Who Can Fix The Economy?

 Stocks rose out of pure boredom, up 73 points.  Bonds moved sideways, as did oil and gasoline.  Today was a short session so Wall St. could get home to get ready for the fireworks tomorrow.  Happy 3rd of July.

Gold fell $13 today as people took their profits from the recent major run-up in gold.

The Dollar gained significantly as the European Central Bank announced an increase in their key interest rates.  You would think that the dollar would fall on this news are more money would move to the Euro, rather than stay in the low dollar interest rates.  However, this is a great example of “Buy on the rumors, and Sell on the news.”  That’s exactly what happened to the Euro this week.   This is true wisdom for people trying to time the market.

In the news today….

Oil spiked in Europe above $146, as the European Central Bank (ECB) raised interest rates by 0.25% to 4.25%.  The head of the ECB did not emphasize that he would be raising rates in the future to fight inflation (the current reason) - so this caused the crash in the Euro.  However, logic says that inflation doesn’t stop overnight, so future rate rises are in order in Europe.

US unemployment rate stayed unchanged at 5.5% - not much news here, as this is a manipulated number anyway.  You know that more and more people are losing their jobs, so the trend is very clear = recession.

Tonight’s Dinner Conversation

Here is a recent poll.  Barach Obama got 32% and McCain got 28%.  What was the question????  “Which presidential candidate can fix our economy?”

Here is the interesting point.  40% of those polled didn’t know, or thought neither of them could fix the economy.  You see – the general public is really smart.  In reality, a president can do very little to affect the US economy.  The FED Chairman is much more powerful than the President at affecting the economy.  

So, the question for you tonight is, “What CAN a President do to affect the economy?”
HINT: A president can set the tone and environment for the economy.  This means the President can certainly make an economy WORSE.  But, how does he make it better?

Here are today’s numbers:
Dow Jones 30 Industrial - 11289 (up 73 points)
10 Year Treasury Bond - 3.97% (up 0.01%)
Euro - $1.5699
Gold - $934 (down $13)
Oil - $143.79 (up $0.19)
Gasoline - $3.55 (no change)

Spread The Word: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • Reddit
  • StumbleUpon
  • Technorati

July 3rd, 2008 | Posted in U.S. Government | No Comments

  • No related posts

    • Hold The Latte

     The market went sideways all day until the end of trading, and just as Oil hit a new high, the market cracked, ending down 167 points.

    Bonds, much to my surprise, fell a little in interest rates.

    The Dollar fell, and we’ll see what the markets say the rest of the week.  The European Central Bank is expected to increase its interest rates tomorrow – so markets, being contrary beasts, will probably sell (rather than buy) the Euro tomorrow.  We’ll see.

    Oil hit a new high, and is poised to crash through $150 a barrel soon.  Naturally, you can expect to pay more at the pump very soon.

    In the news today…..

    The number of jobs in the economy fell by 79,000 jobs in manufacturing, and an additional 3,000 jobs in the service sector.  While this is expected, it’s also bad news as people get very nervous, and spend less money when their job is jeopardized – and this should continue to drive the economy south.

    Starbucks is closing 600 stores in the US (these are the uneconomic ones) and will open 200 more stores.  If you are in the real estate business, you usually could count on an area being a “good area” if there was a Starbucks in the area.  You no longer can count on that measure.


    Here are today’s numbers:
    Dow Jones 30 Industrial - 11216 (down 167 points)
    10 Year Treasury Bond - 3.96% (down 0.03%)
    Euro - $1.5881
    Gold - $947 (up $2)
    Oil - $143.57 (up $2.60) - New Highs are so Boring???
    Gasoline - $3.55 (up $0.04)

    Spread The Word: These icons link to social bookmarking sites where readers can share and discover new web pages.
    • Digg
    • del.icio.us
    • Reddit
    • StumbleUpon
    • Technorati

    July 2nd, 2008 | Posted in Jobs | No Comments

  • Hold Onto Your Seat
    • ...
  • Two Kinds Of Deficits
    • ...
  • Maui Mastermind
    • ...
  • Gold Moves
    • ...
  • Credit Rating Effect
    • ...

    Manufacturing Hanging In There

     Stocks started out with a big implosion with the Dow working its way down over 100 points, but ended up 32 points.  This is another example of a sideways move.  There was no news today to move markets – just a big nervousness about the price of oil and fear that jobs are drying up in the US.

    Bonds, on the other hand, drove the 10 Year Treasury rate down to 3.90%, and then ended at 3.99%.  I fear that this was the last gasp of the bond market, and from now on, interest rates will be rising – but in a volatile fashion.  May bonds RIP.

    The dollar contined being weak, but just a little weak – mostly sideways.

    Oil hit another ALL TIME HIGH of $143.05 today, and gasoline just remained high.

    In the news today…..

    Wachovia Bank stopped offering negative amortizing mortgages.  They are retreating, and trying to control their risk profile.  Good for them.

    CIT is going to sell its mortgage business and mobile home business to concentrate on commercial finance – it’s core business.  It will also be writing off $2B in the process.  More bad loans; drip, drip, drip.

    Oil is up 46% in 2008 – just 6 months.  If that’s not shocking enough, CORN is up 66% in 2008.  I guess that means I’ll be cutting back on popcorn at the movies.

    Manufacturing activity came in at an index value of 50.2.  Remember that anything above 50 is “growth”, and vice versa.  So today’s number just shows that manufacturing is just hanging in there, and exports are really saving the bacon of manufacturing.


    Here are today’s numbers:
    Dow Jones 30 Industrial - 119382 (up 32 points)
    10 Year Treasury Bond - 3.98% (up 0.01%)
    Euro - $1.5788
    Gold - $944 (up $16)
    Oil - $140.97 (up $0.97)
    Gasoline - $3.51 (up $0.01)

    Spread The Word: These icons link to social bookmarking sites where readers can share and discover new web pages.
    • Digg
    • del.icio.us
    • Reddit
    • StumbleUpon
    • Technorati

    July 1st, 2008 | Posted in U.S. Economy | 3 Comments

  • Second Shoe Drops
    • ...
  • Hold The Latte
    • ...
  • Recession and the Falling Dollar
    • ...
  • Stocks Power Ahead
    • ...
  • $460B Fallout
    • ...

    World Reserves

     All the markets moved sideways, so there’s really nothing to report there.

    Some folks are worried about stocks being in a BEAR market right now, and the possibility of a BEAR market rally – that’s when stocks go up for a short time before continuing their downward trend.  For those of you who are traders, i.e. thinking about getting in and out in less than 6 months (I bet you thought I was going to say “daily”) – then this could absolutely happen.  I would recommend that you look at a long term graph of whatever market you’re in.  That way, you will see the volatility in your market, and how long it takes to make significant moves.

    In the news today…..

    Credit card companies are reducing the credit limit on some of their cards.  They are trying to reduce their risk to people defaulting.  However, this has one very bad side effect, and I want all EconomyGuy readers to be aware of this side effect, especially if you got an announcement from your credit card company.  When your FICO score is calculated, the amount of your credit card limit is used in the calculation.  If you normally carry a balance on your credit card from month to month, you will be hit with a LOWER FICO score.  If you pay off your cards, it shouldn’t make a big difference in your score.

    A recently passed Congressional Farm Bill had a provision in it that acts as a great example of how stupid Congress really is, and how it works to YOUR detriment.  This Farm Bill included a provision to settle a discrimination lawsuit between the US Government and black farmers.  A small amount was included in the wording ($100M) so that voting Congress(stupid)people wouldn’t worry about this provision.  However, the $100M was a place holder, and the actual amount of settlement is likely to be closer to $3B.  So, what’s wrong with that you ask????  Well Congress didn’t say how this was going to get paid.  It’s just another example of spending your (your children’s and your grandchildren’s) future income without even THINKING about it.  Where’s someone who will take responsibility???

    Tonight’s Dinner Conversation….

    Let’s talk about reserve currencies.  Do you know what they are?  Well, you probably know the US Dollar is the world’s reserve currency.  But, what does this mean in reality?  Well, if you look at ALL the reserves held by ALL the central banks in the world, then you see that:

    1. the US Dollar is 63% of the world’s reserves
    2. the EURO is 27% of the world’s reserves
    3. the Yen is 3% of the world’s reserves
    4. and the also ran’s


    The US Dollar at 63% is at its lowest percentage EVER, and the trend is downward.  It was 73% about 10 years ago.  The winner in this beauty contest is the EURO.

    So, the question for you tonight is “What happens if the US Dollar loses its place as the world’s reserve currency?”

    PS – Here’s a hint.  It’s not a pretty picture for anyone living in the USA.

    Here are today’s numbers:
    Dow Jones 30 Industrial - 11,350 (up 4 points)
    10 Year Treasury Bond - 3.98% (down 0.01%)
    Euro - $1.5745
    Gold - $928 (down $3)
    Oil - $140.00 (down $0.21)
    Gasoline - $3.50 (down $0.02)

    Spread The Word: These icons link to social bookmarking sites where readers can share and discover new web pages.
    • Digg
    • del.icio.us
    • Reddit
    • StumbleUpon
    • Technorati

    June 30th, 2008 | Posted in Currency Markets | No Comments

  • Rice Cartel
    • ...
  • Rumors
    • ...
  • A Lesson In Gold
    • ...
  • Someone Is Making Millions
    • ...
  • Food Crisis
    • ...

    More Of The Same

     Today was a mini-repeat of yesterday.  Stocks, after being slaughtered yesterday, were killed today.  Bonds continued their value gain (decrease in interest rates) and ended below 4.0% for the 10 Year Treasury.

    The Dollar continued it losing ways.

    Oil continued up, and set another new high of $142.60; but, gasoline (always being difficult) lost one penny.

    In the news today….

    Consumer Confidence fell to a 28 year low in May.  The metrics, while being meaningless – only an indicator, came in at 56.4 from 59.8 the previous month.  The lowest this metric has ever been was 51.7 in 1980.  If it blows through that number, it will be a great indicator of how lousy people are feeling about the economy.  What fun to wait and see.

    AIG, the world’s largest insurance company, is going to write down $5B from its subsidiary insurance companies from bad subprime mortgage bets.  AIG had previously announced $15B in write downs, so this just more of the same drip, drip, drip……

    Merrill Lynch will take a $5.4B write down for the 2nd Quarter 2008.  Then is must go out (somewhere) and raise enough capital to stay in business.  More fun.

    Morgan Stanley is being downgraded by Moody’s rating services.  More fun.

    Tonight’s Dinner Conversation….

    This week was a very interesting week – unless you own stocks.  The first 3 days were really boring, but Thursday and Friday shook the financial world.  If you are an investor, you couldn’t hide from this week.

    So, the question for you tonight is “What’s really going on? And, what’s causing all this chaos?”

    Hint for tonight’s conversation: Is it possible that the truth of the US economic situation is becoming visible?   Can the US stand the truth?  What would happen if the truth were stated up front?  Is there an island of moral certainty anywhere in the sea of finance?

    I was happy to see a headline showing another BEAR market confirmation today.  (The S&P 500 is now down 20% from its high; a BEAR market confirmation)  After my BEAR confirmation yesterday, the financial press must have jumped on board.

    Here are today’s numbers:
    Dow Jones 30 Industrial - 11,347 (down 107 points)
    10 Year Treasury Bond – 3.99% (down 0.04%)
    Euro - $1.5795
    Gold - $931 (up $16)
    Oil - $140.21 (up $0.57) - a NEW HIGH OF $142.60.
    Gasoline - $3.50 (down $0.01)

    Spread The Word: These icons link to social bookmarking sites where readers can share and discover new web pages.
    • Digg
    • del.icio.us
    • Reddit
    • StumbleUpon
    • Technorati

    June 27th, 2008 | Posted in Markets | 3 Comments

  • No related posts

    • Wow, What A Day


    WOW!!!!!  What a great day in the markets.  Stocks got killed with the Dow down 358 points.  Stocks got the real message about this economy and the market in general.  Stocks are in a BEAR market, and today was a great example.

    Bonds reduced in interest rates and pulled back to almost 4% on the 10 Year Treasury.

    The Dollar got killed by both the Yen and the Euro.

    Gold took off based on the Dollar fall, and went up $33/ounce.

    Oil hit a NEW HIGH of $140.39, and gasoline followed in oil’s wake.  The OPEC president predicted a $150 oil and Libya announced they were cutting production.

    In the news today….

    The REAL NEWS today was the markets themselves.  They MOVED in a big way – all of them.  Stocks are feeling the recession as reflected in declining profits for companies (remember the S&P 500 company profits are off 10%), and is worried about future inflation further eroding those profits.  The technical condition of the market is BEAR, and only BEAR.  Today was a technical “break-out” on the down side, as DOW support was at 11,850 and that melted away.

    Bonds reflect the “safe haven” for money.  As people sold their stocks, they need somewhere to put their money, and they generally choose bonds as a relatively safe place to do that.  So, as the stock market declined, the bond market increased in value (decreased in interest rates).  Hurrah for bonds.

    Oil jumped up today, and this had to be “speculators only” price movement.  The Dollar is the same level it’s been all of 2008, and supply/demand appears to be still balanced.  That leaves only speculation to move the oil market.

    What’s interesting is that the Dollar fell as OIL moved up.  The dependency between oil and the Dollar has reversed.  It is oil that is wagging the Dollar tail – not the other way around.  (You might have just heard that here first.)

    Gold, on the other hand, got real excited that the Dollar was weakening, and it shot upwards.  So, for at least today, you can see the relationship that the Dollar dog is wagging the Gold tail.

    Other news…..

    Existing home sales were UP 2% to 4.99 million homes last month.  The supply of existing homes fell to 10.8 months worth, compared to 11.2 a month ago.  Don’t get too excited.  This is not a sign of the bottom of the housing market.  It has a long way to go before there is any “buy” signal.

    The 30 Year fixed interest rate Mortgage is 6.45%, and the 15 Year Fixed is 6.04%.  Here is an story that might help some of you who have ARM mortgages that you want to get out from under, and are having trouble doing so.  My wife, Christine, has an Option ARM on a rental unit and has just completed negotiating with the lender to modify the existing mortgage to a 6.5% 30 Year Fixed with all other terms remaining the same.  I am very proud of her as the future for mortgage rates is UP.  Inflation will insure that interest rates go up over time.  Maybe this is something you could do too – just call your mortgage company and ask.


    Here are today’s numbers:
    Dow Jones 30 Industrial - 11,453 (down 358 points)
    10 Year Treasury Bond - 4.03% (down 0.08%)
    Euro - $1.5757
    Gold - $915 (up $33)
    Oil - $139.64 (up $5.09) - a NEW HIGH OF $140.39.
    Gasoline - $3.51 (up $0.12)

    Spread The Word: These icons link to social bookmarking sites where readers can share and discover new web pages.
    • Digg
    • del.icio.us
    • Reddit
    • StumbleUpon
    • Technorati

    June 26th, 2008 | Posted in Markets | 1 Comment

  • No related posts

    • No Suprise From FED

     All markets moved sideways again – just like yesterday – except the dollar which lost value after the FED announcement today.  Oil and gasoline moved a little downwards based on oil storage measures.

    In the news today….

    The FED announced today that it would NOT change the Fed Funds Rate (just as predicted).  They used their loud voice to WARN that they will be fighting inflation “sometime in the future” by increasing interest rates (just as predicted).  This was really a ho-hum day at the FED, and quite boring, given the excitement of past announcements.

    New House Sales fell 2.5% in May over the previous month.  The median price of a new house was $231,000, down 5.7% from last year.  The Investory of Unsold New Homes was UP to 10.9 months worth of inventory.  UGH!!!!!  We really need to get the inventory to start dropping to see an end to the pain.  However, the handwriting is on the wall.  Prices will continue down for new homes even as the number of sales declines – just like they are for used homes – and there is no sign of a bottom in sight.


    Here are today’s numbers:
    Dow Jones 30 Industrial - 11,811 (up 4 points)
    10 Year Treasury Bond - 4.12% (up 0.01%)
    Euro - $1.5677
    Gold - $882 (down $9)
    Oil - $132.70 (down $2.45)
    Gasoline - $3.39 (down $0.07)

    Spread The Word: These icons link to social bookmarking sites where readers can share and discover new web pages.
    • Digg
    • del.icio.us
    • Reddit
    • StumbleUpon
    • Technorati

    June 25th, 2008 | Posted in FED | No Comments

  • No related posts

    • Bear Market

     Almost all markets went sideways today – awaiting the words of wisdom from the FED tomorrow.

    The currency markets picked up on the weak consumer confidence number announced today.

    In the news today…..

    Housing prices dropped 1.4% in April, or 15.3% annually as a national figure.  The fall in price seems to be slowing nationally, as it appears the pace of the falling price is slowing.  Why would this be??  My guess is that the foreclosures are slowing, but don’t worry, they’ll pick up again later this year.  13 of the top 20 metro areas had record low prices.  Miami and Phoenix were the biggest fallers – both 3% in the month of April.  There is now talk about a “vicious cycle” in housing prices as prices go down because of foreclosures, and the lower prices cause more foreclosures.  I’m thinking that news writers are really “slow” mentally to only be picking this up now.  This should be no surprise to EconomyGuy readers as we’ve talked a lot about this happening, and it is happening in “worst” markets.

    Consumer Confidence fell to its lowest level in 16 years during June.  This is expected to get worse, and this prediction is coming from the consumers themselves.  Is this a self-fulfilling prophecy?

    US Corporate profits are falling about 10% overall (S&P companies).  Guess what this means for stocks???  A few months ago, it stated that stocks were in a BEAR market according to DOW Theory.  This last week’s actions continue to confirm that as major trend lines are being broken on the downside.  I hope you are not in the general market, and if you absolutely must be in stocks, that you carefully picks places that will over perform such as energy, commodities, etc.


    Here are today’s numbers:
    Dow Jones 30 Industrial - 11,807 (down 35 points)
    10 Year Treasury Bond - 4.11% (down 0.06%)
    Euro - $1.5569
    Gold - $892 (up $4)
    Oil - $137.00 (up $0.26)
    Gasoline - $3.46 (up $0.01)

    Spread The Word: These icons link to social bookmarking sites where readers can share and discover new web pages.
    • Digg
    • del.icio.us
    • Reddit
    • StumbleUpon
    • Technorati

    June 24th, 2008 | Posted in Markets, Real Estate | No Comments

  • Bear Sterns
    • ...
  • Unusual and Exigent Circumstances
    • ...
  • Another Bear Stearns?
    • ...
  • More Of The Same
    • ...
  • Gold Moves Back
    • ...

    Credit Rating Effect

     Stocks moved absolutely sideways with no change on the day.  The market is waiting for the results of the FED meeting over the next 2 days.  The bond market moved sideways too.

    The dollar got a little stronger, and then gave up half of its gain.

    Oil went higher along with gasoline.  All the talk in Saudi Arabia this past weekend was a waste of time as far as the oil futures market was concerned.

    In the news today…..

    The FED meets tomorrow and Wednesday.  The bets in the bond market is that there will be “no change” in the Fed Funds rate announced at this meeting.  In addition, the bets continue that the August FED will continue to have no change in interest rates, but the September meeting could have an INCREASE in interest rates.  I would discount whatever the market is saying out in September as a LOT of things are going to happen between now and then.

    Do you remember the news where the credit rating companies (like AMBAC and MBIA) were having their credit ratings reduced?  Their ratings were reduced from AAA to AA.  Here is what this means.  All the paper issued, and guaranteed by these companies, will have their ratings reduced from AAA to AA.  All the institutions that hold this paper will have to re-value these notes, and a further decline in the financial sector could result as write-offs would result.  It’s interesting to understand what something like a downgrade can have on the economy.


    Here are today’s numbers:
    Dow Jones 30 Industrial - 11,842 (no change)
    10 Year Treasury Bond - 4.17% (up 0.03%)
    Euro - $1.5519
    Gold - $887 (down $17)
    Oil - $136.40 (up $1.04)
    Gasoline - $3.48 (up $0.04)

    Spread The Word: These icons link to social bookmarking sites where readers can share and discover new web pages.
    • Digg
    • del.icio.us
    • Reddit
    • StumbleUpon
    • Technorati

    June 23rd, 2008 | Posted in Banks | No Comments

  • Knock-On Effects
    • ...
  • A Foreclosure Crisis Solution?
    • ...
  • World Reserves
    • ...
  • Interesting Times Indeed
    • ...
  • Bond Market News
    • ...

    Middle East Trouble

     Stocks took a massive hit today as oil price lit up in price.  Stocks are just nervous about its future, and is selling into that fear.  Financials are in deep trouble, and blue chip companies like GM are in trouble too.

    Bonds increased in value as stocks fell, and bonds became a “safe haven” for the money.  Bonds in general are getting hit by the down grading of bond insurance companies, as the bond ratings have dropped in unison.

    The dollar got hit hard today, and fell across most currencies.

    Oil and Gasoline picked up today on the news that Israel was practicing a bombing raid on Iran.

    In the news today…..

    Israel practiced a bombing campaign on Iran it was announced today.  They took 100 aircraft plus refueling aircraft on a 900 mile mission (over Greece) and 900 miles is the right distance for an Iranian bombing run.  Just for your insider knowledge, Israel couldn’t do this practice without the active aid of the US.  

    Oil price shot up on the news.


    Here are today’s numbers:
    Dow Jones 30 Industrial – 11,842 (down 221 points)
    10 Year Treasury Bond - 4.14% (down 0.06%)
    Euro - $1.5627
    Gold - $904 (down $1)
    Oil - $134.62 (up $2.69)
    Gasoline - $3.44 (up $0.09)

    Spread The Word: These icons link to social bookmarking sites where readers can share and discover new web pages.
    • Digg
    • del.icio.us
    • Reddit
    • StumbleUpon
    • Technorati

    June 21st, 2008 | Posted in Oil | No Comments

  • Market Jitters
    • ...
  • Money Heaven
    • ...
  • Another Bear Stearns?
    • ...
  • Issue 03/07/08
    • ...
  • US Dollar Equals Canadian Dollar!
    • ...
    « Previous Entries