This morning’s non farm payrolls number for the month of November was expected to be bad, but almost no one expected it to be as bad as it actually was. How bad were the job losses in the month of November? A stunning 533,000 jobs were lost last month alone. Economists had been expecting losses of about 350,000 jobs during the month of November. The jobless rate jumped to 6.7% in November. Service-producing industries lost a record 370,000 jobs last month alone. As if last month’s data wasn’t bad enough by itself, the job losses for September and October were revised much lower, by a total of 199,000 jobs.

Many economists say that this is a sign of either a very deep recession coming, or possibly even a depression. This was the most jobs lost in a single month in the last 34 years, so there is clearly a significant amount of pain going around in this country. For the broader economy the message is clear, things are terrible and they are getting worse very fast.

What should you do in a period of record job losses and so much uncertainty about the overall economy? As a consumer you should take every step possible to get your groceries and goods at the cheapest price possible and save on all other costs such as transportation costs. While it is certainly hurtful to think of losing your job, with the economy losing so many jobs and companies being pinched and forced into more layoffs I think it is a good idea to have yourself a rainy day fund of some kind. By this I mean, set aside a little bit of money in case you are laid off from your current job, just so you have enough to make ends meet while trying to find any kind of income possible. Protecting yourself from the possibility of future pain is the name of the game right now. As hard as it may seem to save a little bit now in case things turn horribly bad for you and your family, it would be that much harder if you don’t plan ahead.

If you live in Asia, you can buy a DVD for $2. It’s not a typo. You can really buy a good quality DVD for $2 in Hong Kong, China and India. As you might have already guessed, those DVDs are pirated. If you want to buy DVD for $2 in North America, only option is to search for used DVDs in Craigslist, Half.com or eBay. Even then, it is almost impossible to find a good quality DVD sold in these sites for such a low price.

You can check out your local Blockbuster for used DVDs. They sell used DVDs for less than $10, some DVDs go for less than $5. If you have a local hometown video rental store (not the big brands like Blockbuster or Hollywood video), you will get a better deal over there.

Still, if you want to buy a DVD of the new movies at cheaper price, none of the above options is going to help you. You will be better off by using DVD swap sites like Zunafish. You can swap your DVDs for the DVDs from other users of Zunafish. DVD swap concept is slowly catching up. Users are afraid of getting cheated by other users. Sometimes, you just need to trust when you make the first attempt in the swap sites.

If you watch at least one DVD per week, you can also consider another option. Netflix. They don’t sell DVDs for low price. But, you can rent DVDs from them for the monthly subscription price of $8.99. Monthly subscription is of value only if you rent at least 4 movies per month. Blockbuster.com also offers the DVD-in-mail rental option. Good thing about renting the DVD thru Internet is that there no commute to the local DVD store. If you can get the value along with the convenience, nothing can beat that.

Related Link: Chinese officials smash biggest pirated DVD laboratory

Every time the stock market goes to its lows and rallies nicely there are a few more analysts on Wall Street who race to be the first to say that this is the bottom and investors should put their money to work right away. One of these times they will be right, but up to this point there have been a lot of analysts who have been incorrect countless times. Barry Ritholtz, of The Big Picture Blog, wrote a very interesting post a few days ago that showed just how many bear market rallies there have been since October of 2007. Looking back on each of these events I can plainly remember the financial network media declaring that this was the end of the bear. Remember Bear Stearns and its shocking deal in March? At the time the news media was saying this was terrific news because it was signaling an end to the run on banks. Looking back on that time we see that the S&P 500 was about 35% higher than it is now and the run on banks was only beginning.

Bear market rallies are typically very strong and quick rallies. The thing that makes them so dangerous is that they move so quickly and they make people believe they are missing out on something big. In reality if you look back in history, many of the days the stock market has had its biggest gains were during the worst of bear markets. What is the lesson here? The lesson is that bear market rallies always have lots of power behind them, and there are always plenty of analysts rushing to call the bottom in the stock market. Please remember when you are investing that in the best of bull markets stocks tend to gain gradually and consistently rather than jumping and then plunging constantly. Be very wary of dangerous bear market rallies and the analysts who are “sure” that the bottom is in.

I think that one of the biggest mistakes people make is reading a book and/or watching a specific television show and hearing advice on how you should run your finances and taking it is the perfect example they should follow in their own situation. It is extremely important that you account for your own situation and your needs and goals when mapping out your personal finances.

There is absolutely nothing wrong with watching a personal finance expert on television, in fact it can be quite helpful. The caveat is, you must understand that they do not know your individual situation so they aren’t typically speaking directly to you, but rather to the masses.

The better way to look at it is to educate yourself as much as is humanly possible through personal finance experts, but realize that you will have to fine tune your individual plan based on what is going on in your own life. If you need a personal financial planner to help you with your goals, then you should get one, but you should never just directly take the advice of someone who doesn’t know your situation thoroughly.

The current state of our economy is very dreary at best. Americans are in worse and worse shape financially by the day, and many are having to take drastic measures to make ends meet. Your own personal finance situation is not something that you should take lightly at any time, but in the current economy it is especially harmful to take it lightly. Educate yourself and become a well informed individual, but remember at the end of the day you need to be in the driver’s seat and make the final decisions for your own personal finances.

Credit cards can be a double-edged sword. If they are used properly the wise consumer can benefit quite nicely from the use of a credit card. Many credit card companies offer nice reward programs or a pretty decent percentage back on lots of different kinds of purchases. While these can be great, a pile of credit card debt can be extremely harmful to anyone. Particularly scary are statistics that show many of the Americans who are deepest into credit card debt make less than $50,000 per year. The people who can least afford to pay their way out of credit card debt are the ones most frequently getting into that terrible position.

Many consumers do not sit down and realize how much the credit card debt they are in is really costing them. Some rates are as high as 20% or so, and yet many consumers continue to fall deeper and deeper into the credit card debt trap.

How should you try to stay out of credit card debt problems? The best way to do that is by keeping the amount of credit cards you have to a minimum. All the rewards programs in the world cannot come close to making up for how much you’ll spend wallowing in credit card debt. Pick one or two cards that have great rewards programs and stick with them.

If you are already in debt the best thing to do is start by paying off those with the highest interest payments. Credit card debt relief is possible, so don’t think its an unreachable goal. Don’t simply pay the minimum every month or you won’t be getting anywhere. Find somewhere else in your life to cut some costs, such as taking your lunch to work rather than eating out, and pay a little extra on that debt.

Each year more Americans fall deeper into credit card debt, don’t let yourself be one of that quickly growing group!

Most of the mutual funds go long (buy and hold) on the stocks. Some of them short the stocks. Few mutual funds practice long-short strategy meaning that they go long some stocks in their portfolio and short the rest of the stocks.

Traditionally, mutual funds used to buy or short the stocks. They don’t normally play with options. Derivatives like options are the favorite of hedge funds. Mutual funds tend to stay away from the derivatives to reduce the volatility. However, in the recent years some mutual funds were started to adapt the “buy-write” strategy which essentially is writing covered calls on the stocks owned.

What is covered call? If you own a stock, you can write a call option on that stock. You already own the stock, so it is “covered call”. If you write a call option on a stock without owning the stock, it’s called “uncovered call” or “naked call”. Ok, don’t ask me why it’s called naked!. May be because some people lost their cloths by writing uncovered calls.  Covered calls are conservative play. Uncovered calls are dangerous, there is literally no limit for the loss if uncovered call option position goes against you.

When you write a call option on a stock, you promise the buyer to deliver the stock at a certain price on or before a specified date. You get the call option premium from the option’s buyer to reward you for your commitment. The buyer wants to buy your call option, because he/she thinks that stock will go up soon. If the stock goes up after you write the covered call you will lose all the upside potential of the stock. If the stock goes down, the buyer of the call option lose the money.

In difficult times like the one we currently face, writing covered calls on the stocks you already own would be a prudent thing to do. Covered calls are also known as “buy-write”. Some mutual funds offer funds that use covered call strategy to reduce the volatility of the portfolio. Risk managed equity option income fund (EROAX) from Eaton Vance is one of them. This fund seems to weather the storm of the recent weeks compared to S&P 500. See the chart below for the comparison.

Disclosure: I do not own the mutual funds mentioned in this post.

If you like this post, check out the part-2 of this post.

There have been very few times in history where the strain of uncertainty has been so abundantly clear in both the stock market and consumer spending behaviors. The uncertainty comes from all different angles, and while you certainly can’t blame investors and consumers for being extra cautious, it is actually part of the vicious spiral downward.

What kind of uncertainty is out there right now for the average investor? There is great uncertainty as to the extent of the current recession, as well as fears of possible deflationary pressures on our economy. The fears that the credit markets have virtually dried up are far from over with as well.

What kind of uncertainty is there for the average consumer? Consumers are worried about job security, investments, retirement plans, as well as a multitude of other things. The truth is as the average American worries whether they can make it from paycheck to paycheck and whether they will have a pink slip on their desk on Monday morning, the economic pain will just continue to worsen. No person in their right mind would continue spending just as much as they had been despite huge changes in the overall economic picture, and more specifically, their own personal finances.

Everyone has always known that the stock market can’t stand uncertainty and a lack of confidence in the system, but consumers confidence in the system is even more important than big investors. Make no mistake about it, the consumer is the driver of our economy and the current uncertainty swirling around our economy will likely leave many questions unanswered for quite some time. The markets and consumers alike can generally handle some pretty bad news, but what they can’t handle is the complete unknown. Right now we are in the unknown, and the pain is getting worse every single day.

Related Link: Dow plunges on news recession began in Dec. 2007