I know it should not surprise any of us anymore that the politicians, i.e. cheerleaders, continued to laud the "economic recovery" they think they have engineered or expertly brought about but I nevertheless have my habitual and nagging doubts. I'm not a perma-bear but somehow, down in the trenches of trying to eek out a living, pay my taxes, have an occasional night out on the town and then pay for all the residuals of a "normal" life, I feel that economic recoveries somehow "feel" a lot different than what those politicians and government economists keep screaming at us, "WE ARE IN A RECOVERY - THINGS WILL BE FINE. WE ARE ON THE ROAD TO PROSPERITY". Politicians have a most wonderful brain whereby REAL facts are disregarded and THINGS WHICH ARE PATENTLY NOT TRUE are turned into factoids.

OK, so here are some very recent REAL facts that both you and I need to consider, regardless of what your local politician at the local media outlet is screaming at you. No order of importance is implied here...

1) The real German unemployment is near 20%, or 8 million. The government readily admits to 6,5 million, or 15%, even though they officially report only 5 million. The difference of 1.5 million are those on "government projects". But, like I said, the other 1.5 million, thus making 8 million, are forced early retirements, government shelter programs, those out of work but who haven't actually signed up, etc.

2) The US "experts" were calling for 200,000 new jobs. Hmmm, it was only 146,000. Aw, what the hell, only 25% off target !! We're experts you know. The simple fact is: this number disappointed. "There is no mistaking the anaemic character of job creation that we are getting", said Dick Berner, chief US economist and Morgan Stanley. The biggest highlight, in the last year the US has LOST 2.8 million manufacturing jobs. Likewise, if there was a resurgent job outlook, an inherent wage pressure would be noted. At the moment there is none. Hence any slackening on the consumption/demand front leaves only asset price increases to take up the slack. See Housing graphic below. This is NOT the stuff of economic recoveries. The second point is, most of the new jobs are in the low end sector.

Currently the Housing index is 10% above its 50 dma AND 25% above its 200 dma. Bubble anybody ?

And this in just the past 3 months. This is now becoming very scary and may be the KEY thing to watch as it could be THE PROXY for consumer demand - when this dam breaks, make way for high ground.

3) The EU officials say inflation is negligible. I now show you my middle finger pointed upward, all other fingers are down. Food is rocketing higher, petrol higher, restaurants & cinema higher, medical insurance up 50% in 3 years, building materials higher, on and on. But, inflation is negligible. Likewise, unemployment levels are creeping up all over and profitable companies continue to lay off more to keep the bottom line up for shareholders. Meanwhile, more German industry moves to Eastern Europe as I predicted.

4) The price of crude is creeping back up to the $50 bbl level. Russia has come out and said they will end the de facto USD peg and re-align to the Euro. They have now signaled an end to the Dollar hegemony. At the G7 meeting, the chinese didn't even think about a revaluation peg for the Yuan. The world may slowly slip over to the Euro peg. This would put a pin in the bubble theory of a short squeeze on the USD if nobody wants the damn thing any longer. If both commodity-producer nations and Central Banks are slowing and controllably offloading the USD and moving on to bigger and better things, where does this leave the USD? Certainly not being short sqeezed....just a thought.

This might take a while but if it continues then the USD will be up a creek without a paddle...rudderless and drifting. Meanwhile, right now, the USD is bouncing up and needs to beat the red resistance level. An upside target of 87 (fibo 38%) might be in the cards but then may fall further as the trend indicates. PS Even Greenspan said the USD needs to fall further. Why? Because he can't raise rates too quickly or the Asset-Consumption Model outlined above starts to unravel quickly and falls apart.

5) US Treasuries: the most important thing right now is the yield spread on the short and long bonds and the supply/demand question. The upcoming auction by the US Treasury to auction off $51 billion in 3, 5 and 10 year notes just as foreign Central Banks have been net sellers up to 2 February is not a particularly high vote of confidence. Taking the slogan "What if there was an auction and nobody showed up?", I hope they have a Plan B in mind.

6) And finally, we still have the entire open field of geopolitics and Iraq, Iran, Israel/Palestine, etc etc. Funny too how nobody is mentioning wildly about how the oil price is rising again as they did when it was falling, or better, consolidating, before a next leg up. The Commodities index certainly is still a wide open field and likely will be with China in question mark mode of "hard or soft or no landing at all". Trying to get reliable and timely information regarding China seems to be my biggest challenge...

So, all in all, I'd say things are not nearly so wonderful and rosy as the politicians like to portray it. There are still very big questions and problems ailing the world economy and instead of admitting and addressing these things, the politicians just keep rolling them over to the next election.

In conclusion, I have learned to do my own research and have simply ignored the politicians and pundits because I don't know their hidden agenda(s) but I do know that markets have a way of making many a fool and its simply in our own best interest to do our own homework. My only agenda is to keep a substantial part of my savings around to fight another round in the investment battle. That is indeed a very difficult challenge in today's world.

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