*****Unemployment: 9% Coming?
*****Bottom for Housing
Stocks put together a nice rally on Friday to end the week on a positive note. Once again, we’ve seen investors buy stocks when the news is mostly negative.
President-elect Obama is now saying that the economy will get worse before it gets better. Whether he truly believes that or not, it’s the politically savvy thing to say. He’s not going to get any points for over-promising and under-delivering.
*****I haven’t spent much time on unemployment lately, other than a few sporadic warnings that stock prices may still not be ready for 8.5%-9% unemployment rates.
Friday’s employment report puts the issue back on the front-burner.
I have said that the bear market won’t end until there’s some stabilization in the job market. This doesn’t mean an uptick in employment. The bottom for stock prices will be a speck in the rear-view mirror by the time that happens.
Stabilization means the end is in sight. There will come a time when the rate of layoffs will slow, when all companies who need to cut costs will have done so. The latest jobs numbers suggest that’s a ways off.
The consensus estimate for new jobless claims in November 335,000. Wrong. The number was 533,000. That’s a big miss. And it gets worse. The jobless number for both September and October were increased by 199,000.
That means the U.S. economy lost 1.55 million jobs in the last 6 months. That’s the biggest loss of jobs in 30 years. For a little more perspective, 1.55 million is nearly the number of jobs that were lost in the 2001 recession that included the months following 9/11.
*****Unfortunately, there are even worse numbers to consider. 637,000 people weren’t counted in the "official" jobless numbers because they’ve stopped looking for work, effectively removing themselves form the employment pool.
Another 621,000 people have apparently settled for part-time work because they can’t find full-time work. These people count as employed, but it’s pretty obvious they’ll not be contributing much to GDP by way of spending.
*****The Mortgage Bankers Association reported that 10% of American homeowners are either behind on payments or in foreclosure. Such data has been kept for 29 years. And the current is an all-time high, as you might have guessed.
Such a high number suggests to me that loans to risky borrowers who perhaps shouldn’t have gained approval are only part of the problem. This segment may have gotten the snowball rolling, but now unemployment is making that snowball grow to a frightening size.
Perhaps government bailout plans and lower mortgage rates will help. But I’m now officially very skeptical of the consensus 2Q 2009 bottom for the housing market.
*****We’ve seen stocks shrug off bad news and move higher lately. And that’s one important indicator for a market bottom. But needless to say, there’s a limit to how much bad news investors will ignore as they seek out value-priced stocks.
As you know, I’m concerned about unemployment. That makes me cautiously optimistic about stocks right now, emphasis on cautious. I wholeheartedly advocate taking trading positions in certain stocks. And I can even be comfortable taking long-term positions in high-quality companies.
But I still think there could be some rough going for stocks in the months ahead.
*****Even with the upside we’ve been seeing for stocks lately, I know there’s still a lot of uncertainty out there. I read all your questions and comments. And the two most common questions I see are: will stock prices recover; and is this a good time to buy stocks?
I’ve been answering those questions in the Daily Profit, but now, I’d like to take it one step further.
Next Monday, December 15, at 6:00 p.m., I’ll sit down with the Chief Trading Strategist from TradeMaster Daily Stock Alerts, Benson George, to get his outlook on stocks and the economy over the next few weeks and months.
This will be my first Internet video event. I’m calling it Stock Summit 2008: Profits After the Fall. And I’d like for you to attend.
During this 30 minute interview, I’ll be asking Benson for his outlook on stocks as we head into the New Year. Plus, he’ll share with you his strategies that you can use to pull profits out of the current market.
You’re sure to get plenty of useful – and profitable – information from Stock Summit 2008: Profits After the Fall. There’s no fee whatsoever – the event is totally free, but space is limited. So why don’t you join us next Monday, December 15th at 6:00 p.m.?
Pre-registration for Stock Summit 2008: Profits After the Fall starts today. Space is limited, so if you’re interested, please reserve your seat right away. Click HERE for details.