Friday, September 04, 2009

Emini Futures Trading / Prosperity for God's People - Friday September 4, 2009

(QQQQ)(DIA)(SPY)(.SPX)

Complete broadcast.



Unemployment Was NOT a Green Shoot

But quickly, let's look at today's unemployment numbers. This was not the way one would want to celebrate Labor Day. Unemployment rose to 9.7%. Some take comfort in that unemployment in the Establishment Survey (where they call existing business and poll them) was only down by 216,000, which admittedly is better than 600,000 but is still a very bad number. Rising unemployment is not the stuff that inflation is typically made of. And there are reasons to think the picture may be worse than that. Here are a few thoughts from David Rosenberg:

"What was really key were the details of the Household Survey, which provide a rather alarming picture of what is happening in the labor market.

"First, employment in this survey showed a plunge of 392,000, but that number was flattered by a surge in self-employment (whether these newly minted consultants were making any money is another story) as wage & salary workers (the ones that work at companies, big and small) plunged 637,000 — the largest decline since March (when the stock market was testing its lows for the cycle). As an aside, the Bureau of Labor Statistics also publishes a number from the Household survey that is comparable to the nonfarm survey (dubbed the population and payroll-adjusted Household number), and on this basis, employment sank — brace yourself — by over 1 million, which is unprecedented. We shall see if the nattering nabobs of positivity discuss that particularly statistic in their post-payroll assessments; we are not exactly holding our breath."

The ISM numbers came out this week and, while manufacturing is up, the service industry (which is far larger) is still contracting, and the employment elements in the surveys show employers are still planning to cut jobs. Think about almost 11% unemployment next summer in the middle of the political season. Watch the competition among politicians to demonstrate they care and "get it." And watch as they spend your money to show how much they care.

And from the above mentioned Liscio Report: "As we outlined back in May, financial crises hammer employment, resulting in average losses of 6.3% followed by a long flat line. We hate to point it out, but we're currently down 4.8% from the December 2007 onset, and if US job losses in this recession stay in line with the major financial recessions in "advanced" countries studied by the IMF, we stand to lose another 1.8 million jobs. Some of those will likely be taken out in upcoming benchmarks, stimulus money has some clout, and no one has a reliable crystal ball, but we need to remember where we are in a painful cycle if we see some hopeful flickers."

That would take us to well over 11% unemployment.

Interesting statistic. Want to know where wages are rising? Think federal government workers. The gap between civilian and government workers was less than $13,000 nine years ago, but now is almost $30,000. Inflation has been 24%, but government wages are up 55%. According to a recent release from Rasmussen Reports, a government job remains "the top employment choice in today's economic environment." (chart from Clusterstock)

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States, counties, and cities are having to make deep cuts, in both jobs and programs. Today's Wall Street Journal talks about the cuts in state after state. States cannot print money like the US can, so at some point they have to either raise taxes or cut spending to balance their budgets. Raising taxes just makes it less profitable for businesses to remain in your state. There is a very high correlation with high state taxes and unemployment.

The following chart shows how rapidly income taxes are falling. Sales tax receipts are down. At some point voters are going to demand that their federal government show some of the same restraint that households, cities, and counties are being forced into. My bet is that next year raises for government workers, even those in unions, will come under attack. They won't be cut, but watch as political backlash builds.

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Without federal stimulus, the GDP of the US would have been over minus 6% in the second quarter, not the minus 1% it was. The third quarter would be flat to down and not the plus 3% it is likely to be. Housing and autos will turn down as the stimulus on those markets goes away.

I think it is very possible we will see a negative GDP by the first quarter of next year. Unemployment will still be rising. Deflation will be more of a problem, because the housing component (the largest portion of the consumer-inflation index), based roughly on rentals, is clearly under pressure. While we don't have enough space this week to go into detail, savings are up and consumer spending is down. Without the stimulus, things would be much worse.

Here's the kicker. Expect to see a big push for another large stimulus package next spring (and maybe sooner), as the effects of the current one wear off. The government wants to bring back demand by getting consumers to spend again. And you can count on unemployment benefits being extended. A tax holiday on Social Security taxes below a certain income? In the short run they can do it, but at a long-run cost.

It is going to be hard for a Democratic administration to not push for another large stimulus. That is what Krugman and his fellow travelers will be pushing. Classic Keynesian thinking wants both for the government to run large deficits and for the central bank to print more money. Remember, last year I said that the Fed would print a lot more money than they are talking about in the current plans. They are going to have the cover to do so, because deflation is going to be seen as the problem.

Next week, we will look at money supply and the velocity of money, savings, consumer demand, and more as we further explore the complex molecule that is deflation.

But one last thought, as I have had a lot of questions on gold recently. "Isn't gold telling us that inflation is coming back?" The answer is no. Since the early '80s the correlation between gold and inflation has dropped to zero. Gold has had very little to say in the last 30 years about inflation.

But what it may be saying is that paper currencies are a problem. Gold is going up not only in dollar terms, but in euros, pounds, yen, and more. My view is that gold should be seen as a neutral currency. The dollar is the worst currency in the world, except for all the others. Is it possible the Fed will not respond and print more money next year? Sure. And the dollar could rise as deflation kicks in. The only time we saw the purchasing power of the dollar rise in a sustained manner was during deflation, in the last century.

The race is not always to the swiftest or the fight to the strongest, but that's the way to bet. And right now, my bet is the Fed will print money to fight a double-dip recession and deflation. And gold would be one way to play that bet.

John Mauldin, Best-Selling author and recognized financial expert, is also editor of the free Thoughts From the Frontline that goes to over 1 million readers each week. For more information on John or his FREE weekly economic letter go to: http://www.frontlinethoughts.com/learnmore

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5 Bible Verses Every Christian Should Know

Let me start by saying that it was difficult to create this list. Think about it, I am trying to pick the best verses from the Bible about a particular topic. Are there really best verses, or are there just those that have impacted us more than others? I tend to think the latter.

So, this list is just that. These are the 5 verses that, even as I just scratch the surface of understanding them, have revolutionized my financial life. Each one of them has had a strong impact on many decisions in my life. I hope you allow them to impact you as well.

1. Philippians 4:19

And my God will meet all your needs according to his glorious riches in Christ Jesus.

If you have lived much life at all, you are probably well aware that putting your trust in the economy, your employer, or your bank account is not a good idea. They are all fair-weather friends. They all can be helping you greatly one minute, and then the next everything has changed.

God, however is always faithful. That is why we should always be trusting Him as our supply! It doesn't matter if there is a financial crisis, if you get laid off, or your 401k loses 37% - God will still supply your needs. Just like He promised.

2. Malachi 3:10

Bring the whole tithe into the storehouse, that there may be food in my house. Test me in this," says the LORD Almighty, "and see if I will not throw open the floodgates of heaven and pour out so much blessing that you will not have room enough for it."

It is a bold step of faith to start tithing. Cynics sometimes argue that tithing is not required in the New Testament. I actually agree, since our salvation is no longer based on works, but on faith in Jesus. But there is no escaping the truth that tithing opens the door for blessing that can not be opened without doing it. From my own personal tithing experience, I can attest that I am so overwhelmingly convinced beyond any shadow of a doubt that tithing increases blessing, that I will never live any other way.

3. 1 Timothy 6:10

For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.

This verse is so often misquoted that it is almost laughable. Money is not evil. The love of it is. Having a million in your bank account doesn't mean that you love it. Having $5 in your account doesn't prove that you don't.

For example, Warren Buffett has billions in his accounts, but he is giving almost all of it away to benefit the lives of others. On the other hand I have heard stories of people getting killed over a matter of $20. It is a matter of the heart that only God can judge.

4. Acts 20:35

In everything I did, I showed you that by this kind of hard work we must help the weak, remembering the words the Lord Jesus himself said: 'It is more blessed to give than to receive.'

Giving sets us free, while hoarding entraps us (James 5:2). Giving changes the lives of others (John 3:16). Giving brings blessing back to us (Luke 6:38). Giving allows us to store up treasures in Heaven rather than here on the earth (Matthew 19:21). Giving really is fun - we need to be in on it.

5. Proverbs 22:7

The rich rule over the poor, and the borrower is servant to the lender.

The freedom of being debt free has always been so incredibly enticing to me that I have been willing to give up a whole lot in exchange for it. The last 3+ years my wife and I have been diligently chopping away at it, passing up opportunities to spend as frivolously as some of our peers have done. Getting out of debt is not easy and often requires a fight, but the freedom that comes with it is so worth it.

All verses from the NIV

Faith Based Investors!




1 comment:

  1. Very thoughtfull post on prosperity .It should be very much helpfull.

    Thanks,
    Karim - Creating Power

    ReplyDelete

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