With the nation’s unemployment rate officially in double-digit territory and the under-employed rate ready to the 20% mark, the politicians that promised bliss in the days ahead are eating their words today.

And that means Wall Street is eating its recent gains.

For nearly a month, the Dow has hovered around the 10,000 mark. After hundreds of billions of dollars were withdrawn earlier this year, it was relatively easy to put that money back to work and send the equities market higher.

But now that the economic data is showing facts of slower-than-expected expansion rather than “ideas” of growth, investors are forced to explain their logic. The Dow doesn’t want to budge from 10k.

So far, I’ve heard very few reasons for prices to go any higher. Maybe in China or Australia, but certainly not here in the land where everything is changing.

Think about what has occurred over the past twelve months and tell me if you believe today’s companies are worth as much as they were two years ago or even five years ago.

We’ve had government takeovers of major banks, mortgage lenders, auto manufacturers and insurers. Washington has told people how much they can make in a year. Legislators even introduced retroactive taxes.

Then there is the threat of cap and trade blowing energy prices (an input to nearly every American business) sky high. Now it is mandatory healthcare and the risk to corporate payrolls, tax structures and discretionary spending.

After all that, I hate to think about what is next. An assault on allergens?

*** Maybe I’m just being too pessimistic. After all it has been a long week and I spent five hours at the airport in the middle of the night yesterday waiting to pick up my mother-in-law.

Don’t get me wrong. I think there are some fantastic buying opportunities out there. There are just not in the places most Americans are looking.

But since the mother-in-law brought me eighty pounds of fresh Alaskan salmon, halibut and moose meat (she’s as close to Sarah Palin as you can get without committing to Playgirl), I am starting to feel a bit generous today.

That means I’m going to share with you what I am certain will be the biggest gainers of the next twelve months.

First… healthcare. Think about it. Who is easier to rip off than the federal government?

Just ask Haliburton, Goldman Sachs and whoever sold those $750 toilet seats.

Within a year of signing some diluted version of Pelosi-care, the headlines are going to be filled with record-breaking profits out of the nation’s largest healthcare providers and drug companies.

If Wall Street has the nerve to toss out billions in bonuses while the ink on their bailout checks is still drying, imagine the kind of zeroes that will be added to the paychecks of healthcare executives.

I can hear the excuses now. “If we want to save lives, we have to retain the best workers.”

It is going to be a feeding frenzy when Uncle Sam is the third-party payer.

Next, forget about gold.

One reader wrote to me yesterday and said, “I think it will hit $2,000, but it will probably hit $600 first.”

Could not have said it better myself. Gold’s value is too tied up with political moves and currency fluctuations. With one well-timed press release, China can send the price wherever the heck it wants.

I don’t want my wealth facing that kind of risk, especially after we just rammed Beijing with the largest tariffs yet.

That’s why my money is on palladium. It’s much harder to find and has a huge industrial demand.

Palladium is at the heart of the world’s commodity carry trade. I told TFN Strategic Traders to play Stillwater Mining several months ago and the trade nearly doubled in a week. It is still a good buy, especially as China’s auto industry takes shape.

Finally, go short on natural gas. Get as much leverage as you can because prices are about to plummet fast.

On Wednesday, the International Energy Agency was one of the first major groups to back my opinion. In a draft of a report due out next week, the influential group warned of a massive glut of natural gas as global demand begins to top off and turn around just as we are pulling more of the stuff out of the ground than ever.

But don’t wait until Tuesday to read the report. You can read my version right now. In it, I recommend three ways to play the situation.

So far, two of the plays would have already doubled your money. All three are well into positive territory. Prices are almost out of my buying range, so do not hesitate to take action.

*** Before I go for the week, I need to make a correction. Yesterday, I inadvertently said the Senate extended unemployment benefits for 14 months. The actual extension is 14 weeks.

I apologize for accidentally releasing my psychic secrets. The 14-month extension won’t come until next spring, when Congress finally makes it illegal to layoff any employee.

Enjoy a great autumn weekend,
Andrew Snyder

Good day… And a Happy Friday to one and all! Yesterday, I welcomed you to October. I had been prepared to tell you about a famous radio station here in St. Louis, that has long called October… Rocktober… But forgot, as usual! But anyway… It’s the first Fantastico Friday of Rocktober!

Today is a Jobs Jamboree Friday too! And… I’m not getting a good feeling about today’s labor report at the Jobs Jamboree. The forecast is for jobs losses to fall from -216,000 to -175,000, but the unemployment rate to tick up to 9.8% from 9.7%… I got the feeling, baby, baby, I got the feeling… Oops, a little James Brown on Fantastico Friday never hurts! But what I was saying was I’m getting the feeling that there are risks to this forecast… And that the job losses could come in higher, which would really be a BAD thing for the recovery flag wavers and risk takers, I’m sorry to say…

You see, the recovery flag wavers and risk takers are wishing, and hoping, and thinking and praying that the data in the U.S. continues to show some sign of life. Any signs that the U.S. economy could be slipping backwards, would deep six stocks for sure, and if last year’s trading tells us anything, it would have an adverse affect on Commodities and Currencies too!

So… This is a BIGGIE, today, folks… So strap yourself in, and make sure you keep your arms and legs inside at all times during the ride!

Yesterday’s currency trading left a lot to be desired… There was little movement from the overnight sessions which tomahawked the non-dollar currencies. That’s a good thing… But the downside risk today is just too much for me right now… Maybe after 7:30 CT I’ll be able to breathe again, for that’s when the Jobs Jamboree prints… Again, Japanese yen enjoys the sun from both sides of their house… When the dollar is weak, yen rallies with the other non-dollar currencies… When the dollar is strong, yen rallies alongside the dollar! It’s good to be the yen! (that is before the Ministry of Finance in Japan begins to intervene!)

Hey! Remember when I bashed the Cars for Clunkers scheme, I mean program, and exposed it for what it was, and what it would do to future sales of automobiles? Well, as they say… The proof is in the pudding!

Yesterday, it was reported that General Motors (NYSE:GRM) had posted a 45% drop in September U.S. light-vehicle sales, while Chrysler’s sales fell 42%. Ford saw a much more modest drop of 5.1%. Among Japanese auto makers, Toyota said its September U.S. sales declined 16% from a year earlier, while Nissan saw its results fall 7% and Honda said its sales slid 23%. The auto industry was hurt by the expiration of the U.S. government’s “cash-for-clunkers” rebate program.

Yes… I told you this would happen… I also think that any Gov’t program to prop up the economy is just falling into the ghost of Japan’s hands… I’ve explained this before, about how when Japan experienced a HUGE market correction after their go-go 80’s, they panicked and began throwing money at the problem, instead of just letting the markets run their course… The Japanese introduced stimulus package after stimulus package, and Gov’t program after Gov’t program, like Quantitative Easing… And look how well that’s worked out for them!

So the ghost of Japanese recoveries that never panned out, is haunting the U.S. Gov’t now!

Today is also the start of a G-7 meeting in Istanbul… Istanbul was once Constantinople! Or so the song goes… Any way… The rumors coming out of the pre-meeting stuff is that G-7 will no longer make a statement or issue a communiqué’ regarding currencies, as they now feel that the only group that should have that responsibility is the G-20, which last week took the world economies watchdog title from G-8…

Currency traders have long used these G-7 communiqué statements as a tool that indicates direction for currencies… And while that has actually come to fruition a handful of times over the years, for the most part, G-7 was nothing but a boondoggle!

One thing that’s out there that you won’t see a lot of people talking about is the vote going on in Ireland today, on the Lisbon Treaty, which the Irish people voted down last year… This Lisbon Treaty changes the way the European Union works, and would amend the Maastricht Treaty… It was intended that all member European Union states would ratify this before now… So, this vote is like the Sword of Damocles hanging over the euro for Monday morning…

You see, the vote will be taken today, counted tomorrow, and announced Sunday, which will cause a knee-jerk reaction to the euro trading on Monday… Right now, the polls show the Treaty will be accepted this time by the Irish. If passed, it goes to Poland and the Czech Republic, and if they vote yes then it would lead to ratification, which would be a good thing for the euro… A no vote would be bad thing, just like it was in June of 2008, when Ireland voted no the first time around.

Yesterday, the IMF issued a report on Currency Composition of Global FX Reserves… And this is quite telling I believe, for the report showed a continued diversification away from the dollar, in the 2nd QTR of this year… I had to laugh last year, when I was on the FXU Currency Tours, and one of the guys there said that the fall of currency reserves allocation of dollars from over 80% to 64%, was nothing but currency appreciation by the euro… I would point to the these IMF reports, when I talked so that I didn’t make a big thing out of it…

Did you see the story in the Wall Street Journal (WSJ) regarding Lehman Brothers? This story has conspiracy stamped all over it, so you know me, I was all over this story like a cheap suit! Here’s the gist of the story from the WSJ… “An examiner is looking into how the Federal Reserve was promptly repaid billions of dollars in cash and securities it lent to Lehman Brothers before the bank filed for bankruptcy, while other creditors are still owed money. The court appointed Anton Valukas, chairman of Jenner & Block and a former U.S. attorney, to explore whether the Fed received improper preferential treatment.”

Chuck again… Now, you, me and the lamppost all know what went on here, just by that description in the WSJ… But, we’ll wait for the report, I guess…

The U.S. stocks really got taken to the woodshed at the close yesterday, and the futures in the overnight markets are weak… So… Guess where the money goes when they sell stocks? That’s right, U.S. Treasuries… So, just about the time you think that the mom and pop’s of the world that went to Treasuries last year in the so-called Flight to Safety, had taken on enough losses, and were going to get out… Here comes the stock correction that I’ve been talking about… Or maybe not… Maybe this is just a couple of days of selling… Or maybe it is the correction…

So, if dollars are flowing into Treasuries, the yields of those Treasuries are going down once again… UGH! This just doesn’t make any sense to me! Didn’t these people that went to the so-called Safety of Treasuries last year, but lost money, learn anything? Or did enough time pass and they’ve “forgotten the pain”?

Oh Heck! This just feeds more air into the Treasury Bubble… Which means that it grows larger and larger, and also means that when it does POP, the losses will be severe and all across the board… I mean, isn’t that what we’ve learned about what happens when a bubble POPS in the past?

Yesterday, the data cupboard was busy… We had the Weekly Initial Jobless Claims post a higher number than was expected, coming at 551,000, VS last week’s 534,000… I always love it when the Jobs Jamboree follows a Weekly Initial Jobless Claims repot… Because… The Weekly report shows that, in this case, that 551,000 jobs were potentially lost last week, and today’s monthly report by the BLS will show something far less…

We also saw that the U.S. Consumer continues to spend more than they make, as Personal Spending was up 1.3%, while Personal Income was only up .2%…

And then finally we saw the U.S. ISM Index (manufacturing) come in weaker than expected, but remain above 50, at 52.6… That’s a weaker number than the August figure which was 52.9… And I would think that someone would have noticed this… But we had the TV on all day, and I had it one when I got home, and never saw mention of this anywhere!

And then there was this… Colleague, Aaron Stevenson, called me yesterday morning, trying to beat the deadline for stuff to add to the Pfennig… He missed… So I have it for today… Remember yesterday morning, when I announced that BOA CEO Ken Lewis was retiring, and that I thought that to be strange?

Well, Aaron was all over this, telling me that he worked for BOA for a number of years, and sat in on meetings with Ken Lewis, and that Ken Lewis was not the kind of person to take “early retirement”… In fact, Aaron says, “that 4 months ago, I heard an interview with Ken Lewis, and he said I’m 62, I’m not ready to retire.” Aaron said that he was a “no surrender, no quit, kind of guy.” Hmmm… I wonder what changed in 4 months? Well, Aaron thinks, and I agree, that he was forced out by the Feds, for speaking his mind on the BOA / Merrill Lynch deal that was brokered by the Fed and Treasury…

OK… To recap… Today is a Jobs Jamboree Friday, and I’m getting the feeling that it will be disappointing VS the forecast of 175,000 job losses. G-7 meets this weekend, and there might be a change in the what they say after each meeting. The ghost of Japanese recoveries, is at work in the U.S. Ireland votes on the Lisbon Treaty today, and the dollar remains well bid VS the non-dollar currencies… Except yen!

And this… On Monday next week, I will be doing an educational presentation for the folks at DTI… You can find out more here: http://www.dtitrader.com/trading_education_MMM_everbank.htm

Currencies today 10/2/09: .8630, kiwi .7130, C$ .9175, euro 1.4550, sterling 1.5850, Swiss .9620, rand 7.72, krone 5.8250, SEK 7.0420, forint 186.20, zloty 2.9185, koruna 17.4750, RUB 30.20, yen 89.30, sing 1.4170, HKD 7.75, INR 47.75, China 6.8265, pesos 13.77, BRL 1.7860, dollar index 77.20, Oil $69.69, 10-year 3.15%, Silver $16.25, and Gold… $996.75

That’s it for today…Time to get working on making this Friday, Fantastico!

Chuck Butler

Source: A Jobs Jamboree Friday!

Good day… And a Terrific Tuesday to you! A long Holiday Weekend, that was quite good for yours truly! A great tailgate, a great Missouri Tigers victory, 3 of 4 for the Cardinals, a great end of summer bar-b-que at the Butler House, and a day to recharge the batteries… Really couldn’t ask for much more… Yes, the weather could have cooperated a bit better, but, hey, that’s nitpicking!

Well… Last night I was checking the markets to see what was going on, since I had walked away from the desk on Friday afternoon… And much to my surprise, the currencies, led by the euro, seemed to be breaking out of their recent trading ranges. The euro was trading 1.4335, when I checked then… And when I turned on the currency screens here at the office this morning, the euro has stretched that move to the 1.4480 level! WOW! Looks to me as though the deficits that the dollar drags around are not looking to sharp to investors… But then, what took them so long to dump that fashion faux pas? Ahhh, grasshopper… As I’ve said many times before… The markets will do what they are supposed to do… Just not when… Which means, sometimes you have to wait… And wait… And think that they guy ranting each day in the Pfennig is barking up the wrong tree!

Chinese stocks were up 2% overnight, so that has led to even more risk taking this morning in Europe… Wait till the “Big Boys” get back from the Hamptons this morning and see what’s gone on since they left for their 3-day Holiday weekend!

You know when the dollar is not faring well, when not only the usual suspects of euro, Aussie, kiwi, loonies and francs are taking liberties with the dollar, but also the Japanese yen… And THAT folks, is an indication to me that maybe, just maybe, cause you never know, fundamentals could be coming back to the head of the class. Oh! And one other thing, that puts a nail in the dollar’s coffin is, last night I checked the price of Gold too… Then it was $999. This morning… It’s $1,005!!!!!!

So… We’ve got euros kicking tail and taking names later, and Gold kicking the dollar when it’s down. We’ve seen this type of rout on the dollar before… They used to take place at least once a week before the financial meltdown in August of 2008… And before the collapse of Lehman Bros. That’s when the markets, traders, and investors, all had their eye on the fundamentals ball, and whacking the dollar out of the park whenever another piece of bad data came the dollar’s way.

If this is the beginning of another period like we saw pre-August 2008, then get strap yourself in, and make certain to keep your arms and legs inside at all times during the ride! If it’s a false dawn, it sure is a strong false dawn!

One of the best writers for a newspaper, that I’ve come across is Ambrose Evans-Pritchard, and I came across an article he did this weekend… This news could also be one of the reasons the dollar is getting sold across the board this morning. Here’s a snippet of the story…

“Cheng Siwei, former vice-chairman of the Standing Committee and now head of China’s green energy drive, said Beijing was dismayed by the Fed’s recourse to “credit easing”… He went on to say, “If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies.”

So… According to a top member of the Communist hierarchy… The U.S. Federal Reserve’s policy of printing money to buy Treasury debt threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy… Shouldn’t that be enough to compel other owners of dollars to do the same? I would certainly think so, folks… I would certainly think so!

And in a not so wide spread story… The United Nations (UN) is talking about creating a new global reserve bank to issue a new currency to protect emerging markets from the “confidence game of financial speculation… HEY! The UN said this… Not me! So… Those of us who have read the book, The Creature from Jekyll Island, have the conspiracy chills going down our collective spines right now…

Isn’t this the second time this year that we’ve heard about a “global reserve bank”? The first time we heard about it, the IMF was to assume that role and issue special drawing rights (SDR’s) as a global currency… Now, we hear something a big different, but it’s the same folks… I’ll tell you right now what they are doing… The “powers to be” are “getting us used to hearing about this” by releasing stories here and there… That way, when the time comes for them to unveil their plan to have a global currency, they’ll be able to say…”We’ve been talking about this for a long time, and no on had a problem with it then!”

OK… Enough of the conspiracy stuff… Let’s see what’s going on with the other currencies beside euros and yen! Well, first off we’ll get Central Bank meetings from the Bank of England (BOE), Bank of Canada (BOC), and the Reserve Bank of New Zealand (RBNZ), all on Thursday… I think that for the most part, the data that will print this week will be important, but all print as expected, which doesn’t really move a market…

For instance… We’ll see the latest Trade Deficit data, and Monthly Budget Statement… Those numbers will be not so great, but as long as they print as expected, they won’t cause major earth movements. And as far as today and tomorrow are concerned the data cupboard is pretty bare, with only the Fed’s Beige Book printing tomorrow afternoon… So… This rout on the dollar could get extended and push the envelope on dollar weakness…

In Australia, The August NAB Business Confidence and Conditions printed a very strong increase to put the report at a 6-year high… This report only leaves me to believe that the Reserve Bank of Australia (RBA) will probably hike rates as soon as October… Just thinking of the RBA raising rates lights a fire under the A$, and it’s trading this morning at 86-cents and change…

The Canadian dollar / loonie is trading with some fire this morning after creating 27,100 new jobs in August! Canada’s jobs report showed that 27,100 new jobs were created in August, when a decline of 15,000 was expected! Add this news to the one last week where Canada’s output increased in the 2nd QTR, and one would have to begin to believe that Canada has exited their recession… However, the Bank of Canada (BOC) as they will prove this Thursday when they meet, has already stated that they will keep rates low until an economic recover is firmly in place and the downside risks have been put in the rear view mirror… So, the loonie won’t get help from the BOC… But with Gold at $1,005, and Oil on the rise again… Well, I talked about this last week, and it’s playing out… I love it when a plan comes together!

Speaking of jobs… The U.S. Jobs Jamboree on Friday held a couple of surprises… 1. the number of jobs lost in August was smaller than expected at -216,000… And 2. the unemployment rate rose to 9.7%… Oh! And the previous month’s number was revised up from -247,000 to -276,000… Sneaky how that do that, eh? The media is all over the better than expected -216,000, and forgot to mention the upward revision to the previous month’s number, which wasn’t small potatoes either!

For many years, I’ve tried to get people to look at the revisions, the Weekly Hours worked, and the Avg Hourly Earnings to get the “real” beef from the Jobs Jamboree report… We just talked about the revision… The Weekly Hours Worked and Hourly Earnings were a non-event, with nothing to tell us that the economy is growing stronger, or that it’s getting weaker… So, to me… The Jobs Jamboree was a washout except for the revision!

The Brazilian real got a boost yesterday, as it was announced over the weekend that a new offshore Oil reserve had been discovered. And I really liked what President Luiz Inacio Lula da Silva is proposing… The President is proposing that Brazil begin to form an Oil Fund, that would be similar to the one that I’ve talked glowing about for years, in Norway…

Speaking of Norway… The Norwegian krone, has taken a que from the euro, and really made a strong move overnight VS the dollar.

And in yet another step toward gaining a wider acceptance for their currency… The Chinese announced the issuance of renminbi denominated bonds in Hong Kong… This would be the first renminbi denominated bonds to trade in the Capital Markets, and a large step for the Chinese and their currency.

Speaking of the renminbi… The Chinese allowed the currency to gain VS the dollar by a wide margin overnight. This is the first significant move VS the dollar in some time…

And with all these strong currency moves… The dollar index has fallen to a low for the year at 77.24… This is a significant move, folks… Because… In the 1st QTR of this year, the dollar index got down to 77.40, and bounced higher from there… And here we are again… It was thought that the 77.40 figure would prove to be a resistance figure… But the dollar slid right past that figure… I would think that having the index remain below 77.40 for the day and overnight would be HUGE!

So… Before we head to the Big Finish… Let’s recap… The dollar has fallen big overnight… The Chinese are not happy with the Fed printing dollars… The UN is talking about replacing the dollar with a global currency that is issued by a “new global reserve bank”… And all the currencies along with Gold and Silver are rallying on these things…

Currencies today 9/8/09: A$.8640, kiwi .6975, C$ .9350, euro 1.4490, sterling 1.6560, Swiss .9560, rand 7.5250, krone 5.9150, SEK 7.03, forint 186.90, zloty 2.8170, koruna 17.5475, RUB 31.32, yen 92.20, sing 1.4250, HKD 7.75, INR 48.47, China 6.8275, pesos 13.25, BRL 1.8410, dollar index 77.24, Oil $69.53, 10-year 3.43%, Silver $16.75, and Gold… $1,005

That’s it for today…I hope your Tuesday is as Terrific as it can be!

Chuck Butler

Source: A Rout On The Dollar!

The financial services industry in the United States and Europe is still reeling from the financial crisis, shedding tens of thousands of jobs each month – even a year after the crisis hit its apex.

However, recent evidence suggests that the financial services industry in Asia – particularly China, which was largely isolated from the toxic assets that caused the crisis – is starting to rebound.

Indeed, many global financial firms are picking up hiring in Asia even as broad unemployment continues to rise. The reason: These financial firms want to be most active in the region of the world that has the best potential for growth, as well as the best opportunities for profit.

“The death of the industry has been greatly exaggerated,” Matthew Hoyle, founder of Matthew Hoyle Financial Markets, a Hong Kong-based headhunter for the banking and hedge fund industries, told the New York Times. “I am actually quite excited about the prospects for the rest of the year,” adding that “Things have picked up here — unlike in Europe and the United States, where that’s absolutely not the case,” he added.

Financial firms slashed 19,000 jobs in August – the 21st consecutive monthly drop for the industry, according to payroll processing firm Automatic Data Processing (ADP). The finance and insurance sector has shed 332,000 jobs since the recession began in December 2007. And the losses will likely keep piling on.

Labor Department data set to be released today (Friday) is expected to show the U.S. unemployment rate surged to 9.6% in August after dipping to 9.4% in July. From December 2007 to July 2009, the economy as a whole shed 6.7 million jobs.

“There’s a gradual improvement in labor markets underway in the sense that the monthly losses are diminishing,” said Joel Prakken, chairman of Macroeconomic Advisors LLC and an ADP spokesman. “The disappointing news it that we have several more months to go of job losses.”

There’s a similar story unfolding in Europe, as well. The unemployment rate across the 27 European Union countries rose to 9% in July from 8.9% in June, while the unemployment rate for the 16 countries that use the euro jumped to 9.5%, according to Eurostat.

As in the United States, many of the job losses have been sustained in the financial services sector. European banks and financial firms have cut 140,000 jobs since the third quarter of 2007, according to data compiled by Bloomberg.

About 84,000 European finance jobs are expected to hit the chopping block this year, according to a recent report by City of London Corp.That’s nearly ten times the number of finance jobs the region lost in 2008.

As the Europe’s largest employer of financiers, the United Kingdom will be most affected. It is expected to lose up to 35,000 finance jobs this year.

Employment at British, French and German financial services firms won’t return to its early-2008 highs until at least 2013 the report said. Even then, the United Kingdom will have 10,000 fewer finance jobs than it did in 2008.

The EU financial services industry employed about 1.4 million people and was worth about $315 billion (219 billion euros) at its peak in 2008, according to City of London. However, the entire industry will shrink 6.2% in 2009 and not return to growth until 2011.

“I’m fairly optimistic on the financial sector returning to profitability, but that won’t necessarily feed through to dramatic employment growth,” Alistair Milne, a senior finance lecturer at London’s Cass Business School, told Bloomberg.

Financial firms will be focused on “growth efficiency” over the next four years and “earning money out of the staff they’ve got at traditional businesses” such as fixed income, equity trading and derivatives trading, Milne said.

Asian Growth a Beacon for Financial Firms

While the financial services sectors in the United States and Europe continue to shrink, finance firms operating in Asia are already rebuilding.

Standard Chartered Bank said last month that it would recruit 850 bankers in the next 12 to 18 months. The majority of those hires will take place in China, but significant numbers will also to be added in Singapore and Malaysia.

“We have aspirations to double the industry growth rate and double our customer numbers in three years,” Foo Mee Har, Standard Chartered’s global head of premium banking, told the Telegraph.

Household wealth in Asia, outside Japan, was expected to grow by 12% annually until 2012, she added.

Meanwhile, HSBC Holdings PLC (NYSE ADR: HBC) said last week that it is recruiting more than 100 staff members in Hong Kong, and it plans to add 1,000 employees in mainland China this year.

Vincent Cheng Hoi-chuen, chairman of HSBC’s Asia-Pacific unit, even said that his company hopes Shanghai will grow into a financial center that rivals Hong Kong.

“I sincerely hope that Shanghai will become a financial center, as China is able to have two centers, given its size,” he said. “There should be enough capacity for companies to list in both or either market at the same time, despite more and more companies planning to go public in the capital market.”

And Australia and New Zealand Banking Group, which competes with Standard Chartered, expects to increase its staff in the retail banking business in China more than 10-fold to over 500 by 2012. The company is currently moving ahead with a plan to open more than 20 branches in the country by 2012, up from three currently.

In addition to these recently released plans:

• Bank of America Corp. (NYSE: BAC) added five senior staff to its Asia Pacific Commodities team and JP Morgan Chase & Co. (NYSE: JPM) added seven members to corresponding Asia commodities unit.
• Credit Suisse Group AG (NYSE: CS) added nine specialists to its Asia sales and trading business. (Credit Suisse’s Asia-Pacific operations are on track to contribute 25% of the firm’s total revenue in coming years.)

• And Citigroup Inc. (NYSE: C) said it plans to expand its commodity team in Asia at a “double-digit” pace in a bid to capitalize on rising demand for raw materials.

“Asia will be the biggest contributor to growth in commodity consumption,” Ananth Doraswamy, regional head of commodities, toldBloomberg in an interview from Singapore. “We will need more people in energy trading and metal sales, as well as agricultural products.”

A survey by Singapore-based recruiting firm Robert Walters showed that job advertisements in Hong Kong, Singapore, China and Japan jumped 6.4% in the April-June quarter from the three months prior, the New York Times reported.

That’s not surprising considering that unemployment in Hong Kong, Singapore, and Japan – at 5.4%, 3.3%, and 5.7% respectively – are still relatively low when compared to the United States and Europe. And while unemployment is still an issue in China, that country’s economy expanded by 7.9% in the second quarter, exceeding most analysts’ expectations, and lending credence to Beijing’s goal of 8% annual growth.

Indeed, the finance industry seems to have found greener pastures in Asia, where economic growth is still taking place.

“Asia is seen as a growth market,” Robert Walters’ Mark Ellwood toldThe Times. “Companies are not going out all guns blazing again, but there is once again an appetite to hire in certain areas.”

Finance Jobs Going Where the Growth Is – Asia ]]> http://www.contrarianprofits.com/articles/finance-jobs-going-where-the-growth-is-%e2%80%93-asia/20377/feed 0 http://www.contrarianprofits.com/articles/in-the-race-for-a-us-economic-rebound-growing-debt-and-budget-deficits-remain-the-biggest-possible-roadblock/20117 http://www.contrarianprofits.com/articles/in-the-race-for-a-us-economic-rebound-growing-debt-and-budget-deficits-remain-the-biggest-possible-roadblock/20117#comments Mon, 24 Aug 2009 22:33:22 +0000 William Patalon III http://www.contrarianprofits.com/?p=20117 Even as investors get more and more bullish about the outlook for the U.S. economy, the economy’s underlying foundation continues to erode.

In a report to be released this week, the Obama administration will boost its 10-year projection for the federal budget deficit to about $9 trillion – an increase of roughly $2 trillion, or 29%, from its prior projection, Fox News reported over the weekend, citing a source from the Office of Management and Budget (OMB).

The new cumulative deficit projection – for 2010-2019 – replaces the administration’s previous estimate of $7.108 trillion. Changes in budget projections – whether they result in a surplus or a deficit – are often refined as economic conditions change. This new projection was necessary because the recession has…

Good day… A quiet trading day to start the week off yesterday. As I turn on the computers this morning the dollar index is trading right at the level it was yesterday morning. The currencies were up a bit through most of Monday’s trading day, but the dollar came back in Asian trading leaving us right about back where we started.

The only data released yesterday was the index of US leading indicators which rose slightly in June for a third consecutive month. The numbers gave a bit of hope for all of the bulls, with many exclaiming that the US economy has turned a corner and the recession has ended. I am not so sure, as rising unemployment and continued weakness in the housing market will likely hold any recovery back.

Aaron Stevenson sent me a story he read on CNNMoney.com yesterday which highlighted the labor problems here in the US. The article states that more than 650,000 Americans will have used up all of their unemployment benefits by September, and the Labor Department is expecting the problem to accelerate. “In the next few weeks, the victims of the mass layoffs that happened six months ago – when the pace of layoffs was at its zenith – will start running out of their basic benefits. A total of 4.4 million people are expected to face this fate – or 65% of the entire filing population. And while they may have up to another year of unemployment insurance benefits – thanks to the confusing patchwork of extensions that were enacted last summer – they will soon be unaccounted for in government unemployment reports.”

As Chuck has continually pointed out, the Labor Department doesn’t track anyone who has been unemployed more than 26 weeks, and has no plans to adjust the way the report claims (even though they know they are under-reporting the actual unemployment rate!). As a result, the weekly jobs data will probably start showing declines in continuing filers later this year. But these declines won’t be because of an improved job market, but instead will be because many of these filers will be falling off the Labor Department’s radar.

Even the director of the White House’s National Economic Council, Mr. Lawrence Summers, isn’t feeling so rosy about the prospects for recovery. “I don’t feel there’s a basis for predicting that income growth is going to resume in the near term,” Summers said in an interview yesterday. So while the US economy may not be sinking any more, Summers doesn’t believe the economy will be able to quickly pull itself back up from the deepest recession in a half a century. “The pace of growth next year I think is very much in doubt, and difficult to predict, and will depend crucially on our effectiveness in implementing the programs that have been legislated and the kind of confidence that’s provided by what Congress is able to do in crucial areas like health care and financial regulation and energy,” Summers said.

The focus today will shift to Federal Reserve Chairman Ben S. Bernanke who will be giving his semiannual monetary policy testimony to Congress today. The markets are looking for Bernanke to map out an ‘exit strategy’ for the loose money policies which have been enacted over the past few years. Bernanke gave a sneak preview of his testimony in an opinion piece which he wrote for the Wall Street Journal yesterday. “When the economic outlook requires us to do so,” the central bank will employ a series of tools to tighten policy, Bernanke said in the piece. He outlined five different ways the central bank will be able to prevent the record reserves that banks have accumulated from causing money supply and inflation to surge.

I don’t doubt that Bernanke and the Fed have the means to pull liquidity out of the system. What I question is if they will have the cojones to use these methods when the time is right. In order to stem inflation, the Fed will be required to start tightening policy just as the economy is starting to recover. If they tighten too early, they could squash the recovery, and if they wait too long, inflation could spiral out of control. History has shown that the FOMC is typically late in their move to tighten.

And the likelihood of an anemic recovery heightens the risk that the Fed will be late in reacting. The recovery will be weak compared with historic recoveries from recession. I just can’t imagine Bernanke stepping up and pushing rates higher in the face of a weak economic recovery. But we will see what he has to say to congress today. His testimony could be good for the dollar, if he is able to convince the markets that he and his compatriots will step up to the plate and keep inflation at bay. Again, I just don’t believe he has the fortitude to time his move correctly.

Chuck sent me a note after reading a great piece by the Mogambo Monday.. The Mogambo doesn’t think Bernanke will be able to rein in inflation, and believes investors should protect themselves by purchasing gold:

“And if you don’t think that gold will shoot up when inflation starts roaring like that, then you are obviously new at this investing business and you haven’t had time to look at what happened to the price of gold when it was $35 an ounce in 1970 and over $800 an ounce by 1980 when the inflation (from the vast expansions of the money supply needed to simultaneously finance the War on Poverty and the War in Vietnam) was rising along this same parabolic ride.”

I love how you always know exactly where the Mogambo stands on things! I can’t argue with his logic and agree that gold is a good hedge against rising inflation which I’m sure we will see on the other side of this recession/depression. Every investor should have a portion of their overall investment portfolio dedicated to precious metals, and our unallocated metal select accounts are one of the most efficient ways I know of to hold gold.

Speaking of the precious metal, gold held above $950 an ounce overnight, and seems to be on a fairly sharp upward path. Gold has gained just over $45 in the past two weeks and looks set to test resistance levels around $960. If it can push through these levels, the next resistance would be around $985. And just think what the price will do once we start seeing signs of inflation creeping back into the global economy.

So the dollar will likely move up today as long as Bernanke can ‘deliver the goods’ in his testimony to congress. But if the dollar does rally, I would take advantage and look at the move as an opportunity to purchase currencies at better levels. Some of the largest, and smartest investors are looking to do the same, and share our believe that Bernanke will be unable to turn the liquidity pump off in a timely fashion. PIMCO, the manager of the world’s biggest bond fund, said it is looking to buy the Brazilian real as the dollar slumps and growth in emerging economies outpaces that of developed nations. According to a report published by PIMCO, investors should buy emerging market currencies to protect themselves against the risk that US policy makers will allow the dollar to slide should they lack the skill to “drain the system of emergency liquidity at the appropriate time.” The report goes on to say “In light of an expected long-run erosion in the value of the US dollar, Pimco will look to take positions in select emerging market currencies that we believe have the most compelling appreciation potential.”

Want to take a position in the emerging markets without the risk? Why not look at our new BRIC MarketSafe CD. It combines Brazil, India, Russia, and China into a 3 year CD which is protected against any downside risk. I think we came up with a real winner on our newest MarketSafe!

Currencies today 7/21/09: A$ .8132, kiwi .6548, C$ .9040, euro 1.4217, sterling 1.641, Swiss .9362, rand 7.8703, krone 6.2998, SEK 7.685, forint 191.68, zloty 2.9982, koruna 18.1561, yen 94.20, sing 1.4419, HKD 7.750, INR 48.4337, China 6.8305, pesos 13.2694, BRL 1.8987, dollar index 78.923, Oil $64.16, 10-year 3.61%, Silver $13.555, and Gold… $947.85

That’s it for today… It is food day here today, as we celebrate everyone with July birthdays. The crew is coming in with food galore; Krispy Kremes, Cake, and every imaginable form of dip n chips. It is going to be a real challenge for me to stick to my diet today (but I guess I can have a free day every once in a while right!?!?) Hope everyone has a Terrific Tuesday, mine is sure shaping up to be one!

Source: US Leading Indicators Push Higher

But don’t expect that to last. A slump in consumer spending and soaring unemployment could both pose a significant threat to retailers going into the 2009 holiday season.

The U.S. unemployment rate hit 9.5% in June and could eclipse 10% by the end of the year, sending the economy into a “jobless recovery.”

In a speech to Congress on May 9, Federal Reserve Chairman Ben Bernanke cited a lack of consumer spending could serve as a constraint on hiring. This could create a paradoxical effect as employment obviously plays a key role in consumers’ spending habits.

Even for the employed, the lessons learned from the worst economic downturn since the Great Depression will resonate with consumers. That has already been evidenced by the U.S. savings rate, which has climbed above 4% for the first time in more than a decade.

In addition to taking money out of the hands of potential customers, soaring unemployment could lead to higher lending standards. As unemployment rises, so too will credit defaults and the cost of credit will increase accordingly.

In the past, consumers have counted on attractive financing promotions for the purchase of big-ticket items such as high-definition televisions and kitchen appliances. But that won’t be the case with tighter credit

“Consumers were also able to spend more because of the easy availability of credit, most notably through mortgage equity withdrawal and they responded by buying more items,” said Deloitte Strategic Advisor Richard Hyman.  “These conditions underpinned retail growth for the past 10 years but have now disappeared. However, it’s worse than that. They will clearly not return once the recession is over.”

Of course, tighter credit isn’t just a problem for consumers.

A Brick & Mortar Inventory Crunch for the Holidays?

The potential bankruptcy of commercial lender CIT Group Inc. (NYSE:CIT) could be a major tipping point for businesses that rely heavily on credit. Vendors for retail giants such as Wal-Mart Stores Inc. (NYSE:WMT) and Target Corp. (NYSE: TGT) rely on CIT for factoring – an old form of finance in which the lender pays the vendor for its accounts receivable. If the retailer fails to pay for the goods, the lender assumes the responsibility to pay the vendor.

“Right now our industry is preparing for the fall and winter season,” Kevin M. Burke, president and chief executive of the American Apparel and Footwear Association told The New York Times. “A lot of these orders are going to come to a grinding halt if there is no capital.”
A CIT bankruptcy would be a “double whammy” to stores whose suppliers have already cut the amount of merchandise they are making to better align inventory with the drop in consumer spending, said Burke. If those suppliers lose their sole source of capital, what little merchandise retailers originally ordered might never arrive.
The timing of CIT’s woes is “terrible,” Al Ferrara, a partner in retail and consumer products business of consulting firm BDO Seidman LLC said in a Reuters interview. “Retailers now are basically gearing up for the back-to-school and the fall season.”
An inventory crunch at brick & mortar retailers would give a competitive advantage to online retailers, which have more flexibility and already account for about a third of holiday retail sales.

For brick & mortar retail businesses, managing inventories during the holiday season is a delicate balancing act in which managers must walk a fine line between over- and under-ordering stock.

If retailers overstock, they will be forced to offer even steeper post-holiday discounts than they would like in a desperate bid to unload inventory. But if they don’t stock enough merchandise to meet demand they risk not only missing out on sales, but driving potential customers to online retailers, such as Amazon.com Inc. (Nasdaq: AMZN) whose warehouses are not restricted by the display racks and checkout counters found in brick & mortar stores.

This doesn’t mean brick & mortar retailers will sit idly by this holiday season as Amazon siphons off customers via the Internet. All of the nation’s biggest retail players have their own websites too, but the gap between Amazon and the No. 2 online retailer, Staples Inc. (Nasdaq:SPLS) is huge: Amazon generated $19.2 billion in online revenue in 2008, while Staples generated less than half of that in the same year: $7.7 billion.

While half of the top 10 online revenue generators came from traditional stores, notably absent were brick & mortar discount giants Wal-Mart and Target.

And even Best Buy Co. Inc. (NYSE: BBY), which displays in-store signage promoting an “expanded assortment” of products online for consumers who did not find what they were looking for in the store, came in at just No. 10 on the list.

Shopping for a Silver Lining

While a continued slump in consumer spending would benefit no one, certain retailers are better positioned than others, and could ultimately use adverse economic conditions to turn a profit.

For instance, the aforementioned Amazon.com, which is the world’s largest online retailer, could see a sizeable boost in its web traffic as consumers comb the Internet for bargains.

Companies that have a consumer-friendly economical brand, such as Wal-Mart, will also benefit.

Wal-Mart’s “Save Money, Live Better” slogan is already resonating with consumers, and The No. 1 retailer in the world has gone to great lengths to cement its reputation as the affordable choice for shoppers.

The company has set up a “Save Money, Live Better” website (complete with testimonials of what people are doing with the money they save by shopping at Wal-Mart) and a “Live Better Index,” which includes an interactive map of the United States to show how much money people have saved in each state by shopping at Wal-Mart.

The result of Wal-Mart’s efforts? Holiday sales grew 7% last year, according to the Advertising Research Foundation.

Similarly, same-store sales are consistently rising at discount houses such as Family Dollar Stores Inc. (NYSE: FDO), and Ross Stores Inc. (Nasdaq: ROST), the latter of which has the “Dress for Less” sloganright under its name at every store. On the flip side, stores like Macy’s Inc. (NYSE: M) and Saks Inc. (NYSE: SKS) have reported consistent declines in same-store sales over the past few quarters.

“Needs-driven spending will gravitate towards retailers able to tick the most important consumer boxes like price and convenience,” said Deloitte’s Hyman. “Although it will remain the engine of retail growth, wants-driven spending will slow and consumers will be much more choosy.”

Source: Retail Sector Faces Uphill Climb in 2009

Good day… Chuck got an early start on a two week hiatus from the desk, so you will be stuck with me writing the Pfennig for the next two weeks. But don’t worry, you will still get a small dose of Chuck over the next week as he typically emails me his thoughts while on the road (I call it Pfennig Pfodder). Risk aversion dominated the currency markets overnight, as terrorists set off two separate explosions in Jakarta and investors moved money back into the ’safe havens’ of the US$ and Japanese yen.

Chuck wrote about this move yesterday, believing the bad news regarding CIT would probably cause a risk reversal. But the US stock market shook off the CIT news and rallied higher after a big earnings report by JP Morgan and a somewhat positive statement by Nouriel Roubini. Roubini, the New York University economist who is credited with predicting the financial crisis, said in a speech yesterday that the US economy might be close to the bottom. The stock jockeys took this statement along with the positive earnings reports and ran stocks up. But Roubini later tried to caution these bulls against reading too much into his statement, and reminded everyone that he has not changed his thoughts on a US recovery: “I continue to see a shallow, below par and below trend recovery.”

Those looking for a quick v shaped recovery will be disappointed, as we continue to believe the recovery here in the US will be more of an L shape as our economy struggles to recover. After all, who is going to propel the US economy to recovery? In past recessions, we have been able to depend on the US consumer to pull us back out. But the poor consumer is now facing the highest unemployment rate post WWII combined with falling home prices and much stricter lending policies. And with the dire fiscal position of most states matching that of the federal government, the tax burden placed on almost all taxpayers will likely be rising, chewing up more of consumers disposable income. We are no longer be able to rely on US consumers to ‘borrow and spend’ our way to GDP growth (which is actually a good thing!!). Consumers are tightening their belts, and saving a larger percentage of their income; good news for the consumers, but bad news for the economy.

The administration has tried to take over where the US consumer left off by borrowing record amounts of money and injecting it into the economy through stimulus packages. But recent data bring into question whether or not this stimulus is having the desired effect, and many are now questioning whether any fiscal measures can pull the economy out of recession. With the credit markets still tight, and the negative outlook for consumer demand, no amount of government intervention seems able to stop the decline in jobs and quickly pull the US out of this recession/depression. The reason is that the ‘multiplier effect’ of the stimulus money is too low. Typically when the government injects funds into the economy, the effect of each dollar they spend is multiplied several times over as it moves through the lending / spending cycles. It works like this: $1,000,000 given to a bank by the Fed is lent out to consumers and business who then spend the funds on goods and services. The companies who sell the goods and services place a majority of these funds back into the bank who then turn around and lend them back out, starting the cycle all over again. But recently neither the banks or the consumers are acting ‘normal’. Banks who have received stimulus funds are using them to shore up balance sheets and keeping them in reserves. Consumers who have received stimulus funds, or are strong enough to qualify for loans have been doing the same thing; using the funds to pay down debts and saving a larger percentage. So the multiplier effect of each dollar injected by the administration has been much smaller than in years past. While some in the administration are calling for another stimulus package, others are now realizing the impact of government stimulus will continue to be decreased by the low multiplier. The government should probably just let the recession take its course, and avoid adding more debt to our already over burdened tax payers.

But ‘big government’ is back, and the current administration obviously feels it is their job to make government even bigger. Chuck had this to say about this weeks earlier announcement of a new government run health care program:

“The Big Debate right now is a National Health Care program… I’ll come right out front and center and say that I’m not for it, which shouldn’t surprise anyone that’s been reading this letter very long. But there’s someone else who should be more important a figure against this than I think the media is reporting…

I’m talking about Douglas Elmendorf, the Director of the Congressional Budget Office who, under questioning by members of the Senate Budget Committee, had this to say…
“Instead of saving the federal government from fiscal catastrophe, the health reform measures being drafted by congressional Democrats would worsen an already bleak budget outlook, increasing deficit projections and driving the nation more deeply into debt.”

He went on to say… That “bills crafted by House leaders and the Senate Health Committee do NOT propose the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount.”

But… I doubt they listen to him… For when it comes to spending and driving up the deficits.. They haven’t listened to former CBO director, Alice Rivlin… And they haven’t listened to former Comptroller General, David Walker… Why the current CBO director now?”

Data released yesterday showed the number of Americans filing claims for unemployment benefits fell last week to the lowest level since January. But like last week, these jobless claims were skewed by the Labor Department’s ‘adjustments’. As I explained last week, the automakers typically lay off workers during July, so the BLS adds back thousands of jobs in order to offset these seasonal layoffs. But this year, the auto plants laid off these workers months ago, so the seasonal adjustments are adjusting away actual job layoffs, not just temporary automobile layoffs. These distortions will likely continue for the next few weeks, with the weekly numbers climbing back over 600,000 in August when the seasonal adjustments end.

The TIC flows were also released yesterday and showed International demand for long term US financial assets weakened in May. Investors sold the most Treasury notes and bonds in six months, with the net Long-term TIC flows dropping almost $20 billion. The ‘experts’ had predicted a rise of $16.5 billion in purchases. But as investors dumped long term Treasuries, purchases of US stocks in May were the strongest since January of 2008. So the impact of these flows were minimal on the value of the US$. The administration has to be worrying about the direction of the TIC flows, as it continues to bring record amounts of Treasuries to the markets. If investors shy away from the new debt, interest rates will be driven higher putting further pressure on our ’stealth recovery’.

After reviewing the numbers, I spotted another item which should be cause for concern. The report showed foreign governments were moving from the longer term maturities of Treasury notes and bonds into shorter term bills which have a maturity of less than one year. Foreign governments continue to be worried about the future ability of the US to maintain our record deficits. The Chinese economy continues to grow, and is propelling them to a much more important status among global leaders. Chinese Premier Wen Jiabo continues to express concerns regarding his country’s US Treasury holdings, and officials in Japan, the second largest investor, have also begun to express concern. The administration is calling in the big guns to try and assuage China’s concerns. Federal Reserve Chairman Ben S. Bernanke will brief Chinese officials at a summit this month about how the US plans to keep inflation in check over the next few years. The summit is the first high-level gathering of its kind since President Obama took office.

China reported yesterday that their economy grew 7.9% in the 2nd QTR, which was greater than the 7.7% forecast by economists, and the 6.1% that was booked in the 1st QTR. This was the first acceleration in growth in more than two years, and comes on the heels of a $585 billion stimulus package which was targeted at increasing infrastructure and getting credit flowing again. The positive growth number will likely cause them to start raising rates in 2010 according to a Bloomberg news survey. Economists predict the one-year lending rate will climb over 50 basis points after remaining steady for the rest of the year. China is the only one of the 10 biggest economies that is expanding, and confirms what we have been saying for some time: China will be the engine which propels the global economy out of recession.

Chuck noticed the good numbers out of China before heading out yesterday, and sent me the following:

“This news must be manna from heaven for Australian commodity exporters… As I’ve said for some time now… China’s economic strength strong demand for raw materials, of which Australia is not only geographically positioned to supply China with raw materials, but has the raw materials to supply to China! And demand for Australian raw materials is a proxy for commodities as a whole… And, will underpin the A$!”

If you agree with what Chuck is saying regarding the A$, it may be a good time to buy some more as the AUD$ slid below .80 overnight due to risk aversion. Both the AUD$ and NZD$ fell against the dollar and the yen as investors shifted to safe haven currencies. The New Zealand dollar fell the most in two weeks after Fitch Ratings cut the nation’s long term sovereign credit rating outlook to negative. Fitch said the nation’s deficit is large and a “stronger fiscal adjustment than currently planned” may be needed. First, I think everyone should treat anything coming out of the rating agencies with caution. But I agree that the nation’s deficit is too large, but the news coming out of China should go a long way toward pushing these commodity exporting countries back into the black. As Chuck says above, as China expands the commodity currencies should stay well bid.

Before I head to the big finish, Chuck wanted me to make this announcement to all the Pfennig readers….

After 2 long years of looking for the next MarketSafe CD to issue, I decided to put together the countries that have been in the news lately. So… Introducing: The EverBank MarketSafe BRICK CD! This will be a 3-year CD that will have FDIC protection, 100% Principal Protection, and 100% of the upside of the combined values of the currencies from Brazil, Russia, India and China! If the combined values of these 4 currencies should go down in 3 years, you’ll get your principal back!

To invest in this new MarketSafe CD, you need to either go to: www.everbank.com where after reviewing the offering you will be able to apply for the CD right on line, or by calling the trading desk @ 1-800-926-4922 for the details.

Currencies today 7/17/09: A$ .8000, kiwi .6444, C$ .8945, euro 1.4100, sterling 1.6291, Swiss .9276, rand 8.102, krone 6.3926, SEK 7.8203, forint 194.08, zloty 3.0682, koruna 18.3992, yen 93.83, sing 1.4504, HKD 7.7501, INR 48.68, China 6.8316, pesos 13.58, BRL 1.9318, dollar index 79.49, Oil $61.93, 10-year 3.56%, Silver $13.19, and Gold… $934.45

That’s it for today… The EverBank kickball team pulled out another victory last night in a tightly contested match. Happily, none of our players were injured, but a player on the opposing team did a faceplant which still has everyone on the desk laughing. The weather here in St. Louis has turned fall like, and we are supposed to have record lows over the weekend. Should be perfect for a triathlon I am competing in Sunday morning. Hope everyone has a Fantastic Friday and a Wonderful Weekend!!

Source: Risk Aversion Returns

Maybe it’s because the government hasn’t actually got around to disbursing most of the cash yet. Maybe it’s because debt-laden Americans are simply saving the stimulus dollars rather than spending them. Maybe it’s because the Recovery Act was really nothing more than a congressional wish list of pet spending programs.

US News & World Report editor Mort Zuckerman, writing in yesterday’s Wall Street Journal, says there are 9 reasons we are in even more trouble than the 9.5% jobless rate indicates.

1. June’s total assumed 185,000 people at work who probably were not. The government could not identify them; it made an assumption about trends. But many of the mythical jobs are in industries that have absolutely no job creation, e.g., finance. When the official numbers are adjusted over the next several months, June will look worse.

2. More companies are asking employees to take unpaid leave. These people don’t count on the unemployment roll.

3. No fewer than 1.4 million people wanted or were available for work in the last 12 months but were not counted. Why? Because they hadn’t searched for work in the four weeks preceding the survey.

4. The number of workers taking part-time jobs due to the slack economy, a kind of stealth underemployment, has doubled in this recession to about nine million, or 5.8% of the work force. Add those whose hours have been cut to those who cannot find a full-time job and the total unemployed rises to 16.5%, putting the number of involuntarily idle in the range of 25 million.

5. The average workweek for rank-and-file employees in the private sector, roughly 80% of the work force, slipped to 33 hours. That’s 48 minutes a week less than before the recession began, the lowest level since the government began tracking such data 45 years ago. Full-time workers are being downgraded to part time as businesses slash labor costs to remain above water, and factories are operating at only 65% of capacity. If Americans were still clocking those extra 48 minutes a week now, the same aggregate amount of work would get done with 3.3 million fewer employees, which means that if it were not for the shorter work week the jobless rate would be 11.7%, not 9.5% (which far exceeds the 8% rate projected by the Obama administration).

6. The average length of official unemployment increased to 24.5 weeks, the longest since government began tracking this data in 1948. The number of long-term unemployed (i.e., for 27 weeks or more) has now jumped to 4.4 million, an all-time high.

7. The average worker saw no wage gains in June, with average compensation running flat at $18.53 an hour.

8. The goods producing sector is losing the most jobs – 223,000 in the last report alone.

9. The prospects for job creation are equally distressing. The likelihood is that when economic activity picks up, employers will first choose to increase hours for existing workers and bring part-time workers back to full time. Many unemployed workers looking for jobs once the recovery begins will discover that jobs as good as the ones they lost are almost impossible to find because many layoffs have been permanent. Instead of shrinking operations, companies have shut down whole business units or made sweeping structural changes in the way they conduct business. General Motors and Chrysler closed hundreds of dealerships and reduced brands. Citigroup and Bank of America cut tens of thousands of positions and exited many parts of the world of finance.

I don’t have to tell you things are bad. Everybody knows things are bad. It’s a depression. Everybody’s out of work or scared of losing their job. The dollar buys a nickel’s worth; banks are going bust; shopkeepers keep a gun under the counter; punks are running wild in the street, and there’s nobody anywhere who seems to know what to do, and there’s no end to it.

We know the air is unfit to breathe and our food is unfit to eat. And we sit watching our TVs while some local newscaster tells us that today we had fifteen homicides and sixty-three violent crimes, as if that’s the way it’s supposed to be!

We all know things are bad – worse than bad – they’re crazy.

It’s like everything everywhere is going crazy, so we don’t go out any more. We sit in the house, and slowly the world we’re living in is getting smaller, and all we say is, “Please, at least leave us alone in our living rooms. Let me have my toaster and my TV and my steel-belted radials, and I won’t say anything. Just leave us alone.”

Well, I’m not going to leave you alone.

I want you to get mad!

I don’t want you to protest. I don’t want you to riot. I don’t want you to write to your Congressman, because I wouldn’t know what to tell you to write. I don’t know what to do about the depression and the inflation and the Russians and the crime in the street.

All I know is that first, you’ve got to get mad.

You’ve gotta say, “I’m a human being, goddammit! My life has value!”

So, I want you to get up now. I want all of you to get up out of your chairs. I want you to get up right now and go to the window, open it, and stick your head out and yell,

“I’m as mad as hell, and I’m not going to take this anymore!!”

Network was released just two years after the 1973-74 stock market crash. And Beale’s mad rant to camera was very much a product of its time, capturing brilliantly the out-of-control inflation, the recession, the Cold War.

But we bring it to your attention today because Beale could just as well be talking about our “Great Recession,” the one brought on by easy credit, corrupt government, shoddy regulation, bungling corporate management and the credulity of the herd. And because Beale’s speech has one vital ingredient, something that’s sorely missing from our current predicament: anger.

So today, dear reader, we’re going to get mad, Howard Beale-style. We’re going to stick our head out the window and yell. And if you’re reading this, wherever you are, we ask you to do the same. Get mad… Remember who’s responsible… And most important, start putting in place your plan to survive this whole stinking mess.

As the author of Bailout Nation, Barry Ritholz, wrote last week at The Daily Reckoning, the recklessness and incompetence that led to the economic meltdown seemed to be a team effort, “but that does not mean we cannot attempt to highlight those whose contributions have disproportionately led to the final catastrophe.”

First on Ritholz’s list of culprits, and on ours, is the man they once called “the Maestro,” former Fed chairman Alan Greenspan. According to Ritholz,

Several of Greenspan’s policies proved to be wildly misguided: the regular interventions to protect asset prices and bail out investors, the irresponsibly low rates after the post-2000 crash, and his nonfeasance in supervising lending. Most of all, it was his deeply held philosophical conviction that all regulations are bad, and are to be avoided at all cost. We now know what that cost is, and it’s astronomical.

Here we part company with Ritholz. The lack of regulation did not cause the collapse. It was bad regulation combined with the implicit promise of government bailouts led to the extravagant and poorly calibrated lending and financial risk taking that finally blew up the financial markets last year.

But whatever your view on Greenspan’s regulatory errors, his decision to keep interest rates artificially following the 2000 stock market crash was incredibly dimwitted. First, it facilitated the re-election of one of the nation’s most blundering presidents George W Bush in 2004. Second, it fueled mass speculation. This led to an inflationary spiral that pushed commodities prices and real estate valuations into the stratosphere.

Of course, the Maestro was just doing his bidding. And who knows, maybe the old fool really did believe that all that funny money would one day find a good home.

Congress, on the other hand, was supposed to look out for the interests of the American people and uphold the Constitution. Yet over the years it has eroded so much of what once made America great.

Instead of a free market, it has given us central planning, fiat money, the biggest deficit of any serious country in the world. It has destroyed the value of the dollar. It has given us a national debt, the interest on which cost the American taxpayer $260 billion last year alone. It has given us Fannie Mae and Freddie Mac and laws criminalizing banks’ failure to lend to subprime borrowers. It has given us an unfunded liability for Social Security and Medicare that now measures just under $100 trillion or 700% of annual GDP.

On Congress’s watch, the America that routed Hitler’s armies, rebuilt Europe and defeated the Soviet Union has been brought to its knees.

Maybe we’re just tired and grumpy. We’re on our way to Berlin to see how the German economy is holding up, and we’ve been traveling all day. But we see this as reason to get mad.

As the ancient Greeks knew well every crisis is an opportunity. (It’s engrained into their language: the original Greek word “crisis” translates into opportunity.) The Great Depression led to the creation of the Securities Exchange Commission, deposit insurance and the Glass-Steagall Act, which separated investment and retail banking.

To what end will the current crop of American politicians use this “Great Recession” (as James Grant of Grant’s Interest Rate Observer calls it) or “Greater Depression” (as Casey Research’s Doug Casey terms it)?

To begin, we might reasonably expect our dear leaders to allow the crisis do its work. As Joseph Schumpeter taught us, and important function of economic crises such as the one we’re now experiencing is they help rebalance an economy and make it more efficient.

According to Schumpeter’s core idea of “creative destruction,” downturns, if left to their own devices, have the positive effect of weeding out inefficient and failed companies and allowing more capable businesses take their place. They also encourage investors to reallocate their capital sectors and businesses with more chance of success.

On a wider scale, our current crisis is perhaps a once off chance to rebalance global trade – something that has been dangerously out of whack for some time now. We know that leading up to the collapse Americans lived beyond their means: they spent too much money they didn’t have. Meanwhile, the Chinese saved too much and spent too little. As a result, America imported (and consumed) too much and exported (and produced) too little.

This is now naturally being rebalanced: personal savings rates in the US are now rising back toward their historical average. The Bureau of Economic Analysis revealed that Americans in May on average saved 6.9% of their after-tax income – the highest level in 15 years.

White House chief of staff Rahm Emanuel and those that surround him in the Obama administration appear to have a different view of the opportunity that’s been created by the current crisis. (Readers will recall that Emanuel famously urged his fellow Democrats to remember never to let “a serious crisis go to waste … it’s an opportunity to do things you couldn’t do before.”)

Unfortunately, Team Obama isn’t much interested in Schumpeter’s creative destruction or the allowing debt-crippled Americans save and pay down their debts. Instead, it’s bent on the twin political wonders of bailouts and ‘stimulus’ packages.

The government has so far spent $439 billion of the $700 billion TARP slush fund on bailing out failed banks, insurers and auto makers. (So much for creative destruction.)

The Congressional Budget Office now admits that most of the money it shelled out to GM, Chrysler and their financial arms and suppliers ($55 billion) and to AIG ($70 billion) will be lost. And losses for the bailouts of Citigroup and Bank of America are now expected to come in at $9 billion and $10 billion respectively. (Yes, dear reader, we’re angry…)

President Obama billed the first ‘stimulus’ package as “making dramatic investments that would revive our flagging economy.” But as we know now, the truth lies elsewhere. The Wall Street Journal estimates only “about 12 cents of every $1” of that particular spending bill is “for something that can plausibly be considered a growth stimulus.”

The 647-page bill rushed through Congress was impenetrable enough to keep all but the most determined snoops away. But we know now it contains $1 billion for Amtrak, a railroad that hasn’t turned a profit in 40 years; $2 billion for child-care subsidies; $50 billion for the National Endowment for the Arts; $400 million for global-warming research; $650 for to pay for digital TV conversion coupons; and $150 for the Smithsonian (among other boondoggles).

We also know that the unemployment rate today is 9.5% – nearly 20% higher than the Obama White House said it would be with its much-hyped $787 billion ‘stimulus’ package in place.  And that it in May it took $6.52 stimulus dollars to increase consumer spending by $1. As David Rosenberg of Gluskin Sheff puts it, the money from Uncle Sam is going into the coffee can instead of being used to buy more coffee: Americans are saving, rather than spending, their stimulus.

In addition to the Obama’s first failed ‘stimulus,’ a second spending bonanza is now being proposed. This is a grave mistake. Americans are finally saving more and consuming less. They are even taking tentative steps to paying down their all too onerous debt burdens.

What does the government do confronted with this prudent behavior? It panics. And it immediately tries to reverse the trend. It borrows money out of pocket from foreigners and prints dollars to try to jumpstart the very trend – debt-driven spending – that led us to the current collapse.

The truth is no amount of Keynesian stimulus will replace the roughly $12 trillion lost in household wealth. Former political lights tried this throughout the 1960s and 1970s. The result? Poor growth and high inflation.

We can’t escape the fact that overspending, overborrowing and undersaving caused this crisis. It’s wrong to believe that it’s also the cure.