It doesn’t matter what Obama or Bernanke say tonight

Reason Minor: No matter what the Fed Chairman or the President says, it quite simply will not be enough. It will take a decade at least for employment to reach the levels we saw in 2007.As of August 2011, only 58% of the overall population is working. This is down from approximately 63% throughout 2007. (Source: Bureau of Labor Statistics http://data.bls.gov/timeseries/LNS12300000) That means that 5% of the 2007 working population has either retired or given up during this period, and they have not been replaced.To re-employ that 5% – meaning bringing them back into the job market – requires the creation of about 93,000 jobs a month over the next two years. This keeps unemployment at 9%.To understand this, remember that you have to consider yourself as part of the workforce, even if you don’t have a job, to be unemployed. If hiring picks up, many that have given up will actually start looking for a job, and between the time they start looking and actually find a job, they actually add to the unemployment number. So long story short, to get back to the 6% unemployment of 2007 pre-crisis period AND back to 63% of the population considering themselves “in the workforce” we need to add 287,000 jobs per month for 24 consecutive months. What are the odds? Well based on history, nada. Zero. It has never happened for a 24 month period in U.S. history.

Reason Major:  Europe. I am not an expert on international banking systems or the European Union’s economy. What I do know is that there just is not enough money to bail out Italy’s economy, let alone the dominoes that will fall along the way – Greece, Spain, Ireland, Portugal, maybe also Belgium and France. If Greece leaves the European Union (as in “Don’t let the door hit you in the — on the way out”) then it becomes very likely that the Euro dissolves.

And if that should happen? Love him or hate him, George Soros generally knows what he is talking about: “If the euro were to break up, it would cause a banking crisis that would be totally outside the control of the financial authorities. So it would push not only Germany, not only Europe, but also the whole world into conditions very reminiscent of the Great Depression in the 1930s, which was also caused by a banking crisis that was out of control.” (“SPIEGEL Interview with George Soros” 8/15/11 Spiegel.de http://www.spiegel.de/international/europe/0,1518,780189,00.html)

So how close is Greece, the lead domino, to default?  As of 9/7/11, Reuters reports the two year Greek government bond is trading at a yield of over 60% (“Bunds up ahead of ECB, room for disappointment” Reuters.com 9/8/11 https://www.reuters.com/article/2011/09/08/markets-bonds-euro-idUSL5E7K80Z120110908).  Nobody, individual, business, or country stays solvent with such a lack of trust in its debt. Greece is dead man walking.

Bottom Line: It doesn’t matter what the Fed, Congress or the President can come up with to jump start our economy, if Europe breaks apart. And since that seems like a true possibility, if not probability, we are staying minimally invested, short with ETFs, or hedged with short ETFs and dividend paying stocks in all of our portfolios, until we have some clarity from the other side of the pond.

Not only can’t Europe survive a Greek default, I’m not sure we can either, as weak as our economy is today.