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  • Another Strong Jobs Report, But Economy Remains Weak

    Last Friday’s unemployment report for July was significantly better than expected for the second month in a row. This has led many analysts to upgrade their forecasts for growth in the second half of this year. Yet as I will argue below, forecasters often put far too much weight on one or two monthly economic reports that can be revised significantly in subsequent months.

    While new jobs were substantially above the pre-report consensus in June and July, let us not forget that job creation in May was almost non-existent, the lowest in several years. The fact is, the US economy continues to limp along at less than 2% growth.

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  • November Jobs Report Wasn’t So Great After All

    Today we'll take a close look at the November employment report last Friday, which was a positive surprise.  The 321,000 new jobs added last month was the highest reading since January 2012 and was substantially above the pre-report consensus of 230,000. The headline unemployment rate remained at 5.8%. The question is, will such job growth continue, or was this a one-month, seasonal anomaly?

    Yet not all of the news in the November jobs report was positive. While the headline new jobs number was 321,000, a deeper dive into the data reveals that there were only 4,000 more Americans working in November than in October (details to follow). Full-time jobs declined by 150,000, while lower-paying part-time positions increased by 77,000 – that’s not good.

    President Obama praised the jobs report and suggested that the economy is nearing full employment. The truth is, the economy is still far from full employment. The unemployment rate would have to fall to 5% or lower for that to happen, and it is not expected to do so anytime soon.

    And speaking of the president, rumors are swirling in Washington that Obama is seriously considering new sanctions against Israel, our strongest ally in the Middle East. The Obama administration is opposed to Israel’s decision to build new homes in East Jerusalem, and that this construction“undermines the peace process.” Now, apparently, they are considering sanctions against Israel. That is preposterous!

    Finally, our recent live webinar with Wellesley Investment Advisors is now available for viewing on our website. Wellesley invests exclusively in convertible bonds and is the only convertible manager we recommend. Whether you are knowledgeable about convertible bonds or not, I highly recommend that you watch this presentation.

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  • The Slowing Economy & the Fed’s Dilemma

    IN THIS ISSUE:

    1. The Economic Slowdown Continues

    2. Confidence & Employment Remain in Retreat

    3. Bernanke Announces Fed's Latest Plan

    4. Is Obama Planning a "September Surprise"?

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  • Largest Tax Increase in US History

    I reported last week that the Consumer Confidence Index plunged unexpectedly in June, and forecasters are still trying to figure out why the mood of the country turned so sour last month. Part of the reason is the fact that the Bush tax cuts of 2001 and 2003 are set to automatically expire at the end of this year. President Obama has said that he wants to extend the Bush tax cuts for all Americans except those households making $250,000 or more per year. Yet the legislation to extend the Bush tax cuts for all but the 'rich' is stalled in Congress, and Americans are worried that we will see the largest tax increase in history in 2011.

    We will also examine in detail why raising income taxes on the 'wealthy' is bad news for small businesses and job creation, especially with our fragile economy and high unemployment. For example, do you know that two-thirds of small business profits are generated by households making over $250,000 per year? That's according to the IRS. With taxes on this group set to rise from 35% to 39.6% next year (actually to 40.8% with the phase-out of itemized deductions), it's no wonder that small business owners are reluctant to hire new workers. President Obama has yet to figure out that soaking the rich does NOT result in higher income tax revenues.

    And at the end of this week's E-Letter, I will give you the results from our recent FINANCIAL LITERACY QUIZ. Over 6,000 readers took the quiz and most scored very well. Congratulations! I think you'll find the results very interesting.

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  • The Economy & This Rocky Recovery

    For the most part, the economic reports over the last month or so have been positive, including last Friday's 1Q GDP increase of 3.2% (annual rate). Most economists agree that the recession hit bottom in the middle of last year, and we have now seen three consecutive quarters of positive GDP growth. Yet while it would seem safe to conclude that the Great Recession is over (for now), economic growth will be handicapped all year by the continued housing crisis. Home foreclosures continue to increase at a record pace, including an unprecedented 367,056 properties in March alone. Thus, it is quite possible that the 3.2% growth rate in the 1Q will be the best we see all year. We will take a look at most of the latest economic reports in this issue, as well as the rapidly growing problem in home foreclosures.

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  • Are We Sure the Recession is Really Over?

    The announcement on October 29 that 3Q GDP surged 3.5% was seen as a confirmation that the recession is over. However, a closer examination of that report reveals that it was still a disappointing quarter for the economy, especially considering how much government spending contributed to the gain... The government reported last week that US worker productivity surged to the highest level in six years in the 3Q. Normally rising productivity is a good thing but this time, much of the increase is due to massive layoffs -- fewer workers are having to do more work -- and many companies are laying off the best and brightest, such as scientists and engineers... The unemployment rate surged to 10.2% in October, the worst in a quarter century.

    This week, we will examine all these issues at length, plus I have included a very worrisome analysis from economic forecaster Nouriel Roubini regarding the US dollar and what he sees as the next credit crisis on the horizon. Finally, I have included an article from the Wall Street Journal that lists the most insidious parts of the new healthcare bill that just passed - prepare to get very angry!

    Finally, our thoughts and prayers go out to all of the families of the innocent soldiers who were killed and injured in the tragedy at Fort Hood that occurred on November 5.

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  • Economic Recovery vs. Rising Unemployment

    This Thursday, all eyes will be on the 'advance' estimate of 3Q GDP, and most analysts expect it to be positive and confirm that the US economy emerged from the recession in the July-September quarter. Yet even if the GDP report is positive on Thursday, we all know that the unemployment rate (currently 9.8%) continues to rise and is likely to go up for at least several more months.

    If the government counted everyone who is unemployed, or is working part-time because they can't find a full-time job, the real US unemployment rate was 17% as of the end of September. So even if the recession 'officially' ended in the 3Q based on this Thursday's GDP report, this economy is far from out of the woods. And if the dollar continues to fall, even more dire consequences (ie - a double-dip recession) are likely to follow. It's a lot to cover in one letter, so let's get started.

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  • The Stock Market Conundrum

    The market goes up, the market goes down. Will we have a sustained rally, or is this just a 'sucker rally' that will soon end with a significant downturn? As we look to the experts to help answer these questions, we find that their predictions are all over the map. Many quantitative models are saying the market is severely overbought, while those relying on fundamental analysis say the market is fairly priced. It seems that the more 'expert' opinions we get, the more confusing it becomes for investors to know what to do.

    The biggest question for investors who are currently on the sidelines is whether they have missed the majority of the bull market rally, or if it still has a way to go. This is especially true in the case of Baby Boomers, whose retirement nest eggs have been hit by two major bear markets within a decade. They need the growth that the market has the potential to produce, but can't stand another major down market, which may also be in the cards.

    This week, I'm going to discuss the various viewpoints both for and against a sustained market rally. As you will see, both sides are supported by facts, figures and historical precedent. They can't both be right, but both could be wrong should the market be headed into a broad trading range.

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  • Is The Recession Over? Don't Bet On It

    Over the last month, we have seen several encouraging economic reports: 2Q GDP was down considerably less than expected (-1.0%); the unemployment rate officially fell slightly in July to 9.4%; and the ISM manufacturing index posted a nice improvement last month. As a result, many forecasters have declared that the recession is over. This week, we will look at the latest economic reports which suggest that we've seen the worst of the recession, but do NOT mean the recession is over. I will also reprint excerpts from a recent economic and market analysis from Dr. John P. Hussman, of the Hussman fund family, which I think you will find interesting.

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  • Second Stimulus - Good Money After Bad

    We will touch several bases in this week's E-Letter. First, we take a close look at the latest economic data which has a few 'green shoots' but remains mostly negative, and further supports my view that we will not be out of this recession for some time to come. Second, I share my thoughts on why a second major stimulus package is not a good idea, and my thoughts on what the government should do instead. And finally, I share with you the best article I've seen on why the official monthly government 'unemployment rate' report is so under-stated. It all should make for interesting reading.

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  • Where To Turn If You Lose Your Job

    The US unemployment rate soared to 9.4% in May, the highest level in 25 years, and is on track to top 10% by the end of the year. Over six million US jobs have been lost since this recession began. With those chilling numbers in mind, I thought this would be a very good time to revisit a topic I have written about in the past, the Johnson O'Connor Research Foundation, which scientifically tests people's natural aptitudes to determine what career paths would be best for them. Everyone in my family has been through the testing, including me. If you or someone you know has lost his or her job, a trip to Johnson O'Connor could prove to be invaluable. Also, if you have kids or grandkids that don't know what to pursue in college, get them tested - you'll be glad you did....
  • Signs of the End of the Recession - Maybe

    While most of the latest economic reports remain quite bleak, we have seen a few modestly positive indicators over the last few weeks. In addition, the latest Wall Street Journal survey of 53 economists concludes - on average - that the recession will end by the 3Q of this year. If correct, that would be very good news. Yet the leading economic indicators (LEI) and the unemployment rate continue to worsen month after month. Thus, I continue to believe that we will be in this recession for the rest of this year. The Federal Reserve's latest Beige Book assessment agrees, unfortunately. This week, we will take an in-depth look at the latest on the economy, the credit crisis and when we might see an end to this recession. Finally, I will discuss the recent rally in the stock markets, and whether this is a new trend or simply a bear market rally. Let's jump in....
  • Why The Stock Markets Are Collapsing

    The US economy is in the worst recession since the Great Depression, and the latest economic reports have been even worse than expected. The US stock markets continue to collapse, with the Dow and the S&P 500 down well over 50% since the peak in October 2007. It is estimated that $10 trillion in wealth has disappeared in the US alone as a result of the stock market bust. Investors around the world are asking WHY? In my opinion, a big reason why the markets are collapsing is the trillions of dollars in new federal spending that President Obama has enacted. Plus, his record $3.55 trillion federal budget for 2010 will likely result in a deficit of over $2 trillion for fiscal 2010. I believe that this enormous spending, plus his other liberal plans that he intends to put in place this year, are serving to drive stock prices much lower than what should be happening. This is a lot to cover in one letter, so let's get started....