WTO Director General Pascal Lamy, told Reuters Television:

That’s the situation and I’m afraid I can’t read any good news in my trade numbers.

This news doesn’t bode well for any type of recovery. “Jobs picture turns gloomier” say the headlines. The U.S. unemployment rate officially popped up to 9.5% as nonfarm payrolls shed 467,000 jobs in June. The market is tanking today on this “brown shoot”… But the real story is far worse. And as reality seeps into the empty head of Joe Investor it could spell the end for the post-2008 wipe-out sucker’s rally…

As James Davidson points out in Crisis Strategy Alert, the BLS numbers have been massaged, manipulated, and contorted into giving only half the story. He says,

To get a real picture of the current unemployment levels you need to focus on the grossly underreported U-6 data set known as “alternative measures of labor utilization.” The U-6 data set includes everyone counted in U-3, plus “all marginally attached workers” and people who aren’t working full-time but wish they were (i.e., the underemployed). (Marginally employed covers “persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past.)

When you add up U-3 and all the underutilized workers, the official U-6 rate for May 2009 is 16.4%. In other words, the employment picture is twice as bad 14 months after the recent peak as it was in December 1930, 18 months after the peak prior to the Great Depression.

But this surge in people lining up for welfare isn’t limited to the US either. According to the BBC, unemployment in the eurozone also jumped to 9.5%.  Leading the charge is Spain with 18.7% unemployment, while the liberal Dutch are experiencing a mere 3.2%.  Martin van Vliet an economist at ING on the new numbers:

May’s sharp increase in eurozone unemployment demonstrates that the ‘green shoots of recovery’ are not yet showing up in the labour market.

Ireland looks like the next eurozone nation to bite the dust. Our Irish editor, Chris Hunter, is taking holiday in Dublin right now.  In an ode to his arrival, Moody’s slashed Ireland’s debt rating from AAA to AA1.  Dietmar Hornung of Moody’s Sovereign Risk Group had this to say in news release:

The pronounced weakness in the economic activity has been translating into a severe deterioration of Ireland’s public finances, and the country is set to emerge from the current economic crisis with a considerably higher debt burden for the foreseeable future.

Moody’s is the last large agency to cut Ireland’s credit rating.  Fitch and Standard & Poors cut it earlier this year citing soaring public debt and a negative economic outlook.  As Irish GDP continues to contract, we expect further cuts in Ireland’s bleak future.

Yes dear reader the next leg down in this Greater Depression is not far off. The textbook sucker’s rally is losing steam. Take profits and buckle up because the second half of this year could test the March lows. If that were to happen, or even anything close it would be devastating to investor sentiment. Most “investors” have never seen a prolonged bear market, they wouldn’t recognize it or know what to do.  But one thing they will do is flee to cash.

In the short-term, we here are Notes are bullish on the dollar for this reason. Long-term of course we think the buck is doomed. But woe to those who go against the dollar too early. We think that James Davidson is doing all the right things to capture short-term dollar strength while hedging against long-term weakness with the Crisis Strategy Alert portfolio, click here to learn more about what he’s doing…

This from Investment U:

Recall, in late March I predicted here the dollar was overdue for a rally. Ninety-six percent of you cursed me. The other 4% pocketed an easy 20% or so (more if you played the options market).

But after such a swift run – mind you similar moves in currencies typically take years, not months – is the dollar rally finally coming unhinged?

Legendary investor Jim Rogers seems to think so…

As he told Bloomberg News in a TV interview, he plans to exit his dollar holdings because he thinks the dollar “will go down a lot” and it is “going to lose its status as the world’s reserve currency.”

To which I simply respond, “Into what Jimbo?”

No other choice for a reserve currency exists. No matter how much other governments wish it were so.

The euro is frequently mentioned. But it’s depreciating in value. And there’s not enough liquidity to handle the demand. Plus, it’s still a prepubescent, experimental currency, not one governments can invest in with 100% faith.

Moreover, with two-thirds of foreign reserves already in dollars, it would take more than eight years to replace the dollar as the currency of choice.

So once again, I’m striking out on my own. (And I’m ready for the flood of fan e-mails.) While many pundits would like you to believe that the dollar rally will be short-lived, I completely disagree.

The dollar’s not done.

Today I offer up three more reasons why. And of course, three ways to play it…

Too Far, Too Fast? Hardly…

Keep in mind, currency rallies tend to be measured in years and months. Not weeks and days. In fact, according to Bespoke Investment Group, the average dollar rally lasts 489 calendar days. The longest rally on record lasted roughly 10 years.

While I don’t think we’re in store for a historic run this time, I do think the current rally has more legs (about another year based on the averages out of Bespoke).

Aside from no alternative world reserve currency, here are three more fundamentals in defense of the dollar:

Further Interest Rate Cuts
Foreign governments bought into the farce that was decoupling. As a result, they remained hawkish for way too long, keeping interest rates too high, at a time when they should have been cutting them to stimulate growth. And now they’re scrambling to catch up. They must make growth their first priority. So further interest rates cuts are inevitable, narrowing the gap with U.S. interest rates. And before long, perhaps the middle of 2009, we could be raising rates while other countries are still lowering.

Continued Deleveraging
As Mark Astley, CEO of Millennium Global Investments, a U.K.-based currency manager notes, “there is a pyramid of leverage” in the financial markets that will take considerable time to unwind. The half-frozen credit markets are only slowing down the process. As they thaw out completely, expect hedge funds and foreign banks to keep buying up dollars.

Uncertainty Reigns
Despite a new president, uncertainty remains in the markets. Or as UniCredit wrote in a recent research note, “We do not expect global recession fears to wane considerably.” And during times of fear and risk aversion, the dollar tends to outperform.

Bottom line, the current rally has plenty of room to run. If you dare to be contrarian, here’s how I recommend you play it…

Consider Pure Plays
For a pure play on the U.S. dollar – without trading the currency markets – I recommend the PowerShares DB US Dollar Bullish Fund (AMEX: UUP). It’s designed to replicate the performance of being long the greenback against the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc.

Another strong choice is the EverBank* DollarBull CD. Available in 3-, 6-, 9- and 12-month terms, it offers potential appreciation in the U.S. dollar against a selected foreign currency. If you opt for the latter, I recommend going long the U.S. dollar versus the euro.

Take Profits on Unhedged Multinationals
Consider taking profits in multinationals with significant foreign currency exposure. I say that because the rapidly strengthening dollar will dent future earnings in two major ways. First, because profits earned abroad will be worth less, as they’re translated back into dollars. Second, because demand for the company’s products will drop off, as they will be more expensive to foreign buyers. We’re already seeing this double-whammy hurt third-quarter results for some big multinationals. But if the dollar holds its ground, or strengthens further, the impact will be much more dramatic in the fourth quarter. So get out while you’re ahead.

Buy American
While the dollar was plummeting it made sense to buy companies with significant international sales. They provided a nice currency hedge. However, a strong dollar means we need to reverse course and seek out companies with zero (or minimal) international revenues. I’d stick to solid companies in the utility, health care and consumer staples industries, as demand will remain steady no matter how long the recession lasts.

In the end, I know my dollar stance is contrarian. Or as many of you put it last time, “ignorant” and “completely out of touch.”

I’d add “profitable” to that list now. And I don’t expect this time to be any different.

Source: Jim Rogers is Wrong… The Dollar’s Not Done