Recession Looms, Unemployment Indicators, More on $100 Oil, Words of the Year, and More!

The unemployment rate has now risen 0.6% in less then 12 months. Historically speaking, any rise of more than 0.5% in less than 12 months also indicates a recession:

We report these data under the assumption that the Labor Department is releasing accurate numbers… during an election year.

“Politically, it is extremely important for the Bush administration to keep the monthly jobs changes on the plus side, because a down month or two could provide the timing base needed for the National Bureau of Economic Research to call a recession, and such is not wanted in an election year. As with the month before, the reported monthly payroll gain was statistically indistinguishable from a monthly contraction.

“Keep in mind that beyond the standard gimmicks, the Bureau of Labor Statistics simply can report any jobs number it desires. The current message from the reporting seems to be that the administration does not want to show a recession, but it would like Mr. Bernanke to ease further.”

And if last week was any indication, the stock market won’t be faring very well in 2008, either:

The new year sell-off accelerated on Friday after an exceptionally dismal job report… the S&P 500 shed 2.5%; the Nasdaq fell 3.7%.

Grab the Zoloft. It could be a tough year.

“I think we’ll break records in this department. My bet is earnings shrink in the first quarter, too.”

(If you seek to diversify your portfolio during these troubled times, we recommend Capital & Crisis. Chris has a slew of great value picks in nonmainsteam sectors, like water businesses, natural resources and wealth-amassing conglomerates. For the price, it can’t be beat. Learn more here.)

But don’t worry, faithful consumer… all is well. Sharp announced yesterday that it will soon begin selling the world’s first commercially available 108-inch LCD television:

What recession? Sharp has yet to reveal the cost of this, umn, large TV… but you might want to begin that refi application this afternoon.

Yay.

Word of the year… in 2008?

“Here’s a story that’s flown under the radar,” notes Dan Denning.
“Citibank told customers in December that outgoing wire transfers from the bank’s accounts would be limited to just $2,000 per day.

“But wait, there’s more,” Dan tells us. “Last week, under the guise of responding to a wave of fraud from automated cash machines, Citi also announced a limit on cash withdrawals from its ATMs in New York City.

“And you thought the money in your bank account was yours.

“There could be a perfectly reasonable explanation for all of this. But the simplest explanation is almost always the best. Citibank is in desperate need of its capital. The best way to keep your customers’ money is to prevent them from taking it out of the bank. It’s a kind of low-level, mild-mannered capital control.”

$100 oil is “not necessarily very high,”
said OPEC president Chakib Khelil on Sunday.

The new leader of the world’s largest oil cartel believes inflation-adjusted highs in the 1980s were “between $102-110.” Thus, $100 in 2008 is no big deal.

“The surge in price will probably go on until the end of the first quarter of 2008,” Khelil predicted, “before stabilizing during the second quarter.” How he comes by this view… he didn’t say.

“It would take a lot of economic slowing to arrest the squeeze between growing demand trends and depleting supplies,” notes our own oil adviser, Byron King. “Oil supplies are so tight… between sabotage in Nigeria, bad management in Venezuela, raw depletion in Mexico, Peak Oil in the Middle East…. the slightest amount of bad news — a hurricane in Gulf of Mexico, a pipeline leak in Alaska, a bomb blast in Iraq… would send prices up even further.”

If you’re not reading Energy & Scarcity Investor, the drawdown in the world’s oil supplies could really disrupt your investment strategy. Or… give it a boost… for example, you might want to consider:

The only pure play on California’s “slow volcano” power supply.

“Shoot straight in 2008!”

“We had our best year in 2007… It was much easier to [find good help] than in a boom year, when we could hardly keep up.”

“There appears to be a 25-year logarithmic support trend line for the Dow Jones industrial average that goes back to September 1982,” writes a third reader, doing a little tea-leafing on their own.

“This past Friday (Jan. 4), the Dow’s sharp drop appears to have been stopped almost exactly by this 25-year log support trend line — please see my chart:

Click here to zoom in

“The Dow is at a very major long-term technical ‘reckoning’ point and is testing the support line. It remains to be seen in the next week or so (especially on Monday) whether the Dow passes the test by bouncing back up off the support line or fails the test by continuing to drop through it.

“According to my calculations, the support line is rising at approximately 12.3% per year (on a compounded basis). IF — and this is a very important IF — the support line holds for the rest of 2008, the Dow will close the year at a worst-case value of approximately 14,340.

“However, given the deteriorating macroeconomic fundamentals, it is difficult to predict whether the support line will remain unbroken.”

Cheers,

Addison Wiggin
The 5 Min. Forecast