12.12.08

12.12.08      

            This week seemed to be loaded with companies announcing job cuts. Bank of America said it will cut up to 35,000 jobs over the next three years. Some of those of course will be at Merrill Lynch which they just bought a few weeks back. Rio Tinto will cut 14,000 and Dow Chemical 11,000. That amounts to 1,200 per state as an average. And that is just from those three companies. There were many others also making similar layoff. Add these to the 573,000 new ones reported last week and you can see why continuing claims hit a 26 year high of 4.43 million, also a 26 year high. Divide that by 50 and you see that, on average, 886,000 workers are now out of work in each of the 50 states. Add to that the big problems the Auto Sector is facing and the Housing Sector is still in the dumpster, you can’t find anything to smile about. If things don’t turn around soon, we are starting to think that a Depression could be in the cards in the foreseeable future. It is very bleak looking isn’t it? At one point last week, the one and three month T-Bills went negative for a while. That means that some investors were willing to pay the Federal Government to hold their money for them. Add to that the Governor of Illinois trying to sell the vacant Senate seat left by Obama, and the former head of the Nasdaq Market admitting to a fraud of 50 billion dollars, one doesn’t feel very warm and fuzzy does one?

            In order to get a grip on the market, you need to step back from it and see what it is doing on a longer term basis than just day by day. These 200 to 400 point moves on a daily basis can be confusing. First let’s look at it from a week to week movement and we will use the Dow throughout this study.  Starting in August the Dow has been down 14 out of 18 weeks. It started at 11,734 and as of 12/12/08 it stands at 8,629. In one week in September it dropped by 1,874 points. Now let’s move the time frame to monthly intervals and see what it shows us. So far this year the Dow has been up on 3 months out of the 12 and July was one of the three and that just barely made it into positive territory. December still has a shot at it but is now down about 200 as we are today. The last up month was August. As you can easily see, it has not been a good place to be unless you are very aggressive and played the short side of the market.

            We of course are going to stay right where we have been since August 28, in CASH.

Till next time

The MTA Staff