Wall Street: Big drop tomorrow? Are stocks overvalued and overloved? - by Anthony Cherniawski

The number of unemployed persons decreased by 556,000 to 14.5 million in December, and the unemployment rate dropped to 9.4 percent. Over the year, these measures were down from 15.2 million and 9.9 percent, respectively. This is largely due to unemployed workers running out of benefits. It appears that these people are no longer counted in the labor force, leaving as many as 3.91 million unaccounted for and a real unemployment number closer to 11.7%. We must ask our lawmakers to make the BLS account for these people.

U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force rose from 16.3% in November to 16.6% in December.

The CES Birth/Death Model added 24,000 hypothetical jobs to the payroll numbers. This leaves only 79,000 probable new jobs created in the month of December. Remember, we need 150,000 to 200,000 new jobs just to maintain at the current employment level.


Wall Street: Margin debt - borrowing to buy stocks - has shot ahead of the S&P. It normally follows the index up and down. When margined stock gets ahead of the market, any significant drop is in danger of snowballing as stock is sold to cover the margin. Call it the old fashioned type of Flash Crash, of the sort we saw in 1929 when stock was bought with sub-prime margin (90% margin on 10% cash), or right after the Lehman debacle when TARP was pronounced. How the 'bots might handle that we may find out - technicians are all over themselves with expectations of a 5-7% drop as early as tomorrow.

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