It was a coincidence, but The Spectrum Group issued its annual figures on the number of millionaires in the US. People in households with a net worth of over $1 million, excluding the value of their primary residences, rose 16% to 7.8 million. That seems like an impressive number at first pass; until Spectrum points out that the number of millionaires decreased by 27% in 2008. The new 7.8 million millionaires number is barely better than it was in 2004, and it is only moderately better than the 7.1 millionaires that the country had in 1999.

The BLS and Spectrum data have something in common. The numbers look good in a vacuum, but when compared to historical data, both reports are depressing. The fact that there are five unemployed people competing for each job in the US presents a nearly perfect sense of these desperate economic times. There is no reason to think that it will not be years until there is a reasonable balance between jobs and those looking for work. The numbers may seem to get better over the next several months, but that could be due to people dropping out of the labor force completely although they are capable of working. Too many people have just given up hope.

It is crass to compare the out of work to the population of millionaires, but when the two sets of numbers are placed side by side it does show how little progress even the wealthy have made since the beginning of the recession. The United States lost 2.5 millionaires in 2008. The number of households with a net worth of $500,000 or more fell by 4.4 million during the same period.

Joblessness in America is still nearly as bad a problem as it was at its depth last year. Affluence, once a goal for so many people in the US, is not only harder to attain, but harder to keep.

The sense of malaise among the employed and unemployed is barely better than it was a year ago, which is considered to have been the nadir of the recession by most economists. The US was still losing over a half a million jobs a month then. Monthly job loss is closer to zero now, but there does not seem to be any additional optimism in the market, and, in fact, people may be more hopeless because so many have been out of work for a year or more. So many have been out of work so long that their benefits are gone and they must hope that Congress will extend them now and perhaps extend them again.

Someone once observed that being a millionaire is overrated. A million dollars is not enough for most middle class people to retire on. Most millionaires are not corporate executives. They are gas station owners and proprietors of other small businesses. They are the people who used to have a few employees, and now have a few less. Their own net worth has plummeted, but the people who were their workers have no net worth at all.

The recession was bad for the rich and poor alike. But, at least there are still 7.8 million millionaires who can probably send their children to college and retire before they are 75. Tens of millions of other people cannot say the same.

Douglas A. McIntyre

Evans expects that the “pace” of the economy will move back closer to its potential as the time moves through 2010.  He further noted that this will not be sufficient to close the widening gaps in the labor market.  He unemployment rates to continue to rise.

Evans believes the recession will keep the cost of living low, and noted that expenses should be under the core rate of 2%. While inflation targets matter, our main focus here is the GDP effect.  What is more important, a percentage move up in inflation or a percentage drop in GDP?

It seems as though the Fed is looking for positive growth in the second half on GDP.  We saw a long-term outlook in the last couple of months that seemed a bit rosy.  We at 24/7 Wall St. do not have any projections for GDP for the second half of 2008 yet, but we do not see positive GDP coming back.

While we believe that Q4 GDP may turn positive, that might just be because the last Q4 period was weak.  We also rank those hopes about equal to prayer, neither of which should be used in financial forecasting nor in investing strategies.

The Fed is telling you that GDP will get worse and unemployment will get worse.  Those are its assumptions.  What we are worried about is that the Fed may not be modeling in enough pain.  Yet.

Jon C. Ogg
February 11, 2009

Banks will have to go through a comprehensive stress test. This will help balance sheets and improve disclosure.  The funds will come with conditions that will provide  greater lending than would have been there.  It sounds as though the ones that need to fail are going to fail.

The Fed, FDIC, and other agencies will work alongside industry in a new public-private partnership that will focus on legacy loans and assets.  Treasury and private investors are both still exploring options for how to value the toxic and distressed assets.  The initial package is $500 billion, but can be expanded to $1 trillion.

This will be for business and consumer lending, and no program will work without the securitization markets working.  This will target commercial mortgages, autos, small businesses, and other areas.  The plan assumes up to $1 trillion for purchasing the securitizations of those assets.

Geithner also stressed that this will cost money, will involve risk, and will take time. It also will include a comprehensive housing program that will be available in a the next few weeks.  Geithner will also work with Congress on sufficient resources for the package.

We hate to be pessimistic, but what this  plan really  is a promise to  work details out.  This does sound as though the institutions that can’t really be saved will not be.

Stocks slid sharply since there was no formal detail on each part of the plan.  And Treasury note prices rallied sharply as this still leaves uncertainty for debt issuers and borrowers alike.

The market might accept a “less good” plan right now if it feels that it at least has certainty and becomes policy.  Unfortunately, today was more of a promise of a promise rather than a promise with a set of goals on how to get there.

Jon C. Ogg
February 10, 2009

You will want to check your own math here on the CBOT Fed Fund Futures Page as this was done on the fly and not at the office.  On Friday, the chance of a rate cut was only about 7% as SEPT-2008 fed fund futures were $98.0175.  What is funny now is that the further yougo out on the curve, the more likely a rate becomes.  If you go to OCT-2008, there is now a roughly 68% chance that we’ll see a rate cut of 0.25%.  In NOV-2008,we have an 88% chance of a rate cut of 0.25% versus versus a 26% chancejust on Friday.  And if you go to DEC-2008 or into 2009, we cross thegreater than 100% mark for a 0.25% rate cut.  That was only a 34%chance as of Friday.  The peak month as of today is April-2009, and bythen there is even about a 76% chance that the rate cutscould be as much as 0.50%.  None of this is assured.  It is solelybecause of today’s financial stock sector malaise withinstitutions on the brink of implosion and failure.

Wasn’t it just a couple weeks ago that everyone was talking about RATEHIKES?  That is Wall Street for you.  But now you have seen theseizure of Fannie Mae and Freddie Mac.  You have seen the government-backed bailout/buyout of Bear Stearns, the quick-sale of Merrill Lynch,the Chapter 11 filing of Lehman, and an AIG that looks financially lessable to sustain itself than if it had accountants and complianceofficers from the dementia wards.

Now there is just one small problem.  The rate cuts, evenif they do come to pass, are not going to help.  All of these institutions need majorde-leveraging to become healthy again.  They need borrowersto pay for their mortgages, their car loans, their home equity loans,and their credit card loans.  They also need unlimited amounts ofliquidity available for them to borrow. 

Unfortunately, there just isn’t enough cash and liquidityto go around for everyone.  Even if this round gets resolved, there arefundamental problems and they cannot just be gotten out of byannouncements that portfolios and units are for sale.  Lower ratesaren’t going to help the problem.

Jon C. Ogg
September 15, 2008 

The good news is that there are many stocks and many sectors that hold up and it is becoming ever easier by the day for Joe Q. Public to learn to profit from the market slides too.  We just covered a whole spate of ETF’s (OUR FULL ETF INDEX HERE) and you can see the bear market ETF’s to own, and these will also be the ones that many trade during a recession.  We would caution that with many already writing about a bear market or a recession that the worst may have already been seen.  Investors who buy when everyone else feels miserable usually win in time.  247WallSt.com has come up with many lists for traders and investors for 2008.

Investors have been fond of Defensive Stocks in companies such as food, beverages, tobacco, consumer products, and the like.  We have our own index where we cover Value Stocks and trends affecting individual stocks that are geared toward value investors.  We noted "The Four Safest Stocks in the World" this last week, and we even came up with a list of value stocks from defensive stocks for the first part of 2008.

We also gave our own targets and opinions on the components of the Dogs of the Dow for 2008 to show which ones are challenged to do better and which ones may be the sleepers.  Does it make sense that Home Deport (NYSE: HD) is UP FOR 2008?  We outlined it as "Bad times at companies feel like they will last forever just like in the economy, but history dictates that they always recover.  After Q1 or Q2 this could end up being one of the surprise sleepers of 2008."

We also created a list of iconic US companies that may not exist at the end of 2008. Some may not even make it halfway through the year. Not all of these will go out of business, as some may be auctioned off in pieces and others may be bought.

Turnaround stocks (FULL INDEX HERE) are perhaps some of the best opportunities.  Whether you are in good times or bad times there are many companies that just don’t make the grade and have difficulty in generating any growth or any consistent earnings.  Catching the right one will be exponentially rewarding, but because these are troubled you have to be aware that some will completely bite the dust.  We broke these up groups as well and came up with a basic industry list that has yet to turn the ship around.

First and foremost, we came up with a list of stocks that could double in 2008.  This is not a safe list for the faint of heart, because the set-up for a double is very difficult for established companies and there are usually extreme circumstances that have to be in place.  Companies like E*Trade (NASDAQ: ETFC), Palm (NASDAQ: PALM), SIRIUS Satellite radio (NASDAQ: SIRI), Level 3 Communications (NASDAQ: LVLT) and more are on this one.  FULL LIST HERE.  When we did this big list and evaluated out screening of more than 100 companies, there were actually many more stocks that also fit the bill.  Keep in mind that something bad happened along the way for these shares to have been bettered enough where the stock could double. On this other list were companies like Capstone Turbine (NASDAQ: CPST), Qwest Communications (NYSE: Q), Travelzoo (NASDAQ:TZOO) and more. FULL SECOND LIST HERE.

247WallSt.com has also noted some of Jim Cramer’s 2007 calls that still show some pertinence in 2008, and many are still active calls of his.  Cramer also recently outlined many overlooked or oversold tech stocks that he thinks have an uncommon value here.

Most of these come under review regularly in our weekly subscriber letter in "10 Stocks Under $10" which is exactly what it describes: ten low-priced stocks under $10 where we make bullish or bearish analysis as to what is good or what is bad about these.  We call some candidates for exponential growth and some where we think the companies are likely doomed.  247WallSt.com even produced a list of stocks whose volatility and values could cause the shares to FALL 50%.  Some of these already have or are close to it.

Lastly, we have a list of potential management changes.  We have a list of CEO’s that we have designated as CEO’s WHO NEED TO GO.  This is not only over share prices, because many companies do well while their stock doesn’t.  These CEO’s have done heinous jobs usually with a key event or series of events under their watch that has rendered them (and their company) useless.  We even gave a handicap of what sort of rally the stock might see if these managers left.

Jon C. Ogg
January 27, 2008

This new stimulus package is going to help keep things afloat a bit and the new mortgage cap lifting along with lower mortgage rates will allow many homeowners to refinance.  But there are still going to be many more credit blow-ups, more house foreclosures, more cars repossessed, more credit card defaults, more delinquent payments, slower retail sales, more bankruptcies, and probably fewer jobs.   

We can’t predict where the market will be at the end of the year and can’t predict how bad the economy will really get.  We may have a softer landing than it was looking just last week, but it is still going to feel like a thud or a hard landing if not worse to many individuals and many businesses.  We’ll be the first to admit that with many in the media covering "Bear Markets" may already mean that the worst has been seen.  Many argue that long-term investors and value investors want to start buying stocks in a recession because if you wait for the good news to come in you might have already missed the boat.

247WallSt.com wanted to compile a list of "Inverse ETF"s" that are actually designed to go up in a down market.  This is in a sense the same thing as short selling without having to understand the metrics and rules of short selling.  In essence, these are the easiest transactions to make for novice investors and sophisticated fund managers alike.

ProShares has created ETF’s that trade inversely with the markets.  These are aimed to allow investors and traders to hedge against market downturns or that want to profit from a market decline.  These ETFs are very liquid and actively traded and are designed to go up when indexes go down.  As a reminder, the SHORT funds use no leverage, but the UltraShort funds employ leverage.  Here is that list by Fund (Ticker):

• Short QQQ (AMEX: PSQ)    
• Short Dow30 (AMEX: DOG)    
• Short S&P500 (AMEX: SH)    
• Short MidCap400 (AMEX: MYY)    
• Short SmallCap600 (AMEX: SBB)    
• Short Russell2000 (AMEX: RWM)    
• UltraShort QQQ (AMEX: QID)    
• UltraShort Dow30 (AMEX: DXD)   
• UltraShort S&P500 (AMEX: SDS)    
• UltraShort MidCap400 (AMEX: MZZ)   
• UltraShort SmallCap600 (AMEX: SDD)   
• UltraShort Russell2000 (AMEX: TWM)
• UltraShort FTSE/Xinhua China 25 (AMEX: FXP)… short selling the Chinese Stocks.

Rydex Funds was perhaps the first of the mutual fund operators that actually had the inverse of the S&P called the Rydex Ursa Fund, now called the Rydex Inverse S&P 500 Strategy Inv (RYURX).  As Rydex saw the importance and rise of ETF’s, it combined its open-ended fund management operations into one that now has ETF’s for traders as well.  Here are its inverse funds:

• Rydex Inverse 2x S&P 500 (AMEX: RSW)
• Rydex Inverse 2x S&P MidCap 400 (AMEX: RMS)
• Rydex Inverse 2x Russell 2000 (AMEX: RRZ)

These are not all of the ETF’s out there.  But these are two of the fund families we have seen that have liquidity and recognition in the sector.  Stay tuned to our ETF news as we are expanding this into a new branch.  We’ll also be covering certain defensive strategy ETF’s that use covered call option strategies, value investing strategies, and some that focus on defensive strategies.

Jon C. Ogg
January 27, 2008

• Former FOMC Chief Alan Greenspan (CNBC report) today lifted his chances that the US will tip into recession at 50% rather than a prior 30% chance, He noted how the US economy will be in trouble and vulnerable to shocks for the next two quarters.
• John Bogle, the Vanguard founder, just put the chances at 75% that the U.S. is heading for recession during a CNBC interview.
• Goldman Sachs recently put the chance at 45%.
• Reuters reported that FITCH rating agency now has a 40% chance of a recession.
• Warren Buffett said on CNBC this week in his interview that the economy is very close.  He noted that if employment starts to snag then we’ll tip into recession.
• Morgan Stanley expects a recession now.
• Barclay’s speaks to FinancialWeek on their recession comments.
• CNBC reports market pundits saying that optimism about a central bank effort to ease the global credit crunch turned to skepticism.
• MarketWatch lists recession stories in its dailies.
• Bill Gross of PIMCO thinks 3 1/4% Fed Funds is the answer.

Here is our own list DEFENSIVE STOCKS where investors currently try to hide if they have to keep some money in stocks.

Jon C. Ogg
December 13, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.