CHESSNOID

Considering we are getting a new President this week, I expect the stock markets to rally even if we have bad news. The markets have dropped significantly from their New Year’s opening.

At this point, the bloggers who argued that the recession would actually be the beginning of another Great Depression are starting to win me over with their views.  I have had tough times in my life and even watch my father work through tough times of his own.  I still remember the alternating gas plate days of the 70’s and the almost impossible to get jobs after graduating from college during the late 80’s.

This particular recession is more severe and even vicious in the way it is taking out every single industry. There are many economists and analysts who argue that a Great Depression can’t happen again, but most of these experts were the same people who didn’t realize the global recession was upon us a year ago.

Right now, the unemployment numbers being published are being spun in their best positive light.  Some people see right through that.  According to the Market Oracle:

Employment Numbers Are Worse Than Posted
First, I have to address some more government data that can be misleading. We were told Thursday that initial unemployment claims were “only” 524,000. The talking heads immediately said that was proof the economy is simply bad, not falling off a cliff. Again, like last week, that seasonally adjusted number masks the real number, which was 952,151. That is not a typo. There were almost 1 million newly unemployed last week! That is up over 400,000 from the same week in 2008, while the seasonally adjusted number was up only 200,000. Last week the real number was 726,000, so this is a material rise of over 225,000, yet the seasonally adjusted number suggests a rise of only 57,000 from last week.

The continuing claims data leaped over 500,000 to (again, not a typo!) 5,832,746. The length of time people are staying unemployed is also rising rapidly. We are up almost 1.5 million new continuing claims in just the last five weeks. That is a stunning rise of over 30% in unemployment claims in just over a month. The data is truly ugly, but it is what it is.

When you are in periods where there are deep outliers to the data because of very real turning points in the economy (such as we are going through now), the seasonally adjusted numbers can mask the real underlying trends, both up and down.

Listen to what Dr Doom’s Nouriel Roubini (a New York University economics professor who predicted the housing bust back in 2006) has to say:

Nouriel Roubini: I fear the worst is yet to come

Roubini thinks the solution is to spend more and do the stimulus package. That is already a done deal and now we can wait to see if it works. I want to stay positive and hope it does, but these actions are no different from what the Bush Administration has done the past 8 years. The same actions are likely to yield the same results.

The different numbers being put out by the government offices are probably being under-reported since it seems when the real numbers come out they are adjusted to a higher number.  I do think the worse is yet to come so prepare for it.