Home About Archives RSS Feed

@theMarket: 9 Percent Unemployment, Can 8 Percent Be Far Behind?

Bill Schmick

Sure, I'm jumping the gun a little, but I suspect in the weeks ahead economists will begin forecasting a percentage point drop in joblessness by the end of this year. Granted, that number is nothing to celebrate, but at least it is moving in the right direction.

For investors, however, that slow decline in unemployment does have a silver lining. You can count on the Federal Reserve to keep short-term rates at historic lows and keep QE II going until hiring accelerates. That means stock prices are going higher and Treasury bonds lower.

As I wrote last week, the conflict in Egypt is a sideshow, although it did get gold and silver off their proverbial backs. Dusting off my technical charts, I believe a bottom in gold at $1,300 a ounce or there about is reasonable. We almost hit that level ($1,318 a ounce) a week ago.

Silver also dropped to the $26.50 range and has risen every day since then. From the price action, it appears that the corrective phase of precious metals is just about over. Buyers take note that oftentimes, commodities will tend to re-test their lows; so if you are buying here save a little cash in the event these metals re-test.

Egypt has also caused oil to spike to my price target of $100/bbl.Six of the world’s ten most-used oil markers are now in triple digits. Crude oil futures for March delivery, the marker most often used in the U.S. media is still "only" $89-$90 a barrel so we still have a little room on the upside before I become cautious on oil in the short term.

Last quarter's earnings season is winding down and once again there were more beats than misses. The latest batch of economic numbers (if sustainable, and I think they are) indicates that the present quarter should see an acceleration in earnings overall. U.S. chain store sales jumped 4.2 percent in January, despite the horrendous weather. The auto manufacturers are generating such strong profits (a 17 percent rise in January) that suppliers, lenders and dealerships are beginning to feel new life in their own financial performance after a two year hiatus. That trickle-down effect should impact America's Main Street very soon.

On the global front, it's a similar picture with 15 of 24 of the world's major economies registering a surge in manufacturing. Factories throughout the U.S., Asia and Europe are experiencing growth, but it is also leading to higher commodity prices and therefore inflation. China and other developing countries have complained that U.S. policies (specifically the $600 billion QEII) are the root cause of these price increases. Federal Reserve Chairman Ben Bernanke denies that and instead blames any inflationary pressures on the runaway growth among emerging market economies.

Bottom line: every country in the world is playing the emerging market game, exporting their way back to prosperity. Those countries that have traditionally had that field to themselves suddenly find themselves in competition with the big boys. They can bluster, complain, even make veiled threats, but given the realities, they need us as much as we need them.

We had another big week in the markets as the averages rebounded from the Egypt scare, although all of the gains came on Monday and Tuesday. This year seems to be shaping up like the last, where most of each month's gains occurred on the first day or two of the month. In 2010, Mondays were especially kind to investors, but we will have to see if that trend persists again this year.

I'm bullish, although readers should expect pull backs at any time. Some of them may be quite hefty but that won't derail what I see as a continued upward bias in all the averages with industrials, commodities and technology leading the pack for now.

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or e-mail him at wschmick@fairpoint.net. Visit www.afewdollarsmore.com for more of Bill's insights.

2 Comments
Tags: metals, manufacturing, exports, Egypt      

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
SVHC Surpasses Fundraising Goal For SVC Campus
MCLA Green Living Lecture: Framing Messages to Make Them Appealing
Veteran Williamstown Prudential Member Not Running Again
Pittsfield Panel Rejects GE Fund Salary Requirements
Adams Police Seek Help Identifying Armed Robbery Suspect
BCC Fine And Performing Arts Virtual Information Session
North Adams Committee Recommends Against Hydrant Ordinance
North Adams Airport Commission to Hold Scheduled Meetings
Pittsfield O&R OKs HR Reclassification, Three New City Positions
Baker: Mask Mandates Essential Even as Vaccines Distributed
 
 


Categories:
@theMarket (360)
Independent Investor (450)
Retired Investor (33)
Archives:
March 2021 (1)
March 2020 (5)
February 2021 (8)
January 2021 (5)
December 2020 (6)
November 2020 (8)
October 2020 (7)
September 2020 (6)
August 2020 (6)
July 2020 (10)
June 2020 (7)
May 2020 (9)
April 2020 (9)
Tags:
Housing Europe Euro Metals Currency Federal Reserve Rally Stock Market Debt Economy Congress Bailout Recession Retirement Election Jobs Greece Selloff Deficit Pullback Commodities Europe Wall Street Interest Rates Crisis Stimulus Debt Ceiling Markets Fiscal Cliff Taxes Banks Energy Japan Oil Stocks
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: How Will Wall Street II Play on Main Street?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: Will the Municipal Bond Massacre Continue?
Recent Entries:
The Retired Investor: Supply Chain Chaos
@theMarket: Higher Interest Rates Clobber Stocks
The Retired Investor: SPAC Attack
@theMarket: Stocks Versus Bitcoin
The Retired Investor: Clubhouse Comes of Age
@theMarket: Financial Froth Infects Markets
The Retired Investor: Gambling, the Vice We Love
@theMarket: Stocks Regain Momentum
The Retired Investor: The Business of Space
@theMarket: A Roller Coaster Market