Even in the world of finance, there are momentous conversions. As they say on Wall Street, a rally ends when the last bear gives up. An old friend had been a source of inspiration for tech bears for many years. He suddenly saw the light and gave up in 1999. Shares he had formerly scorned – often dotcoms with no revenue and no business plans – were suddenly added to his own portfolio. This also heralded a big change – the end of the tech bubble. Tech stocks collapsed. Most disappeared. Then, Stephen Roach became vaguely bullish in 2007, after a long period of doubt and misgivings.

Now it is Jim Grant who has changed his mind. A generation of investors has gotten used to Grant’s ‘doom is nigh’ warnings. Now, he says, it’s a boom that is nigh.

What is remarkable about the Grant conversion is that his vision gives off so little heat and light. His WSJ article shillyshallies around; rehearses the history of previous recessions and comes to rest in front of a flickering match: “The deeper the slump, the zippier the recovery.”

Many were the sheep in Grant’s flock. They feel betrayed, as if their shepherd had gone over to the wolves. Here at The Daily Reckoning, we take no personal offense. In the following few words we merely stoke up the fire.

We will not argue with Newton’s Third Law. For every action, there is a reaction. Every boom has a bust. And every busted bubble has a bounce. Even the Titanic’s stern rose, before she slipped below the waves.

First, we consult the facts. But facts are survivors. They will tell whatever tale their interrogators want to hear. As for opinions, after six months of a stock market rally, the once half empty glass has become half full. We predicted it ourselves. But we’ll let Robert Prechter say, ‘I told you so.’ Even before the rally began, Prechter foretold its story:

“Regardless of extent, it should generate feelings of optimism. At its peak, the President’s popularity will be higher, the government will be taking credit for successfully bailing out the economy, the fed will appear to have saved the banking system and investors will be convinced that the bear market is behind us.”

As to Mr. Obama’s popularity, Prechter was wrong. But 4 out of 5 ain’t bad.

Grant’s brief tour of recession history seems to confirm his Newtonian position: the further an economy falls, the further up it rises to get back to normal. This downturn has clipped nearly 4% off America’s GDP, substantially more than any previous downturn since WWII. Therefore, it will come back strong.

Today’s slump in the United States hardly compares to the one of ’29-’33, which took 27% off the GDP. Then, in the ranks of the unemployed, stood one out of every four able-bodied workers, as opposed to just one out of every 10, according to today’s statistical legerdemain. Still, the depth of the drop did not prevent a vigorous bounce; on the contrary, it seemed to demand it. After ’33, the US economy grew by nearly 10% in each of the next four years.

In the slump of ’82, GDP sank at a 6.4% rate. Again, the reaction was nearly equal and opposite to the action. “Not until the third quarter of 1984,” says Grant, “did real quarterly GDP growth drop below 5%.”

Of course, even a US Congressman will bounce, if you push him down the Capitol steps. But not every one will get up again. In the ’33 example, the US economy, still youthful and vigorous, got up nicely. But then it fell again. By the end of the decade he was still on his back, with 15% unemployment and 2% deflation. Only later, after four years of world war, did the economy begin a sustained recovery.

Now it is 2009. The poor fellow is down again. The feds rushed to help him to his feet. They gave him a combined fiscal and monetary shot-in-the-arm seven times stronger – in terms of GDP – than the average postwar countercyclical stimulus. The juice opened his eyes. But he still staggers. He has put on some weight over the years; he now carries three times the debt/GDP as he had in ’82. His stocks are three times as expensive, in P/E terms, too. His bones are more brittle and his mind a little slower. What’s more, in ’82, he had been on a deleveraging diet for more than a decade. In ’09, he has just begun.

What will happen next, we don’t know. But if we turn bullish on this economy and urge you to buy stocks, it will surely be time to sell them.

Enjoy your weekend,

Bill Bonner

Source: The Last Bear

This chart blew us away. Stock prices are supposed to move at random. So how do we explain such a seemingly orderly pattern? To answer this question you have to also consider the cyclical movements of commodities prices. Take a look at the chart below. It shows the trend in commodity prices between 1982 and 2000 – an 18-year upswing in equity prices.

As you can see, commodities entered a secular bear market just as equities entered a secular bull market. And vice versa.

The reason for this is actually relatively simple. As costs for raw materials increases corporate profits decrease. Eventually, the decrease in profits causes demand to fall for commodities… and prices fall.

This fall off in prices then reduces investment in the acquirement and production of raw materials, which in turn reduces supply. As supply gets tighter prices begin to rise again. Investment in commodities becomes once again profitable, and the cycle completes itself.

This story gets really interesting when you consider that during the vicious sell off in commodities last year prices bottomed far higher than in previous recessions.

According to Rosenberg:

In the 2001 recession, the oil price bottomed at $19.33/bbl; in 1990, it bottomed at $16.81/bbl; in 1982 at $28.48/bbl; and in 1975 at $10.11/bbl. We bottomed this cycle at levels that were peaks in prior cycles. The same holds true for copper – it hit its trough at $1.39/pound this time around versus $0.630 in 2001 and $1.00 in 1992. Ditto for the ‘softs’ – soybeans bottomed at $8.48/bushel this time, compared with $4.15 in 2001, $5.42 in the recession of the early 1990s and $5.32 in the early 1980s downturn.

What does this mean for your investments? Put simply, this implies that “the floor is in” for commodities. Consider adjusting your portfolios accordingly.

Investors are further assured that the stocks held in the index have nothing to do with borrowing or lending, women’s fashions, cosmetics, modern cinema, popular music, or pork.

Personally, I wouldn’t touch this fund with a barge pole. It is virtually guaranteed to earn sub-par returns.

Here’s why…

Investing in Sin Stocks vs. Socially Responsible Stocks

If you were given the choice six years ago between investing in the environmentally and socially responsible Sierra Club Stock Fund (Nasdaq: SCFSX) or investing in sin stocks with the Vice Fund (Nasdaq: VICEX), which invests primarily in tobacco, alcohol, defense and gambling, which would you have chosen?

I’ll give you a hint. Your profits would have been much bigger if your conscience weren’t your guide.

• The Sierra Fund has delivered negative returns over the past six years.
• The Vice Fund has delivered positive performance – and beaten the S&P 500 handily, too.

This is no aberration.

Merrill Lynch recently examined the performance of alcohol, tobacco and casino stocks in all recessions since 1970 and found that while the S&P 500 fell 1.5% on average, sin stocks rose an average 11%.

This downturn isn’t shaping up to be any different.

Sure, consumers are cutting their spending far more than in past recessions. But history shows that people do not drop their bad habits in hard times.

Rather many people feel an intense need to escape through alcohol, tobacco, or a trip to their local casino.

This is not too surprising.

If a citizen of ancient Greece or Rome were magically transported into the modern era, he would be astounded by the current state of agriculture, transportation, housing, medicine, architecture, technology and general living standards.

Humanity itself, however, would offer few surprises. We remain the flawed human beings we have always been, struggling with the same deadly sins our ancestors wrestled with millennia ago: greed, gluttony, sloth, pride, anger, envy and lust.

Investing in Sin Stocks Through The 7 Deadly Sins

Given this reality, when it comes to investing in sin stocks, four months ago The Oxford Clubunveiled its new Seven Deadly Sins Portfolio.

It is already up 41%, more than 10 times as much as the S&P 500.

We locked in a 92% profit in the casino stock Wynn Resorts (Nasdaq: WYNN) in 64 days. Our shares of Smith & Wesson (Nasdaq: SWHC) have doubled in less than four months. All but one of our positions are up over 20%.

Why are these vice stocks outstripping the broad market by such a wide margin? One answer is careful security selection.

But two other studies out of Yale and Princeton offer a further rationale.

• One study attributes vice stock outperformance to the lack of attention pension and other institutional investors pay to these stocks in order “to maintain an aura of respectability.” (That creates opportunity.)
• The other believes it’s because companies in sin industries benefit from high barriers to entry, thanks to strict regulations and taxation.

These factors are not likely to change.

I’m not endorsing the sin industries, incidentally.

I don’t smoke and I hope my kids never do. I don’t gamble unless the stakes are negligible. And I don’t own a handgun, although I am a supporter of Second Amendment rights.

Why Would Anyone Invest in Sin Stocks?

So why would I consider investing in sin stocks and these types of companies?

• Because my investment portfolio is a vehicle for achieving and maintaining financial independence, not for making grand moral statements.
• Consumers and investors have every right to patronize or own any legal, publicly traded business that creates jobs, pays taxes and allows citizens to enjoy their many freedoms.
• Moreover, you only need look at Afghanistan under the Taliban to see what a society unleavened by political, religion and economic freedoms looks like.

Last month French President Sarkozy made news when he said the burqua – a symbol of the repression and subjugation of women – “is not welcome in France.”

Shariah law isn’t welcome in my portfolio either. And the returns have been superb because of it.

Source:  Investing in Sin Stocks: How to Oppose Radical Islam in Your Portfolio

Given that more than $800 billion of federal money has been earmarked for U.S. “stimulus” projects, one would actually expect that the frightening job losses of the past six months would quickly reverse, and that the U.S. economy would soon start creating the 3 million jobs that U.S. President Barack Obama has promised.

Unfortunately, that has not been the case.

That’s not to say that the outlook is for a Great Depression, an economic reversal in which a country’s output plummets by 25% or more from its peak level. While the current U.S. recession may well be the “worst since the Great Depression,” it’s becoming clear that the peak-to-trough output decline will be something like 5% – worse than the recessions of 1973-75 and 1980-82, both of which saw output declines of about 3.5%, but not all that much worse.

After all, the money supply has not been allowed to collapse as it did during the 1930s and there has been no repetition of the infamous Smoot-Hawley Tariff Act, though the “Buy America” provisions in the original stimulus outline and the corresponding “Buy China” provisions inChina’s corresponding package indicate that “Smoot-Hawleyism” still lurks just beneath the surface.

However, the following four factors make it almost certain that the U.S. economy will be slow:

• Record-low interest rates make it impossible for the U.S. central bank to use rate cuts to jump-start growth.
• The huge U.S. budget deficit will force the federal government to continue its heavy borrowing – potentially “crowding out” private-sector players seeking loans to finance their own growth.
• The growing size and influence of the U.S. public sector.
• And an over-growth of government regulation.

Let’s consider each one.

First and foremost, the U.S. Federal Reserve has loosened money supply inordinately over the last year, with short-term interest rates at 0.00% and money supply growth at 15% per annum. Thus, there is no Fed loosening available to spur employment.

Interest-rate-sensitive sectors – especially housing and construction – are likely to remain depressed for years. These sectors are major employers of low-skilled and semi-skilled labor, which will not be picking up their normal slack.

A second adverse factor is the exceptionally large federal budget deficit - expected to reach $1.85 trillion, or 13% of the U.S. economy, in this year alone, according to the nonpartisan Congressional Budget Office(CBO). That deficit will stretch several years into the future, thanks to the stimulus package and various bailouts initiatives.

In the short term, these rescue-oriented provisions have helped U.S. employment, not the least by allowing federal and state governments to do some hiring. But in the longer term, the federal borrowing they have caused will restrict the private sector’s access to the capital markets. That will hinder small businesses in particular. Indeed, the private sector will find it difficult to fund capital expansion, and again the result is likely to be a dearth of hiring.

A third adverse factor is the expansion of the public sector itself. To some extent, it does not matter how budget deficits are financed; the important consideration is the transfer of resources from the private sector – allocated by the automatic optimization of the so-called “price mechanism” – into the public sector, where no such considerations apply.

It’s not just a question of government itself; it’s now clear, for example, that Chrysler LLC and General Motors Corp. (OTC: GMGMQ) are to be controlled by the government – with subsidies – at our expense.

When General Motors announces, as the company did Wednesday, that it will build automobiles on the basis of an assumed oil price of $100-$120 per barrel, one sees at once a politically motivated strategy; GM will cease making the large cars that in the past have been its principal source of profit. If oil prices average $50 or less, as is perfectly possible in a long period of sluggish global growth, General Motors will be a mess – and will need to be bailed out by us again.

The late William F. Buckley Jr. once claimed that 500 names chosen at random from the Boston telephone book could do a better job of running the country than Congress; I wouldn’t mind betting that such a random selection would also make a better job of running General Motors than the government.

Related to the growth in government is the growth in regulation. For example, President Obama’s “cap-and-trade” plan to address global warming will impose a new tranche of costs on the U.S. economy, without any great offsetting spurs to employment. In areas such as energy production and heavy industry, employment will be depressed by the additional cost burdens those areas bring, as well as by the simple difficulty of complying with the new regulations.

To see where a larger state sector and more regulation can lead, one need only look at the European Union (EU). Whereas U.S. unemployment was below 5% for much of the last decade, the lowest rate reached since 2000 was 8.8% in the EU. What’s more is that certain areas of the EU have much worse records than this.

In Spain, for example, unemployment was close to 20% for much of the 1980s and 1990s, and has now soared once again to no less than 18.2%.  The EU is not ensconced in a Great Depression and Spain remains a relatively wealthy country; nevertheless, the rigidities in the European system are such that unemployment remains persistently high, with adverse social effect, such as the rioting in the Paris banlieus.

The European Commission (EC) recognized this problem as early as the 1980s, and has been gradually pushing Europe towards the more open U.S. labor market, with only moderate success.

Because of over-loose money, excessive budget deficits, growing government and impending regulation, it is thus unlikely that the U.S. economy and its job market will bounce back as quickly as it has in the past.

The investment “takeaway” from this is obvious, I fear: A substantial part of one’s money should be invested in the free-market economies of East Asia, where regulation and taxation are lower, so even though a recession has also hit, recovery is likely to be much more robust.

Source:  The Four Key Reasons the U.S. Economy is Facing a ‘Jobless Recovery’

We know from Jeremy Grantham’s work on the “presidential cycle” that stock values rise on average 22% (based on the S&P 500) in the third year of a presidential terms relative to years one and two. This is not statistical noise. It’s evidence of the power presidents have to puff up stock markets through financial stimulus, political maneuvering and moral hazard.

Nobody who seeks political power is ever happy to give it up. So presidents try to give the economy a helping hand in time for elections. Bush, helped by a pliant Fed chief, did a better job at this than most. To say that the Fed’s monetary policy was loose in the run up to Bush’s reelection campaign is an understatement of epic proportions. George Junior had learned an important lesson from his father’s presidency: recessions don’t get you reelected.

Of course, the ensuing expansion of credit also helped by loose regulation of the shadow-banking sector and derivatives markets, couldn’t last forever. And the hero of the 2004 presidential elections left office during the biggest economic disaster since the 1929 crash.

President Obama knows his presidency will stand or fall on voters’ perceptions of his ability perform major triage on the wounded US economy. It does not, however, matter to Obama’s reelection bid if the economy assumes a sustainable pattern of growth; a good old-fashioned dose of ‘stimulus’ will do. Obama’s playbook is to borrow and spend America out of trouble. It is a short-term remedy at best. At worst, it will ruin the country.

The government will borrow 50 cents of each dollar it spends for the next year. To do this it will run the largest annual fiscal deficit since the US mobilized for World War II. There are only two ways to pay off the debt pile George W Bush and Barack Obama have run up. (President Clinton left office with a budget surplus.) The government will either raise taxes via the IRS or trigger inflation. It will likely resort to a combination of both.

This point is not lost on even Obama supporters. Warren Buffett had this to say recently about spiraling deficits:

A country that continuously expands its debt as a percentage of GDP and raises much of the money abroad to finance that, at some point, it’s going to inflate its way out of the burden of that debt.
Every country that has denominated its debt in its own currency and has found itself with uncomfortable amounts of debt relative to the rest of the world, in the end they inflate.
That becomes a tax on everybody that has fixed dollar investments.

Buffett thinks the ratio of debt to GDP in the US could reach 80% by 2011. Right now, the government has backstopped roughly 70% of the US economy with public funds. This is not a free market by any stretch of the imagination.
It is difficult to understand how the government will extract itself from this situation without triggering another collapse.

As we have said before here at Notes, traders and investors are now betting on Uncle Sam’s support of the market, not the market itself.

They’ll keep our homes, track our finances and clean up after our pets. Best of all, they’ll be robotic. So you won’t have to feel guilty. You won’t even have to tip them! Within a few years, truly sophisticated consumer robots will be common in high-income households. Before you know it, incredibly capable general-purpose robots will be seen as essential appliances.

It’s funny how hard it is for people to accept big, obvious change. Even when the world is transforming in front of their eyes, lots of folks don’t see it. I remember when the prevailing opinion was that personal computers were a novelty. The real money, analysts said, would be in mainframes. Do you remember when the Internet itself was viewed as merely interesting, but with little financial potential?

If you go back further, you’ll see this same inability to recognize trends with cars. At first, the notion that people would want to own automobiles was too much for the mainstream. Sitting in traffic these days, it’s hard too imagine such shortsightedness was once conventional wisdom.

Those who understood that those changes were inevitable made fortunes. They didn’t worry about timing or recessions. They just invested in a portfolio of early carmakers. Despite the fact that some automakers crashed and burned, those who bought diversified portfolios of car stocks made vast fortunes. That’s what I’m urging investors to do with robotics now: build a diversified portfolio of the companies that hold key competitive positions in the industry.

Already, some low-end robots are exploding into new markets. Even as consumers cut back dramatically last quarter, sales at one of the robot companies I follow increased dramatically during the first quarter. This trend will continue. Selected robot companies are bucking dismal economic conditions. Moreover, military spending on robotics continues to expand and buoy many robot companies. Just days ago, the U.S. Army ordered 125 robots from a company I have been following.

The proposed Obama budget increases funding for the Department of Defense programs that move robotics forward. The trend toward unmanned robotic weaponry, like iRobot’s PackBot, is unstoppable. Military conflict will not go away, and robots offer many developed nations a way to reduce battlefield casualties.

As Moore’s Law continues to improve computer technologies, the decision to risk robots, rather than humans, will be easier and easier to make. Regardless of consumer spending trends, we will see far more advanced robots in the battlefield and on crime scenes. Those advances will, in turn, accelerate the domestic and industrial robotic industries.

Believe me. You want to own robots.

Part II: Memristors

Memristors are the “fourth circuit variable” hypothesized in 1971. Until now, though, three circuit variables have long been the basis for all electronic circuits. They are resistance, capacitance and inductance.

Last year, HP made news by demonstrating a practical application of memristance. At the time, I was astonished that the development had occurred so soon after HP’s announcement that it had discovered a way to build memristors.

HP may have been only the first group to recognize what it had on its hands. Researchers from such institutions like the University of Parma in Italy and UC San Diego have also built prototype memristors from polymers and metallic oxides. They too are exploring applications for this exciting new technology and could end up holding important memristor intellectual property.

Nearly all existing commercially available transistor-based technology is capable of assuming only two states per element, either 1 or 0. So by necessity, all calculation is done in binary.

Memristors, because they can assume different states corresponding to different levels of resistance, are multi-state elements. This quality facilitates a much higher data density. Memristor storage density will be at least 10 times that which is achievable using current transistor-based technology. Imagine the storage capacity of a large hard drive on the head of a pin.

Moreover, memristor memory is nonvolatile. It retains its state even when no power is applied to the circuit. This has tremendous advantages over current memory technologies that lose their data when the power is switched off. Furthermore, unlike current transistor technology, memristance becomes more pronounced and efficient the smaller the element is. In transistors, small size and high density lead to greater power loss and heat production. The opposite is true with memristors. Nanotech-level scaling actually amplifies the memristive properties of the individual elements.

It’s not only computer scientists who are excited by these developments. Biologists are beginning to realize the potential memristors have to mimic organic or biological computing.

Because many of the properties of memristors are so similar to brain cells they may be used to imitate brain functions. If, as scientists believe, they can be used to mimic synaptic function, they could bring true artificial intelligence much closer.

Recently, researchers have been able to model the learning ability of the amoeba with a simple memristive circuit. According to HP, these circuits can “remember and associate a series of events in a manner similar to the way a human brain recognizes patterns.” In other words, the circuits learn.

While HP has grabbed the headlines, such devices are currently being developed for use as nonvolatile resistive memory by various companies. Some, like HP, are probably too big to be breakthrough technology stocks. Samsung is one of the giants working on the technology. On the other hand, Micron Technology and Unity Semiconductor apparently have some patent rights, at least, to memristor technologies. If they’re significant, these companies could be small enough to experience transformational profits that rival Intel’s historic growth.

It is only a matter of time before this new technology begins to break through. We will be monitoring this area for developments and will keep you informed.

P.S.: The question now, of course, is will there be a memristor pure play. One of my colleagues (an IT engineer) is currently talking to researchers about that very question… Get on my list and become one of the first to learn about these transformational companies as they develop. Here’s a link.

Source: Robots and Memristors

The closest fellow they’ve got is Wen Jiabao – China’s prime minister and a man intent on spending his way out of the country’s economic problems. He might just succeed, too. More on him in a minute.

While millions of Irish revelers (and wannabe Irish) were no doubt nursing ugly hangovers this morning, China has one of its own: A record 25.7% plunge in exports during February.

With the Chinese New Year holiday having occurred in late January this year, economists expected February’s numbers to look better than January’s 17.5% drop from a year earlier – or to at least stabilize. But instead, it highlighted a country with a split personality.

Let’s look at China’s Jeckyll and Hyde economy…

February Flop

On the one hand, it’s evident that China having a very hard time selling its goods to the rest of the world, which (like China) is in the midst of a sharp economic slowdown. For example, deep recessions have hit major export consumers like the U.S. and U.K., plus widespread weakness across Europe.

For a country whose massive export growth has formed the foundation of its economic explosion, it’s no surprise that with this pivotal sector having steadily declined since November, so too has China’s economic growth.

A government forecast puts China’s first quarter GDP growth at 6.5%, compared with the 6.8% fourth quarter figure. And as exports tumble, the World Bank now estimates 6.5% growth for 2009 overall, the weakest since 1990 and a sharp cut from its earlier 7.5% projection.

But on the other hand, there are signs that China’s stimulus program is working, with internal investment rising.

China Hopes For Some Bang For Its Yuan

While its export market is flagging, China’s government is trying to boost its prospects in a way that it can directly control: Spending.

And with a $585 billion stimulus package rolling through its economy, China is adhering to the notion that if you want the best results, you have to spend a bit to get them. China’s banks have lent more money over the past three months than in the past year, according to the New York Times. The number of loans in February alone quadrupled to just over one trillion yuan ($157 billion).

A large portion of the money is going towards repairing and rebuilding China’s aging infrastructure. The National Bureau of Statistics said fixed-asset investment spending shot up by 26.5% to 1.03 trillion yuan over the first two months of 2009, compared with the January-February period in 2008. That thrashed estimates by 5%.

In turn, the improvements could give China a crucial competitive advantage. While others bail out their economies and slide into debt, China is using its strong cash position (ironically borne largely from its export growth) to now help offset export declines and its reliance on that area by improving prosperity from within.

Already, railroad spending tripled over the first two months of the year – much-needed investment for an industry that has struggled to cope with industrial production and demand. That’s in addition to increased spending on the country’s roadways. Construction equipment sales are projected to climb by 20% over the second half of 2009. Education, research and development, and social programs are also enjoying increased spending.

In some ways, the global downturn has forced China to stop relying on its exports and real estate market for growth and instead adopt a wider, more strategic focus.

And there could be more on the way…

Back Up The Stimulus Truck

China’s Prime Minister Wen Jiabao is certainly bullish when it comes to spending money.

Four months after announcing the $585 billion stimulus package, Jiabao pledged to “significantly increase” spending in a speech two weeks ago. He reiterated that more recently in saying that the government has “reserved adequate ammunition” to “introduce new stimulus at any time.”

He may need to, in order to meet his government’s 8% GDP growth target and stem the tide of rising unemployment. With 20 million migrant Chinese workers now jobless and blue-collar job wages falling, it puts additional pressure on China’s fragile pension and healthcare systems – and heightens the prospect of social unrest.

But with all the new money washing through its economy, China is still a viable investment…

In The Year Of The Ox, Should You Be A China Bull?

“As long as the government’s stimulus measures to boost domestic consumption are properly implemented, investment growth will continue to accelerate, making up for the loss of exports.”

So says Ma Jiantang, head of China’s National Statistics Bureau. And given the surprising speed with which many investors have jumped off the China bandwagon, that bodes well for those who still retain some perspective.

Despite cutting its forecast for China, the World Bank says China will fare better than most other economies, driven by its stimulus efforts. In addition to huge infrastructure spending and bank lending, retail sales were up 15.2% over the first two months of the year, with auto sales rocketing 25% higher. And the Shanghai stock market is up 22% this year, too.

Plus, firms like Intel (Nasdaq: INTC) and manufacturers Hon Tai (Taiwan) and IMI Plc. (Britain) are boosting their operations and employment in China.

What’s more, in the wake of the government loosening regulations on Chinese companies wishing to make foreign acquisitions, the commerce ministry is sending a delegation to Europe, specifically on the hunt for buyout targets in a range of industries.

It’s not all rosy in China, of course. The country is suffering at the hands of the global economic downturn like many others. But China is using the wealth and prosperity it’s built up over the past several years to deal from a position of strength.

So while some headlines may play up the doom and gloom, it’s also clear that the China bull is still alive and kicking in some areas.

Source: China’s New Bull Run

It’s the first time since 1939 that job losses have exceeded 600,000 for three consecutive months, as revisions for December and January showed an additional loss of 161,000 jobs.

The record for monthly job losses was set in September 1945, when nearly 2 million people lost their jobs after the Allied forces won the most destructive war in history and American industry was transitioning from wartime to peacetime, Money Morning reported Monday. Then, in October 1949, 834,000 jobs were lost when almost all the nation’s steelworkers went on strike in the final month of a short-but-brutal recession.

Another strike in July 1956 resulted in 629,000 lost jobs, but the next month the economy bounced back and 678,000 jobs were regained.

The work force is much larger today than it was in 1949 or 1956. But with about 4.4 million jobs lost since the recession began in December 2007, more than 3% of U.S. payrolls have been eliminated. That puts this recession in a category with the recessions of 1982, 1954 and 1949 when 3.1% of payrolls were cut. About 4% of U.S. payrolls were lost in 1958.

“There is not a single sign that points to a bottom yet,” Ellen Zentner, a senior economist at Bank of Tokyo-Mitsubishi UFJ Ltd. told Bloomberg.  “It is the worst recession in the post-war era.”

Analysts at Wachovia Corp. (WB) estimate that 6.5 million Americans will have lost their jobs by the time the financial crisis finally subsides.

“Employment losses have deepened considerably in recent months,” wrote economists for Wachovia. “With total revenue declining at its worst pace since the late 1950s, many businesses and governments are in survival mode and have no choice but to cut jobs.”

The Labor Department report showed that Factory payrolls declined by 168,000 in February after falling 257,000 in January. Builders shed 104,000 payrolls after dropping 118,000 in the month Prior. Government payrolls continued to be the only bright spot, as Uncle Sam added 9,000 workers in February and 31,000 in January.

The U.S. unemployment rate surged 0.5% to 8.1% in February, the highest level in more than a quarter century.

Source: Job Losses Continue to Mount in February, Unemployment Rate Soars to 8.1%

These stocks act as an early warning for what is to come and you don’t need the data from the U.S. Labor Department to give you the figures or warning.

This from the Team:

During most recessions, the auto sector has traditionally taken it on the chin. This week, we found out some interesting news that gives us some new insight into the changing buying habits of American consumers, and perhaps, new insight on investing.

AutoZone (NYSE: AZO) reported increased sales and profits as customers lined up to fix old vehicles instead of purchasing new ones. It’s a logical and expected result of consumers saving more and splurging less.

Another lesser-known indicator, this time on jobs and joblessness, are the numbers coming from payroll heavy Automatic Data Processing (Nasdaq: ADP). From the ADP Employer Service gauge we know that 697,000 jobs were cut from payrolls in February.

What these data streams tell us is that we can find investment information outside sources like the U.S. Labor Department and industry sales figures. And for astute investors, these “canaries” can give us fair warning before the official data is released.

For example, if we find out how severely some of the biggest online advertisers are cutting back, wouldn’t that information be important to know before online advertising juggernaut Google (Nasdaq: GOOG) reported it’s numbers? I would think so.

So keep your eyes and ears peeled and maybe you’ll stumble across the Holy Grail for today’s market… The sign we’ve hit bottom.

Source: AutoZone and ADP, Non-traditional Indicators