Sunday, January 17, 2010

Update/Comments 1/16

Upon the advice of one of the best there is, I've decided to put $4000 into IBM, which today is at $131.78; this represents 30 shares; they are at a very low p/e and most of their earnings are abroad, which seems to be doing quite nicely. I'll put a stop loss @ $120 and a goal of $147.

Meanwhile back here in Hooverville, the misery continues, The latest unemployment report listed a loss of only 85,000 jobs, which actually would be better news.. if it were true:

"The reason why unemployment, as per the Household survey, stayed at 10% and "only" 85,000 jobs are reported MIA in the Payroll survey can be found in the labor force numbers. From November to December 2009, the "persons not in the labor force" category went up by 843,000 (over 1 million when not seasonally adjusted), and now stands at 83,865,000. The vast majority of those singing off, i.e. not actively looking for work, are people who can't see any jobs anywhere in their environment. The worse the economy gets, the fewer people are counted as unemployed. It’s a lovely invention, but it's also an awfully perverted one"

Reporting the true unemployment in the US used to be accurate; it was called the "U6" measurement. The Gov't does'nt officially report this anymore since the Clinton Administration changed the rules, but a few websites still calculate it, and the real unemployment rate is 17.3%.. ie.. a "Depression Lite" as I like to think.

In other news, Venezuela debased their currency by half last week. Locals went on a shopping spree of epic porportions in response. Soon enough, with their price controls, long lines will be formed for the basics of life. This is a nation that was once prosperous. It used to have about $40 billion in reserves; this number is down to at least $6 billion; this currency move is likely because (at least in part) because the reserves are now non-existant. Oil production has dropped by a third in the last few years. This is the picture of a banana republic imploding. But it gets worse; according to the BIS, Spain's banks are knee deep in loans to Venezuela.. and Spain is already in terrible shape. This is called contagion:

"We see from this that the problems in Venezuela are soon to be the problems in Spain. Not only are their banks exposed to the trade credits outstanding but the exporters must have been making a fair buck in selling the stuff to Venezuela that are behind these credits. So the sovereign risk story in Venezuela is soon to become a sovereign risk story in Spain. The great sucking noise of credit contraction is continuing. Today it is Viet Nam and Venezuela; tomorrow it will be with those that trade with the weak ones. Sooner or later there will be no strong ones left. As this process progresses it will rise to the top"

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