Simple ideas for getting America back on track

I was recently asked by a former client, what I might do to solve America's unemployment problem. I told them that I had several ideas which have not been tried. The first solution is a unique one based upon the fact that Republicans don't want to continue paying for Unemployment benefits ($$$) for the unemployed, especially the people on unemployment benefits for 99 weeks or more. And Democrats want to just help them by giving them extended benefits.

My solution is to require work from the unemployed to receive benefits. For example, many schools need painting, windows repaired or replaced, security improvements like video cams around the grounds, Teachers helpers, installing air conditioners, etc., etc., etc. I believe this would help those unemployed for so long start to feel better about themselves, have some resources to pay their bills and prevent foreclosure of their homes. We could even pay them more than the benefits might provide and we would still be ahead of the game, as this would increase some consumer spending and raise taxes somewhat in local communities that have a Sales tax.

Getting something back from giving extended benefits would help take the sting out of giving perceived handouts.

The next idea I had was to change our Educational system, by having school go year round. I would provide students a week or two vacation, but not the whole summer off. I would have them get air conditioning for schools and installed by those working above. I would then change teachers salary to reflect a full time job. We could have all teachers making $100,000 and above a year but we would be attracting more teachers with this salary level from many different backgrounds.

We need to think outside the box in tackling our issues. But it starts with a willingness to put some ideas out there and see if anyone picks them up and improves on them. I have, so where's your's?

Market comments for Nov. 26th

Well, it's a short market day today but I can't keep the same prediction as I had yesterday. Today is pointing down around the world. The debt crisis in the Euro zone is spreading beyond Greece and Ireland and now threatens Portugal and Spain according to many stories by the Main St. media outlets. The Dow Futures have been down about 100 points this morning in pre-market and the Euro countries markets are down about 1.5% on average today.

Many like CNBC are hyping the Black Friday Shopping spree, which is the greatest marketing vehicle in America. With all the hype about "shoppers are spending" they hope to entice those weak of mind and discipline to get out there and "help America". Bah Humbug, I say. I'm all for buying gifts for family and others as the next person. I just think the best way to help Americans right now is to help the less fortunate. And those folks are the ones who have been unemployed for 99 weeks or longer. You want to help America? Hire one! Call your Senator and Congressman and have them pass another extension in Unemployment benefits for them. Or you could take in a person who is living on the street and help them get on their feet. Or you can volunteer at a shelter or donate Food to the Food bank in your local community. These are the best things you can do right now. And you can have the courage to disagree with those who say these folks are freeloaders, even if they work with you or live in your neighborhood. Some of us need to stand up to those who have to understand the plight of those who don't have. That's what America used to be like. But it seems in this continual season of partisanship, that has been lost too. And don't blame the victims!

I feel better now. A good rant clears the throat! Now listen to this You Tube video of what's happening over in Europe with this debt issue as one politician "clears his throat" too. You don't hear this in our Congress, but you should!

Chart of the Day: Nonfarm payrolls Decade Gains (1940-2009)

This from Chart of the Day this morning. The chart shows clearly the impact of the Bush years of this last decade on Employment and job growth. Our people suffer today (17.5% are either underemployed or unemployed) because of the effects of the lack of job growth. This is an amazing statistic: This past decade is the first decade on record during which the number of jobs increased by less than 20%. To quote Chart of the Day site:

"Today, the Labor Department reported that nonfarm payrolls (jobs) decreased by 85,000 in December while the data for November was revised upward and now shows a gain of 4,000 jobs. For some perspective, today's chart illustrates the percent increase in the number of jobs for every decade since the 1940s (the data goes back to 1939). As today's chart illustrates, the number of jobs at the end of a decade has been anywhere from 20% to 38% greater than 10 years prior. That 20% plus growth has been the case until the decade just passed during which the number of jobs basically ended the year where it began. This subpar job growth is particularly noteworthy due to the fact that the US population has increased by 10% in addition to a significant increase in global wealth during the same time frame."

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)

Stock Market outlook: Where are we headed?

I thought it was time to do some charting and see what has happened in the past few months and where we are headed by mid October using charts as a predictor. I have included two charts today. The first is of the Dow and the second is of the S&P 500 using a 3 year period. I have two added lines on each chart. One is colored Blue and represents why so many thought we were headed down the past month (and we didn't). The second line is red and it shows the highs I think are still possible between now and Options Expiration in October, before we do finally have that downturn I have been expecting. Here are the charts:



For the Dow it says that we will not go over 10,000 and on the S&P 500 we will not go over 1090, but there is still the possibility of some good gains in the meantime. Those of us still holding any Short positions, you have endured a lot of pain these past few months, me included. I don't know for you if this is the time to sell, as it could be almost the worst possible time to do that. But let me be clear here, there is more pain ahead short term for short positions and those wanting to get out should, as you know your tolerance for pain better than I do. I will tell you this, I am holding mine and may buy more to average down. The question to ask yourself is this: Do you think we are near the end of the recession or do you think we are near the bottom of the decline? They are very different questions with differing strategies depending how you answer the questions. I think we are near the bottom of the decline. Just 12 Percent of Stimulus Money Has Been Spent according to this report dated August 5th. Moreover, that 12 percent includes some $13 billion from the Social Security Administration in one-time $250 checks to current Social Security recipients. So we haven't had enough stimulus yet to really make much of a difference. Add to that the fact that over 400,000 were dropped from the unemployment numbers reported yesterday as they gave up looking for work. When the Congress extends benefits for the unemployed, those 400,000 will be added back into the unemployment numbers, making the overall percent unemployed much higher.


It has been a good week for my shares of stocks long and they have given me gains for the week but I am looking at building cash right now in preparation of the Fall drop.

The Markets in review and outlook for week ahead

Many were surprised at this week's market action. I know I was! I had predicted a market pullback last week going into this one and had also said mid week that the range of the Dow and S&P 500 has gotten much tighter and I did not thing we were going to go to higher than 8,500. This tightened this new range on the Dow from 7,500 to 8,500. I also said we had come to almost 8,200 and to me it was riskier to stay bullish then it was to believe we should go down from here. So where did we end up now that we have the advantage of hindsight?

First ask yourself this question. Did the market go up steadily this week? Don't look it up just think how you felt about the week. Ok, here's how it ended. The Dow was up only 48 points for the entire week, closing at 8,131 compared to a week ago Friday when it closed at 8,083. But didn't it "feel" like it was going up all week? How could it move up so slowly to only a 48 point gain for the week? To me it was a very controlled market. By controlled I mean the big Institutions controlled the market action this week very tightly. Why, you wonder? Because everyone who could fund and IRA or Retirement account did so, and the inflows, although less than other year's funding, because of the more unemployed, still represented new money. They did not want to scare you just yet as they want this new money to be invested into the market so they can go short and take it without causing much more harm to the overall market. They just want your money.

What was the play in my mind this week. It was raising cash by selling and/or buying ETF Ultra Short TZA or SDS or any of those instruments which are Short the market. From here ahead, I don't see a precipitous drop back down to the 6,440 low on the Dow and corresponding other indexes like the S&P 500 or Russell 2000. But I do see us meandering lower now that the psychology seems to have changed around to this recession is going to end and things are looking better or there is a "glimmer of hope" out there. That means you can buy these ETF's near their lows now and watch them rise as the market pulls back.

I purchased the ETF ULtra Short, TZA, this week several times building a very decent position with the shares. My last purchase was at $31.97, which is very near the new low for the ETF of $31.66/share yesterday. I expect to make at least $15-$20/share on this ETF before long. Remember back in the beginning of March, this ETF was at a high of about $112 and at the end of November was above $150/share. So there is plenty of opportunity here to make some very high profits. The risk is that the market is now going to continue to climb back up to 9,000 and things are going to be much better in the economy. Either way it goes, we win in a sense, don't we.

You will notice there are 2 charts I posted this week. One is a chart of the Put to Call ratio (if you click on it it will enlarge and then go back a page to come back here). You will notice that in my view there are new Buy and Sell levels to consider in using the Put to Call ratio as a tool. Any movement outside the last set of red bands signal either a Buy or Sell. If it drops low, Sell and if it goes above the upper red band Buy. You can see there has been a shift down on November 19th and 20th, the last clear buy signal at 1.40 and 1.31 respectively. This was when the Dow hit 7,500 and then went back up to over 9,000 the first week in January. There was a Sell signal on February 9th when the Put to Call ratio hit a low of 0.67, which began the descent of the Dow from about 8,000 to the low of 6,440 culminating on March 6th and 7th. You will notice the signals from the Put to Call ratio come a day or two ahead of the market move.

I also have said to watch Gold prices as a tell of market direction. I had expected the price to go back up over $900/ounce this week and stay there but it didn't, as the market did rise instead of drop. As you can see from the other chart both Gold and Silver dropped in price this week. Both metals are used not only as a currency play but is used in manufacturing. If you look at how both Platinum and Palladium acted this past week and over this 3 month period for each of these charts, the prices have steadily risen. Something must correct here. Either Platinum and Palladium are going to have a significant pullback, which I doubt, or Gold and Silver prices are going to start to reverse course and increase again. I think that is a more likely outcome given we have set in place prices of all commodities to rise as inflation rises due to the stimulus efforts of countries around the world. Inflation is the major concern of world leaders going forward.

I realize this is a much longer post than usual about the market, but I felt it was necessary to get people to be grounded again in reality. Things are still very bad. The unemployment rate will get worse. Foreclosures will rise both in Residential and now Commercial Real Estate, not only because of the increase in the ranks of the unemployed, but also because more loans will be re written with higher interest rates than many had during the Sub-prime lending years. Those mortgages are set to move to higher interest rates throughout the remainder of this year and next year, compounding the present housing problems We are far from being over this problem. Invest with an eye to taking profits when available. The mantra should be preserve Capital for the next year. On a final thought, today's San Francisco headline is that the Unemployment rate for California for March is now 11.2%, the highest in 68 years.

I also invite you to take the mini poll on the right margin if you have not done so this month. I have data back to December from this poll and I am trying to see any trends in people's view of the recession. Thanks for the visit and come back when you can. You can also subscribe to this site by clicking on the Orange RSS logo. You will be notified via email every time I post anything new. Thanks!