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!

Reflections on how jobs are lost and created.

I went to the supermarket this morning to buy a few groceries so I can make a nice dinner today. As I went up to the register which was open, I noticed another man going to the self serve register. You know what those are. That's where you take your own groceries out of your cart, pass them by the bar code reader, then bag your own groceries and pay with a credit card. Well, this man was talking to another about the economy and the lack of jobs, without any awareness of what he was just doing using that self serve checkout system.

Come to think of it most Americans seem oblivious to the fact that is as much our responsibility to create jobs, as is the Congress, the President, and big business. Every time I go to the supermarket, I notice that some responsible person is bringing their shopping cart back to the area where they are stored and probably patting themselves on the back for doing it, rather than leaving the cart between cars or in walkways in the parking lot. But what I remember was when I was a kid of 16, that was my job. I was hired to get the carts and return them to their storage place so that customers didn't have to think about returning them or having them hit cars. It didn't pay terrifically but it did help me buy a car.

I ask you this Independence Day to consider what you do to eliminate jobs and what you can do instead to keep the ones we have and create more jobs. Try tipping a little more than usual for good service on the condition the person you give the tip to hears you say, "I'm tipping you a little extra today for your good service, but I have a favor. Please make sure you do the same and either pass it on to someone else who gives you good service with the same condition or treat yourself to something nice. The main thing is keep that tip moving to as many people as possible. If we all do that we will spur on this economy in spite of Congress, the President and big business. YES WE CAN!

Happy 4th of July.

Cross Purpose: Creating Jobs or increasing profits?

This morning President Obama was in Schechdetty, NY at a GE facility talking jobs. President Obama has tapped General Electric Chief Executive Jeffrey Immelt to head a new White House panel tasked with finding a way to grow jobs.

In an article in December on CBS.com, they studied this issue and whether job growth is happening elsewhere. Here's the front of that article:


Corporate profits are up. Stock prices are up. So why isn't anyone hiring?

Actually, many American companies are just maybe not in your town. They're hiring overseas, where sales are surging and the pipeline of orders is fat.

More than half of the 15,000 people that Caterpillar Inc. has hired this year were outside the U.S. UPS is also hiring at a faster clip overseas. For both companies, sales in international markets are growing at least twice as fast as domestically.

The trend helps explain why unemployment remains high in the United States, edging up to 9.8 percent last month, even though companies are performing well: All but 4 percent of the top 500 U.S. corporations reported profits this year, and the stock market is close to its highest point since the 2008 financial meltdown.

But the jobs are going elsewhere. The Economic Policy Institute, a Washington think tank, says American companies have created 1.4 million jobs overseas this year, compared with less than 1 million in the U.S. The additional 1.4 million jobs would have lowered the U.S. unemployment rate to 8.9 percent, says Robert Scott, the institute's senior international economist.

"There's a huge difference between what is good for American companies versus what is good for the American economy," says Scott.

To read the entire article, click here.

I believe that when looking at this issue one must take into account the fact that the sole purpose of corporations is to build shareholder equity (cash & other assets) and it is not to hire people to lower the unemployment rate. There is no moral directive to improve society. It's all about profits. So I am not positively disposed to think Jeff Immelt and his Business Council will do anything but figure out how the government can either lower taxes to help their profitability, or deregulate their businesses. But remember the purpose is to increase profit, not jobs. If they create some jobs that will be a side benefit, not a priority goal for business. Why do I say that? Because business is currently sitting on Trillions of dollars of cash but they are not hiring people. They are saving their cash. Until part of their purpose is to create U.S jobs with U.S. workers, the unemployment rate will remain quite high.

IF THERE IS JOB GROWTH, MOST WILL HAPPEN OVERSEES, NOT HERE IN THE US. ANY JOB GROWTH IN THE US WIL BE ONLY WHEN ABSOLUTELY NECESSARY. That's the new reality!

The real story about jobs: There are fewer and fewer being created!

This from Chart of the Day today. The chart below illustrates the percent increase in the number of jobs for every decade since the 1940s (the data goes back to 1939). It is definitely a shock to see the chart and to contemplate what it means to Americans unemployed and those that worry about their current jobs. Today's chart illustrates that up until this millennium, the number of jobs at the end of a decade has always been at least 20% greater than 10 years prior. During the last decade, not only was that 20% plus growth not achieved, the decade actually ended with less jobs than when it began. This negative job growth is particularly noteworthy due to the fact that the US population had increased by 10% in addition to a significant increase in global wealth during the same time frame. With one year down in the current decade (see gray column), today's chart illustrates that job growth is positive albeit only slightly so. If job growth during the current decade were to increase at the same pace as what occurred during the first year of this decade, the decade would end with an 8.7% gain in jobs (see gray dot). This is certainly better than the decade just passed, however, it is well off the 20% plus pace of decades past.
Let's be clear here, these were the Bush/Cheney years for the most part. They ruined this country for a long time and will go down in history as the worst President and Vice President in the history of the U.S. I am really glad they are gone. But the effects of what they have done to us will last for decades.

The November Unemployment rate comes down for the first time in a long time.

The Unemployment rate for November came in at 10.0% a change from 10.2% in October. This is the first time it has been down any in a long time. Non Farm payrolls were down 11,000 jobs.

Before the announcement the Futures showed the Dow up 25 and now it is up 130 points in pre market. The Nasdaq looks good as well as it is up 25 points now in premarket.

UPDATE 1:30pm PST

The Dow closed up 22 points but was as high as 148 points higher, earlier in the day.

California Unemployment rate reaches 11.9%

California's unemployment rate continues to rise but it is not in the top spot for Unemployed. Michigan holds that spot followed by tiny little Rhode Island, then Nevada and Oregon is tied with California. California has the largest population with about 37 Million people. So when the numbers come out for the U.S. Unemployment rate for the month of August, due on September 4th, expect it to go up from 9.7% to either 9.9% or 10.0%. It will go higher than 10.0% over the next 6 months. The country needs to create jobs, as without them there will not be a recovery. It doesn't look like the private sector can, so people shouldn't be so negative about the government's role here. The government must do the job when the private sector can't, and that is what the Obama Administration is trying to do. So be supportive of what President Obama is trying to do here, my Republican friends, or you too may find yourself in bread lines!

In the photo above, Job seekers line up to inquire about jobs with Cintas Service Professionals at a job fair in San Francisco, Thursday, Aug. 20, 2009. The number of first-time claims for unemployment benefits rose unexpectedly for the second straight week, a sign that jobs remain scarce even as other data show the economy is stabilizing. (AP Photo by Marcio Jose Sanchez)

New data on Corporate America and the stock market

Much to think about going forward in the stock market. As we approach the end of August and the beginning of the Fall, one thing on investors mind is this, Does the stock market have room to still go up since the rise of the past 3 months? To answer that question I will use The Chart of the Day below, because it shows we are in totally unchartered waters.


The scary thing to me from this chart isn't how far the S&P500 has gone up from its historic P/E ratio, but rather the implication for how far the market could drop, if reality sets in that we have a disconnect between the real economy and the stock market. This chart should give all great pause. To add money into the stock market is this level would seem to be the epitome of foolishness. If this doesn't look like a bubble, I don't know what would be a better example. It is a bit scary with a P/E of 145, which is a minimum of 3.5 to 4 times as high as it ever has been. Consider you have been warned! Unless we get a recovery which creates real jobs, we are looking at a very rough road ahead.

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.

Retail sales down another month!

Latest data for July Retail Sales shows it down 0.6%, ex Autos. Overall Retail Sales were down 0.1% for July.The reason to take out the auto numbers is they were pumped up by gov't action from the "Cash for Clunkers" program. This is not good news going into the Back to School season. Import prices are down over 19.3% year over year and once again it shows us in a deflationary environment.The number of U.S. households on the verge of losing their homes rose 7 percent from June to July, as the escalating foreclosure crisis continued to outpace government efforts to limit the damage. Nevada led the nation in foreclosures for July. Foreclosure filings were up 32 percent from the same month last year, RealtyTrac Inc. said Thursday. More than 360,000 households, or one in every 355 homes, received a foreclosure-related notice.

Banks repossessed more than 87,000 homes in July, up from about 79,000 homes a month earlier.

Unemployment unexpectedly increased for the week. The 4 week moving average is up to 558,000 lost jobs.

The Consumer is not returning to the marketplace according to these numbers and unless they do, more are going to lose jobs and more foreclosures are on the horizon. You feeling optimistic now? It's back to school soon and the reality of the world as people return from vacation. Take a deep breath!

Don't forget to take my Mini Poll on the right margin as to how long you believe the recession will last.

Merry Christmas? Do the best you can!

I know, it is depressing to hear the news about how awful things are right now. Today they announced 586,000 filing Jobless claims for the week and that many aren't shopping. But come on, there is more to Christmas than worrying about the future. How about being in the moment and being grateful for the blessings we have had this year. Let me recount some of those things to be happy about this Christmas.

First, we are alive and enjoying being able to just breathe. If you don't consider that a blessing try living without it. Most likely you you have a house to live in or an apartment and aren't reading this from a homeless shelter, nor are you homeless. You also must have a computer unless you are reading this from your local library computer. Now for the more existential blessings.

This is the last Christmas we have to have George Bush as President and Dick Cheney as Vice President. Those bad days end in only 27 days. That will end listening to a President who uses poor grammar, has difficulty making complete sentences and can't pronounce the word "nuclear". It will mean the end of the use of torture and the beginning of restoring our image around the world.

We will have a new President and, with him, will come the hope of the economy turning around, a focus on healthcare for all, a plan to reduce Global Warming with investments in Green technology and the creation of millions of new jobs, through initiating infrastructure projects across America. This will mean new schools, less crowded classrooms, improved technology in those schools, better roads, bridges fixed and other projects to help jobs and our local communities.

We can bury our heads in the sand and leave the recovery to the new president and his team or we can think how we are individually contributing to getting us out of this mess and on to a recovery. So I want to wish you all a very Merry Christmas. Enjoy your family, enjoy your own company if you are alone, and think about what is good in your life even if it's just that you are alive and still breathing. And Santa is coming to your town tonight. God Bless.