Home » Economy, Investing, Market Analysis, Trading

Back To Reality…

4 February 2010 2 Comments

A down 3% day in the S&P 500 Index serves as a painful reminder that we still have huge, huge challenges as an economy.  We’ve had several large moves lower in the past couple weeks which have had the impact of reminding people that this so-called recovery might be anything but.

If you haven’t heard, the government underreported job losses by close to a million units over the past year.  Basically, something like an additional 800,000 jobs were lost that we not reported.  For anyone who has been skeptical over government economic figures, this doesn’t surprise us.  For the others, it typically goes unnoticed.  Similarly, we report a great GDP number then revise it lower a month later when nobody cares anymore.  My point here is that you need to remain skeptical about the economy, the markets, everything.

As I’ve been saying for a long time, you should be taking defensive positions with regards to your finances.  Do not trust the recovery.  Do not trust the unemployment number that will come out tomorrow morning (Friday) – the number doesn’t factor in the people who are so demoralized that they don’t even look for work anymore!  The real unemployment is much higher.

I’m not here to make you sad, but I’d be doing you a disservice if I told you everything was great and you put your money into speculative recovery stocks and then got cleaned out.  I don’t know what the market is going to do tomorrow, next week or next month, but I do know that I won’t be surprised if it goes lower, much lower.

Gold

Gold got hammered today.  If you read my blog, you know I like gold.  I’ve also repeatedly said that any correction will impact commodities and gold.  It’s going to be very volatile and a bumpy ride, but I think its worth buying on dips (perhaps now).  I wouldn’t mind personally if it went back down to the $1000 level.

If you’re investing in gold, it needs to be for long term security, which means you should probably own physical gold.  The paper trading assets make me nervous.  Gold shouldn’t be traded.  It should be viewed more as insurance.

Tomorrow

Tomorrow morning we get the unemployment report which usually moves the market.  Most traders view the market in a down trend now, so I wouldn’t be surprised if the market opened higher than moved lower.  There have been many examples of “sell the news” in recent days.

Disclosure: I covered part of my short position in BC into the close today but am still holding significant short positions.

2 Comments »

  • nifumich said:

    That's the thing, I see jobs are available out there, but the problem is, some people have been unemployed for such a long time, they are getting "comfortable" with it, or so frustrated they don't bother to look everyday. So many people are unemployed that it is a huge battle to get the jobs that are available. The economy or stock market won't be able to make a full recovery until that "real" unemployment number goes lower. Too many people are afraid to start investing and spending for fear of losing a job now.