Thursday, June 18, 2009

Continuing Claims dip?

It's hard to argue with the data when the government reports that continuing unemployment claims dipped this week for the first time in 5 months. The market decided that this dip in claims was enough to inspire a little rally today - the first of the week.

However, as with most data I think there is more to the story.

"Fewer people are receiving jobless aid largely because more of them have exhausted their standard unemployment benefits, which typically last 26 weeks. Government figures, in fact, show the proportion of recipients who used up their jobless benefits in May topped 49 percent, a monthly record."

Wow, 49% of recipients used up their benefits in May and the continuing claims number only dipped slightly? There are two take-aways from this info -- 1) Anyone looking to spin the declining number of continuing claims is going to have a field day because claims are going to continue to fall. 2) This could be another major problem for the banks and US consumers as because the unemployed that were just keeping their heads above water will now be without any income stream as their benefits expire.

While we've enjoyed a staggering rally off the lows in our domestic markets (up 25% to 39% depending on the index) some of the global rallies have been legendary.

The Russian market is up 137% from the January low. I'm sure a big portion of your 401k has exposure to the Russian market, right? Now, much of the gain can be attributed to rising global commodity prices and their market might fall just as fast if oil retreats.

Or how about the 90% jump in the Indian market since the March lows? Truly stunning.

The markets have basically been treading water now for a month - the key question is are we pausing before we head higher or preparing for a pullback? Time will tell.


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