This champagne-cork-popping performance obscures a few trends that should be worrisome to the celebrants. First, the S&P 500 has gained no ground whatsoever since May 8, the first trading day after the Federal Reserve triumphantly announced the results of its banking sector “stress tests.” Second, the BKX Index of financial stocks has DROPPED more than 16% since May 8. (As we have noted in prior editions of the Rude Awakening, the finance sector has been leading the overall stock market – both to the upside and downside – for the better part of four years. So the sluggish recent performance of the BKX Index is probably not a “nothing.”) Lastly, most gauges of investor sentiment – like the VIX Index of option volatilities – are flashing readings of extreme investor optimism. Typically, as contrary indicators, such readings presage a market selloff.

But even if we were oblivious to all of these “inside baseball” stock market indicators, we would find plenty of reasons to worry about the near-term prospects of the US stock market.

Yesterday’s headlines, alone, offered ample evidence that something is rotten in the state of the U.S. economy:

For starters, the Office of the Comptroller of the Currency announced a troubling jump in “prime mortgage” delinquencies during the first quarter. Secondly, the S&P/Case-Shiller Index of home prices continued to slide, both year-over-year and month-over-month. (But the rate of decline is slowing which, we are told, means that the housing market is “bottoming.” Maybe yes, maybe no. We been hearing these pronouncements almost every month since the housing market peaked in 2006). Lastly, the Conference Board disclosed that consumer’s are feeling blue once again. Consumer sentiment dropped sharply from the prior month.

It’s true that much of the economic data flying across the newswires are less bad than before. But they are not good in any absolute sense of the word. Economic distress is still ascendant from coast to coast, with very few exceptions. The only other ascendant trend is self-delusion.

In yesterday’s edition of the Rude Awakening, we examined the adulation and success the “big men” in America are currently enjoying…and we postulated that the very existence of this adulation indicates that the crisis is far from over. But maybe this analysis of ours is too wacky and unscientific for most Rude readers. So let’s take a hard look at the hard lives America’s little men (and women) are enduring.

A “little man,” loosely defined, is any worker in the United States who does not appear among the “Friends” on former Treasury Secretary Hank Paulson’s Facebook page. A secondary definition of “little man” would be any individual without Ben Bernanke’s cell phone number in his “Fave 5,” and/or any individual without a direct line of credit from the Federal Reserve.

“Everywhere one looks these days,” we observed in yesterday’s Rude Awakening, “the big men are looking pretty darn smart. Meanwhile, the little men are suffering like never before.”

In what Sarah Baxter of “The Sunday Times” of London calls a “Mancession,” American males are suffering a disproportionate share of financial distress. “The economic crisis is sweeping away men’s jobs at a faster rate than those of women in America,” Baxter relates, “heralding the onset of a so-called ‘mancession.’” The Wall Street Journal’s, Mark Penn, dubs the growing ranks of unemployed males, “GLBs” (Guys Left Behind), and suggests their sufferings bode ill for the future of the American economy.

Picking up on the observations of Baxter and Penn, the Financial Times remarks:

“Men have lost almost 80% of the 5.1 million jobs that have disappeared in the US since the recession started. This is a dramatic reversal of the trend over the past few years, when the rates of male and female unemployment barely differed.”

This curious statistic may contain valuable a macroeconomic insight. Specifically, men are losing jobs because America’s metal-bending industries are atrophying.

“Men have been disproportionately hurt,” the Financial Times explains, “because they dominate those industries that have been crushed: nine in every 10 construction workers are male, as are seven in every 10 manufacturing workers. These two sectors alone have lost almost 2.5 million jobs. Women, in contrast, tend to hold more cyclically stable jobs and make up 75% of the most insulated sectors of all: education and health care.”

“The widening gap between male and female joblessness means many US families are solely reliant on the income the woman brings in,” the Financial Times concludes. This widening gap also means that America’s economy is becoming dangerously reliant on service and finance industries, rather than manufacturing industries.

To be sure, a paycheck is a paycheck, no matter whether a “Ms.” or a “Mr.” is cashing it…and a pink slip is a pink slip, no matter which gender is receiving it. But that’s not the whole picture. If the service-sector “Ms.” is cashing her paycheck, while the manufacturing-sector “Mr.” is receiving his pink slip, trouble is not far behind.

This is not a male-female thing; it is a national prosperity thing. Large economies cannot live on service industries alone. And large economies do not “recover” while their manufacturing industries are contracting. So, no, the U.S. economy is NOT recovering, no matter how many folks wish it were so.

Even if we look at the recent economic data through gender-neutral spectacles, we see a picture of national distress, not national recovery. We see soaring long-term unemployment, coupled with a subsistence-level consumer spending.

America’s “headline” unemployment rate is 9.4%, which is pretty darn bad. But America’s actual unemployment rate is more like 16%, which is a horrific. The chart below tracks the combined percentages of American workers who are: 1) unemployed; 2) partially employed, but seeking full-time employment or; 3) so discouraged that they have stopped looking for work, even though they are unemployed.

The chart speaks for itself…If this is a “green shoot,” it must be a weed.

Source: Stocks Deliver Their Best Quarter in Over a Decade: So What Now?

What was Mr Brown expecting? He’s run the country into the ground and people are showing their disapproval at the polling stations.

After screwing up the banking sector and making many, many people’s financial situation worse… the country has stood up together with Paddy Chayefsky like exuberance and stated: “I’m as mad as hell… and I’m not going to take it anymore”.

The country’s mad, we’re mad, the finance sector’s crippled – what can be done?

Well consider this…

The finance sector makes up one third of our economic output, contributes £20 billion to the trade balance… and accounted for nearly HALF of UK GDP growth in 2007.

There are now more finance sector workers in Britain than there are construction workers, farmers and factory workers combined.

And they are in trouble!

Let me ask you something dear reader…

What do you think’s going to happen to the domestic economy… and to YOUR savings and investments… if Britain’s ‘Miracle Money Machine’ has its output slashed by one tenth… one third… or even half?

Well – as the pound continues to perform disastrously against the Euro and the dollar… investment banks brace themselves for further fallout… it’s time to batten down the hatches, because you’re about to find out.

Below you’ll find the link to a brand new Crisis Report published by The Fleet Street Letter. They’ve also identified three stocks poised to benefit from the finance sector-led recession they believe has to kick off in 2008.

Click here to read the Crisis Report

Not only is the most dramatic asset bubble of modern times clearly over… not only are the recent falls in real estate and equities just a taste of what’s to come… but a sector that accounts for nearly one third of Britain’s entire economy is about to get hammered!

If City activity dries up, so does growth, says Damian Reece in The Daily Telegraph. “The entire southeast, from house prices to employment, is a geared play on global financial markets.”

According to its analysts this could be one of the biggest challenges to face the British economy in The Fleet Street Letter’s entire 70-year history.

And it’s hurtling towards your savings and investments like a freight train even as you read this.

And if you’re not ready yet, you’ll want to be soon.

The Fleet Street Letter has been helping its readers prepare their portfolios for the coming crisis since October 2005.

With the situation deteriorating daily, they’ve decided to issue some advice to you today.

Specifically, the team have identified three “gloom loving” stocks they believe will thrive during the finance sector-led recession.

This could be the most important investment advice you read this year.

Click here for the full briefing

Regards,

Rob Mackrill
The Daily Reckoning

P.S. If like 75% of the country you’re fed up with the way Labour are running the country into the ground… you may as well take the chance to make a little bit of money on the back of their ineptitude (it’s something that makes me feel a little better anyway). So give our report a read – you will not be disappointed…

Go here for the full report

Who stated last Sunday that Tony Blair is convinced that Brown can’t possibly beat David Cameron in a General Election.

Or maybe he’s put out by the fact that he’s having to promise concessions to all the people who are going to suffer from the abolition of the 10p tax.

Either way… as Brown staggers around the country putting all his efforts into convincing us he’s not a wounded animal… who’s looking into fixing the crippled economy?

Alistair Darling? He doesn’t operate without Brown standing right behind him… does he?

It’s all very well for Brown to come out and say he’s not going to concentrate on: “gossip and rumour.” But it seems to me that this is all he has been doing lately.

What is the point of all these publicity stunts and safe facing exercises when we have real problems to solve? A cynic might say it’s to detract attention from what you’re actually doing… i.e. NOTHING…

Well I think that fixing our problems is a better avenue to attempt to win a General Election on… as opposed to publicity and spin.

The finance sector makes up one third of our economic output, contributes £20 billion to the trade balance… and accounted for nearly HALF of UK GDP growth in 2007.

There are now more finance sector workers in Britain than there are construction workers, farmers and factory workers combined.

And they are in trouble!

What’s being done to fix our problems – other than our Leader touring the country to let people know he’s still got a job? Nothing that’s what!

And before anyone points to a £50 billion bail-out…

WE’RE THE ONE’S PAYING FOR THAT BAIL-OUT… YOU AND I… OUT OF OUR OWN POCKETS…

It’s not a bail-out… it’s us shoring up things that are failing – so they fail a bit more slowly…

Even the City is saying that this won’t solve a thing. One investment banker we know said:

“The terms of the Bank of England facility are pretty rubbish, I doubt many banks will use it, you can get better terms privately through the Repo market. I think it’s just a fig leaf to cover the Bank’s total inaction on the sub-prime crisis.”

But hey – slip a sly supposed bail-out in to the mix, whilst getting publicity with one of the world’s most beautiful people – AND MAYBE NOBODY WILL NOTICE THAT THIS £50 BILLION SOLUTION IS A LOAD OF RUBBISH.

WELL GUESS WHAT… WE’VE NOTICED… AND WE’RE PRETTY DARN RILED AT THE CHEEK OF IT ALL.

Let me ask you something dear reader…

What do you think’s going to happen to the domestic economy… and to YOUR savings and investments… if Britain’s ‘Miracle Money Machine’ has its output slashed by one tenth… one third… or even half?

Well – as the pound sinks to a record low against the Euro and investment banks brace themselves for further fallout… it’s time to batten down the hatches, because you’re about to find out.

Below you’ll find the link to a brand new Crisis Report published by The Fleet Street Letter. They’ve also identified three stocks poised to benefit from the finance sector-led recession they believe has to kick off in 2008.

Click here to find out more.

Not only is the most dramatic asset bubble of modern times clearly over… not only are the recent falls in real estate and equities just a taste of what’s to come… but a sector that accounts for nearly one third of Britain’s entire economy is about to get hammered!

If City activity dries up, so does growth, says Damian Reece in The Daily Telegraph. “The entire southeast, from house prices to employment, is a geared play on global financial markets.”

According to its analysts this could be one of the biggest challenges to face the British economy in The Fleet Street Letter’s entire 70-year history.

And it’s hurtling towards your savings and investments like a freight train even as you read this.

And if you’re not ready yet, you’ll want to be soon.

The Fleet Street Letter has been helping its readers prepare their portfolios for the coming crisis since October 2005.

With the situation deteriorating daily, they’ve decided to issue some advice to you today.

Specifically, the team have identified three “gloom loving” stocks they believe will thrive during the finance sector-led recession.

This could be the most important investment advice you read this year.

For the full briefing, click here.

Erin and Isabel
Editors
The Miner Diaries

PS: The Fleet Street Letter says: “If you want to keep your hand in the stock market, these are the simplest ways I know to position yourself to potentially grow wealthier from a likely recession in 2008 and 2009. One 5 minute call to your broker and you’re done.”

Go here for the full report.