What a shame!

I know you think I am referring to Egypt, but I'm not. Although there is much to be thinking about when it comes to the events in Egypt. No, I am talking about the end of the Free Enterprise system by the Fed rigging and inflating the stock market artificially, where there is no connection to the reality of the real economy.

Look around you. See how many businesses have their office spaces For Lease. Look around you and look at the Food banks and the unprecedented demand of the new poor who were once the Middle Class strength of this country. Look at the compromises the President made to allow for tax cuts for the wealthiest 1% of the population causing almost a Trillion dollars of more debt to the mountain of debt which has piled up over the last 30 years since Reagan. Yes, that's right since Reagan, since we are now reminded that yesterday would have been his 100th Birthday.

Yes the stock market is rising and many believe they are wealthier and maybe they are temporarily, but the day of reckoning is ahead of us for no good reason other than the fear of what would happen of the Fed didn't pump up stocks.

What a shame!

The Economy and Unemployment: A discussion of current times.

I thought a discussion was in order since the release of the 10.2% Unemployment rate data on Friday. It is difficult for most Americans to really see the impact of these numbers but I am going to share some observations with you on how America is slowly changing like a faucet dripping water or the boiling of a pot of water, it takes time to really notice the change.

Let me start with a quote from Haver Analytics which was published on Saturday.

"The official unemployment rate continues to pale in comparison to the rate which includes "marginally attached workers" and those who are working part-time for economic reasons. It rose to a record 17.5%. Another tally of joblessness indicates that with "discouraged workers" the unemployment rate rose last month to 10.7%. Not only are more individuals unemployed or have stopped looking for work, but the median duration of unemployment jumped last month to a record high of 18.7 weeks. The ranks of those unemployed for 27 weeks or more rose to 5.594 million (145.9% y/y), also an historic high."

Here are some historical facts. The unemployment rate for the years 1923-29 was 3.3 percent. In 1931 it jumped to 15.9, in 1933 it was 24.9 percent. It then steadily decreased until 1941 when it stood at 9.9%. In 1942, after U.S. entry into World War II, the rate dropped to 4.7%.
(Source: US LABOR STATISTICS.) Looking at the data announced on Friday, October's unemployment rate jumped a whopping 0.4%, one of the highest jumps in over 5 months according to the chart above. You see we may be starting a higher monthly rate increase than the previous 5 monthly increases.

Let me put a face on the above quote by using an example. Last time I walked around the famous Newbury Street area in Boston, a prized Chic upscale shopping area, I noticed how many small shops and sizable buildings had "For Lease" signs plastered over windows of empty store fronts. Some advertised whole Floors in the multistoried buildings For Lease. The streets were full of people and bustling from one place to another, but not many carried bags of purchased goods. I grew up in Boston and in all my years I have never seen so many empty store fronts in this neighborhood. You see it isn't just the lower class areas being affected by this economy, it is the upscale enterprises as well. This is a change in American's behavior of seismic proportions. With more Small businesses going out of business, it will mean more layoffs, more foreclosures, more vacant apartments and more suffering for far too many people. I am afraid this is going to be commonplace in the next year. I saw the same thing in an Francisco neighborhoods as well.

The importance of this isn't just in the Retail Sector, it is affecting all Small Businesses because credit has dreid up for most or their savings and cash reserves for a rainy day are spent trying to hang on until the economy turns around. But wait, you say the experts have said the economy has begun to turn around and the stock market is up, The Fed has proclaimed the recession is over and we will be coming out of this eventually. Call me a skeptic, but I do not see things getting better any time soon. The next big shoe to drop is Commercial Real Estate. And with all the small shops closing you can see the ripple about to happen to the buildings too. There will not be buyers of these properties until the prices drop more. And so it goes on and on.

Think about the airlines now for a moment. With much business being curtailed for small business and the number of layoffs in large companies still continuing, the airlines will be standing next in line for a bailout. I purchased 2 tickets to go from the East Coast to San Francisco one way and non stop. Can you guess what the price was for the combined tickets? It was less than $270 total! That's less than what it costs to pay for gas to drive across the country. This can't be good for the airlines. They are selling tickets across the country for about $135 a piece. This is amazing and can;t be profitable when you consider the costs of airplanes, the salaries and benefits for pilots, flight attendants, mechanics, ticket handlers, baggage handlers and all the corporate office functions needed to run a company like IT, accounting etc.

The American Consumer is going through a fundamental seismic change in sending habits that will be permanent for this generation. We are not at the end of this economic downturn. If it were a baseball game I would say we are in the 5th inning with still more baseball to come. Cash is KING and will be for some time to come as well. It has been the American Consumer who has spurred our economy the past 30 plus years. They have been responsible for 70% of our economic growth and for now and for years to come, they are going to be restrained. A good test of this hypothesis is to ask yourself about your planned spending for the holidays. My guess is that it will be about as restrained as it was for last year.

You can try and fight this tend or you can go with the flow and accept it for what it is. Some are calling this period, The Great Recession. Does it remind you of another similar phrase? It does me and for good reason! No wonder Consumer Confidence is way down. And the differences between Wall St. and Main St. need to be reconciled.

For another commentary on the unemployment data read this article from Seeking Alpha titled, "And Bernanke Didn't Think Unemployment Would Reach 10%."

Jobless Claims unexpectedly rise this week

The headline says it all. Analysts were expecting jobless claims to shrink this week and it unexpectedly rose 15,000 more jobs lost, to 576,000 jobs for the week. Continuing Claims also went higher to a total of 6.24 Million people are out of work. I don't know why they expect less job losses as I expect more to come. Last night my wife and I went to the famous North Beach area of San Francisco to see a friend open her first art show. We ate in the neighborhood and walked around. For the first time in 25 years, we saw many For Lease signs on buildings and office space. We saw eviction notices posted on businesses by the Sheriff. We also went to my old neighborhood where I lived before I was married, Union Street, and saw a number of new For Lease signs on empty shops. So the notion of less job losses while enticing to believe to increase our confidence level, is misleading. Things are not getting better for many small businesses. Restaurants are holding on with limited cash.

A friend of mine told me her beau, a senior executive specializing in IT, was let go from a well known hospital in San Francisco. No one is apparently safe from layoffs, even some execs. Things are tight and my best guess is that my prediction of a major stock market pullback is on schedule for this Fall, peaking by October Options expiration, the third Friday of October.

Hope I'm wrong and the market may stay disconnected from the reality of the economy, as it is pumped up by government money given to banks and insurance companies. But this disconnect is more troubling than the actual economy, as all it does is increase skepticism by the public of our financial systems. It's called manipulation. The stock market is just like the Casinos, it's a rigged game in favor of the House.