Running_Man
Thinks s/he gets paid by the post
- Joined
- Sep 25, 2006
- Messages
- 2,844
But the unemployment rate, as bad as it was, doesn't indicate the extent of the pain being felt by job seekers. The report showed 27% of the 13.7 million unemployed Americans have been out of work for more than six months, the highest percentage of long-term unemployed among the overall pool of jobless in the 61 years that reading has been tracked.
Almost one out of six members of the labor force are either unemployed, working part-time when they would prefer to work full-time, or are out of work and have become so discouraged that they did not look for work and thus not counted in the unemployed total
The above is a quote from the "positive" news received on unemployment today. While I still am positive short term on stocks for now, I see storm clouds ever increasing on the horizon.
With the long term treasury rates beginning to make meaningful increases, the long term bull market in 30 year treasuries which dates back to 1981 when yields were in the vicinity of 16 percent probably ended earlier this year with a spike down to 2.5 percent. With a need exceeding 100 billion per month to fund the US government, increases in the long-term rates will become more and more of an issue as the year unfolds and thoughts of 2010 needs become acute. The loss of trillions in housing will not be helped by an increase in mortgage rates. This is simply the key area to keep an eye on, future events are extremely effected by the housing issue.
Increases in taxes to fund these deficits as well as state deficits will sap the economy of needed umph despite the level of government "stimulus". Listening to state politicians on Chicago radio speak of not even addressing the deficits they see for this year, later as the fiscal years come close to an end, the drastic actions needed will become painfully clear to all.
And I am now wary that the rally may not last through the summer as I previously thought. If the 30 year treasury exceeds 5 percent for a yield in the coming months, I will take that point to drastically reduce my stock holdings once again. The key offset for me to watch is whether inflation is imminent as well, and for that I am watching the price of gold and silver. If those prices fall as bond yields rise, I will take that as a sign inflation is not a serious concern medium term and deflation may be much more likely, if however they start another run over $1,000 per ounce on gold then serious inflation may be a near-term issue. I personally just can't see the US running a 3 percent average inflation for the next 10 years with all the extraordinary acts in the last 18 months.
However, this has been a very fun rally to be engaged in and I sure hope it doesn't end soon. Not taking any stock profits just yet.