Startling Unemployment Numbers!

Here we go with more bad news in the form of unemployment numbers, but first let’s look at the current market numbers.  The Dow is down 119 at 8,080, the NAS is down 23 at 1,466 and gold is down $3.10 at $807.  Gold is still trying to hold up above the $800 mark and thus far gold is doing a good job of it considering all the bad news that keeps coming out.

The Wall Street Journal brings us these figures that are not going to make people happy.

“While the official unemployment rate is 7.2%, a different figure that includes discouraged workers who have dropped out of the labor force and those working part-time because they can’t find full-time work hit 13.5% in December. That was nearly a full percentage point higher than in the previous month and up from 8.7% at the end of 2007.”

Private economist, John Williams of Shadow Government Statistics reports a clearer picture of the true unemployment situation.

“During the Clinton Administration, discouraged workers, those had given up looking for a job because there were no jobs to be had were redefined so as to be counted only if they had been discouraged for less than a year. This time qualification defined away the bulk of the discouraged workers. Adding them back into the total unemployed, actual unemployment, as estimated by the SGS-Alternate Unemployment Measure, rose to 17.5% in December from 16.6% in November.”

These numbers are shocking and point toward an ever increasing downward spiral in the US economy.  They also indicate that last years stimulus package had no effect at all.  This years $850 billion is going to go down the same rat hole that the first one did, leaving us with a slumping economy and more debt.  (As I write this I see that gold is moving down, now at $802.70 off $7.40.) This slowdown is compounded by the global slowdown which is also gathering steam.  It is imperative that the government takes the right steps to change the mindset of the public and the course of the economy.  I really don’t hold out much hope that the clowns in Congress will do any of the right things to put the economy on the right track, but I am going to list a few of the correct steps anyway.

What Is Needed To Right The Ship

First:  The Fed should be forced to end the bailouts and let the markets get rid of the bad paper and the companies that created the problem.

Second:  The Federal Government should have a “tax holiday” of six to eight months where no income tax is withheld.  This would put money back into the hands of the people that earned it and would lead to the same people spending it or paying down debt.  Either use of the money would help the people who are suffering through this government created “recession”.

Third:  Cut taxes to zero for up to 5 years for businesses that return to the US from offshore locations.  This would reverse the flow of jobs leaving the US.  The added jobs would  cut way into those startling unemployment figures.

Fourth:  Yhe capital gains tax should be slashed in order to stimulate investment.

These are not the only solutions that should be implemented, but they would be a good start on the way to overhauling the economy.  Since I hold out little hope of any of them being implemented, I think it is wise to prepare for the worst.  On that note, let’s look at some gold stocks that are starting to look real cheap!

Those of you who have read some of my other posts know that these are two of my favorites, but I must admit that this market is making me a little nervous in the short term.  I like both at these levels, but I want to wait and see if gold moves decisively below the $800 level.  The next week or so should give us a clearer picture of where the short term price of gold is headed.  If gold breaks the $800 level we may see a rapid run down to the mid $700′s and the gold stocks will price that in.  So for now, even though these stocks are looking really attractive, I am putting them on hold until we get a clearer picture of where gold is headed.

As always, I currently own these stocks and I am looking to add more shares, but I urge you to do your own due diligence before investing in any stocks.

Till next time, good luck and good trading!

More Gold Market Analysis:

• Jim Sinclair Picks $1,224 Gold
• What Have We Learned About Gold Lately?
• Gold Is Showing Strength!
• Gold To Retest Lows
• Markets Await “Stimulus”