Unemployment Rate at a Five Year High

Bill is still off at his publisher’s ‘jamboree’ in Annapolis, but no matter – today, there is another kind of jamboree all together. That’s right, it’s what our good friend Chuck Butler has coined Jobs Jamboree Friday! Get out the party hats!

The Labor Department reported today that the United States lost more jobs than forecast for August and that the unemployment rate rose to a five year high. The data also indicated that home builders, financial firms and the service industry has trimmed down their payrolls – a clear sign that the effects of the housing slump and subsequent credit crisis are being felt.

“We’re losing jobs in all kinds of industries now,” Roger Kaubarych, chief U.S. economist at UniCredit Global Research in New York, said in an interview with Bloomberg Radio. “This is the clearest recessionary signal we’ve seen.”

The rest of the world is getting the signal as well…markets across the globe are sinking. Apparently, they still had some hope in a speedy U.S. recovery, but no such luck.

Last Friday marked the 10th U.S. bank failure of 2008, as regulators took over Integrity Bank (ah, the irony). How anyone believed the U.S. was on the road to recovery is beyond us.

Bill Gross of Pimco didn’t do much to squash these global fears as he made a plea for further government intervention (i.e., releasing more cash). “This rarely observed systematic debt liquidation is what confronts the U.S. and perhaps even the global financial system at the current time,” Gross wrote on Pimco’s website. “Unchecked, it can turn a campfire into a forest fire, and a mild asset bear market into a destructive financial tsunami.”

Amidst all of this, the U.S. dollar is holding its ground. This morning, the greenback hit an 11-month high versus the euro following news of slumping industrial output from Germany, and that the ECB cut back its growth forecasts.

“The dollar is strong, and getting stronger everyday,” writes Chuck Butler.

“This dollar strength has all been orchestrated by the U.S. government…and that’s fine and legal. Too bad they didn’t let us all in on it so we could book profits and look to buy at cheaper levels, eh?

“As I said when the 2nd QTR GDP report printed, it looks like the markets ‘believe’ in the miracle of 2nd QTR growth. But if that’s the case, then why is everyone still of the belief that there will be a global slowdown? If the U.S. is hitting on all 8, why would we see a global slowdown? And if there’s no global slowdown, then commodities should be the belle of the ball once again, gold would be back to $1,000, and the dollar circling the bowl once again.

“You can’t have it both ways. You can’t say that the U.S. is outperforming the rest of the world, and there won’t be an collateral global growth because of it.

“But, I don’t believe it. Which would mean the dollar buying is all being done with smoke and mirrors.

“Let’s go back to mid-July… The euro has hit $1.60 again and there’s just not a lot of love going around for the dollar. What the markets are feeling (in July) is the weight of the world on their shoulders, because of the rot on the vine with financial institutions…

“Then, almost miraculously the dollar got up from its death bed… And the weight was lifted, but by whom, and why? We found out just last week that it was a coordinated intervention by the central banks of the U.S., Japan, and Eurozone to prop up the dollar. And once the dollar buying got up some momentum, the Big Boy Brokerages were all touting the return of the greenback! But why did the U.S. feel it needed to intervene? OK, here’s what I think…

“‘The Boys’ saw the list of banks and brokerages on the ‘dead man walking’ roster. And they saw the dollar circling the bowl. If the you-know-what hit the fan with financial institutions, it would have sent the dollar down the drain, and who knows, it could have been the end of the greenback as we know it. So, they intervened to prop up the dollar in ‘preparation’ of what was to come, which would allow it to begin its decline from a higher level.

“That’s my story and I’m sticking to it!”

Short Fuse
for Markets and Money

Markets and Money offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, Markets and Money delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors. Founded in 1999, Markets and Money is published in 7 countries with a worldwide readership of almost 1 million people.

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