Friday, July 2, 2010

July Jobs Report

We received the July Jobs Report this morning, which comes out the first Friday of every month, and it is merely an extension of what I discussed earlier this week in The ADP and Beyond.

We lost a total of 125,000 jobs, which was a majority of census workers leaving the workforce.  The unemployment rate was lowered to 9.5% from the 9.7% it was at last month.

The reduction in the unemployment rate is due to the size of the labor force participation shrinking by 652,000 people.  This means people have been unemployed for so long that they are giving up looking for a job.  When people have given up, the government no longer counts them as being part of the work force.

We also received 147,000 "jobs" from the birth/death model.  The government assumes that 147,000 jobs were being created by new small businesses being born and hiring. (Birth/Death)  They make this number up.  The reality, of course, is that small businesses are closing their doors and firing employees at a rapid clip.

But at least it keeps the hopes alive for a little longer.

The following chart shows where we currently stand in our employment recovery compared to previous recessions. (Red line)  Keep in mind that this is with trillions of dollars of stimulus money:

(Click on image for larger view)

Wednesday, June 30, 2010

ADP And Beyond

This morning we received the monthly ADP jobs report, which was expected to come in at +60,000.  The number came in at a dreadful +13,000 new jobs created.

It is clear at this point that depending on which camp you are in we have either entered a jobless recovery or a jobless recession/depression.  I will let you decide which camp you want to be in, but for now let's focus on where we go next since it is clear that the jobs are gone and they not coming back.

Up until this point the unemployment problem has been masked by a major factor:

Unemployment Benefits

A worker laid off has been able to collect unemployment from the state for 26 weeks.  At that point they can then move into the Emergency Unemployment Federal Claims division and collect checks for an additional 73 weeks depending on the state.  That is a total of 99 weeks of free government pay, or 1.9 years.

After a recent vote, however, the emergency claims are being reduced.  As of this Saturday 1.2 million unemployed Americans will stop receiving checks.  Estimates show that by July this number will have reached 2 million.

Now this is where the story gets frightening.  I fully expect Congress to overturn this vote and come back with some sort of new "emergency" benefits program because we are in an election year.

However, the important thing to remember is that our country is rapidly closing in on both a government debt and currency crisis.  There will come a day when our government wants to send checks to everyone that is unemployed, but they will not be able to.

As the creator of the Trends Journal likes to say, "when people lose everything, they lose it."  During the later stages of this depression it will be important to prepare yourself for an environment where personal safety will be an important issue. 

As an investor if you understand now that this is coming, you will be less focused on the fear and chaos around you, and more focused on the assets that will be on sale.

The Psychology Of The Secular Bull And Bear

Excellent visual below that shows the psychology of a market cycle.  I have discussed in great detail over the past few years the long term secular bull and bear markets we are currently experiencing.

The secular bull market is in gold, which began in 2000, and has now entered the optimism phase.  This point can be marked when gold crossed over $1,000.  It is during this phase when the large money players enter the market with force, (David Einhorn, George Soros, John Paulson) but the public has yet to enter.

The secular bear market is in stocks, which also began in 2000, and has now entered the anxiety phase.  The public is still bullish on stocks and optimistic on the economy recovering, but the large money players are placing large shorts on the market.

You can click on the picture below for a larger view:

Tuesday, June 29, 2010

Eastland Mall

There is a mall about 2 miles up the road from where I live in Charlotte.  It was purchased in 1998 for $54 million.  Over the years its value rose as we moved through the real estate bubble.

This past week the property was sold again.  Purchase price?

$2 million.

The property still had a $42 million loan and entered foreclosure a few months ago.  The same is happening for shopping malls, office parks, and apartment communities across the country.  And we haven't seen anything yet.

Did the new investor overpay?  Probably. He is trying to partner with the city to help the project.

Perhaps he has been watching the important consumer sentiment numbers that have been extremely positive over the past few months.  This has given retailers hopes that the American buyer is finally back.

This morning we got the most recent consumer sentiment number, which was down 15% at 52.9 from 62.5. 

Soon after the number was released, Obama and Bernanke gave a live televised interview to let us know that the economy is in full recovery and the new financial reforms will protect Americans from any future crisis.

Thank goodness.