Markets grapple with realities of a “jobless recovery”

Overview and Observation: The proclivity to “identify” the improvement in the jobs sector continues to challenge reality. There are two points to consider. The first of course is the disparity between the monthly jobs “created” number and the weekly jobs “lost” number. The second of course is the lack of identifying the “quality” of those so-called “created” jobs. One must consider the fact that a worker applying for first-time unemployment benefits has “lost” a job. By merely extending out that weekly number to a four-week month number we have over 1.2 million jobs lost in that month. Therefore a monthly jobs created number of 195,000 falls far short of even considering an improvement in the labor situation. The rhetoric from Washington would attempt to show an improving economy but not everyone “drinks the Kool-Aid.” The number of full time workers declined last month as the number of part time workers soared. That situation is not conducive to a labor situation improvement. The cost associated with “ObamaCare” is viewed as the main reason.

This week a major city declared bankruptcy. When I looked at the picture of the devastation in Detroit, I thought I was looking at Berlin after the bombing raids by the Allies. That scene could easily be repeated in other cities and once again, for the pundits, “an unemployed consumer does not consume and the producers of those un-consumed products are next to lay off workers.” The concept of a “jobless recovery” is a bad joke and the true unemployment and “underemployed” figure is closer to 17% not the more palatable 7.6%. The “house of cards” is going to collapse at some point and I suggest strongly the implementation of protective strategic hedging programs for those who rely on investment income to “survive.” Now for some actual information to hopefully guide my readers through the “maze” of “global” reports…

Interest Rates: September 30-Year Treasury bonds (CBOT:ZBU13) closed Friday at 135 23/32nds, up 1 and 02/32nds. Prices had declined on Thursday after the better than expected reports on jobless claims and manufacturing. On Wednesday prices rallied after Fed Chairman Bernanke indicated that the central bank would not push to taper its bond buying program. The reports from the Federal Reserve and the various statements by member of the committee continue to move the market and yields to a point where it is nearly impossible to determine which way the market will move. To that end we maintain our position that the U.S. economy, based on our assessment of the labor situation as stated in the overview, is not in any meaningful recovery mode. Hold long bond call positions.

Stock Indexes: The Dow Jones industrials closed Friday at 15,543.74, down 4.80 but for the week gained 0.51%. The S&P 500 (CME:SPU13) closed at 1,692.09, up 2.72 and for the week gained 0.71%. The tech heavy Nasdaq closed Friday at 3,587.62, down 22.67 and for the week lost 0.35%. The disappointing earnings of Google and Microsoft weighed on the markets Friday. Earnings reports of industrial, consumer good, and natural resources will be the focus in the coming weeks and we believe additional disappointments are in the offing. We continue to implore holders of large equity positions to institute strategic hedging programs.

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