Greetings-
James Braddock grew up in Hell’s Kitchen NY. Rough neighborhood. He aspired to play football at Notre Dame under legendary coach, Knute Rockne. But in his words he “didn’t have th brains for it.” He ended up a fighter. His record was fairly unimpressive at 56-23. Today he is a legend and a movie in 2005 made him famous once again as he was during the Great Depression.
I saw the movie “Cinderalla Man” this weekend. I watched it in 2005 with my previous partner…man what difference 5 years makes. Back then I remember thinking, “I wonder if something like that could actually happen again?” I could see that real estate was clearly going to be in trouble. As well, however, I could not get myself to buy stocks late in 2005 and they ended up rallying for another two years. Our investors made little to nothing in 2006-7, however, when everything hit the fan, they did not lose big. (There, I feel better.) In any case, it is a great movie and James J. Braddock is an inspiring figure.
Granted unemployment has doubled in the last 3 years, but, it is still a far fry from what it was during the Great Depression-(JJ Braddock’s time). My buddy Doug used to say, “stay positive…it could always be a lot worse”. Employment data Friday showed a substantial loss of jobs last month and they substantially revised lower previous months of data. So, it was worse than we thought. The net number lost for the month including revisions was more than 200,000. That is a lot of people for one month.
The BLS calculates 5 measures of unemployment, U1 -U6,
U1: Percentage of labor force unemployed 15 weeks or longer.
U2: Percentage of labor force who lost jobs or completed temporary work.
U3: Official unemployment rate per ILO definition.
U4: U3 + "discouraged workers", or those who have stopped looking for work because current economic conditions make them believe that no work is available for them.
U5: U4 + other "marginally attached workers", or "loosely attached workers", or those who "would like" and are able to work, but have not looked for work recently.
U6: U5 + Part time workers who want to work full time, but cannot due to economic reasons (underemployment).
It is estimated that U6 was as high as 37.6% during the Great Depression…while U3 was as high as 25%. It has been over 16% for more than a year which is almost double what it was a few years ago. Like Doug said…
Unemployment Rate - U6
2000 - 2010
Below is U-3 what is typically reported as the “Unemployment Rate”. It can get worse but… it has only been a lot worse once.
The dollar-
Looks like the investment world likes what the Europeans are doing. Nothing fancy and no clever funny business - just lower spending and higher taxes until they settle their debts with their creditors. You may not have noticed leaving your wallet or your account last month. But the dollar lost 8-9% of its value. On the other hand stocks rallied 8-9%. So, there you go. Don’t spend it all in one place.
When and if the Fed cuts the Federal Funds rate to 0%, it will mark the end…the last bit of the move will be dramatic.
Always keep one nostril pointed toward your own inner cesspool… this little piggy went to market, this little piggy stayed in bonds…
RE: bonds…if they hesitate “deck ‘em” just like like old Jim Braddock. Elections are coming, smart guys are circling, we are bound to hear a lot more about “spending our way out of debt” or something remarkably idiotic over the next several weeks. The dollar has rapidly deteriorated in light of this stance vs. Europe and Japan and gold and the metals are again trading like currencies.
Goldman today lowered its GDP forecast and stated that they expect the Fed "to re-engage in ‘unconventional’ easing through asset purchases (as we discussed recently) and/or a more ironclad commitment to lower short rates". Zero will be pretty low…guess we’ll see!
Careful out there,
Leon
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