Unemployment 9.5%

The national unemployment rate is now 9.5%. Some states have entered double-digit unemployment (California, Nevada, Michigan, Indiana) and this trend may continue. I strongly believe that the unemployment rate provided by the Bureau of Labor Statistics is grossly understated. This rate does not include new college grads, people who have stopped looking for work, self-employed (real estate agents / independent contractors), and the under-employed (part-timers). Unless the employment rate improves the economy will continue to trend downward along with home prices, consumer spending, GDP, and corporate earnings.

Earning season is now kicking off with Alcoa. These earnings may wind up disappointing the market and we could enter the second stage of the bear market selloff of 2008-2009. The government stimulus will eventually wear off and we will be left only with the $12 trillion federal debt burden (which doesn't include entitlement programs like Social Security and Medicaid). China owns $800 billion of US Treasuries and the US stimulus program was $800 billion?!?!

If the Obama administration decides to push for another stimulus program it may send a sell signal on the US dollar which would be highly inflationary. The fed is also monetizing the US debt by buying Treasury bonds. The Fed announced on March 18 it would buy as much as $300 billion in Treasuries over six months to hold down borrowing costs (mortage rates, etc.). The exit strategy is nowhere in sight and it will be very difficult to raise interest rates when the economy is still extremely unstable.