One of our longstanding complaints has been that the traditionally reported measure of Unemployment, U3, dramatically under-reports unemployment in America. It is far too narrow and ignores too many people that want to work full time, but cannot.

We have detailed this over the years, and last summer, modestly proposed the media begin reporting U6, the broadest measure of joblessness. (see Previously, below)

So you can imagine our pleasure when yet another MSM gets hip to this. In the rpesent instance, it is the New York Times, Part-Time Workers Mask Unemployment Woes:

In California and a handful of other states, one out of every five people who would like to be working full time is not now doing so.

It is a startling sign of the pain that the Great Recession is inflicting, and it is largely missed by the official, oft-repeated statistics on unemployment. The national unemployment rate has risen to 9.5 percent, the highest level in more than a quarter-century. Yet it still excludes all those who have given up looking for a job and those part-time workers who want to be working full time.

Include them — as the Labor Department does when calculating its broadest measure of the job market — and the rate reached 23.5 percent in Oregon this spring, according to a New York Times analysis of state-by-state data. It was 21.5 percent in both Michigan and Rhode Island and 20.3 percent in California. In Tennessee, Nevada and several other states that have relied heavily on manufacturing or housing, the rate was just under 20 percent this spring and may have since surpassed it.

Of course, we also know from history that unemployment will continue to rise, even after the recession is officially over (so we got that going for us, which is nice).

Surprisng to see Oregon with the worst Unemployment in the nation — I would have guessed Michigan.


Click for interactive graphic




A Closer Look at Unemployment (September 2007)

Unemployment Reporting: A Modest Proposal (U3 + U6) (June 2008)

Pervasive Pollyannas of Prosperity (July 2008)

NFP: Even Worse Than Reported (December 8th, 2008)

Persons “Marginally Attached to the Labor Force” (July 4th, 2008)

Part-Time Workers Mask Unemployment Woes
NYT, July 14, 2009

Category: Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

286 Responses to “Yes, Unemployment Is Worse Than Reported”

  1. Bruce in Tn says:

    Yes, it is. This administration seems to think that every idea they have is a good one, and should be acted upon.

    If Uncle Sam Takes Mortgages and Becomes Landlord

    “The idea would be that homeowners that are delinquent could surrender ownership of their homes but could continue to live as a renter for several years. Another notion would be to have the government make mortgage payments for borrowers who cannot keep up with their home loans or to get a stipend for house payments along with unemployment benefits. There is another option that Uncle Sam could consider.”

    If you are unemployed, by the time this is over you may wonder why you ever worked in the first place.

    Dire Straits had a song about getting something for nothing and chicks for free years ago…I may play that as the theme at the salt mine today..

    What was it George Orwell said? I love Big Brother…

  2. VennData says:

    I think the administration looks at a problem and searches for a solution. If you’re going to lose your house, this sees like a second best alternative.

  3. Mike in Nola says:

    All to avoid the banks having to write down the mortgage when they take the property back. That would reveal the true losses and the charade played with the stress tests.

  4. uno says:

    Looks like the land of Chicago (bang-bang), formerly the land of Lincoln, has found a solution to the tax shortfall problem: slot machines.

    What’s next: Ho’ House ‘Я Us…?

  5. Bruce N Tennessee says:


    My point exactly. The administration is going to be all things to all people. This cannot and will not be paid for by the taxpayer…any rational person knows the national government is bankrupt and that taking on massive new debt for anything and everything is a fool’s errand. My point is, that rapid socialism of the United States will not be the panacea that people think. Polling numbers show that America as a whole is recognizing this too..

    This will go down in history as the “Put it on my tab” administration…

  6. mark says:

    David Rosenberg has also pointed out in one of his recent notes that continuing claims are much worse than reported since so many are now on Federal extended unemployment benefits which are not reported in the headline data. Counting everyone give a new record not just in absolute numbers but also as a percentage of the workforce.

    People dropping off state unemployment rolls and going on Federal. Now that’s a green shoot we can believe in.

  7. Bruce N Tennessee says:

    “Second best alternative”? Surely you jest. From homeowner to renter of your own home? What an idea.!!! “Hey honey, the toilet quit working…call Obama (my landlord)…and tell him to fix it, since we are renting!”

    ..The gang that couldn’t shoot straight…

  8. jc says:

    These full unemployment numbers are getting around the depression level numbers, aren’t they?

  9. jc says:

    Interesting article about shadow home inventory, about half a million homes seem to be bank owned, not sure how long they can hold on. CA seems to have 300K distressed homes in various phases of foreclosure and thats about triple the MLS listings. Will this be known as the CA depression?

  10. Bruce N Tennessee says:

    Something else I saw yesterday and didn’t have time to comment on…same store sales-Redbook- are still dropping badly, and I know national retail sales were up with cars and gasoline, but down .2% if cars and gas were dropped from the equation….anyway, Redbook seems to think the consumer has effectively closed wallets and that this condition is continuing….


    “Redbook keeps reporting sharp declines with same-store sales at a year-on-year minus 5.7 percent in the July 11 week. Month-to-date, sales are down 1.7 percent vs. June. The report said customers are not responding to women’s fashions which is bad news for department stores. For department stores, this morning’s retail sales report extended a run of very deep declines. General merchandise is also on a long string of declines while clothing is flat. These are the categories tracked by Redbook and ICSC-Goldman which explains why both of these reports have, and unfortunately continue, to report significant weakness. “

  11. flipspiceland says:

    There comes a time when the old models simply will not work any longer. We have seen that played out on the stage of finance, manufacturing, service and professional careers, jobs, and other uses of the people’s time.

    Vonnegut wrote of this time in two of his novels, when work was no longer an option for billions of people. That time seems to have transcended fiction and now is a reality. There has been no work to do for billions of people in third world countries. There is massive global ‘unemployment’ in the sense that
    the people either cannot do anything due to geography, demand, or lack of any skills-for-hire.

    We are now at the early stages of the same thing happening in many first world countries. And no one is doing anything about this sea-change, this new paradigm that is not going to go away.

    Either people are going to take to the streets when the pressure of no money for living becomes too great, since they will be starving and/or homeless, a miracle will happen and magically a new demand will rise for some product or service that will employ millions, or the governments of various countries, states, and cities are going to have to devise new methods to keep people employed in some activity that provides the masses with something to do with their time. The alternative, revolution, is a non-starter.

  12. jc says:

    Bruce thanks for that article.

    I will take a bow for speculating/predicting a while back that there would be some sort of US superagency that would take custody of the bank owned homes and buy them and resell or rent them at a “fair” price. We’re really in a depression and major states like CA will fail and home values in the sand states will fall 90% if the reckless lenders eventually are forced to unload these properties.If this plan is enacted it will be the ultimate windfall for the biggest banks. We’ll be paying for this as long as we live!

  13. dblwyo says:

    Barry – thanks. I notice that your prior readings post has Mort Zuckerman’s WSJ oped piece. Let me also draw everyone’s attention to last week’s Newshour on PBS which has a segment precisely on this topic (actually a couple over a couple of nights). It seems to me this meme is starting to get real traction.

    FYI and FWIW my own look at the situation starts by assuming that we need 150K jobs/month to breakeven with pop/labor force growth (& perhaps) productivity. On that basis the weak non-revcovery leading into the Great Recession meant we entered at 4 MILLION jobs in the hole. We are now ~ 12 million in the hole.

    “Recovering” from that will take a long and painful time. Worse, while everybody is focused on the short-term the consequences then and now of this deep re-structuring are not on the discussion agenda.

  14. jc says:

    jc Says:
    May 22nd, 2009 at 8:47 am

    I have a prediction – the US will create a superagency to take possession of the abandoned and foreclosed homes and shield the banks from massive losses by paying a “fair” price and then hold and maintain them so local communities receive property taxes and the areas are not blighted and renting them at “fair” prices losing money at both ends – but holding and praying for a housing rebound. A new form a can kicking and loss transferral from banks to taxpayers

    I will take a humble bow for this

  15. jc says:

    I also suggested here “buy a home, get a grencard” was a partial housing solution before Lefrak and Gary Shilling had their proposal published in the NYT. The unemployment situation here will kill it.

  16. Bruce N Tennessee says:

    Bond Market July 15 2009
    July 15th, 2009 7:34 am

    Prices of Treasury coupon securities are posting small mixed changes in overnight trading. In fact some benchmark prices were unchanged while others posted small declines.

    Ebullient sentiment in the equity market is still weighing on the bond market. Goldman Sachs posted better than expected earnings as did JNJ earlier. After the close yesterday Intel reported that Q2 revenues would beat forecasts. So all is well with the equity crowd. For now.

    If I may digress from my normal morning musings it is hard to paint a sanguine portrait of future economic growth.

    In the short run it is certainly possible to conjure up a picture of positive growth in Q3 and/or Q4. Inventory levels are low and will be replenished. In particular the automobile industry is set to ramp up production after a period of very low production. That will certainly give a healthy boost to GDP.

    I do not see,though, how growth can be maintained at robust levels. yes, the actions of policymakers have averted financial collapse and Armageddon. However,it is my opinion that the return to 3 percent growth which prevailed for most of the last three decades is most unlikely.

    Unemployment (the lagging indicator) will continue to rise and will probably top out close to 11 percent. That does not count the discouraged workers who have left the work force or those forced to work reduced hours at lower wages.

    It will be a very slow recovery in the jobs market as the high level of unemployment will weigh on income growth and consequently spending. Without robust consumption corporate profit growth will prove anemic and business investment spending by the corporate sector will suffer.

    Consumer balance sheets have shrunk as housing prices have cratered and as equity markets have suffered severe declines. Consumers have responded logically by shoring up their balance sheets with increased savings rate. I believe the last savings rate I observed was 6.8 percent (driven there by some one time factors). For years during the credit driven expansion it ran around zero.

    I am not smart enough to know where it will settle in but if it does finally settle in around this level it will represent an enormous amount of foregone consumption. How will that be replaced and if it is not the long term consequences for growth are quite melancholy.

    Government policy is currently stimulative but one can see the shift coming. I note that the press reports that the House version of the plan to nationalize health care will include a surcharge on the earnings of millionaires. That is another nail in the coffin of spending.

    And at some point several years down the road ( I suspect) the financial markets will call for a healthy retribution for our profligate spending and in so doing will force additional rounds of tax hikes which can only be effective at raising revenue by reaching deep into the middle class brackets.

    That does not bode well for growth over the long term either. Nor does the carbon tax which will raise the cost of everything from soup to nuts.

    I see a bleak five year period with growth in the one percent to two percent range. That will provoke a clash between domestic political pressures (too high an unemployment rate) and international pressures to curb deficits which I suspect will eventually weigh on the dollar and its status as the world reserve currency.

    …And no, B in T does not write this daily bond update…

  17. “…Western nations including the United States have gradually implemented virtually all of Marx’s 10 key steps toward creating a dictatorship. What are some examples can you find? Americans would be wise to study the “Ten Planks” and demand that the President and Congress abolish all laws, regulations and agencies which govern these (and all other) unconstitutional seizures of power. Communism was never intended to free man, but to enslave him; indeed the Communist Manifesto promised a “dictatorship of the proletariat” and history proved it always ended up slaughtering millions of the proletariat.

    Karl Marx’s “10 Planks” to seize power and destroy freedom:

    1. Abolition of Property in Land and Application of all Rents of Land to Public Purpose.

    2. A Heavy Progressive or Graduated Income Tax.

    3. Abolition of All Rights of Inheritance.

    4. Confiscation of the Property of All Emigrants and Rebels.

    5. Centralization of Credit in the Hands of the State, by Means of a National Bank with State Capital and an Exclusive Monopoly.

    6. Centralization of the Means of Communication and Transport in the Hands of the State.

    7. Extension of Factories and Instruments of Production Owned by the State, the Bringing Into Cultivation of Waste Lands, and the Improvement of the Soil Generally in Accordance with a Common Plan.

    8. Equal Liability of All to Labor. Establishment of Industrial Armies, Especially for Agriculture.

    9. Combination of Agriculture with Manufacturing Industries; Gradual Abolition of the Distinction Between Town and Country by a More Equable Distribution of the Population over the Country.

    10. Free Education for All Children in Public Schools. Abolition of Children’s Factory Labor in it’s Present Form. Combination of Education with Industrial Production.
    Of important mention here is Saul Alinsky’s “Rules for Radicals”, which is President Obama’s governing textbook. Much has been written about Obama’s (and Hillary Clinton’s) study and use of Alinsky’s strategies for seizing power without concern for ethics or the harm caused. Read the book (try Amazon)–study it and you will better understand Obama’s governing strategy and anticipate his actions. Marx and Alinsky both shared a similar desire to seize power at any cost, hence the listing on this page. It should be of little surprise that Alinsky dedicated “Rules for Radicals” to the devil.

    Excerpts from Rules for Radicals

  18. Groty says:

    Average hours worked per week is down to 33. That’ the lowest on record since record keeping begain in 1964.
    The average worker is already effectively working part-time.

  19. jc says:

    I will also predict that the superagency solution will be unimaginably expensive and we’ll be paying for it for approximately the duration of the 30 year mortgages.

    In a way it’s a workaround to the stonewall BB has hit trying to force mort rates down to 4%. The US will be the effective 4% lender, unless the magnitude of this program and other gov deficits crushes US credit with our foreign lenders.

    It’ll start fairly small targeted at the sand states and other blighted industrial areas. At this point it really has to be done. If the sand states and midwest are hit with -90% RE vals due to waves of foreclosures we’ll have social consequences comparable to the GD. I remember Bush saying his admin would help institutions but not individuals but they let this situation get out of hand. The genie is out of the bottle.

    It will be the ultimate in public housing! And the mother of all windfalls for the big banks and other government funded speculators.

  20. manhattanguy says:

    Market futures are up huge after Intel report. As I mentioned yesterday, don’t fight the tape even though it doesn’t make very much sense. Today’s rally could very well be a head fake. But going “long” in the last few days worked out better than being “short”. I hope to sell my huge $UCO position today and add more to $COF shorts.

    @lefty: thanks for the article on $COF

  21. dead hobo says:

    And it’s going to get worse, creating a negative spiral. I’ve heard anecdotal stories about consumer spending for substitutes, considered to be ‘personal downsizing’, that WAS adequate to have suddenly disappeared. Campbell’s Soup has a blowout forecast … that’s not great news. GS blowout profits being meekly accepted as normal instead of the result of parasitic behavior and evidence of Government incompetence and complicity is not good unless you work for GS. The concept of hunkering down is going into a higher gear.

    No, China is not doing that well either. Yum says that both the US and China markets are doing poorly. If the Chinese aren’t going out for a cheap meal, then how can they be doing well? Stories to the contrary are news fluff.

    Obama is going to be a 1 term president. He’s a leadership failure.

  22. Christopher says:

    “…..or the governments of various countries, states, and cities are going to have to devise new methods to keep people employed in some activity that provides the masses with something to do with their time.”

    Or break an old favorite….war. Nothing stimulates like an old fashioned shooting war….Wars on ignonymous entities like “Terror” or “Drugs” don’t cut it. WE NEED A REAL ENEMY!!
    “Remember the Maine!!”

  23. JC:
    Is CA still handing out IOU’s? At what point does it become FUBAR out there? A week? A month?

  24. Christopher:
    We are in two right now so that wouldn’t work either. Unless he’s going to start a war with the Chinese.

  25. skardin96 says:

    “Obama is going to be a 1 term president. He’s a leadership failure.”

    LOL, 7 months into the job and you can read into the future. Maybe you should give it a try if it’s so easy huh?

    Wall Street and actual unemployment won’t mix. Doesn’t matter if it’s reported by NYTimes, people in charge of $$$ ignore real news and create their own. Market recovery has been completely fake so far, gains on no solid grounds…when it does crumble again it’s easy to blame whomever is governing.

  26. Mark Down says:

    You angry ‘Gals’ get on with it ..Goldman now Intel… what more do you want?

  27. dead hobo says:

    Calvin Jones and the 13th Apostle Says:
    July 15th, 2009 at 9:23 am

    Is CA still handing out IOU’s? At what point does it become FUBAR out there? A week? A month?

    Those morons did this to themselves.

  28. Greg0658 says:

    flipspiceland @8:30 am … how about early retirement with guarenteed living benefits at 45 (then 44 then 43).. imagine that in another ‘ism .. and the USA could begin to gain back good will around the globe with adding each year 1% more of the population into the same plan .. and I think the pyramids were built because the beer was good after a days work and people do want something to do besides read blogs

    MEH .. I hear ya on the Marx’ .. I ask, do you think an unorganized individual has any chance in the super-capital’ age of the 21st century with highly engineered processes to manufacture? Can you folks in here imagine a startup in this day and age .. the startup situation for the new guy with reorganization for the old .. short of an all out ad campaign to sink the behemoth …

  29. Mike in Nola says:

    By coincidence, an on-topic post courtesy of the Houston Chronicle:

    15,000 Texans to lose checks

    They’ve fallen off the rolls.

  30. Greg0658 says:

    MEH – “Commu’ was never intended to free man, but to enslave him” … I think commu’ is a grassroots action to try and take control from the super-capital’ of the time .. that never ending fight of power for the people v. power over business

    Mark, I don’t need to remind you of all people that MSM and history books are written for the man do I?

  31. krice2001 says:

    @ Mark E. Hoffer 8:50 AM
    I usually enjoy your comments as I do many others here, but the whole “Obama and Hillary”… “Much has been written about Obama’s (and Hillary Clinton’s) study and use of Alinsky’s strategies for seizing power without concern for ethics or the harm caused”

    Please, Mark you’re better than that, I know. Consider your linked source — “” — not exactly the objective, unbiased source that I think one should be looking to. Odd, there was no anger directed in your post of Bush and Cheney’s power grab and use of unconstitutional powers that they flaunted during their tenure.

    Anyway, I’ m not worried about some devious power grab by this administration and that just seems like a big misdirection of our attention. I’m worried about the course of the U.S. now that 3 or more decades of consumerism, lack of real job creation, lack of savings, and bank and mortgage fraud are catching up with us. Unfortunately, I don’t know if there’s anything this administration or any other could really do right now (given unknowns and political realities) to stop the ‘economic correction’ upon us. I certainbly don’t see this administration doing anything nefarious. Wrong and panicked. But not nefarious.

  32. snapshot says:

    Barry – Did you catch this? “Calpers Sues Agencies Over Ratings of Securities”

    McGraw Hill spokeman and everything….I wondered when this would happen.

    Here we go…

  33. cvienne says:


    “I certainbly don’t see this administration doing anything nefarious. Wrong and panicked. But not nefarious.”

    I’ll agree with that…

    I don’t think there are many playbooks lying around to tell anyone how to dismantle an economy that’s based 70% on consumption that’s been using CREDIT & ASSET BUBBLES to consume…

    Bottom line is we have to bite the bullet…

    Unfortunately it has to happen on somebody’s watch…The person (or Administration that is willing to have the COURAGE to acknowledge that will get my respect)…

  34. cvienne says:

    …on the markets…(today)…

    S&P making its expected move to 923…ought to get interesting at that number…

    I’m sure the quant computers are getting that nervous sense of anticipation in their microprocessors right about now…

  35. leftback says:

    LB is not getting short here just yet, although we did start a gold short as GLD piled into resistance.

    LB has examined the inflation data and finds the case to be bogus at present, especially as we know that oil is declining on fundamentals and $gaso has already declined, so that next month’s PPI/CPI will be soft. A good day to short oil, gold and get long Treasuries, in our opinion. Andy, if you’re out there do you have a chart for crude?

  36. Greg0658 says:

    me@9:38am – “the startup situation for the new guy with reorganization for the old” .. all the time as the new guy – your creating from scratch – with materials manufactured by your soon tobe competitor … and/or a derivative by means of your target behemoth which owns stock in the other behemoth companies you must buy from (or worse on the BoD)

  37. dead hobo says:

    cvienne Says:
    July 15th, 2009 at 10:01 am

    S&P making its expected move to 923…ought to get interesting at that number…

    I’m sure the quant computers are getting that nervous sense of anticipation in their microprocessors right about now…

    The Y2K bubble was obvious and the fall was easy to predict. I’m still wrapping my head around a stock market bubble that has the S&P at 925. Presumable, Uncle Stupid wants it to stay there until the economy pulls up to it, eventually, and he will use his friends to maintain the floor and provide cash for an occasional pump. Since a lot of earnings last quarter came from cost cutting and not sales improvements, and since the stats don’t look too hot, I suspect the pump will become more important this quarter. It will return.

  38. cvienne says:


    cvienne is very fond of LB’s view on Treasuries…

    While I’m sure that most of this trading is computers, I did notice the TLT start to maneuver before the equities actually reached any apex (which they still probably haven’t reached)

  39. manhattanguy says:

    @ LB not sure about shorting oil today. I feel that oil just showing some stability at $60. I suspect it will add a few more points before breaking down? Regardless, I am using a trailing stop for $UCO long position to protect profits here. Thanks so much to the panic shorts who covered $COF, I had another fantastic opportunity to short more.

  40. I-Man says:

    hi ho, hi ho…

    Reversal waiting fi sho.

  41. leftback says:

    Not short oil yet… agree there is probably more upside, which we would fade.
    I-Man: There will be an SRS buying opportunity here at some point.

  42. ben22 says:

    ok so we all knew today was coming based on INTC last night.

    Can JPM, IBM and GOOG push this further tomorrow?

    I still think it’s all in the guidance language. Does anyone know if Dimon is presenting tomorrow at all?

    Going with my M, T, W, theme from earlier this week, I have my doubts right now and would expect some pullback Th or F, I doubt a lot of traders, many of which just got hit on the short squeeze, will want to hold a lot of longs going into the weekend.

    Sold some small long positions this morning that I picked up last week for a trade, 1 loser and two winners for a decent gain. Sitting on mostly cash again now and watching like it seems a lot of other people are doing right now.

  43. I-Man says:

    I own enough already… :)

    If I was a day trader, I’d be getting some shorts primed on crude. Fade the spike. The spike is only to fulfill CV’s prophecy of SPX 923.

  44. callistenes says:

    Big hitter, the Dalai Lama. AKA Barry!

  45. karen says:

    i’m laughing hysterically about LB being short gold… he obviously paid no attention to my dollar rant yesterday…

    well, i can hope he put the short on today and not yesterday… he’ll lose less money this way.. lol.

  46. leftback says:

    Morning, Mistress. Big stick you’re carrying today.

  47. ben22 says:


    I think I missed the dollar rant, what are your thoughts on the near term price action? Are you looking for the $US to go below $78?

  48. I-Man says:

    Wow… hope you wore your cup today LB.

  49. cvienne says:


    I see 3 gaps in the chart (on 6/22, 7/2, and today)…

    Basically between 905 & 920 level…After this 923 hit…Maybe we fill in that space for a few days…

  50. karen says:

    ben, looking for a retest of the June low, that’s for darn sure…

  51. leftback says:

    LB is well protected, not wishing to feel the cold steel on his balls. Happy indeed that LB wasn’t short this morning. Added to DZZ and got some DUG. That was a big move in the oil stocks.

    I-Man, we are right here on your XLF 12.1, but we just don’t fancy shorting the banks here, there is a whole lot of sandbagging going on ahead of these earnings, which thanks to Mark to Magic, can easily be BTE.

  52. ben22 says:


    yeah I think I see exactly what you are talking about


    I’m there with you. I have already bought some UUP but I’d like to see the $index drop to the 78′s before adding to the position.

    After the recent bump in silver if it moves a little higher I’d rather try to short that than gold right here. ZSL has had a nice sharp drop the last few days so I think there is a trade there again.

  53. HCF says:

    Watching this morning’s CNBC clips this morning, it seems that the bulls are coming out of the closet again without impunity… i.e. “There’s nooooo way we test the bottom again, BS, BS, BS….” I swear, I would love to see the S&P 500 break 666 later this year just to spite those people.


  54. leftback says:

    “I would love to see the S&P 500 break 666 later this year”

    You people are obsessed with LB’s bottom….

    ben: thanks for the reminder on ZSL. UUP may indeed retest June lows.

  55. Mannwich says:

    On another note, Stewart back to slamming Cramer (& pal/uber-”investor” Lenny Dysktra)…..

  56. Mike in Nola says:

    re: inflation/deflation?

    This was an interesting post from Bill Bonner, who had been a fairly consistent gold bug. Seems to be waivering.

  57. karen says:

    thankfully, we’ll never get to see it…

  58. ben22 says:


    No problem.

    I think UUP will go down more from here as well but I don’t think you’ll see it in the 22′s like you could have bought it last July before the huge rally in the dollar. This would complete what appears to be the five wave down from the 3/6 top in UUP.

    The trend of dollar up stocks and comm. down still looks in place to me so I’ll also be looking to finally pick up some shorts as the dollar gets closer to that bottom.

  59. I-Man says:

    @ HCF:

    I had a feeling that forming a second right shoulder would get the bulls all giddy and get them bolsterous again… thinking that the correction is over and now its all fun in the sun.

    Thats the best part of a complex H&S… you get some shorts shaken out, a short covering pseudo rally, some new longs to buy in… and then the trap is set.

  60. ben22 says:

    I find it hilarious that people still don’t see deflation as a grave threat. Count yourself in the same camp as Erin Burnett if you believe that it isn’t real. I can’t even count how many times I’ve heard her say recently that deflation has been taken off the table. This goes along well with her constant assignment of a silver lining to everything.

    As an aside, John Mauldin has put out some really well done OTB letters over the last few weeks. They are free so I would suggest them if people havent’ gotten a chance to check them out. The letter on Japan is just plain crazy.

  61. karen says:

    ben22, spx 1000+ wouldn’t be viewed as inflationary to you?

  62. cvienne says:

    Meanwhile…back to cold steel on balls…


  63. Thor says:

    Haven’t read through all the posts yet so not sure if anyone has mentioned this yet – my Uncle lives in Oregon and when I asked him about the high unemployment there he said that it was due to two things – Technology companies, but mostly logging – no homes being built = not much logging = high unemployment

  64. Mannwich says:

    Time to party like it’s October 2007 all over again! Generational buying opportunity, folks.

  65. leftback says:

    EWZ up 4%, serious squeeze action. Sorry about your balls, I-Man. Hope they don’t blow the top off this pup.

  66. cvienne says:

    not much logging = high unemployment
    logging = employment (but global warming)
    cap & trade = high energy costs (& profits for GS)
    drill drill drill = employment + low energy costs (but global warming)

    Oh the perils of being a wing nut…

  67. CapitalistCanuck says:

    I’m limping in with a small short on SSO and selling some July puts. I’m probably too early to the table as usual like my long SSO call at 900. But I’d like to get ahead of initial claims tomorrow and profit taking on Friday.

    Retail sales report was pretty weak, and I expect that as we move further along earnings season some of the steam will be taking out of the rally as results from others sectors flow through particularly retail/industrial/manufacturing.

    Maybe we can even retest the high on a push forward as most of the banks have yet to report, I will add more to my short position then. I think eventually we retest the neckline….

  68. cvienne says:


    Look on the bright side…The action this week ought to get those AAII numbers right into the sweet spot…

  69. ben22 says:


    perhaps I’m missing something there but no it wouldn’t, I don’t know how to use the stock market as confirmation of inflation. Maybe you can teach me though why there is a clear relationship there, would love to hear what you think. I’m in the camp that doesn’t buy that the Fed has created any liquidity, that seems to be what a lot of bulls are holding on to. They haven’t been able to reflate anything.

    Part of what I get hung up on is the fact that since the stock market is a secondary market no money is actually ever changing hands and given the massive wealth destruction in stocks since 10/07 I’m not sure how 1k + on spx equals inflation.

    For me the deflationary cycle is still trumping everything:

    Falling demand leads to falling prices, that leads to debt defaults which can then lead to bankruptcy and then that spells layoff’s and wage reductions. I still see this cycle in full effect everywhere I look still today.

    Given our 70% consumer economy, the massive wealth gaps that have been created if credit contraction continues as does the current savings rate, I don’t see how that will do anything but eventually deflate stocks if they do in fact get to 1k. We also now have an administration that is even calling for what could be a jobless recovery, which I also don’t see inflation there.

    As far as watching something for inflation, wouldn’t you rather see gold eclipse the 08 high than using the stock market?

  70. ben22 says:


    yeah I’m looking forward to watching sentiment the next few days. Should be interesting, recently I suppose I’d describe it as neutral, not too many bulls or too many bears. We were pushing up to some pretty extreme levels back at the top prints just before 6/11 but since then it has really calmed down which is why I haven’t completely given up on the original 965-1k call.

  71. I-Man says:

    My balls are fine… I know how this is going to play out.

    Part of my problem is I keep listening to you guys jabber about your day and swing trades… and thats distracting me from the serenity of my position trades.

    Maybe I should just dip out for awhile.

  72. Onlooker from Troy says:

    Re: UE. I’m glad to see the NYT at least acknowledge the problem with UE reporting and talk about U6 (although amazingly they never actually cited that stat specifically).

    But they still neglect to specifically point out how comparing the reported UE rates now is apples to oranges with the official UE rates in the ’80s and before and therefore that UE is higher than it was then. It’s kind of hinted at, but not directly stated. I think they chickened out on actually going there.

  73. Thor says:

    To whoever asked about IUO’s here. Yes, they’re still issuing them, but they haven’t been in the news much. We hear that they’re “fairly close” to hammering out the budget. Last night they apparently were able to come to agreement on cuts to education and the Governator has agreed to a third round of state employee layoffs. This is in addition to the three days a month furlough all state employees are now taking (up from two before the summer)

    Hobo – what state do you live in?

  74. leftback says:

    “some of the steam will be taking out of the rally as results from others sectors flow through particularly retail/industrial/manufacturing.”

    Agreed completely. Just don’t want to bend over in front of the banks and get shafted. Hence trading technicals and looking for obvious weakness in fundamentals (oil, gold).

    I-Man: I and I is also serene, even while jabbering about my dick-brained counter-trend swing trades. Chillin…

  75. cvienne says:


    “I’m in the camp that doesn’t buy that the Fed has created any liquidity, that seems to be what a lot of bulls are holding on to”

    I’d say that the Fed HAS created liquidity…but it cannot create velocity…

  76. leftback says:

    The shoulders on this H&S are 927 and 929, BTW, on a closing basis. If those get taken out, it will be interesting.

  77. Mike in Nola says:

    Practical signs of deflation:

    Milk prices collapsing because no one wants all that fancy cheese and price of corn has fallen. Here in Houston, can by milk at Kroger’s for $2/gal every day. Last year it was about $3.50.

  78. cvienne says:


    ““some of the steam will be taking out of the rally as results from others sectors flow through particularly retail/industrial/manufacturing.”
    Agreed completely.”

    …and if that hits just as the dollar bottoms out…

    well, we know where that’s going…

  79. karen says:

    sorry to break it to the spx shorts… pull out a straight edge and see that we’ve broken up and out of the june/july downtrend. maybe cover on a retest of the breakout? just sayin’…

  80. cvienne says:

    @Mike in NOLA

    “Milk prices collapsing because no one wants all that fancy cheese and price of corn has fallen”

    I’m probably the only one on this site who watches “The Farm Report”, but yes, they are actually culling dairy cow herds in an attempt to put a FLOOR into milk prices…

  81. manhattanguy says:

    My view is that Oil will top off tomorrow. Until then I will stay long oil and short dollar. Tomorrow will be a good day for initiating $DUG trade.

  82. Mannwich says:

    @Mike in Nola: Deflationary signs are everywhere, except for the c@sino markets. We get offers from all sorts of retailers begging us to go buy clothes. I simply wait for a sale before I buy anything these days because I know they’re coming. Every three months I get one from Banana Republic for 25% off of anything. The wife gets them from Macy’s just about daily (50-80% was the most recent one). Others are likely doing the same.

    Food prices have NOT gone up here either. They’ve gone down. Perhaps eventually we’ll get inflation of the things that we need and deflation in everything else?

  83. cvienne says:


    I’m not short the S&P, but basically the same “technical” sign occurred on the break of 880 to the downside…

    I think going above 923 was important, but at this point, I’m only putting a RETEST of 956 on the table…

  84. Mannwich says:

    @mannhattan: I’ve been sitting on some DUG that I bought a while back and plan to back up the truck for more soon.

  85. leftback says:

    Already in DZZ – and DUG and SRS, but playing small. Will look at SCO late today/tomorrow.

  86. cvienne says:


    Basically what I’m saying is that if you happen to see 956, AND, the dollar completing a 5-wave down at the same time…


  87. Onlooker from Troy says:

    ben22 re:

    Good stuff. Agreed. I’ve been somewhat befuddled by this talk of liquidity created by the Fed pushing the market up. Some really savvy investors have ascribed to that theory, such as Mark Faber and Bill Fleckenstein. But none of them, that I’ve seen, can specifically tell you how that supposedly works. This money creation by the Fed for the banks is sitting in reserve against future defaults, not in circulation. Money velocity is down, that’s a fact.

    Dr. Hussman said it very well (and better than I can) in a weekly commentary a couple of weeks ago (, and he constantly fights against the “money on the sidelines” meme that is so very popular.

    It’s sentiment, pure and simple. It may be sentiment that’s driven largely by concerns of a dropping dollar, therefore the strong inverse relationship. But it’s still sentiment.

    Speaking of which that sentiment is very fickle these days, isn’t it? It swings quickly from bear to bull and back again on the slightest trend change. Just more evidence of the extreme uncertainty in our economy and markets these days.

  88. cvienne says:

    What’s interesting to me also is that if the S&P wants to move in “integers” like this, it really doesn’t spell too many problems for the 2x short ETF’s…

    Hit those tops with a fury, then ease off with some small mind numbing retests for about 3 months…I’d be happy with that picture…

  89. cvienne says:

    …lower of course

  90. CapitalistCanuck says:

    This is all a dog and pony show right now, and reality will hit once the economic reports take front and center after earnings season is over.

    Wish I had not lost my initial conviction on being long SSO in advance of this spectacle, cvienne and I went back and forth on this last week. But losses can prompt you to re-evaluate your position and I was just happy to get back to even! Even if the S&P breaks out to 1000, we will see 900 again this year.

  91. leftback says:

    FXE closing in on July 1 peak. Not much room overhead for Euro, oil or equity bulls here.
    The thing is, if you don’t like the $, you are buying the €. Is that really such a good deal?

    SPX/gold will not break above 1000 this year – not unless the hounds of inflationary hell are released.

  92. Mike in Nola says:


    Near its all time low. Will they let it run before putting in some kind of trading restrictions when the banks start taking again?

  93. Pat G. says:

    The USG looks at a problem, then figures out how to spin it. In the 1980s the U3 was the U6 and core CPI included oil and food. We, on this blog, know that the numbers are much worse than are being reported.

    @Mike in Nola–”Inflation could take much longer to arrive than most people think.” What wavering??

    @ben22–”I find it hilarious that people still don’t see deflation as a grave threat.” Really? The headline PPI was 200% > that expected and the core PPI was 500% > that expected. While the core CPI number was inline, the headline CPI number saw its greatest jump since 11-07. Y-O-Y headline CPI is at – 1.4%, mostly due to a 60% drop in oil prices. But Ben, here’s where it gets real interesting; Y-O-Y core CPI is up 1.7% which doesn’t include food and energy as you know. But don’t take my word for it. Gold has maintained its price Y-O-Y while India has decreased its imports by 55% Y-O-Y through the half way point. Somebody is buying it. And the only reason that would be, is as a hedge against inflation.

  94. Thor says:

    I have a question – I think it was Ahab that pointed out recently that if we calculated unemployment the way we did during the 1980′s that the number today would be much higher. Has anyone seen, or do they know of a source, what the actual number would be? I would love to see a chart of historical unemployment rates going back to the 1930′s with different lines showing the unemployment rates using methodology employed over the decades. What would the unemployment in the early 1980′s have been using current methodology? What would estimated unemployment have been in the Depression using current or 1980′s methodology?

  95. ben22 says:


    I pay for Faber’s stuff so I know exactly what you are talking about, he’s firmly in the inflation camp and has made some awesome market calls since last fall, and even before that. Thanks to him I made a killing on FCX recently. On this issue however, I do not agree with him that inflation is a threat any time soon.

    As for sentiment, yeah, it has been fickle lately which I think can somewhat be attributed to the confusion that is out there. I still think bulls and bears alike are on pins and needles and nobody wants to make a major commitment either way right here, well, except some of the “pros” that trot out the same old stuff on CNBC every week. The sentiment on inflation and deflation seems to move very quickly from week to week, when the market goes down more people will bring it up, when we go up, or we get some BTE meme on earnings, no mention of shit revenues, then deflation has been taken off the table.

    In any event, as I’ve said before, if you aren’t trading this market, you probably shouldn’t be in it, regardless of your time frame.

  96. cvienne says:

    One thing I’m looking at is the TRENDLINE for the “weekly” closes on the SPX going back to the ’07 highs…

    That trendline connects “Lehman week aftermath”, plus, the recent 956 top…

    It’s hard for me to tell, but it looks like we’d have to clove ABOVE 920 on this Friday’s close to qualify as a breakthrough on that trendline…

  97. karen says:

    P&F for fxe is 168 : ) we know it can hit 160. well, i do agree in principal and fact that there isn’t THAT much room overhead for oil… i’m done with oil.. since they’re changing the rules and spec positions will be unwound, however a falling dollar will lend some support.

  98. Mannwich says:

    @Thor: I think that would be roughly the U6 number, which is over 16%. Not entirely sure, but I believe this is the case. I think this was changed early in the Clinton administration, if I’m not mistaken.

  99. Mike in Nola says:

    Pat G.

    If inflation is a sure thing, then housing is a terrific buy. Be my guest.

  100. cvienne says:

    Visa card surprise: $23,148,855,308,184,500

    My take? It wasn’t a mistake…it was just a couple of wacky politicians having a night on the town…