Last week’s news that the unemployment rate is soaring wasn’t met with surprise; but what is news is how many educated and employable people are jumping on the jobless bandwagon. As the Economix blog smartly reports, the number of college graduates with jobs fell 282,000 last month - but just 2,000 of them have looked for a job in the last four weeks. So why are 280,000 educated and unemployed moving from Midtown to Slowdown? It’s a hard fall from Wall Street to the workforce, and fired financiers are no different from the rest of us; its tough to find a job at Christmastime.

So what are all those idle bankers betting on this holiday season? Well, depends which bank fired them!

Thanks to Gary, who contributed this comment on a post about the Baltic Dry Index a week ago -

What [a] great time to buy shipping stocks - before you know it demand will be back because pent-up demand will force products to ship. Stocks like Genco (GNK) and others will expode again.

Last week, things looked bleak for equity investors.  As the Dow Jones and S&P 500 slid to historic lows, and the TED spread soared to an historic high (more on that below), it looked to many like the thing to do was pull out of stocks entirely, and enter safer assets like gold, T-bills, and steady bank savings accounts.  But on Monday, the market bounced, led by the news that the U.S. government will invest up to $250 billion to shore up the U.S. banking system in a plan similar to measures taken by several European powers, including Germany and the U.K.

Does this mean the crisis is over, and stocks will recover the trillions of dollars in market cap they lost over the past two weeks?  Unlikely.  Events of the past several months have shown that each time the market rebounds, a fresh bit of disheartening news about one macroeconomic indicator or another causes a sharp decline.  

The Dow Jones Industrial Average fell below 8600 Thursday - bleeding another 7% to continue the incredible losses that have taken place all week.   It seems like the much anticipated bailout has not had the effect that many anticipated - rather than assuaging investor concerns that the worst of the financial crisis was over, it was an inadequate levy in a flood of capital out of the equity markets and into more stable gold and treasury bonds.

And there’s reason to believe that the markets will keep falling in the great financial crisis of 2008.  Some major macroeconomic indicators point to tough times in coming quarters.

As the WSJ reported yesterday, the collapse of Lehman Brothers (LEH) and the sale of Merrill Lynch (MER) to Bank of America (BAC) is just the latest chapter in a stunning redesign of the financial world.  Stand-alone investment banks are dying rapid deaths, with three down in 2008 already (who can forget the spectacular demise of Bear Stearns (BSC)?).  In their place, a new king is rising - commercial banks.

The key difference between an investment bank and a commercial bank is the source of their cash flow.  A commercial bank like Bank of America or Wachovia (WB) takes consumer deposits, which are insured by the federal government to prevent depositors from pulling out all at once (a major catalyst of the Great Depression in the 1930s that is now prevented by tighter regulation and insurance).  Investment banks take no such deposits, and as a result benefit from lighter government oversight that allows them to take big risks to earn huge profits.  To finance their short term operations, rather than taking consumer’s deposited cash, the i-banks borrow in the commercial-paper market and the repo market, putting up securities as collateral for short-term loans.

The government takeover of Fannie Mae (FNM) and Freddie Mac (FRE) will have far-reaching economic effects.  For example, hedge funds that bet against the two companies have already seen windfall profits as the stock prices of both companies plummeted over the weekend, while the financial institutions that invested in the nearly $5 trillion in mortgages and mortgage-backed securities that FNM and FRE guarantee can breathe a sigh of relief. 

The government bailout should help avoid a global financial crisis - but it might not help all of the Real Estate Investment Trusts (REITs) that depend on loans from Fannie and Freddie to finance their growth.

The problems plaguing the Big Three American auto makers in 2008 have been well-documented.  The push for flashy SUVs that guzzle gas but impress at the suburban strip mall caused Ford, GM, and Daimler to shift production towards these bigger cars, but these divisions have become huge drains on profits in recent quarters.  Consumers have responded to the explosion of oil and gas prices and stopped buying trucks and sport utility vehicles, looking instead toward more fuel-efficient and hybrid vehicles.

Europe drank the renewable energy Kool-Aid long before it reached America, and the big car companies have already focused their European and international production on smaller cars that consume less gasoline.  As the global economy sags, these economical cars have continued to sell, and results abroad have been the lone bright spot for Ford, GM, and lower-profile players in the auto manufacturing industry.

The economic visions of the presidential candidates in 2008 are dramatically different, and the contrast is most striking when they discuss taxation. Barack Obama will steal from the pages of English folklore and take from the rich to give to the poor; well, actually, to the middle class, who will benefit from major tax cuts. John McCain sees things differently, and he will cut taxes across the board - most heavily in the highest income bracket, who will see more than $250,000 pumped back into their wallets. (Editor's note: This figure has been corrected from its original version on 9/1/08.)

Source:Tax Policy Center via CNNMoney.com

In the battle for supremacy in the aircraft business, there are only two real players - Boeing Company (NYSE:BA) and Airbus [EPA:EAD].  These two companies compete for market share in commercial and military planes, with demand far exceeding each company’s manufacturing ability, and both have a long order backlog.  Some of Boeing’s customers, for example, will wait as long as five years before the planes they ordered are delivered.  And while they fill these orders, both companies must keep innovating. 

As oil prices continue to soar, and airline companies like Delta and American Airlines struggle with tight margins, planes that fly faster, fit more passengers, and consume less fuel are at a premium.

These days, times are tough in the middle market of the retail business. Luxury companies like Louis Vuitton (LVMUY.PK) are doing just fine, as the rich keep spending regardless of the economic climate. And discount retailers like Wal-Mart (WMT) are benefiting big-time from tight budgets in the lower and middle classes as consumers look to cut costs on discretionary items as their gas and food bills soar. But the middle men - companies like American Eagle Outfitters (AEO), The Gap (GPS), and Tween Brands (TWB) - are suffering as their customers choose low-cost alternatives, or make do with last year’s wardrobe.

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On Tuesday, Tween Brands announced that it will shift its focus from its more established Limited Too stores to its newer, cheaper Justice Brand. In response, investors crushed Tween’s stock price - it fell 17% in that day’s trading. Tween, which is focused on selling to the 7-14 year old girls that are its namesake, will shift 560 of its Limited Too stores to the Justice brand name by first quarter 2009. The company says that it will take a charge of $18 million in the second half of the year after making this move. But it hopes that the conversion will lead to annual savings of $20 to $25 million in 2009 and beyond, after laying off Limited Too staff and shaving marketing and store expenses.

It’s been years since Advanced Micro Devices (AMD) has been a leader in any market. First, it challenged Intel (INTC) in the battle for semiconductor supremacy - and lost, badly, watching helplessly as Intel’s superior technology reached 75% dominance of the microprocessor market by 2007. As Intel surged, AMD swooned, and made a fateful decision to diversify its business. The purchase of ATI Technologies in 2006 burdened the books to the tune of $5.6B - and investors punished the stock, which has dropped nearly 90% in the two years since.

In the health insurance industry, the margin for error is slim.   Companies like WellPoint (WLP) and UnitedHealth Group (UNH) must pay particular attention to a single metric that separates the winners and losers in this massive market.  This statistic is the benefits expense ratio - also called the medical loss ratio - simply, the cost of providing health care to members divided by the revenues from the premiums paid by these members.

Benefits expense ratio, WLP and Competitors

Amgen (NYSE:AMGN) made its reputation as one of the premier firms in the biotechnology industry with its blockbuster anemia drugs, Aranesp and Epogen. Worldwide sales of anemia drugs made up around half of Amgen’s $14.8B revenue in 2007 and an even larger percentage of its profit - Epogen, its original bestselling medicine, brought in revenues of $2.5B, while Aranesp sales hit $3.6B. But these impressive totals obscure falling demand for the drugs - in the the second quarter of 2008, for example, sales in the United States plunged 26 percent.

A major reason for the slow numbers is that public perception of Amgen’s big drugs has become increasingly negative. Amgen’s medications are commonly used by cancer victims to treat anemia caused by chemotherapy treatments, and studies in the past year have shown that these drugs can increase the risk of blood clots and death in these patients. Amgen’s stock was punished in the spring after the studies hit mainstream media in February.

Given the sorry state of the market these days, lots of investors are looking for so-called "recession-proof" investments - companies that will perform consistently in bull runs and bear markets to keep their money secure. What better place to look than a company that dedicates itself to safekeeping?

Iron Mountain (IRM) helps customers store and discard paper documents securely. In effect, this means driving a van to a customer's location, filling it with documents in boxes that IRM has sold to its customers, then driving them to a secure location to be retrieved when the company needs them, or shredded when the docs have outlived their usefulness.

Southwest Airlines (LUV) reported earnings Thursday - and for the 69th straight quarter, the airline turned a profit. Its quarterly net income increased 15% from a year ago, to $321 million. These results are worth a closer look, considering the rest of the major airlines lost a combined $6 billion in the second quarter. How does Southwest stay in the black as the rest of its peers bleed red? The secret - it hedges its fuel prices better than anyone in the business.

For decades, video game companies have relied on a tried and true business model - spend on development of new titles, sell them to customers at high prices, and then roll out one sequel after another to capitalize on popular franchises. But the game is changing, literally, for the companies that make video games. The growth of the internet means that users want to download games right to their computers - and what's more, they don't want to pay for them anymore.

But companies like Shanda Interactive Entertainment (SNDA) and The9 (NCTY) have figured out a way to monetize the new, play-for-free market. These Chinese video game makers no longer charge for their premier titles - they allow users to download them free. Then, once users get hooked, they can pay for upgrades to the game - clothes and accessories for their avatar in a role-playing game, for instance, or increased abilities for their character that will help them make it through more challenging levels.

It seems curious at first when a bank reports losses of $9B, as Wachovia (NYSE:WB) did Tuesday, and its stock price isn’t punished.  It’s even more counter-intuitive when the company’s stock price goes up, as it did after Wachovia said it lost $8.9B in the second quarter of 2008.  Despite the sour news, Wachovia was up over 27% yesterday on the New York Stock Exchange.  Why are investors rewarding the beat-up bank with a share price boost?  A closer look at Wachovia’s recent history helps solve the WB mystery and explains why its investors are still riding high. [Read Wachovia's latest Conference Call Transcript]

The struggles of the financial services industry in 2008 have been well documented.  Banks that invested heavily in the mortgage business got burned when home values began declining in 2007 and one subprime loan after another went bust.  While everyone was hit hard, even the biggest names like Bank of America (NYSE:BAC) and Citigroup (NYSE:C), many analysts expected smaller, regional banks like Wachovia and Washington Mutual (NYSE:WM) to be hit the hardest.