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alstry (36.45)

Alstry's case for 30-50% Unemployment

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April 14, 2009 – Comments (18)

As many of you know...when I started blogging unemployment was at about 6%.  I use U6 as the unemployment figure because it just seems practically the right one.  In Alstry's eyes, even though people are still NOT working and unable to find a job AFTER their benefits run out, for some crazy reason Alstry views them as unemployed even though some Fools don't.

Here is what my buddy awajeller said today:

Alstry, aside from your asinine nonsequiturs, you are darn right I am calling you out on your 30-50 % unemployment prediction.  You are no different than the people you are condemning.  You make a million bold predictions, and should any one of them show any accuracy you tout how you were right all along.

Seriously, how bold is Alstry's prediction....e

When I started blogging about a year ago, unemployment was about 6%....Then it went to 7%, and then 8% to 9% then 10% but didn't stop at 11% before going to 12% on its way to 13% an not resting at 14% to 15% and now EXCEEDING 16%!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Today Discover announced it is axing 4% if its workforce.  A few days ago 3M indicated it is cutting 11% after cutting a bunch a few months ago.  Now hosptials, nursing homes and other health care  providers are cutting.  Tens of thousands of retailers are shutting down.  State and local governments are dumping workers......and today our fearless leader told us to expect lots more cuts in the future.

The kicker is going to be health care and state and local governments.  In 1950, only 1% of the American workforce worked in health care....today it is over 12%....a 1200% increase.  State and local government is not much different......if we just cut those number in half still exceeding by many times the 1950 ratios.....we will be well over 30% unemployment real soon.

Based on my conversations...EXPECT MAJOR CUTS IN HEALTHCARE EMPLOYMENT IN COMING MONTHS.

If we are already OVER 16% per government statistics, and a number of experts argue we are over 20%.....how long do you think it will take for us to be over 30% and exceed the worst rates of THE GREAT DEPRESSION...especially since our president says to expect lots more job losses in the future?

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=179932&t=01002130057764754273#comments

 

Looks like Alstry's projection for 30-50% unemployment is in the bag....what still escapes me is why so many Fools are such Fools and fail to see what is so easy for Alstry to see...even when the FACTS are presented to them......sometimes I feel like Mr. T and really pity the Fools who keep sticking their heads in the sand.

18 Comments – Post Your Own

#1) On April 14, 2009 at 5:26 PM, StatsGeek (29.40) wrote:

Several less bearish Fools have asked when I will stop being so bearish.

The answer is when most of the malinvestment has disappeared and the debt has been dramatically reduced (which necessitates lots of bankruptcies).  As you've pointed out, Alstry, it is mathematically impossible for all this debt at every level to ever be paid off.  

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#2) On April 14, 2009 at 5:44 PM, drgroup (69.10) wrote:

"EXPECT MAJOR CUTS IN HEALTHCARE EMPLOYMENT IN COMING MONTHS."

Eggsactley right. Fewer employed people means less people covered by employee provided healthcare. Fewer people covered by insurance means less money being pumped into healthcare. Less money in healthcare means layoffs...

Now throw in the possibility of government controlled healthcare and really watch those numbers tumble.

The sand at the bottom of hole is starting to feel good around my ears.

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#3) On April 14, 2009 at 5:50 PM, jddubya (< 20) wrote:

Just curious - are you referring to 30-50% "Alstry's functional unemployment?"

 

Also, where did you get "...not resting at 14% to 15% and now EXCEEDING 16%!!!!!!!..." ??

 

The bureau of labor statistics most recent report shows only 8.5%

http://www.bls.gov/news.release/empsit.nr0.htm

 Again, I'm just curious on the numbers.  If you've already answered these elsewhere I apologize.

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#4) On April 14, 2009 at 5:56 PM, outoffocus (23.50) wrote:

Statsgeek,

The reason I'm still bearish? I did a stock screener today on stocks with good fundamentals (good balance sheet, low P/E, low forward P/E) who's share price had been beaten down.  I came up with 9 stocks.  9 stocks?!?!?!  That doesnt sound like a bottom to me.  Now granted, CAPS screener isn't perfect, but even within the margin of error I should have come up with more stocks than that.

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#5) On April 14, 2009 at 5:57 PM, Option1307 (30.19) wrote:

He's referring to the U6 number, not the U3 number as the bureau reports. The U6 number is a broader, often said to be more accurate number, that started in 1994 if memory serves me right under Clinton.

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#6) On April 14, 2009 at 6:03 PM, Option1307 (30.19) wrote:

jddubya

Check this link for more on U6 vs. U3 and unemployment...

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#7) On April 14, 2009 at 6:04 PM, jddubya (< 20) wrote:

Ok - my apologies, I should have looked up u3 and u6.  I understand now.  Still, is 30-50% the alstry projection for the U6 number?  Or is 30-50% the alstry projection for the alstry function unemployment rate?

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#8) On April 14, 2009 at 6:06 PM, alstry (36.45) wrote:

jddubya,

Here is the chart from the Department of Labor Table A12

http://www.bls.gov/news.release/empsit.t12.htm

Please look at U6 three columns in... March 2009 at 16.2%.  Then read the Note defining "marginally attached workers"...I think the common definition for those people defined as maringally attached would be UNemployed.

Under many European views...would U6 should be expanded which would result in a current rate of over 20%.

Here is what my buddy TMFDeej said this morning:

There's a huge difference between your views and my views, Alstry. 

You believe that unemployment will hit something like 30% to 40%, that more than half of the companies that are in the S&P 500 will go bankrupt, and that we all will be overwhelmed by an army of unemployed zombies and our firearms will be useless against them.

Alstry's response:

Some Fools...even TMFFools, just never learn nor can the see the light when the facts are presented to them....CLEARLY!!!

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#9) On April 14, 2009 at 6:09 PM, alstry (36.45) wrote:

jddubya,

My prediction for 30% or more is the Department of Labor U6 rate.......that is the number that I refer to as functional unemployment and what CNBC has referred to as "real" unemployment.

Hopefully this clarifies any confusion once and for all.

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#10) On April 14, 2009 at 6:10 PM, whereaminow (< 20) wrote:

When I started blogging about a year ago, unemployment was about 6%....Then it went to 7%, and then 8% to 9% then 10% but didn't stop at 11% before going to 12% on its way to 13% an not resting at 14% to 15% and now EXCEEDING 16%!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Hmmm, now if I were a hack economist like Paul Krugman, I would surmise that unemployment is actually caused by alstry's blogging. 

David in Qatar

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#11) On April 14, 2009 at 6:14 PM, JFund (55.14) wrote:

I believe you will completely miss the greatest investment opportunity in generations.

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#12) On April 14, 2009 at 6:20 PM, alstry (36.45) wrote:

Alstry misses a lot of things.....but rarely the facts when presented on a physical silver platter with a bloody standing tall just waiting for my consumption.

Gardena, Calif.-based home merchandise retailer Z Gallerie Inc. has filed for Chapter 11 protection in a California bankruptcy court, according to a Reuters report. The company listed assets and debt in the range of $10 million to $50 million in its filing in the U.S. bankruptcy court for the Central District of California. The company said in a statement that it was reorganizing to remove the liability from 22 leases associated with store closings and the closing of an Atlanta distribution center that the company had announced in February. The 30-year-old company plans to pay vendors who do business with it going forward on an administrative priority basis for all goods and services received on or after its filing date.In its filing, Z Gallerie said its January 2009 sales fell 19.4 percent when compared with a year earlier. The company operates 57 retail stores across 18 states and employs about 900 people.

You may expect tens of thousands of retailers to shut down possible costing millions of jobs.

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#13) On April 14, 2009 at 7:16 PM, DemonDoug (32.38) wrote:

U6 (or what would have been considered U6) was over 30% at the height (or trough as you might consider it) of the Great Depression... so that would seem like it would have a historical precedent in terms of the absolute bottom of unemployment.

Of course in really, really bad economies like argentina and zimbabwe, they had 75% and 90% unemployment, so by no means is 30% or even 50% a floor.

And I agree with Statsgeeks sentiment wholeheartedly, and I thank outoffocus for sharing his screening research.  The only companies I would go long on right now are ones with little to no debt and have strong positions.  Still a lot of great shorting opportunities out there (CGRB and AZO come to mind) for those willing to take the risk.

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#14) On April 14, 2009 at 7:28 PM, bdash (27.46) wrote:

alstry,

last I checked U6 was at 15.6%, and yes you do have to adjust for the season in any reasonable estimate. In case you haven't noticed healthcare is a relitivly safe industry, yes I realize they will be hit a little by the recession/depression (or whatever you want to call it) but even if 20% of those in healthcare lose their jobs (highly unlikely unless you are talking about financial troubles that amount to food riots) unemployment would still sit at 18.0% which isn't exactly 30%. Your predictions are far from "in the bag" and your evidence is atrocious. I hope you have something a little more concrete to share with us. 

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#15) On April 14, 2009 at 8:09 PM, Bupp (28.75) wrote:

Seasonal adjustments are not helpful when the government is manipulating the numbers and putting political pressure on the stats guys.

Ignore seasonal adjustments and look at the year over year unadjusted change.

Though if I told my labour econ prof that she'd think I was a nut.

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#16) On April 17, 2009 at 4:09 PM, Londamania (47.97) wrote:

"Please look at U6 three columns in... March 2009 at 16.2%.  Then read the Note defining "marginally attached workers"...I think the common definition for those people defined as maringally attached would be UNemployed."

Why?  Part time work does not mean unemployed and you are then using this much larger U6 number to assume no income at all.  This is incorrect.  At a minimum you should be using the U5 number for your justifications of no bill payments, etc..which is 1/3 lower than the U6 number.

But then you have this problem:

"In the early stages of an economic boom, unemployment often rises. This is because people join the labor market (give up studying, start a job hunt, etc.) because of the improving job market, but until they have actually found a position they are counted as unemployed. Similarly, during a recession, the increase in the unemployment rate is moderated by people leaving the labor force or being otherwise discounted from the labor force, such as with the self-employed.

For the fourth quarter of 2004, according to OECD, (source Employment Outlook 2005 ISBN 92-64-01045-9), normalized unemployment for men aged 25 to 54 was 4.6% in the USA and 7.4% in France. At the same time and for the same population the employment rate (number of workers divided by population) was 86.3% in the U.S. and 86.7% in France.

This example shows that the unemployment rate is 60% higher in France than in the USA, yet more people in this demographic are working in France than in the USA, which is counterintuitive if it is expected that the unemployment rate reflects the health of the labor market.

Due to these deficiencies, many labor market economists prefer to look at a range of economic statistics such as labor market participation rate, the percentage of people aged between 15 and 64 who are currently employed or searching for employment, the total number of full-time jobs in an economy, the number of people seeking work as a raw number and not a percentage, and the total number of person-hours worked in a month compared to the total number of person-hours people would like to work. In particular the NBER does not use the unemployment rate but prefer various employment rates to date recessions"

Or in short, it's much more complicated than extrapolating a U6 number to proclaim that we are all doomed to mud huts.

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#17) On April 20, 2009 at 11:36 PM, SuperPicks (29.16) wrote:

Great post, & I loved the closer, haha.

"sometimes I feel like Mr. T and really pity the Fools who keep sticking their heads in the sand."

LOL

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#18) On May 16, 2009 at 12:36 AM, AbrilH (< 20) wrote:

The current economic dilemma resulted to series of unemployment and bailouts. It is crucial to be updated about the current situation of our economy. This is why you really should check out opportunity.gov. Opportunity.gov is a Federal website that is geared toward people dealing with unemployment. It has helps for worker retraining and Pell grants for people who want to go back to school, and unlike quick payday loans, you don't have to pay them back. The available funding for Pell grants has dramatically increased, and also the tax credits for college students with the American Opportunity Tax Credit, which are both part of President Obama's plans for supercharging higher education in our nation. Taking advantage of opportunity.gov might mean getting a job good enough that you'll never worry about debt relief.

 

 

 

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