Markets and economyMONTHLY JOBS NUMBER TOTALLY SUCKS---IF RATES STAY HIGH COULD BE PROBLEM. EVERYTHING ELSE OK

Human behavior

When a blue collar guy gets laid off he goes home and screws (a revenge fuck or a depression lay), thus producing another baby. When a middle class guy or woman gets laid off they shop (living well is the best revenge), thus increasing debt and the cost of borrowing. Checking the numbers this week may back up my observation.

Everybody I've learned from has always told me that Consumer Confidence is just another stupid study by somebody earning a living by making stupid studies. There is no such thing as Consumer Confidence. The survey is a "snapshot in time". This means the people answering the survey just after an American soldier has been killed don't feel good while the people answering after we capture Saddam's sons feel great. It's a number nobody who knows anything pays attention to. Other thanto go long or short the S&P immediately after the report and bail after making score because everyone knows the dopes think the numbers mean something and will buy or sell based on it.

Interest rates remain high as bonds go on a fire sale. If you are confused on bonds go to this post below. I was WRONG last week when I said the dumb money had come into the market; it has not. It is still on the sidelines.

First, the jobless claims. They fell to 388,000 in the July 26 week, down from a revised 391,000 the prior week, the lowest level of jobless claims since the week of February 8th. What is really important here is that this is the second straight week the number has been below the 400,000 mark, something very good. BUT THE MONTHLY JOBS NUMBER SUCKS this is the true unemployment rate and it continues to show business shedding jobs. Don't kid yourselves, this is a bad number and must improve. No other number means anything until jobs are being created. "Outsourcing" of jobs might become the only real issue the Democrats have and they will pound this one hard.

GROSS DOMESTIC PRODUCT (GDP) second quarter (GDP) rose 2.4 percent on an annualized basis, up from a 1.4 percent growth rate in the first quarter. Very bad news for Democrats, which speaks volumes about that sad excuse for a party. Inside the number is the fact that inventories fell by a monster $18 billion. Add to that, cap spending is up especially on equipment and software. Demand is up 3%. Overall profits are up 6%, productivity gains up 5%, both up bigger than GDP. Bigger is ad budgets are up for 8th week and travel is up, and copper a huge industrial metal is up 33% from the lows. Democrats may now switch to the homosexual marriage issue in order to recapture power hoping a majority of us will switch orientation if we will only attend the "right" schools. Consumer spending grew 3.3 percent, up from 2.0 percent in the first quarter (Consumer Confidence report??? When middle class people feel bad they shop).

BIGGEST NUMBER BY FAR: Business investment rose 6.9 percent; compared to the prior negative 4.4 percent. Huge number. Biggest gain was in federal government spending rising 25.1 percent. That is the biggest gain since 1967, driven by a 44.1 percent jump in defense spending.

LIBERAL MEDIA SLANT: The employment figure is smaller because people are so depressed they stopped looking for jobs (when blue collar guys get depressed they go home and screw); things are actually horrible (repeated in each paragraph). The defense spending that helped boost the GDP is not likely to be sustained, and layoffs threaten consumer spending. The economic figures are bloated by the unconscionable war and can't be sustained. The "supposed turnaround in business investment" acutally reveals fragility in business confidence; they are just reacting not leading. Consumer spending DROPPED 0.1 percent in June. Mortgage rates are now over 6% which punishes all working Americans (they will drop in the next two weeks so you won't hear this cry for long). And the JOBS number proves.... (everything bad you can imagine); but as I've said for months this is the only number that matters. Unemployment is an Atomic Land Mine under this market

STOCKS: No change. A ton of money to be made. Select carefully based on fundamentals of the company, their debt, and the dividend yield. Dow well above 10,000 by Christmas (unless the ACLU succeeds in banning it, then by Kwanzaa for sure; it will be 11,000 by Ramadan).
Warning: use the NASDAQ 100 not the broad market and keep an eye on the S&P 600, which is the small cap index. I think IBD runs this daily if not, they run it every other day.

Finally, if you don't have a system that tells you to get out of a stock that drops below a certain point or tells you to get out with a 6 to 8 percent drop from buy in, you just plain don't belong in the market at all. If you aren't ready to bail out of three out of four picks right away you don't belong in the market. You are ALWAYS going to lose 24% of your money while picking a stock that pays dividends and rises several hundred percent. PERIOD. Now if you buy a stock at $20 that yields 4% (eighty cents) and it rises to $40 and still pays eighty cents you have made a big score if you have scaled out on the way up. You will own thirty to forty percent of the shares you originally bought at $20 (thirty shares at $40 means $1200 vs 100 shares at $20 equaling $2000) but you have taken at least $1,000 off the table and reinvested it. You have turned $2,000 into $2,200 plus dividend yield which is still 4% based at your buy in price if dividends haven't gone up. That's 10% on your money money in a few months without greed. An effective yearly rate of at least 40% and what is wrong with that?

Add at 1:00 PDT In response to many emails chiding me for the gutlessness of "scaling out", which is absolutely sound practice. It commonly called "pyramid" trading, meaning you buy many positions and by scaling out you will have fewer so on a diagram it resembles a pyramid.

This is the only way for a small investor to play this market. You must know how to do it and do it. Unemployment is an atomic land mine under this market. Here are some facts:
1. We have shed almost 3% of the total jobs during this recession. Think about that one.
2. The working age population has GROWN by more than three million.

Look at it this way, we have lost 2.6 million jobs and gained 3 million workers. This recovery, if it happens, will have to generate 5.5 million NEW jobs in one year. Not impossible but it will take a balls out recovery of more than 5% GDP to do it.

You dam well better invest using sound investing practices or you may find yourself on the welfare line.