Job creation ain't what it used to be!

With today's employment data release, I thought a trip down memory lane might be informative. My focus today is NAFTA, the North America Free Trade Act, and the Presidential run of Ross Perot in 1996. First, below is a chart posted by Chart of the Day which shows Non Farm Payroll job gains, by decade, from the 1940's. Here's the chart below:

What is significant from this chart is what has happened the past decade of the 2000's. Basically, no jobs were created. In fact jobs were lost during the Bush Presidency. Jobs have been created the past several years, but no where need the number required to sustain a good economy with low unemployment.



Now we bring in Ross Perot. If you remember when Ross Perot ran for President, he warned us all about NAFTA not being good for America. In fact, his famous quote from the Presidential campaign became, "If NAFTA passes you will hear a giant sucking sound of jobs leaving America. In 1994, NAFTA became law. I think Ross Perot has been proven to be correct after all!

Year end summary of the Dow and stock market trends

This is my year end summary of the stock markets for the year and where I think what might occur in 2012. My first chart below is of thew Dow for the past 10 years on a monthly basis. As you can see below, for 2011 the Dow managed to stay between 11,000 and 12,800. Looking at the big drop in 2009, where we went all the way down to 7,000 on a monthly basis and 6440 as a low daily close.

It is interesting to notice the Volume chart for the Dow. We averaged about 600 Billion shares a month from 2002 to mid 2009. Since then we have had a significant drop to 380 Billion shares. So the rise from 7,000 was built on significantly less volume than the rise from 2002 to 2009, which was a Bull market rally. It looks to me that since 2009 we have been in a Bear Market rally, as the volume has been too low for a true Bull rally.

The key to watch on this Dow chart are the 2 red lines. We will need a breakout either to the upside or to the downside to determine longer term trends from this chart alone. However, looking at the Dow 25 year monthly chart, we get more clarity, as seen below.

I do still expect a drop below current levels during 2012. The Head and Shoulder patters or "W" pattern as I call it does point to lower lows going forward and limited upside potential.

Given the chart readings, the next thing to do is see if world events suggest a more optimistic or pessimistic view for 2012. We have a Presidential year election in November 2012 and we have had gridlock in the Congress in 2011. I don't see the gridlock easing and many issues including our own debt which must be dealt with as well as continually funding the government. The Unemployment scene isn't going to get much better because we have structural unemployment which will be around for a long time unless somehow we retrain workers in new skills to meet a more technological demand than typical blue collar workers have brought to the work environment. We also have the Supreme Court making a decision on President Obama's Health care bill legislation as to whether it is Constitutional or not.

Then we have the Sovereign Debt issues in Europe, the Arab Spring and new leadership in North Korea, a test of the government of Iraq to function without our military presence and then there is Iran's pursuit of Nuclear weapons. The Euro is in crisis and Russians are challenging Putin's grasp of the presidency there. And last but not least, we have all those who believe the world will end on Dec 21st 2012 because of the Mayan predictions.

Let's conclude with the fact that 2012 will have many volatility swings ands most likely testing the previous extremes of those swings. It is a year to be cautious with your financial assets. My belief is that we humans will do almost anything to avoid pain rather than to risk succeeding. Therefore, I believe it is wiser to be on that side of the investment strategy by being short from time to time. It is also wise to take profits sooner rather than being greedy and waiting for more profit before selling.

Good luck this coming year. Thanks for taking the time to visit my Blog. This new year marks 7 years of my blogging. I have had 79,000 visitors to my site in that period. Happy New Year!

Summary of this week in the stock market and where we go from here. (UPDATE)

At the end of this very volatile week in the stock market, with days up and down in a 500 points range, many are wondering whether they should sell or buy stocks. This is compounded by the facts that we are in an indecisive period right now and therefore predicting market direction is even more difficult in the short term. I have said I believe we are headed lower in the next 6-12 months, but I can't tell you when we drop further from here. We had closed below the 11,000 level this week on Monday and Wednesday, but on Thursday and Friday we closed above, closing at 11,269. I had said in my previous posts there was going to be a fight at the 11,000 level once we had broken below the 11,500 level. So, in fact, we did and, this testing of 11,000 level, may not be complete.

In the below chart, of the Dow over a 5 year period, I have added some red arrows to signify many of the significant drops in the Dow value followed by flat indecision periods, identified with blue flat lines. The purpose was to show that there is a period of time after a drop where the direction is uncertain. We are now in that period. As you can see below, it can last for about a month or so. Other factors are at play.

The news will dictate in which direction we go, and I think one could build a very strong case that markets will go down further. For example, this most recent major drop was precipitated by 2 events. The first was the concern over Italy and its debt problems and whether they were going to default, because they are such a large economy, they can't really be bailed out unless the EU started printing money like our Fed did. The second concern was from the Debt Ceiling deadline and the politics involved in almost defaulting here. This precipitated the S&P to downgrade the US from AAA to AA+ rating. Then the market tanked.

We are now in the stage where we have the Congress appointing a special committee to work out details to come to an agreement on where further cuts are going to come from. They must do this by Nov. 23rd. If they can agree on a package, there is no guarantee it will be approved by both Houses of Congress, because there will be no Amendments aloud. It will face an up or down vote.

Also, we have the 2012 Budget which must be approved by Congress by Oct. 1st. All this with the 2012 Presidential election in the background. The chances of having bipartisanship is nearly zero. That is why I see the market going down a lot more from here. As the expression goes, it is all baked in the cake. Wish it weren't so, but it is the stark reality we face. And the Fed has signaled they aren't going to do much more given the economy looks so weak. They said they will keep existing rates through until 2013, which is an unprecedented move on their part.

It took us 2 1/2 years to climb out from the low of 6,500 on the Dow. I believe it will only take a year to go down and retest that low, given the state of politics and the weakness in the Global economy, with many debt laden countries. This will also produce social unrest at levels we have not seen in my lifetime. We are starting to see the early stages of this now.

UPDATE: Monday 5:35am PST.

The Empire Manufacturing Index data was released at 5:30am this morning. The reading came in at -7.70 for August compared to an expectation of 0.0 and the previous dat of -3.76 for July. This month's data is going in the wrong direction for recovery and for a healthier stock market. The reading this morning is not having a negative effect on the Futures market and from all I can see the market will start up this morning.

At 7:00am PST the NAHB Housing data will be released for August. Expectations are for a reading of 15, which would be the same as it was for July.

Tuesday's release of July's Housing starts and Building Permits will be interesting to see. Also tomorrow's data will include Import and Export prices as well as Industrial Production for July and Capacity Utilization for July. These are all lagging indicators. The most important of these are Housing Starts, Building permits and Industrial Production.

You get politics as usual with Hillary. Obama deserves a chance to change that.

What disgusts me most about the Democratic race for the Presidential nomination, is how low both Hillary and Bill are willing to go to get the nomination. This behavior rallies the Republicans and then we are back to politics as usual for the General election.

It's time the American people blow the whistle on this type politic and relegate it to history rather than continue it into the future. We have a chance to change it if we have the courage to seize the moment. It is that precious moment I have been waiting for my entire life. We have a chance to heal the racial divide, once and for all. Will the American people stand up and be counted? It will take the younger voters to vote for this change as so many of my age bracket are stuck in a state of unconsciousness

Remember, we neither get the President we want or don't want. We get the President we deserve by the mindset we bring to the voting booth. DON'T ALLOW YOUR FEARS TO CHOOSE THE NEXT PRESIDENT, BUT RATHER YOUR ASPIRATIONS. It's an easy choice then.

Fighting for Truth, Justice and the American way

No, it's not Superman, nor is it President Bush nor Alberto Gonzales, Attorney General nor the Congress. It took place in a small Court in Ohio and was fought by average Americans exercising one of their Constitutionally guaranteed freedoms to fight for Truth, Justice and the American way, by serving on Jury Duty.

Ohio Election Workers Sentenced

Wednesday March 14, 2007 12:16 AM


By THOMAS J. SHEERAN

Associated Press Writer

CLEVELAND (AP) - Two county election workers were sentenced Tuesday to 18 months in prison for RIGGING A COUNT OF 2004 PRESIDENTIAL ELECTION BALLOTS so they could avoid a longer, detailed review.

Jacqueline Maiden, 60, a Cuyahoga County election coordinator who was the board's third-highest ranking employee, and ballot manager Kathleen Dreamer, 40, each were convicted of a felony count of negligent misconduct of an elections employee.

Cuyahoga County Common Pleas Court Judge Peter Corrigan allowed the women to remain free on bail pending appeal, but indicated he thought there was a more widespread conspiracy among election officials.

``I can't help but feel there's more to this story,'' Corrigan said.

Ohio law says that during a recount each county is supposed to randomly count at least 3 percent of its ballots by hand and by machine. If there are no discrepancies, the rest of the votes can be recounted by machine. A full hand count is ordered if two random samples result in differences.

Special prosecutor Kevin Baxter said in the defendants' January trial that they worked behind closed doors three days before the public recount on Dec. 16, 2004, to pick ballots they knew would not cause discrepancies when checked by hand, thereby avoiding a full hand recount.

To read the whole story click here.