Unemployment data - Dec 10, 2008

Employment figures showed a steep decline in November. Oct and Sept were also adjusted downward. In absolute terms this was the 5th sharpest decline in payrolls in 70 years. It is expected that unemployment will reach 9%. This will put more pressure on the Govt to take bigger and swift action. They do recognize that the country's Infrastructure does need an overhaul and may target a major part of stimulus to such projects. But being a consumer society, consumers will also get a decent chunk of change. I am sure that the first one to start spending will be the govt. So the Industrials may be a good buy sometime later. I could not help noticing the muted reaction by the market to these dismal unemployment figures. Does this indicate that we may have reached the bottom? Probably so but who cares, it still is not the reason to buy. As many analysts have been blaming the market for its over-reaction all this while, I guess now they can blame the economy for over-reacting. After all Afghanistan has not yet declared a recession.

Commodities along with soft metals continue decline and lot of us wonder what's the deal with gold shouldn't it be going up. The recent drop in gold has been due to de-leveraging and redemptions by hedge funds which seems to be nearly complete. While analysts favor the so called strong demand and supply fundamentals for gold, I have always wondered about the demand side of the equation. We don't consume gold do we? In any case gold still happens to be a currency of trust that is not printed and manipulated by any govt and will always have a place in portfolios of investors who don't trust anything else. Remember when every stock was valued in oil. i.e how many barrels for GE stock… or Gold vs S&P. That equation undervalues stocks and over values gold by a significant margin. This margin will close with stocks catching up to gold before gold moves up and it certainly will move up in the long run.