Unemployment – How Bad Could It Get?

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Jan 30 2009
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It surely feels good to see Apple Inc. (Nasdaq: AAPL, stock) shares trading above $90 bucks a share after my previous article. I suppose it’s time to take money off the table *grin* today as Friday is always a good day to lock in profit, if you know what I mean. In fact the best time to cast away your greed and fear is during such long holiday whereby your determination to let your stop-loss (or rather stop-profit) do the work is put to final test. It will be even better if you do not have internet access thus denying you the ability to monitor the stock movement and manually override your earlier decision. Sometimes it’s amazing what the greed and fear could do to you.

Sooner or later you need to train yourself to put your trades on autopilot since it could put the strain off your muscles over long period of monitoring. Long hours of stock monitoring is never a good thing to your health, what more if you have many open positions. That brings to the topic of whether it’s wise to have many open positions and if not then how many is sufficient but that will be another discussion on another day. While autopilot has its advantages, it definitely robs you of the fun and excitement of predicting the stock movement in the next few hours or days. Nevertheless autopilot is your best friend when you do not have sufficient time or resources to digest macro and micro economic news and make decision thereafter.

Unemployment How Bad it isAnyway Friday is also the day U.S.’s Commerce Department is set to release a report showing the economy shrank at a pace of 5.4 percent in the October-December period. If the forecasts are correct then the fourth quarter performance will be the worst since 1982’s recession but if the report shows otherwise (worse than estimation) then the Dow could plunges further *scary, scary*. The effect of global recession is hitting Japan’s economy real bad with unemployment rate jumped to 4.4% from 3.9% in Nov. Sony and Honda Motor Co.’s net profits in the Oct-Dec quarter plunged a whopping 95% and 90% respectively. The Japanese factory output (Industrial Production) plunged 9.6% in Nov, the worst reading since 1953 and it’s taking its toll globally including Malaysia where unemployment may climb to 6% this year – the highest in more than 20 years. This will translate to about 660,000 unemployed zombies *Wow! Think of the possible crime rates*. Spiraling unemployment will spawn many other problems you won’t want to know.

Forget about PM-in-waiting Najib Razak’s claim that the country will never enter recession and Bank Negara’s (Central Bank) attempts to trumpet misleading signals because chances are high that Malaysia’s GDP may be in negative territory (0.7% contraction) against government’s forecast of 3.5% growth. That’s why Najib is desperate to get the so-called second stimulus package out. But the question is what happened to the first RM7 billion stimulus package? Has it been fully disbursed in the first place? If not then why ask for more money and if yes then why the effect is not felt? The last thing we want is another scandal whereby a staggering RM7 billion evaporated into thin air. On the other hand if the argument is the RM7 billion is too small a figure then why such figure in the first place?

President Barrack Obama may be right in calling Wall Street bankers “shameful” to be paid more than $18 billion in bonuses last year but I doubt he could do much with the U.S. economy even with another $1 trillion on top of Bush’s earlier $700 billion bailout package. The U.S. economy is in great mess and you don’t have to be a rocket scientist to know the country’s recovery requires a long journey. They have not even find the right medicine to their problem yet so you can imagine the scale of problem U.S. is facing now. And do I have to repeat that we’ve not even heard about Credit Card’s potential bubble?

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