European market economic data update: They are hurting too!

According to news reports today, Unemployment rose to 9.4 percent in June, the highest since 1999. More than 3 million people have joined the euro region’s jobless rolls in the last year, and the Organization for Economic Cooperation and Development expects the unemployment rate to reach 12 percent in 2010. The highest rate was in Spain, which came in at an unbelievable 18.1% rate. Prices in the euro region dropped 0.6 percent from a year earlier, the most since the data were first compiled in 1996.

What does this mean for the U.S.? It means it will be difficult for Europe, a large trading partner for us, to purchase U.S. products, thus keeping our revenues pressured for U.S. Corporations and earnings going forward. We are counting now so much more on China than we ever have been, a dangerous move and a critical partner of our future economic stability, that we have increased our risk for recovery. And on that note, U.S. stock futures erased gains after the government said personal consumption slumped more than forecast last quarter.

Market review

So Continuing Claims are down a bit today and the Weekly Job Claims are down a little over 8,000 but you would think by the commentary on CNBC this morning that everything was turning for the better and we are almost at a point where we are coming out of the recession. Bah, humbug! You can't believe that hype really, can you? I surely don't. Look folks, let's face it, many are on vacation and things are slow in business this summer, including layoffs. Restaurants might be surviving based upon summer vacation visitors and many stylists might be getting some business because people wanted their hair done before their vacation. But I tell you things are no better out there and this Fall, which by the way is only 2 months away, is going to bring back more unemployment. Don't be lulled by complacency that things are truly better, by just buying into an overbought market. You will surely be disappointed and lose some capital if you do. Next week they will have the Unemployment report for July and while it currently stands at 9.5% unemployment in June, I expect a creep up for July, maybe to 9.7%.

But remember the Consumer Confidence numbers came out this week and were down from the previous month. June numbers from the Conference Board for Consumer Confidence was 49.3 and in July it was 46.6 and when the economic outlook is good this number is usually over 90 to as high as 120. So most Americans don't see things improving going forward, and are concerned about whether they will have a job or not. Many writers of economic newsletters are wondering about whether there is sufficient capital to truly have a free market right now and they fear it is manipulation that has created this rally. I am concerned about this too. It is in Wall Street's interest and now the Federal Government to have the stock market rise to give us all the confidence that things are getting better and therefore we should trust the stock market with our capital and invest. I would like to share one line of a recent report I have seen and must keep confidential. Here it is: "even if the Chinese lent the U.S. all their $2 trillion, it would only cover this year’s U.S. borrowing. Where is the U.S. going to get next year’s? Because next year, it’s going to need even more. Let me be as clear as possible. There’s no way out of this without major structural changes. It’s not going to be just a disaster. Catastrophe is a better word."

The Put to call ratio is about 0.92 and the VIX closed yesterday at $25.61 and remember what I have said all along: Preserve capital and we will have a major stock market correction sometime before the Options expiration for October. We are still in the range from 7,800 to 9,300 on the Dow and have not gone above that level yet. If you want to try to capitalize on the move up in the market, go for it but have your hand on the trigger to sell. You have to have the time to watch the market to be able to do it though.

Headline reads: Turkey launches ground operation in Iraq

"STANBUL, Turkey - Turkish troops launched a ground incursion across the border into Iraq in pursuit of separatist Kurdish rebels, the military said Friday — a move that dramatically escalates Turkey's conflict with the militants.

It is the first confirmed ground operation by the Turkish military into Iraq since the U.S.-led invasion that toppled Saddam Hussein. It also raised concerns that it could trigger a wider conflict with the U.S.-backed Iraqi Kurds, despite Turkey's assurances that its only target was the Kurdistan Workers' Party, or PKK."

This is not good news, as the potential for a wider conflict with Nato ally Turkey and with Iraq, both allies of the U.S., grows with each escalation. Turkey recently has been tilting to their Islamic groups which has troubled the secular leadership of the country. Turkey's ruling government party removed a ban for the head scarfs worn by women in Schools and Universities. The U.S. and its Allies have been looking to admit Turkey into their economic block with benefits. This incursion could harm the outlook for that to happen thus alienating Turkey against the U.S. even more than it has in recent years. Turkey has been a good Ally of the U.S. going back decades. It has been the Bush Administration that has most set back this relationship for possibly decades to come.

To read the entire article click here.

US-Russian Missile Defense negotiations

OK, I had to say something else today, as to me, this is a very important issue. Because of President Bush, VP Cheney and the Administration's bellicose actions in Iraq over the past 6 years, we have lost our leverage with world leaders. Among them, Vladimir Putin, as he is in talks which may break down regarding Missile Defense systems the U.S. wants to deploy in Putin's backyard.

Instead of the U.S bargaining on issues like this from a position of strength, we are arguing from a position of weakness. We are pushing this on Putin at a time where his power has gained and ours diminished. And now we have a President who is on record as saying I can see into this man's soul and work with him. It is plain to see that he is playing you and, by proxy, us. How do you think we would feel if a Missile Defense system was placed close to our border, say in Cuba? Hmmmm, I remember exactly how we reacted as I watched President John Kennedy deal with exactly that situation, and even though we were told they were purely for defensive reasons, we could not allow them to be there.

One cannot negotiate with someone where the bridge of trust has not been built or has already been broken. That is what our side is doing now in these talks. We are hoping he will go along with it. In my view this needs to be put on hold for the next President to deal with, just like the Iraq war will be something for the next President to deal with. It's the worst of all timing right now, and these folks don't want to admit it. So much for Rice and Gates trying to add something, besides failures, to the Bush legacy.

The main story on this can be found in the NY Times by clicking here.