Unemployment
The National Unemployment Rate is officially at 9.4%, an improvement of .1% from June. The real unemployment rate (calculated with the same methodology as during the 30s, which includes those who have run out of benefits as well as those who are underemployed) stands at 20.5%. In California, though, it is getting worse. The official July California Unemployment Rate is officially at 11.9%, up from 11.6% in June. The real unemployment rate is now 26%. Is this the bottom? According to the California Worker Adjustment and Retraining Notification Act (WARN) database, there are 5,889 statewide layoffs planned for August, with the actual figure actually higher because the estimate applies only to companies with 50 or more employees. Those of you who are employed, count your blessings.
The Government Economist
I enjoy watching how the government economists think. I mean, let’s say the country has 100 workers and it lays off 10 employees the first month. We are now at 10% unemployment. Let’s say the second month we lay off another 10. Unemployment is now at 20% and is up 100% from the previous month. In month 3, we lay off another 10. Now unemployment is 30%, but that’s only up 50% from the previous month. The government economist would say the economy is improving because the rate of new initial claims is slowing. To quote 1 Corinthians 1:27, God chose the foolish things of the world to shame the wise.
Math Quiz
Be careful to make sure that checkers give you the right price when you buy items at grocery stores or department stores, eg Safeway and Target. I bought some items and the checker scanned them and they rung up at full price. I pointed out that the items were on sale, that there was a big sign, saying 5 for $9. OK, so she brought out a piece of paper and a pen and proceeded to try to figure out what the per item price was. After struggling with the calculation, I volunteered to assist her, borrowed the pen and paper, and wrote down the calculation and answer for her. This is unbelievable that she couldn’t do simple arithmetic.
Bearish Pundits
Many bearish pundits have been pointing to the current chart of the stock markets and comparing it with the bounce in the stock market after the Crash of 1929. They point to the aftermath of the that bounce and the stock market’s subsequent selloff and L-shaped economic scenario that followed. Long lines at the soup kitchens and the look of despair marked the 30s. Will this be what the United States will look like as we enter the second decade of the 21st Century? I hope not.
Depression: The Human Definition
A mental state characterized by a pessimistic sense of inadequacy and a despondent lack of activity. Unfortunately, this definition of depression can be a result of the economic definition of depression.
This is Hell
I find it interesting that there are those who argue against the government’s stimulus and health care reform initiatives, to the point of calling them “evil.” But imagine that you have been sending hundreds of resumes out, many of which you are qualified for, and not getting any response. Imagine the feeling that you may never ever find another job ever again. Imagine also that you cannot qualify for or pay for health insurance coverage, that you are just one step away from losing everything. Imagine the feeling of seeing your travel and retirement dreams disappear. Imagine the look of your spouse as she wonders why you can’t get a job. And imagine your feelings as your confidence ebbs away and your life feels worthless. Imagine that ending it all seems like your only option, only to face the fact that the ones you are hurting is the family you love. This is despair; this is depression. You are stuck; there is nothing you can do. This is hell.
The Markets
The Chinese Shanghai market has dropped 20% since August 4th, officially entering in bear territory. Worldwide shipping is dropping precipitously. Copper continues to inch towards the $3 mark, but the rate of change is slowing. Lumber is starting to drop in price, possibly indicating a slowdown in building. Are we entering into another recession, the so-called W-shaped recovery, or will we enter an L-shaped scenario with very little recovery for an extended period of time? Only time will tell. In the meantime, we continue to hold on with white knuckles to our holdings with increasing nervousness.
I Apologize
I apologize for this dour report. The only silver lining is that the investment markets continue to march higher, making very good money for those who are invested. But the economic clouds cast a heavy shadow and we must be mindful of this. Risk management strategies are extremely important with regards to your investments. Without a strategy, you are just rolling the dice. We remain fully invested in all markets, except for bonds.
Stay tuned.
Filed under: The Global Investor
