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Hope you all had a very happy 4th of July! Ours was filled with family and friends, burgers and bratwursts, and lots of fireworks.
June was not as bad as May in terms of overall percentage loss, but the indices finished the month at new lows for the year. Technicians are looking for a bottom anywhere between where we are right now and as much as 10% lower. Volatility remains stubbornly high. Traders are finding most of their strategies completely useless and the buy-and-hold salesmen aren't finding many takers either.
Second-quarter earnings reports will start hitting the wires soon and we'll be watching them closely. Good reports could reverse this recent decline for a while. Any hints at weakness will likely send this market into a tailspin and we'll be moving more into cash and other safe areas.
June's employment data was worse than expected and now the mainstream media is coming to terms with having to admit the recovery is slowing. 125,000 jobs were lost in June. Private-sector employers added 83,000 jobs, but that was not enough, even with some additional government hiring to offset the 225,000 temporary census workers' jobs that came to an end.
The president was quick to get in front of a camera and trumpet the decline in the unemployment rate from 9.7% to 9.5%. He said the numbers indicate we're moving in the right direction. Hmmm....
The reason the unemployment rate dropped is because more than 650,000 people gave up looking for work and left the labor force. The president and his advisors know this. Our economy needs to be creating about 100,000 jobs a month just to keep up with population growth. It will have to produce 200,000 jobs per month for several years to get us back down to pre-recession unemployment rates of around 5%-6%.
As more and more people get discouraged and quit looking for work, the unemployment rate will continue to drop, but the number of people needing help will continue to rise. I don't think a 7% unemployment rate with an additional 2-3 million people looking for food, shelter and medical care is much of an improvement.
Home sales plunged in May following the expiration of the tax credit. Mortgage defaults are once again on the rise, up more than 35% from this time last year. Consumer confidence has fallen, as have factory orders. The average work week was shortened and hourly wages fell. This is the "right" direction?
Are we on the brink of another depression? One very compelling and opinionated article on this was written earlier this year by Gerard Jackson for BrookesNews.com. Reply to this e-mail and I'll send you the link if you want to read the whole thing. His basic premise is that the Great Depression was a perfect example of what can happen when governments defy economic laws.
His summary states: "The myth that Roosevelt in anyway promoted economic recovery is just that - a myth. His ignorance and constant meddling gave the US its longest and deepest depression in its history. Unfortunately Obama and his advisors have so far given every indication of being equally as ignorant as Roosevelt and every bit as inclined to meddle with the economy."
How long will we allow congress to ignore basic laws of economics and continue spending money we don't have on programs that only put off the pain of dealing with the situation for a few months? Government spending and government jobs are not the answer. They take more cash out of the economy than they put back in. Wealth redistribution at less than 100% efficiency is unsustainable. I know not all of you agree with me, but no one yet has been able to convince me, with real math, how this can possibly work.
Fewer and fewer people are working private-sector jobs. That means fewer and fewer people are going to be responsible for paying more and more taxes. We'd better get used to it. According to some projections, we're already past the point of no return in terms of being able to "recover" our way out of this mess. Sorry kids, the America your folks have left you is broke.
As a P.S. to this Commentary...yesterday I had to say, "Good-bye" to a 51-year-old friend who suffered a massive heart attack while riding his bike. He was, by all outward appearances in excellent health. The plaque build-up in his arteries told a different and deadly story. Whether you knew Kurt Anderson or not, the world was a better place because of him, and will be for quite some time as those whose lives he influenced grow up and old. I was reminded as I sang a song during the memorial service that had been requested by his widow and sons that he had asked me to sing that song several times in the past but I never quite got around to it. Pick one thing you've been putting off and get it done this summer...especially if it relates to your physical or financial health. |
