Jobs Report, G-20 Aftermath, Two Sectors to Watch, Trading Grains and More!

by Addison Wiggin & Ian Mathias

  • Worst employment scene since 1983… why the stock market couldn’t care less
  • G-20 comes to an end… what you need to know, and a photo not to be missed
  • When all else falls, sin prevails… investing in naughty stocks during tough times
  • Which sector just had its best day in 70 years… and what it could mean for the market
  • USDA kicks off spring planting season… Alan Knuckman on how to trade the grains


First Friday of the month, you know what this means… time for the U.S. employment scene to hit a new low.

663,000 Americans lost their job in March, the Labor Dept. claims today. That puts the official unemployment rate up to 8.5%, the highest it’s been since 1983. March’s loss marks the 15th month in a row of net job losses. Since the recession began, the government estimates 5.1 million Americans have lost their jobs.

Today’s number stands in line with the jobless claims details earlier this week — a record 5.7 million people are currently filing for unemployment benefits.

  But from a trading perspective, as dark as this might sound, today’s jobs number was a nonevent. March’s losses were just a bit higher than the Street anticipated, and the small details were mostly in line with expectations.

The only real surprise came in the form of a big January revision. The government added 86,000 lost jobs during the month, to a January tally of 741,000. That’s actually the biggest monthly drop in 59 years. Such a number would have sent stocks to the woodshed back in early February, but since the revision is now so backward looking, there isn’t much traders can do. Clever trick, eh?

  The Dow held pretty steady on the employment news and opened down by a small margin, about 50 points.

  Investors might wish to sell today simply in light of yesterday’s rally. Stocks soared again Thursday, mostly thanks to the long-awaited mark to market accounting alterations. Major indexes popped about 3%.

  On the other side of the world, the G-20 meeting ended today with some noteworthy news. Here’s all you really need to know:

  • Member nations decided to triple the IMF’s budget, to $1.1 trillion
  • Financials of the world, look out. G-20 leaders agreed that loose financial regulations were largely to blame for this crisis, and banks, hedge funds and credit ratings agencies can expect serious new regulations
  • “We have agreed,” said British PM Gordon Brown, “that there will be an end to tax havens that do not transfer information upon request. The banking secrecy of the past must come to an end.” You’ve been warned.
  • No nation pledged specific additional stimulus spending, but the vibe was undeniable… big government is back.

  So it seems the new “masters of the universe” have fixed all our worldly woes… time for glamour shots!

Oh, my. Where do we begin?

As a snarky economic commentator — really — pictures like this are what dreams are made of: Berlusconi’s vintage moment of Italian overaffection… Medvedev’s uncomfortable “can’t believe you’re touching me” expression… Gordon Brown looks like he’s lost… both Asian representatives sticking to typically straight, honorable postures… Africa’s reprehensive (Meles Zenawi) off to the side, clearly an outsider… Saudi King Abdullah is looking awfully mischievous… and of course, our commander in chief, thumbs up and as confident as ever. If there is a picture out there that better captures the current state of global leadership, we haven’t seen it.

“Let the G-20 leaders have their self-congratulatory moment in the New World Order sun,” Dan Denning tells us. “Their plan is a failure because it blames the credit crisis on deregulation, fraud, free markets and bad bankers. This is a deliberate attempt to obscure the origins of the credit crisis and the recession/depression we now face: the credit boom that preceded it.

“Governments themselves were largely responsible for that credit boom. Their coordinated interest rate cuts and the dollar-pegged global currency system led to an explosion in money, credit and, inevitably, leverage, risk-taking and now losses. They are trying to prevent those losses by throwing more borrowed money at the recession to ‘fight it.’

“That’s moronic.

“We think this counterattack by Big Government to stave off the second wave of the credit crisis gives you time to sell stocks into a rally and diversify your assets ahead of the coming devaluations and inflation. Ultimately, the credibility of national governments and their currencies will be eroded and damaged beyond repair, based on unsustainable fiscal and monetary policies.”

  The dollar’s managed to arrest its latest downturn today. After falling from its high of just below 86 on Wednesday, the dollar index registers around 84.5 today.

  Gold might have been yesterday’s biggest victim. Not only did the mark to market alteration give some hope for American financials, but the latest batch of “not as bad as we expected” data has given the reflation trade some serious momentum. Thus, good old gold, a home for the skeptical and uncertain, is losing its luster. The spot price is just above $900 as we write.

The release of the USDA planting intentions data,” notes Alan Knuckman, “was the official start of the spring growing season in North America.

“The report was bullish across the board, with soybeans leading the way and new crop beans for the November contract solidly above $9.00 a bushel. The beans from last year sitting in the bins are approaching $10.00 as the new crop/old crop dynamics play out. Grains are always one bad growing season away from price explosion pushing prices to last year’s all-time highs above $16.

“Old-school bearish recession mentality below has many leaning to the downside. Cash prices of soybeans are expected to drop 28% in 2009. But our approach focuses on how things will develop, not how we got here. The nearly 50% grain price drop already in place from 2008 highs sets up more as a buying opportunity with the risk-reward potential on any weather developments. Now is not the time to be overly bearish — so rest assured if we stick with our game plan, we’ll come out ahead of the pack.

“Let’s also continue to watch crude for the strength to lead the way for the general commodities markets higher. Crude oil is solidly back up above the pivotal $50 a barrel in a signal of economic support for all markets from stocks to grains.”

Alan’s done a marvelous job taking over the reins at Resource Trader Alert. His readers booked 100% gains on their gold spread in February, and now they are champing at the bit for the coming growing season. If you’d like to trade along, now’s a great time to get involved. Find details here.

  And if you’re watching crude oil, as Alan recommends, you know it’s been quite a week. The same “reflation trade” that’s dragging down gold has given oil a nice kick in the pants. The front-month contract is up almost 11% from its Wednesday low. A barrel goes for $52 as we write.

  “Most recessions are great for investing in alcohol, tobacco and gambling,” Jim Nelson reminds us. “Taking a quick look at our last downturn (2000-2002), it’s clear how lucrative these stocks can be.

“From its high in March 2000, the S&P 500 fell as much as 49%. During that period, Philip Morris — the largest tobacco producer in the Western Hemisphere — jumped as high as 200%. Shares of MGM — one of the world’s largest casino owners — were good for a quick double. And Molson — a leading beer producer — watched its shares rise as much as 75%.

“When the market goes sideway, especially with severe spikes and dips along the way, investors find recessionary plays. Much of our portfolio will take advantage of this, but so will these sin stocks. In fact, these are the ones with the best chance to break out of the trading range to the north, while everything else just falls flat.”

Jim tells us he’s got a perfect “sin stock” on deck for his Lifetime Income Report readers. “It’s got great international growth potential and a big dividend,” he says, “big enough that it could pay for your initial investment in just six years.” If you’re interested, better get on board soon… here.

  Another sector note: The Dow transportation average just had its best day since 1939. The DJT popped 9% yesterday — again, thanks to the wave of new growth expectations currently splashing down on the trading floor. The index is now up 40% from its March low. Optimists might say this is a bullish indicator… transports commonly lead the way out of lousy markets. But we’re not quite ready to pull that trigger. This may just be an extremely beaten-down sector finally catching a break.

  The U.S. service sector contracted again in March, at a faster pace than the previous month. The Institute for Supply Management said today its index of nonmanufacturing sectors scored 40.8 in March. That’s down about a point from February and still below the magic contraction/growth score of 50.

  “Speaking as one who lives outside the U.S., I agree with the Canadian’s comment,” writes a reader. He’s referring to a bit of reader mail that’s triggered quite a rush of responses… you can read the original here.

“No American gives a flying pig about any country outside the USA, not emotionally, not economically, not respectfully. Americans can be such idiots when it comes to psycho-patriotism — see how the entire country was sucked into the Red Pill/Blue Pill election hysteria.


“The Canadian economy is dependent on exports to the USA… your point is? This has no bearing on, nor does it mitigate, the rather repulsive paternalism that comes out when Americans talk of Canada. You don’t like Canadians, you consider them quaint, slow, comic… you just don’t have any respect for anyone else on the entire planet. This I and all other “foreigners” know all too well. It is one of the pillars of the (now greatly increased) anti-Americanism that Americans now seem to notice and wonder over. The rest of the planet is tired, just as the Canadian points out, of being used, abused and patronised by the USA.”

  “Hey, don’t lump all Canadians in with the misinformed few,” writes another. “Well over 80% of what we produce is sold to our American cousins, and we damn well know it. If the U.S. gets a cold, the rest of us catch pneumonia. Perfect she is not, but I would suggest that America makes a much better neighbour than, say, Tibet to China or maybe the former Eastern Europe to Russia. Thanks very much, but I shall take the good old U.S. of A any day, even with your misguided new president.”

  “What’s everyone’s deal?” asks the last. “Agree or disagree with Addison, it doesn’t really matter! I love to read The 5 every day because of the insightful research and clever sarcasm used therein. If you want to be spoon-fed meaningless chatter, made to seem important, watch the neocon Fox News Channel or liberal MSNBC. Then pick a side and agree with them every time! I appreciate The 5’s kind of info, regardless of if I agree or disagree with it!”

The 5: That’s quite a compliment.

Enjoy the weekend,

Ian Mathias

The 5 Min. Forecast

P.S. As a reader of The 5, you get the first dibs on all of our special reports. So check this one out, before we make it public knowledge:A “bread and butter” options strategy for fast, easy profits.

P.P.S. The chief is on the road again today. This time, Addison’s off to San Diego for a tribute to Richard Russell, a legend in our little world of financial publishing. If you’ve never read Russell’s Dow Theory Letters… well… you need to. He’s been at it for over 50 years, never missing a single issue.

We’re sure Addison will return with at least an interesting story or two. Check us out on Monday for the details.



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