Financial Sense Blog

The 9.4% unemployment rate in December 2010, an elevated reading, is down from a high of 10.1% in October 2009. The recent cycle low for the unemployment rate was 4.4% in May 2007. Although each business cycle is different, it is still worthwhile to recall how fast the jobless rate has declined in the past 60 years after each recession.

The speculative position in Gold and Silver has decreased in recent months while the speculative position in other markets such as Copper, Oil, Wheat, and Corn remains near recent highs.

Attempting to arrest a deepening crisis, governments all around the world have bailed out businesses and companies by transferring bad debts to the public books. Although these moves have provided some current stability (after all, governments are much less likely to default), the long-term consequences may be dire.

The recent correction in precious metals and miners has led some investors to question whether they missed the ultimate top in the bull market for gold and silver. Conversely, this would lead to the question of whether the dollar and other fiat currencies have bottomed.

The S&P 500 edged slightly above the high end of my price range target of 1289-1292 last week. However, then it backed off and broke its seven week win streak. There was no technical damage done as the index held above the previous weekly low. The S&P did lose momentum and a close below the lows of last week in the 1270 range would be a negative.

This article is not about pounding my chest, it is about a learning process that many investors fail to take the time to learn. It is easy to grandstand and speak in analogies when discussing the financial markets, but in the end the name of the game is to buy low and sell high or sell high and buy low depending on which direction a trader expects an underlying to move.

I suspect much (but not all) of the GOP’s new spending cut proposals and the beginning of political season will end up as ungovernable, destabilizing rhetoric. Even so, this approach has key elements that illustrate in spades that the days of continual stimulus and backing up the Gumnut truck to fill the trough are numbered. Federal supports in key areas are being scaled back.

Arrears in pension funding are about to move to the front row of the State and Municipal financial problems. Bankruptcy will be a primary means to get out from under the liabilities... But who will be the first to seek protection?

The following is commentary that originally appeared at treasurechests.info for the benefit of subscribers on Tuesday, January 11th, 2011.

If that should be the case one would have to expect that a drop in demand for equities (and other things) is going to have to occur at some point this year. It could be as early away as four months (the last month of QE will be of no significance). This creates a problem for policy makers. They can’t let stocks find their own level. After all, it is now proven that we need stocks going up for the economy to expand, it must work the other way round. Right?