Jobs Up Sentiment Down

"Living at risk is jumping off a cliff and build the wings on the way down." - Ray Bradbury

Today we received some more positive news on the job front with the number of jobs growing faster than expected.  Furthermore the unemployment rate fell to 7.7 percent but this number once again masked the fact that a lot of the improvement to the unemployment number was due to the fact that more and more people are just giving up searching for a job.

Of more interest is the fact that consumer confidence fell sharply in as consumers finally are coming to terms with the massive economic impact of the approaching Fiscal Cliff.  Normally consumer confidence rises with good jobs reports but not this time.  With the thought of taxes spiralling higher and the probability of the effects dragging economic growth lower the number plunged from 82.7 to 74.5.  Combined with this number is the Future Expectation Index which dropped to its lowest reading since December 2011.

So with jobs still hard or impossible to find and with the impact of the Fiscal Cliff approaching consumers are skittish and this does not bode well for both the holiday shopping season and the economy in 2013.  As I have mentioned repeatedly, consumers and investors need to wake up and realize that this slow growth scenario is going to be around for a long time and that coupled with this are low rates of return on investments.

Gone are the days of earning 5 or 6 percent real rates of return (a real rate of return is the rate of return in excess of inflation).  In its place are rates that are lucky to even be positive.  In this environment you need to make sure that your portfolio is protected against any downside shocks as recovery from these will take years if not decades.  In place of risk you need to seek out a portfolio that protects your assets and to me this should include gold, properties and alternative investments such as private equity.

With all the risks that abound at present leveraging up in the stock market just does not make sense so protect your assets even if it means remaining in cash for an extended period.