Just one minute----
Jobless rate bolts to 14-year high of 6.5 percent in October; 240,000 jobs cut.
The new snapshot, released Friday by the Labor Department, showed the crucial jobs market quickly eroding. The jobless rate zoomed to 6.5 percent in October from 6.1 percent in September, matching the rate in March 1994.

Unemployment has now surpassed the high seen after the last recession in 2001. The jobless rate peaked at 6.3 percent in June 2003.Web Link

Big money investors and hedge funds trade on expectations, not news. There was a big run up in the stock market in the week before election when they expected Obama to win the election. Now that he has won the election and there are no more catalysts to drive the market up, the hedge funds are taking profits. In this financial environment, the small time investors who only trade on hard news are repeatedly getting burned.

But, Obama is the messiah, the savior, or so the media thinks. They blame what is happening this week on Bush who they are going to continue to blame long after Obama is in office.

Remember, that they won't be able to blame Obama for anything because that would make them look .... racist!

Sharon, guess you missed the investing class where they taught "buy on the rumor, sell on the news..." That run-up in stocks right before the election - you think that was because investors thought McCain would pull it off?

Sharon,

[Portion removed by Palo Alto Online staff.]

This is unlike any presidential election I can remember. We are not in a typical recession. The global economy is imploding. I can't believe you can be so biased that you cannot think rationally. Oh wait, I have seen a lot of your other posts.

The election was a brief diversion from the otherwise dismal state of the global economy. Given that BO isn't even in office yet, I can hardly think that he can be blamed for this mess. This is a very deep hole.

I suppose Sharon's next post will blame Obama for Katrina, 9-11 and the 'weapons of mass destruction' crock of bull too. Get a clue.

Hey Sharon, the real reason the market tanked yesterday was because everyone who celebrated their hope for a brighter future on Tuesday woke up to realize that BUSH was still president on Wednesday! God help us for the next 75 days.

I think we’re in for, best case, a 2 year recession.
we’ll see decreasing GDP in both 2009 and 2010.
During these two years, we may see 1 or 2 quarters when GDP ticks up slightly, but not enough to overcome the other quarters of contraction.

Conventional wisdom is that equity markets head up 6-9 months before the end of a recession.
So, if CW holds, we’d see an uptick in mid 2010, 18 months from now.

DJIA is trading at a Price to Earnings ratio of about 11. Median historical PE is about 15.
But we’re going into a deep recession that could see corporate earnings contract by 5-10% annually.
That would put the PE target in the range of 5-10. Let’s split the difference and say 7.5 This would mean the DJIA would bottom out just below 6000. It could go lower, of course.

This sounds very pessimistic, but I think there are (at least) two big shoes left to drop:

1. Consumer deleveraging. The ability to borrow against home equity to support increased consumer spending is over.
There is little equity left to borrow against, and no debt availability even if there were.
The market has probably priced in this loss of consumer capacity.

But I don’t think the market has priced in the fact that consumers not only can’t get more debt, but they now have to pay off the debt they have accumulated.
This will necessarily cause a decrease in discretionary income, leading to a drop in consumer spending.
I don’t think this has yet been priced into the market.

Retailers and consumer product companies are in tremendous pain.
This pain will spread to investors once this fundamental consumer weakness is exposed.

2. Pension insolvency. Defined benefit pension plans are a trainwreck.
There are about $1.6 trillion in pension liabilities (there is some controversy about the right number, since this is based on actuarial assumptions, but let’s run with this number.
The sinking stock and bond market has whacked the fund assets to the point where they’re 90% funded.
That’s a $160 billion shortfall.

But it doesn’t end there.
As pension funds fall, their corporate sponsors have to make additional contributions to the plans.
This further depresses earnings, putting more pressure on stock prices.
That leads to further declines in funding ratios, leading to more contributions, etc.

If companies like GM start to file bankruptcy, this mess could land in the Pension Benefit Guarantee Corporation, another government-guaranteed financial entity.
Another bailout could be needed, as well as a cut in benefits, leading to more erosion of consumer spending.

—–

So, while I believe the economy will flush all of this bad crap out of the system over time, we’ve still got a way to go.
The biggest danger is still a deflationary spiral that shuts down big chunks of the economy, so the Fed still has to pump dollars into the economy to combat this possibility.

But eventually, these dollars have to get sucked back out or we will have a big inflationary spike.
The market is predicting more inflation; the yield curve has really steepened in the last couple of weeks.
This will further increase long-term borrowing costs, and hurting investment and economic growth.
And so on.

This is going to be a pretty rough ride. Like most hangovers.

Of course we are in a recession. That has been obvious to most economists and business leaders for months. Unfortunately, certain government officials continued to say "the economy is fundamentally strong" and refused to do anything, thus making it much much worse. During that do nothing time period, the stock market DJIA dropped 30% and hundreds of thousands of Americans lost their jobs.

Today, the new President holds a little meeting with some of his advisors and says very little at a press conference, but the stock market DJIA still goes up 250 points. Wall Street is already liking the President better than the old one. On the other hand, even Sarah Palin could probably do better than the lame duck.

The War Against Larry Summers

For Treasury Secretary:

“It’s hard to imagine the Obama administration wanting to have to devote the time necessary to sell the country on the idea of a guy who made himself famous at Harvard by suggesting that girls can’t do math,” said liberal MSNBC host Rachel Maddow.

I suppose Miss Maddow will now oppose any cabinet candidates who are Mormon, Catholic,Evangelicals,or Orthodox Jews on the ground that they support the traditional definition of marriage,which being a lesbian, she does not like. Pass her the smelling salts quick.

What a joke, 4 years of identity/ grievance politics to endure

Sharon--you are a sad, pathetic, bitter woman--instead of hoping for a change for the better in america and wishing our new president well, you are engaging in your usual anti-Obama crap (remember in another thread you predicted he would be impeached or resign before the end of his first term).
Get a life, Sharon--it;s over--McCain blew it and Plain has crawled back into her lipstick-filled cesspool.

Sharon

That is a very incisive piece of economic analysis looking forward, quite brilliant actually, or you an economist?

The only thing I could add to your analysis is the uncertainty of catastrophic terrorists events.

I know the market does not factor those in until after the event, but I would like to hear your approach to that, anyway thanks and well done.
I thought your comments on the gay activist trashing of Larry Summers was funny but and right on, Lord help us if " those people" influence the decision re the Treasury, we would be stuck with barney frank and that would be a train wreck real fast.

Well done, I hope you keep posting despite the deranged unhinged reaction you got from some nutcase above.

THE DEBUT: OBAMA APOLOGIZES TO NANCY REAGANWeb Link

well not the best start talking about voodoo, but his economic policies may be different

In 1993 a group of U.S. Senators did a study that showed that for every dollar collected in taxes Federal tax laws added another 40 cents of cost borne by private industry. And that is just for the tax regulations.

So, aside from the actual tax revenues there is are the very substantial costs of Federal regulation – and that always goes up. It never comes down. “Deregulation” of any kind is a myth. In the famous cases of the airline and banking industries of the 80;’s there was no real “deregulation” of the industries but merely a relaxation of certain limitations on how they could do business. In doing that business they had to comply with the same regulations as before – and those increase in complexity nearly every year.

You can bet that the Federal Govt that spent 19% of the GDP in 1952 had far less impact on the private sector than the one that spent 19% in 2003.

Rahm Emanuel Was on Freddie Mac Board When They Cooked the Books
Of course this would only matter of Emanuel were a Republican and he was appointed White House Chief of Staff. But since he has that protective D after his name, it won't matter.

President-elect Barack Obama's newly appointed chief of staff, Rahm Emanuel, served on the board of directors of the federal mortgage firm Freddie Mac at a time when scandal was brewing at the troubled agency and the board failed to spot "red flags," according to government reports reviewed by ABCNews.com.

According to a complaint later filed by the Securities and Exchange Commission, Freddie Mac, known formally as the Federal Home Loan Mortgage Corporation, misreported profits by billions of dollars in order to deceive investors between the years 2000 and 2002.

The entire board was later accused by the Office of Federal Housing Enterprise Oversight (OFHEO) of having "failed in its duty to follow up on matters brought to its attention."


We are of to a good start in term of fiscal responsibility/ NOT

Emanuel may have a little problem with paying his taxes.

Hmmm.

President Elect Obama - himself a connected, Chicago insider who has benefited from questionable land deals - may find it difficult to explain why his very own Chicago-based chief of staff doesn't pay property taxes like the "little guy" he claims to represent.
Or perhaps allowing his wealthy friends to avoid taxes is part of Obama's trickle down redistribution economics.
It's certainly the kind of "change" Illinoisans can believe in...since they are quite familiar with it there in the federal indictment land of Daley,
Blagojevich,
Madigan,
Jones,
Cellini, Rezko, etc., etc.

Yes we can rob the treasury now

Media Watcher,

"Remember, that they won't be able to blame Obama for anything because that would make them look .... racist!" Your post is racist.

During CNN's broadcast of Barack Obama's first press conference yesterday, a corner of the screen flickered with a live feed of the Dow Jones Industrial Average.
As Obama spoke, the Dow average lost more than 100 points.
In his brief statement and question session, the president elect of the United States said next to nothing about anything. T
here were no signs of the Yes We Can positivism of the campaign in his low-key, even halting manner.
What little he did say may well signal the beginning of a new phase in Obamamania: No we can't.

TJ - is there an insight in there somewhere? Obama is ratcheting down the (unreasonably high) expectations so that he can achieve some kind of success. That's sounds - ummm - smart?

No one ever said this would be easy my friend. No need to be a sore loser - we are all on the same side now that the election is over.

And of course, perhaps you turned off the TV - the Dow went up 150 points in the last half hour of trading, after the press conference was over.

The stock market went down at the beginning of Obama's press conference because he said we "only have one President at a time" and his options were limited while the other guy was still in office. However, shortly after the press conference, investors realized that Obama was a big step up from the current administration and the stock market flew up 250 points for the day.

You will not find anyone who was and is more opposed to the ideas, vision ( or lack of) and policy proposals of Barack Obama and his party leaders than I.

But, he is now going to be the President of the United States, so those of us who oppose him are going to have to get over it, and not do the idiotic, childish stuff of the left ( anyone for trying to name a sewage plant after BO? Or is there a village in Illinois missing it's Idiot?).

You will note that the Media will not now smirk when discussing Obama's ideas, look down their patrician noses when they interview any Dem, nor will they do endless harping on any verbal errors he makes or idiosnycracies of speech or mannerisms. ( of which there are many).

In other words, he will be given the good will that a President deserves, and I think we all need to aim for that..putting behind the tremendous bitterness and anger we feel for the crap we have put up with for the last 8 years. It is time to show who is mature, and maybe we can teach the far left what behavior is expected of adults. ( We can always dream).

BTW, how many years salary are you willing to bet that you won't catch Bush disparaging Obama,..like Carter and Clinton did to Bush? How much do you want to bet you won't catch Republicans flying to other countries to undercut Obama's foreign policy decisions? How much do you want to bet that you won't see Republicans filibustering and blocking EVERY move by Dems? It is because we believe in the voice of the people, and we know that the people just said they want to lurch left. So be it.

So, at this point, let's just all hope that Barack can decipher data, or at least have good advisors who can, and shift course every time it is apparent that our economy worsens with a policy.

That said, how much do you want to bet that there are NO tax increases after all? Maybe even some tax breaks to stimulate the economy? This guy really doesn't want to be the first Black President..and the first President of this century to take an economic slowdown and turn it into a full-blown recession. ( Like the one Clinton did which the press never mentioned..and which Bush reversed.)

Say what you will about this guy, he is no fool, and is not going to ruin our economy, I believe.

BTW, I believe the DOW went up because he said that he would look at the data and adjust course as needed with policies,...and no new taxes.

THANK GOD there was also no more mention of the market crashing idea of using our taxes to buy up everyone's retirement plans...which would have meant a buy out of about 25% of our stock market and an inevitable collapse of the market.

THAT is why the stock went up. Even I started to get a little "hope" back that he and his party aren't going to destroy this economy.