That was the headline news today on Research in Motion symbol RIMM so I decided to look at the chart to see what was going on in the “real world”. When I got to the chart, one thing immediately jumped out at me and that was the negative action that this market has shown in the past several weeks. Looking at this market a little closer I was able to see that our “Trade Triangle” technology was 100% negative and that our monthly “Trade Triangle” indicator had turned negative on October 28th at $63.38. This is a major negative in my mind for this market.

In this short video I show you exactly what we expect to see for RIMM in the future. I also share with you some downside targets that we are looking at which may surprise you.

Click here for this informative investment video on RIMM

As always our videos are free to watch and there is no need to register. I hope you enjoy the video and comment about it on our blog.

From Yahoo Business:

About 824,000 more jobs may be subtracted from the payroll count for the 12 months through last March when the figures are officially revised early next year, a Labor Department report showed today. The revision would be the biggest since at least 1991.

The bulk of the miss occurred in the calculations for the first quarter of this year, the Labor Department said. The economy shrank at a 6.4 percent annual pace in the first three months of 2009, the worst performance since 1982.

The figures raise the possibility that the government’s calculations continue to miss the mark.

“We are probably still underestimating job losses,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “There could be another 30,000 to 40,000” that the data isn’t picking up, he said.

That would mean the loss of jobs for September could turn out to be as high as 300,000, rather than the 263,000 reported today by the Labor Department. Today’s report also showed the jobless rate climbed to 9.8 percent last month, a 26-year high.

The potential revision for the year through last March would mean that the economy lost 5.6 million jobs for the period instead of the 4.8 million now on the books.

Companies Surveyed

The payroll estimates are based on a government survey of about 160,000 businesses and government agencies covering around 400,000 worksites.

Once a year, the Labor Department revises its payroll figures after combing through tax records from the unemployment insurance program that covers practically all businesses. Those records are only available after a lag, explaining why it takes more than a year to make the tabulations.

The department uses a formula, known as the birth/death model, to determine the influence on payrolls from the formation and demise of businesses.

Because the government doesn’t know if a company fails to respond because it has gone out of business or is just late, it estimates the number of companies that may have folded. By the same token, it plugs in an estimate for the formation of new businesses to account for their hiring.

From April 2008 through December, the tax records showed the Labor Department’s figures overestimated payrolls by about 150,000, said Chris Manning, the national benchmark branch chief at the Bureau of Labor Statistics. That implies the estimates missed the mark by about 675,000 in the first quarter of this year, which currently shows a 2.1 million drop in payrolls.

Not Working ‘Well’

“In this period of steep job losses, the birth/death model didn’t work as well as it usually does,” Manning said in an interview. “To the extent that there was an overstatement in the birth/death model, that is likely to still be there.”

The model added about 184,000 jobs to the payroll total last quarter compared with a 135,000 increase in the same period in 2008, before the financial crisis deepened with the collapse of Lehman Brothers Inc.

“This birth/death model is still assuming that we are getting new jobs from new-business creations,” David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto, said in an interview.

‘Alice in Wonderland’

“These additions are coming somewhere from ‘Alice in Wonderland,’” he said, referring to the novel by Lewis Carroll detailing the adventures of a girl that fell down a rabbit hole into a fantasy world.

“Even though the current data is bad, the numbers are actually even worse,” Rosenberg said.

Wells Fargo’s Silvia says the birth/death calculation isn’t the only thing that’s broken as many companies are also discarding their business models.

Companies “really have diminished their willingness to hire labor for any production level,” Silvia said. “It’s really a strategic change,” where companies will be keeping fewer employees for any particular level of sales, in good times and bad, he said.

The problem is a simple one, and Yellen hits it right on the head: employment.  She expects employment to be a problem for the several years as the economy claws it’s way out of this recession.

From Market Watch, the problem is framed quite squarely:

“Inflation hawks are worried that the Fed’s near-zero interest rates and the trillions in U.S. dollars dumped into the economy via unusual stimulus programs, plus burgeoning federal deficits, will lead to dangerous inflation in coming years.

On the other side of the spectrum, some policy makers and economists fret that economic slack and pressure on wages raise the specter of deflation, or a sustained drop in prices.”

Whether the conspiracy theorists (who abound on the MarketWatch posting board) want to believe it or not, our continuing loose monetary policy has done marvelous at abating a potential implosion in the economy.   It’s stuff straight from the New Keynesian school of economics.  Of course, the Chicago School is fuming over the current policy, but, in my opinion, it was the ridiculous notions concerning efficient market theory and it’s bastard offspring the CAPM that wrought this recession upon us, or at least the designers of exotic derivatives relied upon Efficient Market Premise to draws the underpinnings of the current raft of derivative, specifically CDS’s.

Anyway, Yellen is worried about deflation, which is a disastrous economic malady.

Yellen commented on the bifurcation of views about inflation that has emerged lately, saying that “in my career, I have never witnessed a situation like the one that exists now, when views about inflation risks have coalesced into two diametrically opposed camps.”

Deflation?  Inflation?  You decide

She placed herself in the camp that worries more about falling, rather than accelerating, prices. “My personal belief is that the more significant threat to price stability over the next several years stems from the disinflationary forces unleashed by the enormous slack in the economy,” she said.

Most of the important announcement will occur later in the week such as Industrial Production, CPI and a host of other less important announcements.

Todays Fed amd Fed Agency Announcements:

4-Week Bill Announcement
11:00 AM ET

3-Month Bill Auction
1:00 PM ET

6-Month Bill Auction
1:00 PM ET

What happened to the global economy and what we can do about it

Larry Summers, Economic Recovery, And Ben Bernanke

In a memo to Congress on Tuesday, Larry Summers – the head of the White House National Economic Council – laid out his view of where we are and what is likely to happen next in our economic recovery.

His tone was more upbeat than we’ve heard in recent utterances, although he has been heading in this direction for a while – contrast this April speech with this appearance in July.

What is beginning to turn the economy around?  Summers claims great effects from the fiscal stimulus Recovery Act, but much of that money has not yet been spent.

He also puts weight on “an aggressive effort to tackle the foreclosure crisis.”  There have been sensible steps in that direction, but so far the effects have been decidedly modest.

The main explanation has to be that the administration prevented the financial system from collapsing.  In an economy as large and diverse as that of the United States – with much more government spending than at the time of the Great Depression – as long as the entire provision of credit does not disintegrate, we will recover.

Summers refers to “A Financial Stabilization Plan”, but this is ex post grandiosity.  In fact, the government simply demonstrated unflinching support for all big financial firms as currently constituted.  We the taxpayer effectively guaranteed all these firms debts, unconditionally.  Once the market figured out that the Treasury, Federal Reserve and other officials could pull this off, the panic was over.

But this victory brings also real danger.

Rahm Emanuel, the White House Chief of Staff, put it well recently, “The [finance] industry is already back to their pre-meltdown bonuses.  We need to make sure we don’t slip back to risky behavior where the institutions have all the upside and the taxpayers have all the downside, which is why we need regulatory reform.”

Summers does not shy from this issue.  In his letter to Congress he says we need, “Comprehensive reform of the nation’s financial regulatory system so that a crisis like this never happens again,” and “Financial regulatory reform is vital to preventing against (sic) the asset market bubbles that have characterized previous recoveries.”

There are, however, three problems with what he proposes.

First, he says that the administration “has unveiled a sweeping set of regulatory reforms.”  But the reality is more modest.  There will be some slight strengthening of capital requirements, somewhat more attention paid to “systemic risk” (although this is not well defined), and mildly tougher regulation of derivatives.  Most of this amounts to essentially business as usual.

Second, to the extent that the administration does have a few good ideas – for example on a new consumer protection agency for financial products – it has let opposition build to the point where the lobbyists may well be able to prevent progress.  The time to push for change was earlier this year, when banking was still in political disarray; now the sector is stronger than even on Capitol Hill.

Third, the administration can’t even bring its own regulatory agencies along with its modest reforms.  Last week, Treasury Secretary Tim Geithner expressed extreme frustration with the efforts of these agencies to block reform.  This week, appearing before the Senate Banking Committee, the same people were still in serious blocking mode.

Even the Federal Reserve chairman, Ben Bernanke, does not seem to be on board with reform as proposed by Geithner and pushed by the White House.  It’s not clear if Bernanke has become too close to the banking industry or too captured by his staff, but in any case Treasury feels that he is not fully on board.

If the administration really wants to put the economy on a path to sustainable bubble-free growth, it looks increasingly likely that it will want to replace Bernanke when his term is up early next year.

Secretary Geithner is the most plausible replacement.  He was previously head of the New York Fed and vice chair of the Federal Open Market Committee, so he knows the system intimately.  He has spearheaded all the financial rescue efforts of the past few years; better than anyone he knows what went wrong.  The markets see him as a safe and friendly pair of hands.

And, increasingly, if he wants any kind of real reform, it looks like Secretary Geithner will have to go to the Fed and implement it himself.

But that doesn’t mean I don’t think about things from time to time…and the recent rally in the stock market has me scratching my head some.  I think Benjamin Graham would be shaking his head some, too.  This chart is mind boggling:

spx daily chart

The market has shot up to extraordinary levels in recent months on news that…ah…ermm…earnings are down.  Huh?  It’s true, the economy as whole has stopped the free fall we experienced early in the current year, and we have had a steady stream of “it’s not as bad as it could have been” kind of economic reports.  But this news is hardly the stuff of “green shoots” some economists have portrayed.  To be sure, revenues are down in double digits percentage points from last year, and purchasing power, as measured by tax receipts, is off 22%.  Things aren’t nearly as rosy as many would have you believe.

To go a step further, where in the heck did all this money to fuel this rally come from?  Only 400 million dollars has flowed out of money market accounts and into the market.  So that kind of kills the “money was on the sidelines” theory.  It takes a major commitment of cash to run the market up to the levels we are now seeing.  Somebody is buying stocks in a big way.  But who?

Zerohedge nailed it, I believe:

Why the Federal Reserve of course, which directly and indirectly subsidized U.S. banks (and foreign ones through liquidity swaps) for roughly that amount. Apparently these banks promptly went on a buying spree to raise the all important equity market, so that the U.S. consumer who net equity was almost negative on March 31, could have some semblance of confidence back and would go ahead and max out his credit card. Alas, as one can see in the money multiplier and velocity of money metrics, U.S. consumers couldn’t care less about leveraging themselves any more.

So I find myself thinking that essentially the Fed has subsidized banks who, in turn, subsidized the stock market with what is essentially “zero risk” money because, after all, these banks are “too big to let fail.”  Of course, the economic reality of this Dr. Strangelove-like dichotomy lies in the near future.  I would think, no, I know that the real investment is essential in the market, from real people, for any rally to sustain itself.

Did I mention someone, namely the banks, are making some obscene money, or what I term “stupid money” in this process.  Stupid money always begets a return to reality, and the reality of our current situation isn’t pretty.

Earnings are down, and fundamental theory is quite clear on this point.  Revenues and earnings increases are essential for a healthy market.  We have neither.  Broad participation from the entire investment community is essential…and I believe, with good reason, that the average investor has become risk averse as a result of the butt-toasting he/she has received in the last year, especially in their 401k accounts, that the farthest thing from the less-than-astute stock investor’s mind is to jump headlong into the market with the tattered remains of their retirement assets.  I just don’t see it.

The reality of the situation seems to be the rally has been financed and fueled by the quantitative easing policy and TARP funds the Fed has made available to distressed banks.  Having worked hand-in-hand with the investment banking hierarchy during my trading years, there is no length they will not go to so they might “game the system.”  But really, does the US taxpayer, via the Fed, need to be involved in creating stock market bubbles?

Because that is what I believe, we are experiencing another bubble in equities created by loose economic policy.  Unless earning and revenues show dramatic turnaround, how in the world can the current prices be maintained?  There must be some fundamental reason for equities to become more valuable..ie- their prices increase.  I just don’t see the justification for the whole mess.

And I think, in the final analysis, you will see another mess.

John Mauldin, editor of Thoughts from the Frontline, says Europe’s banks are in worse shape than their US counterparts—and there’s no Fed or Treasury to bail them out.

Europe’s banking system is in far worse shape than the US. The losses may be bigger, and their capital to meet those losses is certainly less. Europe’s banks have been much more aggressive in funding emerging-market expansion than US or Japanese banks. Western European banks have lent $4.5 trillion to various emerging-market countries, businesses, and consumers.

In the first few years of the Bush administration, the banking authorities decided it would be OK to allow five banks to increase their leverage from 12:1 up to 30:1.

Which five banks, you ask? Bear Stearns, Lehman Brothers, Merrill Lynch, Morgan Stanley (NYSE: MS), and Goldman Sachs Group (NYSE: GS).

Thirty times leverage means that if you lose 3.3%, you wipe out all your capital. And we watched as banks too big to fail were bailed out with taxpayer dollars. The point is that here there was a central bank and a government that not only could step in but was willing to.

Regulators in the UK allowed 20:1 leverage on a regular basis. It is now almost 40:1. Assets of UK banks are about five times as large as UK GDP. By comparison, for the US the ratio is barely 2:1.

Think about that for a second. The UK has banking assets which are five times as large as the annual domestic output of the country. They also had a housing bubble. They have their own bailouts to deal with, which are massive and will potentially get much larger. But at least they have a central bank and government that can try to fix the problems.

But [in] the Eurozone, leverage is now 35:1. Given the massive credit problems that Eurozone banks have with emerging markets (plus Spain’s housing bubble, which is every bit as bad as that of the US), will this not end up in wailing and weeping?

And here’s the real issue: They have no Paulson and Bernanke. The European Central Bank cannot step in and start saving individual banks. How do you save a Spanish bank and not an Austrian bank? Austria’s banks have made large loans to Eastern Europe, in euros and Swiss francs, and are going to have large losses, far more than 3%, which would wipe out their capital.

We think of Switzerland as a stodgy, by-the-numbers, clockwork type of banking country. But somewhere, somehow, UBS (NYSE: UBS) and Credit Suisse Group (NYSE: CS) ran up a little leverage. Before the crisis, they were over 40:1. And now they’re nearly at a nosebleed-high 70!

Eurozone banks are already reeling from losses from US subprime-related problems. They are now getting ready to deal with even deeper losses from their own lending portfolios. If the losses were just 5% of the portfolio (an optimistic assumption), it would be 20% of Eurozone GDP. But each country is responsible for its own banks. Where does Europe find a few trillion dollars?