"When times are tough, you tighten your belts," the president said. "You don't go buying a boat when you can barely pay your mortgage. You don't blow a bunch of cash on Vegas when you're trying to save for college."

Today we saw how an entire nation is “blowing a bunch of cash on Vegas” – or rather, the equities markets.  Take a look at the following Dow chart from today:



Notice how the market dropped over 50 points from the opening bell.  Then the unemployment report came out showing a “drop” to 9.7%.  This caused the Dow to recover all of its losses.  Then investors digested what was actually IN the unemployment report and the market went back down 50.  Lunchtime hit and the Wall Street traders succeeded in recovering 25 points of the 50 point drop.  Then the bottom fell out of the market.  It dropped over 160 points!  Part of this was a realization that the European Union is in a major crisis.  Then 3:00pm EST hit and the market erased the ENTIRE 160 point loss to finish the day up 10!  This was attributed to a “better than expected” Consumer Credit report.  That’s baloney.  It was  “Vegas Time” – and the “dealers” (big banks) taught people how the game is played.

The 9.7% unemployment number is fictitious.  The “drop” can be attributed to two things: 1) People falling off the unemployment list because all of their benefits have been used up, and 2) The Federal government hiring people.  There was also a small uptick in temporary jobs.

The Unemployment Report shows a “non-seasonally adjusted” U-6 (broadest) unemployment rate of 18.0%.  Needless to say, this is not a good number.

Financial analysts were expecting December Consumer Credit to drop $9 billion.  The number was actually a drop of $1.73 billion.  Most people think that less credit being paid off is a bad thing, and that the financial market would hate the news.  Actually, it’s exactly the opposite.  Credit = money = debt.  A smaller drop in consumer credit translates to more credit (money, debt) still circulating in the economy – which helps against the deflation monster, and causes stocks to go up.

December was the 11^th month in a row where consumer credit has declined.  This is the longest streak since records began being kept in 1943.

November’s Consumer Credit report initially showed a record drop of $17.5 billion.  This was horrendous.  However, we found out today that the number was actually WORSE.  The new November revision is $21.83 billion.

The G-7 committee is meeting this weekend (France, Germany, Italy, Japan, United Kingdom, United States, and Canada).  They’re meeting in the vacation hotspot of Iqaluit, Nunavut, which is approximately 200 miles from the Arctic Circle.  Maybe they think that will cut down on the possibility of citizens with pitchforks and torches…
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Watch for these indexes to drop:

Chinese Shanghai Composite Index: 2,939.40 (change of 10.03% from July 20, 2009 base value of 3,266.92)
Shenzhen Stock Exchange Component Stock Index (SSE): 11,917.14 (change of 10.94% from July 20, 2009 base value of 13,381.22)
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Here are today’s numbers for the economic indicator:

1) Gold = $1,065.00
2) Silver = $15.15
3) Dollar Index = 80.44
4) Oil = $71.19
5) S&P 500 Index = 1,066.19
6) 3-month Treasury Bill yield = 0.09
7) 3-month OIS = 0.15

HEI = 32.72

(A value of under 100 indicates deflation, while over 100 indicates inflation – as referenced to Sept. 12, 2008…the day before Lehman Brothers collapsed)



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Here are the numbers for the day:

Dollar Index adjusted indexes:
Dow = (10,012.23) x (0.8044) = 8,053.84
S&P 500 = (1,066.19) x (0. 8044) = 857.64
Nasdaq = (2,141.12) x (0. 8044) = 1,722.32

3-month Treasury: 0.09

2-year Treasury: 0.76

10-year Treasury: 3.57

30-year Treasury: 4.52

2-yr vs. 10-yr Spread (Target > 273): 281 basis points – (Danger Zone)

2-yr vs. 30-yr Spread (Target > 369): 376 basis points – (Danger Zone)

3-month LIBOR: 0.25

3-month EURIBOR: 0.66

3-month OIS: 0.15

TED Spread: 16 basis points

LIBOR/OIS Spread: 10 basis points

Dollar Index: 80.44

Volatility Index: 26.11

JPY-EUR Exchange Rate (Target < 115): 122.0806

JPY-GBP Exchange Rate (Target < 145): 139.5986 – (Danger Zone)

JPY-USD Exchange Rate (Target < 90): 89.25 – (Danger Zone)

USD-EUR Exchange Rate (Target < 1.25): 1.3678

USD-CNY Exchange Rate (Target > 7.0): 6.8264

Warmly,

Brad

Comments or questions?  brhamill@hamill.com

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