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Unemployment is on the rise, wages are sinking …

The pound made new lows against the Euro as more collateral damage arrived for the stagflating UK economy today in the form of 75,700 new faces in the dole line in November, raising the claimant count rate to 3.3%. NBS unemployment rate data for October –seasonally adjusted and calculated by the ILO definition, now comes in at a 3 month average of 6%, while average wages for the period stagnated on a year-over-year basis.

These heavily massaged data points do not factor the rapid shedding of manufacturing and construction jobs last month and the anticipated further cull in the financial sector that will inevitably arrive as the year ends –but the trend is still clearly visible: Jobs are disappearing and wages are declining. These indisputable facts put further pressure on the residential real estate markets and consumer spending, pressure that can’t be alleviated by more rate cuts.

As the Nanny State’s politicians grapple with harsh reality, they will undoubtedly look for more rabbits to pull out of the hat (publics works anyone?), but the damage is clearly baked into the cake at this point. We will continue to keep an eye on the UK and will opportunistically look to short into strength until the market finds a bottom or Brown, Darling & King are fired.

The EWU etf still has legs to $13.04 – that’s where our short selling guns come out.

Andrew Barber
Director