and scare of a global depression and can clearly predict where the economy is headed.

We're in for a world of hurt. If the last few months seemed harsh to you, prepare to grab your ankles for another rough ride. This is going to get MUCH, MUCH WORSE than anyone believes or is prepared to state publicly.

If today's trading is any indication, the stock market, along with the government, has gone completely off the rails. More likely, each of them have been far from solvent or honest for at least 18 months. Now would be a good time to start declaring 10 dependents on your W-2, hoarding cash, canned goods and firewood (along with firearms). The rioting will begin sometime next year, if not sooner. Hungry people without jobs or homes can do two things well: riot and die. My thinking is that there will be plenty of both in coming months.

In case you haven't noticed throughout this turbulent fall, all bailout legislation has focused on big business, mostly banking, and not a penny for the average American. Worse yet, the taxpayer has not only not received a plugged nickel, he and she are responsible for the debt. That's part of the social contract we made when we elected the people who are now giving away our money. Naturally, most Americans have been opposed to bailing out businesses from the start, and still are today. The aforementioned social fabric has been pretty badly torn of late, so a new word should enter into everyone's lexicon: repudiate.

It's a wonderful word which releases you from all responsibility to the word or words immediately following it. Repeat after me: I repudiate all debt incurred by the federal government since the illegal election of George W. Bush in November 2000.

Wham! There goes about a $30,000 obligation. Now, if we could get another 200 million or so Americans to do the same thing, we could reduce our debt to pre-2000 level, when the government was actually turning a profit and our national debt was something on the order of $3.8 trillion, not the $12 trillion it's about to become. You want to see stocks soar? Try that little trick!

On the day, advancing issues pummeled decliners, 4496-2151, but the truth lie in the number of new lows (489) to new highs (29). New highs have been flat for some time, though new lows showed gains all week. Trajectory is still negative. Volume was normal.

NYSE Volume 1,552,209,000
NASDAQ Volume 2,224,416,000

That stocks went up so much on Friday is odd, since everything else seemed to be falling in price. Oil fell another $1.92, to an unbelievably reasonable $41.75. Get out and buy an SUV for Christmas! Gold was down $6.50, at $759.00. Silver gained a penny to $9.53

Despite Friday's gains, all indices ended lower for the week, which is as it should be, though we are not nearly down as much as would normally be expected. That 7500 level was no bottom.

It wasn't a really bad week for some, though for people without jobs, it isn't getting any easier. New businesses need to be formed to replace the ones failing now. The biggest and best - companies like Coca Cola (KO), Proctor & Gamble, Exxon-Mobile, Wal-Mart and McDonald's will survive and even prosper. There are actually some good value plays with dividends emerging from that group. But for the rest of the smaller, leveraged businesses and individuals, life is going to sour.

What say we abolish or severely cut the payroll (income) tax? Nothing would put people back to work and boost real estate values any more effectively. Let the federal government run a deficit on that basis.

But Friday's rally seemed to be right out of one of Kafka's most visceral dreams.

More Churning, More Carnage

Unless you are an idiot or simply a "contrarian," you probably don't have much money invested in stocks at this juncture. Of course, you could be fabulously wealthy and still own stocks, but you are now a little less fabulous and a lot less wealthy. So, why do I write a piece of market recap and rehash every day? Eventually, there will be bargains and there will also be a time to begin investing again and until that time, it pays to stay informed, because...

The destruction of the US economic system continues apace. On Thursday, the Labor Department reported that there were more people on unemployment insurance than at any time since 1992.

Manufacturing slowed once more in October. Factory orders fell for the third month in a row, down by 5.1%, according to the latest government statistics.

There is one sliver of truth in government figures. One can safely assume that after the head-bobbers and number-crunchers get their mitts on raw data, it's been so heavily massaged that it wants nothing more than a hot shower and a nap. The numbers released by various government agencies have a common thread: They are always wrong. If it's good news, they usually make it sound better than it is, and the same goes for bad news. In other words, if the government were to report that, say, 300 people died in turkey fires over the Thanksgiving holiday, the real number would likely be 20-30% higher.

Thus, today's report that factory orders declined by 5.1% should more accurately be noted as 6.2%. It truly is becoming worse than "they" say it is.

People are losing jobs at a rapid clip. Those in the public sector, by the middle of next year, will be the last ones standing. Expect unemployment to reach at least 10%, according to the feds, because the real figures are already approaching that and may shoot as high as 15-17% before this economic disaster is fully played out. Not only are jobs being surrendered, people are not finding new work.

Retailers announced massive year-over-year declines, mostly in the teens, but that's hardly a surprise to anyone paying attention.

By the time Mr. Obama takes office in January, there may not be much of an economy left to rescue. He'll surely step into a world of problems, none of which were his creation, but which he will be blamed for and charged with the responsibility to fix. The poor man didn't realize what a mess would be handed to him. He'll need the help of every American to bring our country back from the brink of economic doomsday and it will take much longer than anyone currently anticipates.

Stocks did on Thursday what they do best, they went down some more. The selling was in response to some of the economic news, but, being that the bulk of the losses occurred in the last hour much of the trading was geared toward Friday's pre-opening non-farms payroll report for November, which is likely to record another 200,000+ job losses and send stocks spiraling down even more.

Dow 8,376.24, -215.45 (2.51%)
NASDAQ 1,445.56, -46.82 (3.14%)
S&P 500 845.22, -25.52 (2.93%)
NYSE Composite 5,232.26, -173.29 (3.21%

As expected, losers outpaced gainers, 4792-1914. New lows surpassed new highs, 340-31. Ho-hum. Nothing new there. Volume was moderate.

NYSE Volume 1,469,269,000
NASDAQ Volume 2,063,347,000

Oil declined to its lowest price level in four years, losing $3.12, to $43.67 a barrel. Gold lost $5.00, to $765.50. Silver slipped another 7 cents to close at $9.52 per ounce. The commodities continue to follow the deflationary course.

So, what is one to do if the US economy really is worse than it appears (and that's pretty bad, as it is)?

If you have any stocks, sell them now. The cash will come in handy and there won't be a rebound to levels seen earlier this year for many equities for a number of years, like five, or ten, or longer. Some of the companies in which you may already be invested will not even be listed at this time a year or two from now. There will be massive layoffs, followed by bankruptcies in all sectors. Nothing will be spared.

Also, if the banks haven't already severed your lines of credit and you are a little short on cash, take the cash from your credit line, or buy things you can quickly convert to cash. Banks are pulling lines of credit all over the map. If you've got a 5% home equity line of credit, take a large lump sum in cash. The bank will likely balk, and afterwards close down your credit line, but you will have the cash and it will be better than credit.

Save. Put money aside. Put off that trip to the mall; buy less expensive gifts; cut back on unnecessary expenses.

And, most of all, don't panic. There will be plenty of that going on without you joining the chorus of screams and rants. Besides, if you're prudent and wise, you will be able to snatch up valuable assets at a fraction of their true value. And in the long run, you will emerge far ahead of the pack.

Afternoon Surge Results in Winning Wednesday

US stock indices recorded another positive day - the second in a row - as investors shook off dismal job projections and focused on what seem to be bargains all over the markets. stocks have been so severely hit in recent days that speculators have little choice but to jump in, though more cautious types continue to resist the temptation to dive into equities as the year enters its final month.

Trading wasn't as broad-based as yesterday's action, and the results were a bit less inspiring, but the major indices have regained 70-80% of what was lost on Monday as fear of a continued recession shook markets to their core, sending the Dow Jones Industrials to its 4th-worst point loss in history.

The past two days have seen the now-normal volatility, with indices and individual stocks making wild swings over the course of the session. Today's ride on the Dow was a 390-point swing from the lows to the highs. The Dow ended near the highs of the day, which were achieved in the final ten minutes of trading.

While congress dithers over what to do about the Big Three automakers, Wall Street is busy doing its own handiwork, though the trading recently has devolved into what looks more like insider churning or day-trading, with no real establishment of positions and quick exits from both profitable and losing positions. Traders are certainly on their toes as we wend our way to the conclusion of 2008, one of the worst ever for the stock markets.

Dow 8,591.69, +172.60 (2.05%)
NASDAQ 1,492.38, +42.58 (2.94%)
S&P 500 870.74, +21.93 (2.58%)
NYSE Composite 5,405.55, +96.60 (1.82%)

Things got off to a dreadful start when ADP - a private firm which tracks employment - said their November report showed that the economy shed 250,000 jobs, the worst one-month number since 1991.

Stocks quickly recovered from that somewhat expected news and spent most of the remaining session after 10:00 am in positive territory.

Advancing issues outperformed decliners for a second straight day, though the margin was not overwhelming, at less than 2-1: 4280-2414. New lows were greater in number than new highs, 273-36. While this has been a persistent indicator for 13 months now, we are beginning to see a small increase in the daily number of new highs. Though the numbers are tiny, they are heading in the right direction, but it must be cautioned that some of the companies making new highs are those recovering from the first wave of declines near the end of December, 2007. An increasing number of stocks making new highs should not be seen, in and of itself, as an indication of anything other than the mere fact that some beaten-down stocks are beginning to recover.

The markets remain highly bearish and will remain so for what appears now to be a very long time. There is little hope that the US economy can begin to pull itself out of recession before the middle of 2009, at the very earliest. Severe damage has been done to the very structure of the system, and thus far, efforts to repair it have been inconsequential or ineffective. The condition of the economy since September of this year and August of 2007 has continued to deteriorate. There is no indication that this erosion is coming to an end.

Volume was on the high side, but it should be with the year coming to an end. There are a plethora of reasons to sell at this time, and not many good ones to induce buying, but there is still some speculation, despite dire warnings all around.

NYSE Volume 1,551,506,000
NASDAQ Volume 2,279,699,000

One area which continues to trend lower is in commodities of all kinds. Lower prices for all manner of raw materials eventually is going to wend its way through the supply chain and into finished products. There is going to be a prolonged period of price uncertainty and outright deflation, which could last through 2009, 2010 and beyond. Ability to adjust pricing on-the-fly, so to speak, will be critical to success at almost any level. This kind of pricing flexibility favors smaller companies with established expertise in technology, which is why internet retailers are not suffering as much as their brick and mortar counterparts during the holiday season.

Oil closed at or near multi-year lows, down 8 cents, to $46.88. Gold tumbled another $8.50, to $774.80, while silver gained 2 cents to $9.63.

The equity markets remain somewhat in suspended animation, awaiting the inauguration of President-Elect Barack Obama on January 20th. A new congress will be sworn in days earlier, but the hope that somehow government, the creature responsible for much of the current catastrophe, will come around with a quick fix is looking more and more like a pipe dream.

The economy has suffered more than a couple of body blows over the past two years. The damages was the result of many more years previously in which the Fed and government allowed loose credit, fiscal and monetary policy to cause structural damage to the underpinnings of the system. The kind of damage inflicted is not going to be repaired in short order. There is going to be a long period of transfusion, rest and recovery, because the "patient" nearly died on the operating table.

If you were not prepared for the long haul, you would do well to relocate outside the US for the next few years, but choose carefully. This economic disaster has spread around the globe.

We Are In a Recession, Maybe?

Stocks spent the entire Tuesday session making up for Monday's mess, finishing at their highs of the day. The gains were equivalent to roughly 40% of yesterday's losses, when the government - to the surprise of a limited few - admitted that the economy has been in a recession since the 4th quarter of 2007.

That revelation begs the obvious question: if a recession is defined as two consecutive quarters of negative growth in the GDP, can we assume that the government figures from the first two quarters of this year were slightly fudged?

The first and second quarters of '08 were "officially" gainers, so we were not in a recession then, were we? Or were we?

That's the problem when the government is made up of all variety of scoundrels and thieves, more intent on lining the pockets of themselves and their friends than actually working in the best interest of the citizenry: Numbers get abused, the populace becomes confused and everyone loses.

Last week's rally and the action today is somewhat of a suggestion that people believe the final days of the worst administration in US history will be quiet and uneventful. We can only hope and pray that there's still an economy worth saving by the time President Obama takes over the Oval Office.

Those sentiments are merely window dressing to the real churning that currently plagues Wall Street and the millions of Americans who dread opening their pension or retirement fund statements. There's some thinking that every decline is an opportunity to buy low, but, at the same time, an equally large number of traders is still looking for a bottom.

For the record, the lows of October 27 were tested, retested, and broken down in late November. The current low-water mark is now 7552.29 on the Dow, the closing price November 20. That number came about after the October 27 low of 8175.77 failed to hold. So, we can safely assume -- since we are in a recession, after all -- that stocks will sag through most of December, unless one believes that the bottom is already in (Please, don't make me laugh so hard.). until that low point has been thoroughly tested, bounced off and fleshed out.

Dow 8,419.09, +270.00 (3.31%)
NASDAQ 1,449.80, +51.73 (3.70%)
S&P 500 848.81, +32.60 (3.99%)
NYSE Composite 5,308.95, +216.29 (4.25%)

Today was a classic relief rally, with advancing issues outdoing decliners, 4882-1820, though new lows surpassed new highs by a score of 270-26. Volume was on the heavy side, and all this as automakers planned to return to Washington - this time with actual plans in hand - to cajole the head-nodders in congress for more money.

Those industrial giants will get their money, no doubt, and spend it like drunken sailors. All of this bailout money is going the way all things earned without effort go, quickly down a black hole. The US economy has a lot more worsening to do before it begins to get better, and throwing more money at it isn't a novel idea, nor is it likely to induce a lasting solution.

NYSE Volume 1,611,136,000
NASDAQ Volume 2,104,266,000

In the commodities markets, oil took another turn to the downside, off $1.66, to $47.62, while the metals advanced marginally. Gold gained $6.00, to $782.80, while silver added 18 cents, to end at $9.56 the ounce.

Gold bugs are insistent that the yellow metal should be trading in the range of $1500-2000 per ounce, though the current pricing seems to suggest that they too are overly optimistic. What the current crop of gold-lovers - like their counterparts in the equity markets - fail to understand is the devastating effect of deflation on all asset classes.

The global economy is likely to remain in a deflationary spiral for at least the next two years, probably longer. This is simply a sober assessment of what the subprime-credit-banking mess has wrought. Not only have trillions of dollars of wealth already been vaporized, there is still a limited amount of confidence in the markets. Nobody really has a taste for any of this bitter deflation pill, but it is one we all must swallow, like it or not. The consequences are neither simple nor pleasant, though, in a nutshell, it can be safely assumed that people at the top of the income and wealth ladders will be most severely affected, while those at the bottom will have alternately hard times or grand times, depending on how one plays the game.

Those who are frugal and opportunistic will prosper. Those tied to the economics of the last dozen years or so, will feel more pain than they'd like.

US Banking Industry: Ship of Fools

It's not surprising that after spending most of my day dealing with a consumer credit transaction in a courtroom that I would return to the cyber world and see this Reuters headline: Credit-card industry may cut $2 trillion lines: analyst.

My point - iterated over and over and over again in previous blog postings - is that the credit and banking industry is run by either idiots or thieves, or a dreadful combination of the two. My particular circumstance offers but a glimpse of the absurdity that is banking in the US today. Five years ago, the geniuses who allowed me to run up credit card debt to a mind-boggling $1200, decided that the 14.9% interest rate they were drilling me with was insufficient, and even though I had always made payments on time and had never missed payment, that hiking it to 29.9% and tripling my annual fee would be in their best interests (and, I suppose, somehow, mine).

It was at that time that I picked up the phone and revealed to my creditors that such an arrangement would result in my defaulting on the credit already established unless they would agree to go back to the original terms.

"No deal," said they, and that is what they got. I never paid back a single cent, and, even though I told them that they would end up with nothing repeatedly, over many months, they, nor I, never relented. The bright bankers did get something for their effort, having sold the debt to what is known as a "debt farm" for somewhere in the range of .05 to .20 cents on the dollar and taken their write-off with the government. So, it is the debt farm and their ravenous attorney from whom my legal challenge comes. They too, are finding out how difficult it will be to squeeze a penny out of yours truly.

Regardless of my circumstances, the banking system in the US and beyond is broken beyond repair. I explained to my father yesterday, and now to you, that there is nothing the government can do to prevent the economy from collapsing at this point. Plainly, the bankers see a similar picture and are reigning in their horns, calling in their loans.

This is what we are bailing out, folks. a merciless, belligerent, corrupt system of tribute financing that threatens to overthrow the entire nation's credit, from mortgages, to credit cards, to lines of credit to business to auto financing. The entire concept is as bellicose as would be a Spencerian melodrama: The bankers create credit devices to entice the unsuspecting hoard, then, through their own devious and clever devices, change terms, increase rates, cut off lines and generally self-implode the entire system.

Sadly, it is exactly what has happened.

Word of the looming catastrophe reached Wall Street some time ago, but today's trading indicates that the finality of it all seems to have at last reached all corners. Stocks, after a bright half-session Friday, christened December with another in a spectacular series of sell-offs, this one to the tune of nearly 680 points on the Dow.


SYMBOL LAST CHANGE
Dow 8,149.09 -679.95 (7.70%)
NASDAQ 1,398.07 -137.50 (8.95%)
S&P 500 816.21 - 80.03 (8.93%)
NYSE Composite 5,092.6602 -506.6396 (9.05%)


Those holding to the belief that the bottom was reached on November 20, when the Dow sank to 7552.29 at the close, are surely kidding themselves. The idea that there will be an escape from this malaise by Main Street, which to this point has held together remarkably well, misses the thrust of the bankers' intents. They wish to own all through foreclosure and deceit, to reduce America to a land of indentured servants (we're almost there now). The legal system has glibly played along to this point. How much further strain a flood of new debt collections can be sustained by the courts remains to be seen.

Stocks are headed much lower.

On the day, declining issues pummeled advancers, 5774-968. The ratio of new lows to new highs was rather tame, 251-19, though the number of new lows will almost certainly swell before year's end. The real kicker will be in late January and early February, when companies report 4th quarter earnings. They are almost certain to be negative over a broad swath of industries.

Over the long haul, the joke is on the bankers. They will eventually be removed and replaced by more efficient, honest and reliable means of financing. The transitory time between the self-inflicted, planned collapse of the financial system will be painful for many, misery for some, and instructive to all.

In the interim, expect deflation to be the word du jour for many days through the next 18-24 months, just as they were in the commodity pits on Monday.

Oil slipped once again, lower by $5.15, to $49.28. Gold gave back nearly all of its recent gains, sliding $42.20, to $776.80. Silver declined 85 cents to $9.38. expect more ragged trade in the metals and a false floor around $40 for oil, which will almost surely not hold that level come spring.

NYSE Volume 1,625,792,000
NASDAQ Volume 1,936,715,000

For the foreseeable future, however, there's money in cash.