In early November 1999, the Dow was at 10,500.

10 Years later, it’s a different Dow that sits at 10,000 than we had back then with AlliedSignal, Citigroup (C), Eastman Kodak (EK), GM, International Paper (IP), Minnesota Mining, Philip Morris and SBC Communications now replaced by Cisco (CSC)), Chevron (CVX), Hewlett Packard (HPQ), Kraft (KFT), 3M (MMM), Pfizer (PFE), Travelers (who became Citigroup in 1999, ironically), Verizon (VZ) and Exxon (XOM). The Dow finished 1999 1,000 points higher, at almost exactly 11,500 despite the fact that many people thought computer clocks would fail to roll over and wipe out Western Civilization on January 1st.

I seem to recall, way back when Bernanke was appointed the head of the Fed, a promise to speak clearly. I well recall the "good old days", when economists, analysts, and various financial pundits would agonize over every word Greenspan uttered...nay...even probably agonized over every punctuation mark in written transcripts of his utterances, in an effort to discern exactly what he meant, and his intentions, as well as his famous (infamous?) remark about if the listener understands him, he's not being obscure enough.

Maybe it's me, but either Ben isn't speaking clearly enough, or else old habits die hard, and the various scribes of Mammon torture and tease every Fed statement in their efforts to discern what the future may hold.

There was no surprise with the announced third-quarter GDP for the U.S. economy (+3.5%), however, there was some personal disappointment for me. The disappointment relates to the fact that few, if any, commentators were willing to speak up and exclaim that “the emperor is wearing no clothes.”

The reason that this is such a big disappointment is that the “official” number for U.S. Q3 GDP cannot withstand the slightest analytical scrutiny. So, allow me to analytically dissect this obviously fraudulent number.

There is really no debate about the point that unemployment levels lag the stock market. The data is clear on this. Even if one wants to challenge the accuracy of the level of unemployment, the trend is the same. This past Friday saw the passing of the level of 10% unemployment in America. This level was thought to have been a severe psychological barrier to market participants and the market had sold off the two weeks previous in anticipation of that result. The number was announced on Friday morning, and....nothing. The market barely reacted. And for good reason.

In each of the past six recessions, regardless of cause or severity, the stock market led the recovery in employment by 4-9 months. Examples of the stock market bottom followed by the peak level of unemployment in each cycle include: June 1949 vs. November 1949 (5 months), September 1960 vs. May 1961 (8 months), September 1974 vs. May 1975 (8 months), June v. December 1982 (6 months), November 1991 vs. June 1992 (7 months) and February vs. June 2003 (4 months). It stands to reason that the more severe the recession, the higher the level of unemployment and the longer it will take for the employment cycle to reverse direction. This can be seen in the data as the longest recovery lags were the severe 1974-75 recession and the 1960-61 recession.

Friday’s unemployment report from the Bureau of Labor and Statistics is anything but a green shoot. The official U-3 unemployment number is 10.2%. The broader and more comprehensive official unemployment number, the U-6, is at 17.5%. The U-6 counts all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, and all the people who dropped off unemployment benefits because their unemployment benefits ran out. John Williams at Shadowstats.com suggests that real unemployment is actually running at 22%, which, by our calculation, is approaching Great Depression unemployment numbers.

The unemployment report may come as a surprise to those who have been following the Obama administration and mainstream economists like Paul Krugman. Here are some choice quotes from those we’ve entrusted with our economy:

Lately, I've been thinking that there are probably more than a few readers on SA that think of me as an old, cranky "Perma-Bear". While I'm willing to concede that I may fit a fairly generally accepted definition of "old" (especially in the eyes of those under, say age 30, or so), and I admit that I can be out-spoken, and as the years have passed, I'm less likely to suffer fools gladly, and find no problem in calling a spade a spade, I bridle at the thought of being considered a "Perma-Bear".

Having said that, I started wondering, "What WOULD be an accurate an appropriate label for my investment outlook at the present time?". Considering what was in my portfolio, and why, I decided the most accurate label would be "reluctant bull".

Recent policy decisions by the Obama administration imposing duties on certain goods imported from the Peoples Republic of China (PRC) and the actions of the PRC in response to these duties have resulted in a straining of the relationship between the two countries. Allegations of “Dumping” have been made by, and denied by, both sides. Dumping is defined as the act of a manufacturer in one country exporting a product to another country at a price which is either below the price it charges in its home market or is below its costs of production. In addition to dumping are unfair trade practices. These practices may include everything from setting up the duties and tariffs allegedly to defend ones domestically manufactured goods to embargo of goods or commodities.

Complaints of dumping against the PRC have been made for decades by the developed nations, usually these charges have been countered by denials and counter charges of protectionism. These complaints are addressed by the World trade Organization (WTO). In 1995 the WTO was Chartered as a successor organization to the 1947, General Agreement on Tariffs and Trade (GATT). The United States is a GATT signatory and became a WTO member upon its inception in 1995 and the PRC became a member of the WTO in December of 2001. In so doing both agreed to the terms of the GATT and to be subject to the WTO in matters of resolving international trade disputes.

Sentiment Surveys
The star this week is the ever so humble and common AAII weekly survey of US retail investors. This sentiment indicator sends extreme signals every once in a blue moon. So I guess you better check the night sky tonight because we haven’t seen so few bulls in this survey in a long time.

Data are what they are. I do not cherry-pick economic releases – I try to analyze all released reports that were issued during the week.

I work at not biasing data – although this is an impossible goal as we all have some degree of bias that escapes into our analysis. My bias is that I want to be the person who makes money – not some hedge fund manager, congressman or Federal Reserve official.

“Words from the Wise” this week comes to you in a shortened format as I am about to leave Cape Town for a visit to the colder environs of Switzerland and Slovenia. Although reduced commentary is provided, a full dose of excerpts from interesting news items and quotes from market commentators is included. Blog posting will be slow (and totally absent on some days) while I am on the road. The normal blogging service will be resumed on my return to Cape Town on November 16.

The Federal Open Market Committee (FOMC) maintained its extraordinarily accommodative monetary policy following its meeting on Wednesday. The communiqué had no surprises and said that the committee expected to keep the fed funds rate target in the 0-0.25% range “for an extended period”. As expected, the European Central Bank (ECB) and the Bank of England (BoE) also kept interest rates unchanged at 1% and 0.5% respectively.

You've heard of The Longest Yard. You've heard of The Longest Day. Well, this has been the longest week, given the barrage of significant releases, announcements, et al. We concluded Friday with US non-farm payrolls, after which Macro Man planned to relax over the weekend.

Anyhow, he doesn't have the energy to conjure a neat tie-in...all he can manage is a collection of random thoughts:

Two dissatisfied customers comment about a restaurant. One says, "The food here is terrible." The other replies, "I know, and such small portions!" In many ways, they could be describing our current employment picture. Not only are the portions shrinking, but the jobs themselves are steadily losing quality.

Today's release of the October jobs report showed the loss of another 190,000 jobs had pushed the official unemployment rate to 10.2%, only the second time since the Great Depression that unemployment was quoted in double digits (factoring in workers who had given up job hunting altogether or have settled for part-time work would push that rate to 17.5%). That didn't stop Wall Street pundits from trying to fashion a silk purse of this sow's ear. The 'green shoots' crowd focused on the slowing pace of job losses, the nascent economic 'recovery' (even if it is jobless), and the projected improvement in 2010. No mention was even made of the quality of what few jobs were being created.

By Simon Johnson

The G20 Finance Ministers and Central Bank governors are meeting today in St. Andrews, talking about the data they will need to look at in order to monitor each other’s economic performance and sustain growth (seriously).

“I think stocks are topping out, commodities are topping out and the dollar is making a bottom,” says Robert Prechter, president of Elliott Wave International and author of “Conquer the Crash“.

According to Yahoo Finance - Tech Ticker, Prechter also makes the seemingly counterintuitive argument that the dollar will rally because there’s so much debt, rather than being doomed because of it.

The video clips below provide a handy summary of the reports expected on the economic, financial and corporate front around the globe during the week ahead.

US: Retailers, health care

By David Russell

One big investor is using options and an exchange-traded fund to bet on a rally in Treasury bonds.

Breaking up the 1,800+ US companies that have reported third quarter numbers into sectors, below we highlight the percentage of stocks in each sector that have raised guidance this earnings season. Overall, about 11% of companies have raised guidance this season. As shown below, Technology has blown all other sectors away, with 18.5% of tech stocks raising guidance. Consumer Staples ranks second at 14.3%, and Health Care ranks third at 13.1%. It's a bit surprising to see that Health Care is one of the sectors seeing forecasts increased the most, given the uncertainty around reform. Maybe the Health Care companies are less worried about the impact of reform than investors are?

<< Go to Part I: Ask Alice, I Think She Knows