Jobs number changes nothing long term.

Jobs number this morning gives the market a short term relief and might keep us from a catastropic decline this morning. However the internals of the numbers notes that the only reason the core number is down is that 193000 people quit looking for work, just quit trying. 117K in increase comes nowhere near the 250K plus that we need just to break even on new people entering the workforce. Underlying all this is again the concern the jobs number is manipulated for poliical concerns. This morning's number might be just that to keep the markets from further panic. One other note that the numbers for July are adjusted upward for 100000 teachers being out of work due to summers off and that says this number does not tell the whole story. Smart investors this morning will keep on the sidelines. If the market opens higher that will likely be followed by investors selling into the uptrend to get out of more stocks. Traders are still overleveraged.

Friday's Market preview

As I ended yesterday's column I pray I am wrong, so far I am not wrong. Thursday was brutal.

  

The market here is telling us we can no longer put off the huge pile of debt in Europe. Part of what happened today is nothing more than people fleeing Europe with their assets for US Bonds and cash. NY banks had to begin charging fees for all the cash that flowed into their coffers today because they simply do not have anything to do with the money such as lend it out when no one is borrowing for anything in the US. Europe is about to implode, countries such as Greece, Ireland, Portugal, Spain, and Italy, is are in deep trouble with entitlements and some one there needs to move forward with some leadership on reducing their social programs. Note Italy is the eight largest economy on earth so frankly there is no bailing out for them so this is now serious business. They need a fireman. The European Bank is the fireman there and he is not in sight.

 

The USA desperately needs leadership as well. God bless him, but our current president is lost in his job. Frankly way over his head and worst yet does not know it.  If we do not get our government in fiscal order we are headed the way of Europe.  He continues to want to tax more, and regulate more, and that only scares investments in new business and the resulting jobs running for cover. You demagogue people who work hard and invest and this is what you get.  Some pro-growth policies would help right now but with current leadership none is on the horizon. Add in a media. both print and electronic,  that has so many people employed who are clueless to what is going on here either and therefore you get nothing but gobley gook from them.  However kudos to CNBC today that after a embarrassing swim in the default panic pool settled down and did some good work today.

 

Friday's market continues to worry me here. As I mentioned yesterday we could see just total carnage Friday.  A good employment number will only convince people that the number has been politically altered to help the president. A bad number will just add to what people already believe.  If by chance there is some small rally early on, be alarmed as it will likely be nothing but a dead cat bounce.  Basically a move upward at the open will offer the chance for some who want to get out to finally get out and will likely end in a cascading market towards the end of the day. Kicking the can down the road is over, the can is kicking back.

 

I am now down over 10% and much of that occurred during the last hour when people just wanted to get out at whatever price they could get. As I told a couple of people today if you have not sold by now it is too late. Fear and uncertainly reign and one is best served not to allow fear to take hold. Friday could bring a good bit of margin calls for people who just trade so that will also be in play as well. In the end the market will bottom somewhere were it actually supposed to be in an economy which is quite bad. 

 

I still have three stocks in the green and in a market like this you look and see which stocks are holding up in panic selling.  SO, BCE, DUK, JNK, LO, MO, NNN, and as mentioned before the agency REITS are holding up well and fortunately all are in my hedge fund.  Of course I have some others that are getting killed price wise.  I will be up early Friday taking in the jobs report and preparing to see what happens. History could be in the making.

 

The beach is still calling....

 

Friday could be our generation's 1929.

Finally it seems that the market, traders and investors, have realized our economy is in deep deep trouble. I have opined on this endlessly for months now and others have warned as well. Wall Street went merrily along either not wanting to know or not caring.  The last couple of weeks of trading have been ugly due to this situation. Europe is in a mess, socialism and it's unsustainable entitlements, which have been there all along, now seem to be clear to investors who are exiting in mass today from the continent to US Government bonds. The only reason that is happening is that not only is that the last refuge, but some see the new sentiment in Congress towards budget control as hope there might be hope of no default here. European markets just closed and the day was butt ugly.

 

Friday starts with a 8:30 AM jobs report, which I noted earlier is sometimes silly in it's lack of being real or maybe more worrisome being politically altered to suit current administration needs. In any case everyone  knows unemployment is high and going higher, so all that is needed to have a big blow off in stock and bonds is for the job reports to confirm what everyone knows.  Friday could be like pouring jet fuel on a fire.  There is the possibility of a couple thousand point drop or more in one day as everyone heads for the exits at one time. Simply put it could be our generation's Black Friday in 1929.  I am a believer in generational theory and the theory is history repeats about every 4 generations, or about 80 years, because that is long enough to forget lessons learned. We are about 80 years hence.

 

If you ask me what to do I do not know. You have to decide what assets you have at risk and how much you can stand going down. Best guess is to hold onto your blue chip stocks and bonds as selling now is useless. If you have cash you could get a once in a lifetime opportunity to make some serious profits, but expect those to be years out as this is a economic event not a market event.  Good quality companies with good yields will survive as we will always need those services and products. My hedge fund holds higher dividend stocks and very safe muni bonds, plus serious amounts of options hedged against underlying securities. I am down about 8.1 % currently,  and fortunately some positions seem to be holding up since yields tend to keep floors under stocks.  I do have my limits and if they get reached will cash out and take losses and head to the beach leaving the rest of you to deal with the carnage and Obama's continuing mismanagement.      

 

I pray I am wrong.     

Monthly Payment or Pay Down

Got a call couple of weeks ago asking if I thought it was a "good move" for the someone on the phone to refinance their current home loan.  The current loan was just under 6% and they had about 18 years left to pay off the loan. I opined that it would likely be a positive since both 15 year and 30 year loan rates were at least one percent less than their current rate.  The question went something like this, "we want to refinance at a cheaper rate and extend our loan back to 30 years so as to lower our monthly payment and therefore have lots more cash to spend each month"  I noted that the idea was not very wise and suggested that they refinance at 15 years with a rate over 2 percent less than their current rate and still would have a lower payment and quicker loan payoff.  My idea went to deaf ears.

 

I know from experience and what I am told from professionals in the loan business that the idea presented to me is a regular part of the business. People are continuing to use their home as cash registers. This time not using home equity loans, but using lower rates to the same effect. When will people learn? When will we get back to old fashioned thrift and doing things that do not put your life, home, or job at risk? You would have thought that the just past financial downturn would make people afraid to take such chances. But frankly the problem is that the US government plays backstop to everyone who make decisions such as this and so no one pays for these decisions expect taxpayers. The person ends up not paying their mortgage and the government steps in rescues them by stopping foreclosures so why not take the risk I suppose.

 

Years ago the idea was to have your home loan paid off before you retire.  I remember people having home loan paid off document burning parties. But not anymore. The most important thing today is a lower monthly payment forever, but never pay down your home loan. What are these people going to do when they tire of working, have nothing saved to retire, and still have 10 years or more to have a paid for home. Trust me there is not enough money that the government can tax to cover your bad decisions then.

 

So the answer is get wise and work towards having a paid off home loan sooner rather than later. Take advantage of this lower interest environment to increase your paid off principal, cut your years of payments, and get freedom from debt.  Today you can get a home loan for 15 years at 3.5% or less, take advantage of this once in a lifetime opportunity to refinance or even buy a home. A home to live in, not something to buy and hold for flipping.

                  

Wednesday Market Action

The small gain today, which occurred basically in the last hour is likely nothing more than a bounce back from the heavy selling Tuesday.  I would be very leary of wading back into this pool thinking the pullbacks in stock are a buying opportunity. This market reminds me of the old "Lost in Space" series, as in "danger, danger, Will Robinson."  As I opined yesterday the stocks that would likely hold up here are tobacco and agency REITs and that is exactly what happened today.  CTL, Centurylink is getting taken out back and shot currently and that is likely overdone. Many analysts downgraded the stock when it slightly missed estimates and reported more than expected costs in it's latest Qwest merger.  CTL is a good company, run well, and in my opinion a good buy here. It might go down further later this week, but you would be hard pressed to find a safer 8.3% dividend now.  If you are into more risk taking my favorite ERF is treading near $30 now and pays a 7% dividend and you will likely do ok there as well long term. It is also based in safe Canada.

I continue to look ahead with great concern over Friday's job report. I frankly no longer trust the government to report true employment and wonder sometimes if the number is not politically motivated. However anyone with any intelligence knows employment is down significantly and if the report shows such we could see some serious selling. Might even be conpitulation, or just all out get out of the market before the world ends selling. We are down almost 1000 points here in the last week and fear reins so more selling is certainly possible.  I posted a couple of weeks ago for investors to look at hiding in high dividend blue chips and if you did so then you are likely better off today than most, but it is still painful.  I had four green stocks today versus three yesterday out of 21 current positions, so I feel your pain.

Are You Scared Yet?

If you are not concerned about the current direction of the market you do not have nerves of steel you have your head in the sand. Normal movement like this is generally a market event, but I am becoming more of the opinion this week's movement might be a reaction to the economy. The economy is not in recovery, it might even be in a second dip recession. The concern there is as I opined in a posting a week or so ago the Federal Reserve is out of bullets. Obama has spent money at the federal level that their is no more money to spend on any stimulus. Lastly, the states are in restrictive mode as they tighten their belts to make revenue meet expenses.

Frankly I see nothing that makes me believe the economy is going to recover either.  If, and this is a big if, the jobs report on Friday is really bad as it could be you could see a wholesale abandonment of the stock market by investors and a sell off of gigantic proportions. I am talking 1000 plus points or so. The business environment in this country is as bad as I have seen it in my over three decades of investing and watching the market. Much of this originating from Washington DC, that is become outright hostile to business. Be it heightened regulations, burdensome health care requirements, or just the President telling us day after day how evil any business is period,  No one is investing in expanding their business in this environment and no one is hiring either. For some reason some people in this country believe business regulation and taxation is a bottomless pit.

This evening I had a conversation with a small business owner who told me he not only is not hiring he is laying off to continue to reduce costs ahead of more regulations that could restrict his business. His comments about getting smaller to avoid being a target of Washington politicians make me cringe. That my friends is what we are facing and I see no relief before November 2012, if then. God help you if you do not have a job currently, maybe I should say God help you if you do have a job now too.

Let's also make a point here about the dismal work of the media in the last week, they were so busy talking up "default" that they did not take time to do some investigate work to see this coming. Not sure if this was the media being in Obama's pocket or just lazy. but surely this will should teach any of you left who do not believe me when I say much of the media is useless this should do it.

What is an investor to do in this situation. When I look at my screen of stock and option positions and see only three green on the screen I too get nervous. My three green are GS, DO, both bought correctly and my all time favorite safety stock SO.  Nothing is my portfolio is radically down yet, but many are on the edge. Fortunately my hedge fund is built to withstand situations just like this and survive. However I would advise no buying here and certainly not until after this Friday's job report. As I mentioned in a post within this week the agency REITS look good here and I still believe they do if you are looking to hide somewhere.  NLY, HTS, and AGNC are all solid buys even in this environment. I own HTS, and am considering AGNC. What is not to like with a security that hold value in this market and pays a dividend of 15% plus.  Oil and tobacco could get interesting here if the market finds it footing.  But the old buyer beware is certainly the point here.

              

Six months of blogging

Never in my mind did I think I would be blogging six months after starting this blog. Frankly the original purpose of this blog was to prove to myself and the person who encouraged me to start it that no one wanted to read my opinions and certainly not read about trading activities in my hedge fund.  So here I am six months later since the February 1, 2011 start date and I have been proved wrong.  The person who suggested I do it is enjoying my mea culpa.

 

The numbers truly surprise me over 2200 people have taken a look at the blog at one time or another from over 10 countries, the US, Canada, United Kingdom, Germany, Russia, India, China, Singapore, France, and The Philippines.  Get this over 19 different software browsers, I had no idea there were that many browsers out there.

 

Highest readership, Aunt Wilma's Tomato Sandwiches, Long Time Gone-Scotch Bonnett Pier, Bernanke Washington Greece and You, Common Sense on the Price of Oil and Gasoline, and Jobs Report and My Conversation with a Small Businessperson, are the five highest postings and in that order. Strange that two non-financial posts would be the top readership of a financial blog.

 

Monthly regular readership is now over 500 and growing. Add in the fact that I was contacted about three weeks ago about a newspaper in North Carolina that wanted to publish these postings in their publication. Currently I prefer not to do that since I would be required to do something regularly and this is not supposed to be work. I might offer the postings to publications that would like to publish them on the condition they take it as I have time to do it and gratis. But I will have to think long about that.  I do know that doing this blog has lead me to doing irregular, soon to be regular, spots on a local radio station. 

 

Anyway thanks for the readership and frankly the ego boost. But trust me this is not for ego as the time spent doing this could be spent elsewhere since my time since retiring has been at a premium. So I begin the next six months of posting to this blog with financial matters, hedge fund trading and reports, and some fun stuff too. We will continue this journey and see where it goes. I have been blessed in many ways in this life, but the readers of this blog have added a yet another blessing since February 1, 2011.