| > | | | | generated by financial and accounting shenanigans. |
| I've been sending some e-mail invitations for my | | | | The cleanup job is going to be messy, difficult and |
| husband's big four-oh birthday party to friends | | | | costly. Just how costly? Well, the conglomerate, or |
| of ours and, quite shockingly, a disturbing number of | | | | let's switch the analogy back to the U.S. economy, |
| e-mails that I've sent to people's various places of | | | | will have to trim its costs to the bone, pay down the |
| employment have come back as "undeliverable." | | | | debt and figure out a way to stimulate growth. The |
| When I called, I realized that some of our friends | | | | first task is what really concerns the labor market in |
| have lost their jobs, caught in the mass layoffs that | | | | the U.S., because cost cutting will also mean shedding |
| are plaguing the job markets around the world. No | | | | jobs, and I mean really shedding jobs. |
| doubt about it; what is happening is no regular loss of | | | | What are investors to do in such a hostile |
| jobs. | | | | environment? At this point, don't get too entangled in |
| The next question is: how long are large-scale job | | | | switching between longs to shorts; just make sure |
| losses going to last? Economists are forming two | | | | your stop-losses are tight and closely monitored. |
| opposing groups: one group believes the labor market | | | | Bonds are a good idea when the economy is slowing |
| is about to hit bottom; and the other group thinks | | | | down and inflation is being obliterated. But if and |
| there will be at least two more quarters of brutal | | | | when things start moving again, get rid of them and |
| layoffs. But who's right? | | | | switch to gold. Granted, gold could be heading south |
| Well, the worst-case scenario is what we should be | | | | in the short term, especially with rumors floating |
| looking at and, right now, the worst-case scenario | | | | around that the European central bank might be |
| could mean the unemployment rate skyrocketing | | | | selling some of its reserves to keep increasing money |
| above 10% and staying high for about a year, | | | | supply in the region. That said, in the long term, gold |
| perhaps even two. How does one come up with | | | | should still do much better than any other asset class. |
| this? One way is to put things into a smaller and | | | | As for the silver lining...sure, there is always one, |
| therefore more digestive perspective. | | | | regardless of how bad a situation can get or already |
| Let's pretend we can scale down the U.S. economy | | | | is. Equities are severely undervalued, but there is |
| to a conglomerate that operates globally in a number | | | | more to this. Making stock valuations these days is a |
| of industries, including financial, manufacturing, | | | | thankless job, and in some cases an exercise in |
| resources, defense, etc. This imaginary conglomerate | | | | futility. So don't let current "discounts" fool you, |
| pulls in about $70.0 billion in revenues every year, | | | | because there is still a long way to the bottom. In |
| which could be perceived as healthy, but sales are | | | | my humble opinion, before the recession bottoms |
| cyclical and finicky, the conglomerate's accounting | | | | out, it will likely drive down the markets between |
| leaves much to be desired, and the unions are | | | | 15% and 20% from where they are right now. So, |
| notoriously demanding to the point of their own ruin. | | | | that's the level at which it might be advisable to start |
| The real kicker is that, on top of all the union | | | | buying stocks again. |
| benefits, the North American union division borrowed | | | | Profit Confidential |
| a third of sales based on the quarter of total sales | | | | LOMBARDI PUBLISHING CORPORATION |
| that this region hauls in. | | | | News, Analysis, and Information Services Since 1986. |
| And then came a time when the North American | | | | One Million Customers in 141 Countries. |
| union could no longer pay neither interest nor principal | | | | Lombardi Publishing Corporation |
| on that loan, so the bank that issued the loan had to | | | | Financial Publications Division |
| go under, while the conglomerate had to take on the | | | | 350 Fifth Avenue, Suite 3304 |
| debt, ending up with a debt balance of one fifth of | | | | New York, NY 10118-3304 |
| its global sales. To make matters worse, about one | | | | Copyright 2008; Lombardi Publishing Corporation. All |
| fifth of the conglomerate's assets had to be written | | | | rights reserved. No part of this e-newsletter may be |
| off, too, because, you know, these assets have | | | | used or reproduced in any manner or means, including |
| been overstated substantially. The end results are | | | | print, electronic, mechanical, or by any information |
| overstated revenues, understated liabilities and | | | | storage and retrieval system whatsoever, without |
| fictitious growth rates of the conglomerate largely | | | | written permission from the copyright holder. |