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Sweet Dreams and Nightmares Await US Jobs Report

August 5, 2011 by · Leave a Comment–Perhaps it’s time to make some bets. After today’s horrible stock market plunge, there are likely few investors who have emerged confident, let alone financially victorious. A week of losses across the board and a joke of a US debt deal are hardly encouraging signs for those who are still bothering with the worldwide, digital casino. Thus, as it’s now apparent that a storm may be very near, I see one of two things happening when I wake up in the morning: after I have a coffee, I’ll stare aghast at the US jobs report, which will hugely disappoint the masses and kickstart the storm; or, the report will get a passing grade and we’ll hang on for awhile longer.

After last month’s disastrous jobs report, I am not yet sure what to bet on. The consensus on Wall Street seems to be that the economy likely added enough jobs in July–75,000–to ease panic and unemployment stayed near the lower 9% range. Yet these experts also think that this week’s horrible losses may put a floor under further stock declines . . . And everything will be alright.

On the other hand, everyone else is saying “brace for the worst.” I don’t blame them, seeing as today we managed to pass the imaginary “mass panic” 30+ mark on the VIX, which is known as the world’s “fear gauge.” Considering that I said yesterday that this is the mark that may very well start the fast slide into financial oblivion, I guess I’ve sealed my bet-of-doom.

And the facts are currently on my side. The S&P 500 index is down 11.99% from its recent April 29 high, thus making it in an official correction, while the Dow Jones Industrial Average plunged 512.76 points (4.31%), the Nasdaq 136.68 (5.08%) and the TSX 435.90 (3.4%). The most depressing result: all three major US indices have erased gains made during the year.

The situation across the world was equally as grim. The FTSE, the DAX and the CAC in Europe all dropped more than 3%, while the European Central Bank decided to once again step in, offering unlimited credit to drag the crucial interest rate back down to its target of 4%. Brazil took a massive 5.6% hit, while China struggled and Australia’s prized economy groaned. When asked for a comment on the EU mess, President Jean-Claude Trichet could say nothing more than ”It’s true that we are in a period of a high level of uncertainty, not only in the euro area but at the global level.” How did he get his job?

As for some “okay” news .  . . Gold stayed fairly strong, silver too, and oil dropped below the $90 mark . . . Other than that, the good news may be that investors with strong stomachs could be looking at a potential crash-and-buy opportunity, perhaps the much-hyped chance-in-a-lifetime to scoop up those highly valued junior and major stocks that will be going for pennies. Or, maybe we’ll see armies of frantic last-minute investors, searching for guns and bullion.

When pondering this colourful thought in my dreams tonight, I think my mind will also turn to my quote of the day, brought to you be David Bloom, Chief Currency Strategist at HSBC: ”Anybody who has been on holiday has come back to face a different world. It’s the Wild West right now.”

All bets are off.

Chris Devauld

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