Bearish News

These two charts, via ContraryInvestor.com (subscription), show another side of the jobs equation. The first shows overall labor participation. The last 10 years have not been kind, and declines in the overall % of employed Americans have accelerated. Just wait till the baby boomers all retire on Social-Security and Medicare.

The historical data is interesting, especially the big jump during the 1960’s-80’s. Presumably this is due to the shift from one-worker to two-worker households, as more women entered the workplace.

The second chart shows the # of weeks the average person has been unemployed. Not pretty, as you can see. Eventually many of these people become discouraged, and are no longer counted as unemployed, as they are not “actively” looking for work.

So while November’s “surprise upside” #s were less-bad, the employment situation is still ugly. And much of November’s relative rosiness was due to seasonal adjustments and temporary Holiday jobs.

Buckle up and be ready for a double-dip. It seems inevitable, to me at least. The real test comes if/when the Fed stops buying Freddie/Fannie debt Spring 2010, as they currently plan to.

I’m convinced the programs will be extended once it becomes clear just how dependent this “recovery” is on government printing. Once they announce the “unforseen” need for continued bailouts and printing, inflation expectations will rise.

My guess is that Bernanke/Geithner, et al, will feign shock when things turn south as the current programs expire. But do they seriously expect the real markets to be take over after ending a $1.25 trillion MBS crack-binge?

The term must-read gets thrown around a lot. I’m guilty of overusing it at times.

But I appreciated Obama’s Big Sellout so much, I bought a 2-year subscription to Rolling Stone right after reading it. That will bring the total number of magazines I subscribe to two.

Matt Taibbi’s latest is an important piece. It goes beyond partisan politics, pointing out how guilty both parties are. He lays out the web of connections between Wall Street and D.C.

He explains how they are responsible for past bubbles, and are in the process of blowing new ones. I’ll post the intro, but read the whole thing if you have time (and pass it along):

Barack Obama ran for president as a man of the people, standing up to Wall Street as the global economy melted down in that fateful fall of 2008. He pushed a tax plan to soak the rich, ripped NAFTA for hurting the middle class and tore into John McCain for supporting a bankruptcy bill that sided with wealthy bankers “at the expense of hardworking Americans.” Obama may not have run to the left of Samuel Gompers or Cesar Chavez, but it’s not like you saw him on the campaign trail flanked by bankers from Citigroup and Goldman Sachs. What inspired supporters who pushed him to his historic win was the sense that a genuine outsider was finally breaking into an exclusive club, that walls were being torn down, that things were, for lack of a better or more specific term, changing.

But then he got elected.

Read the rest here. A good piece to forward to die-hard Obama fans still clinging to Hope. Hey, I voted for the guy too. But it’s time to abandon ship. His administration is a complete disaster. It’s a continuation of rampant corruption and kick-the-can economics.

It would send a nice message if everybody bought a newsstand copy. Or a subscription to RS. Let them know we want more of this kind of reporting. Matt Taibbi’s last piece, The Great American Bubble Machine, woke millions up to Wall Street’s looting. If we don’t support the few groundbreaking outlets left, they’re all gonna go the way of Portfolio.

The smart money is betting on moral hazard. From Reuters:

He highlighted the attractive yields on credit issued by GMAC due in Sept 2011, the former General Motors automotive financing company that the U.S. government propped up at the end of 2008.

By Paulson’s thinking, the government involvement is equivalent to an explicit guarantee on GMAC’s finances.

‘So instead of buying (a) Treasury bond which yields 84 basis points, I can buy GMAC which is almost, I consider equivalent to a government bond and I can get 11 percent. That is why we have allocated so much money to this particular security,’ he said.

John Paulson knows the deal. The government has made a policy of bailing out bondholders, and not forcing them to take losses.

He knows this policy is a long-term disaster (hence the gold bet). But if you can’t change it, why not profit from it? A great example of why it’s dangerous to be short (for now). Back in April I warned bears about this problem in More Bailouts and Inflation Loom.

Paulson: Gold is the best currency

Everybody knows Paulson likes gold. In the same article he he offers some interesting insight as to exactly why he’s so bullish.

Even as credit and equity markets looked attractive, he did reiterate his concerns that over the long-term inflation will be a problem because the government’s mountain of stimulus cash will be difficult, politically, to withdraw from the economy.

‘Therefore we are concerned about high rates of inflation in the future. As an investor I became very concerned about having my assets denominated in U.S. dollars,’ he said.

‘So I looked for another currency in which to denominate my assets in. I feel that gold is the best currency.’

hat tip TraderMark

Blankcheck von Moneypants, heh.

If you could ask Bernanke a question, what would it be?

Here’s mine:

What makes you believe the current recovery is sustainable? What happens if/when the Fed stops buying toxic MBS, the FHA no longer guarantees 25% of all U.S. mortgages, and Freddie/Fannie stop gobbling up the bound-to-fail mortgages?

With 25%+ of homeowners underwater, it’s fair to say that the housing market would crash as rates shot up. I’m pretty damn sure the Fed will not end their massive MBS buying-spree next Spring, as the original gameplan calls for.

So what’s the plan, Bernanke? Print, print, print. Delay the inevitable crash, and attempt to inflate our way out of it. Until our lenders really catch on.

Tarp II also seems inevitable, whether it’s 2010 or 2013. Much depends on whether the banks are actually required to value their assets at realistic levels. And whether they are forced to bring toxic off-balance-sheet assets into daylight. If/when they are forced to acknowledge the crap that exists outside their balance sheets (and the ones they used as Fed collateral), things could get ugly.

I’m following the FASB vs. Bank Lobby fight at CFO.com. It’s a crucial one to watch.

Nasty inflation is becoming more likely by the day. If gold continues to pull-back, we may get a great buying opp soon.

Posted by an American serviceman in Iraq.

See the discussion at Reddit.com, where I found it, for more info. The submitter used the title “Equipment bought for Iraq, paid for by the US, stretching as far as the eye can see – this is just some of it”

Here’s the submitter responding to questions about who took it, and why they created a new acct to do so:

Oh no, Im in the military and I took this photo myself. Posting things that are controversial can get you in deep shit (of one form or another). Things over here are very political.

This was too moving too keep under wraps though.

Further down the thread he says, “I got in trouble with a blog my first few months here, hence the paranoia.”