The Economy Guy

Stocks continued their decline today, and have closed below 10,000 for the first time in 3 months.  Watch out below.

Everything else went sideways.

In the news today…..

Citibank – is trying to sell its car loan business.  It has a $3B portfolio of this junk, and is trying to unload it.  They are sweetening the pot by adding some future financing for the buyer.  Citibank is really just trying to get rid of its bad assets off its books before they implode.

FED Tightening – while not started yet, is being discussed by the FED.  They have stated they will raise interest rates (no sooner that a few months from now), and they will be raising the overnight rate they pay banks who park their money with the FED. This is the new interest rate that I advised you of – the one that replaces the FED Funds Rate.  Keep your eyes and ears open to any changes in this rate.

Thain – one of the CEOs at the center of our economic meltdown is getting a second chance.  Thain was CEO of Merrill, and is now taking the CEO reins at CIT, the largest lender to small businesses.  I wonder what trouble he can create in that job.  Why do these guys get second chances anyway?

Tonight’s Dinner Conversation…..

The FED is going to pay the banks MORE interest for doing nothing.  That is the story that I just reported “FED Tightening” above.  Why?  Well, the FED is caught between a rock and higher interest rates.

The FED bought those stinky mortgage securities from the banks, and gave the banks big chunks of cash, and that cash is being deposited at the FED and is earning interest.  This is the money that will earn MORE interest when the FEDs start to tighten.  So, why doesn’t the FED do the right thing and sell those stinky securities on the open market and pull back the cash obtained that way?  Well, it will drive up interest rates.  So, instead, they will pay the banks MORE interest to do NOTHING.  

This is infuriating.  The purpose of giving the banks money in the first place was to get them to start lending.  BUT, they aren’t lending AT ALL.  They are just sitting on their money, and getting rich off the taxpayer paying interest to them on money WE gave them in the first place.

Here are the last numbers for today:
Dow Jones 30 Industrial – 9908 (down 104)
10 Year Treasury Bond – 3.59%
Euro – $1.3648
Gold – $1066 (up $14)
Oil – $71.68 (up $0.41)
Gasoline – $1.89  (up $0.01)

Stocks tumbled today on worries of the European (Greek) debt problems, and the strikes by Greek government workers.  Bonds moved sideways.

The Dollar surged to new highs, and gold, oil, gasoline all fell precipitously.  I’ve never seen gold fall so far so fast, as I did today (down over $50 at one point).  Getting close to a buy.

In the news today…..

Rentals – vacancy rates for homes are at 2.7% (from 2.6%) nationally, and for apartments are at 10.7%, down from 11.1%.  We normally don’t see these types of statistics, and they are interesting to note.  How do you interpret these numbers?  Well, a little common sense – homes are desired more than apartments, and more people are moving into apartments as the economy tightens its grip.

Bank of America – good news that they will be hiring 2000 people.  These new hires coming over the next 2 years will be there to do financial wealth management for B of A’s wealthier clients.  They let all there talented folks go last year.  The bad news is for people who are investing with Bank of America – do you want a newbie handling your account?  I wouldn’t, and that’ my opinion.

Toyota – is being probed by the US Government over its braking problem.  This leads to direct questions on whether or not there is a conflict of interest in having General Motors owned by the US Government.  While I hope the auto safety probes are not politically motivated, you can’t know for sure.  This is one of the reasons I have advocated against government ownership of anything private.

Moody’s warns US Government – that its $3.8TRILLION budget for 2010 doesn’t really help pay the debt off, and even makes it worse.  So Moody is warning that the US could lose its AAA rating if this type of action continues.  Bad news for us all.  Even if Moody’s (who was part of the BIG PROBLEM we had) can’t be trusted for its judgment, we should heed this advice.

OMB Projections – are VERY SCARY.  First of all, the OMB is generally optimistic in its projections.  So, you must consider these guesses as way too optimistic.  But, here is one of their latest projections.  The US Government will have continuous deficits for the next 70 years.  Yes, you read that right – SEVENTY YEARS.  Now does this put the dilemma of the US into perspective?  That one projection guarantees that inflation is coming.

California Teachers Pension Fund – is $43B short.  Yes, $43B.  Now, that’s a lot of money.  I’ve warned that pension funds are underfunded in general after the big meltdown.  This is just a warning to you.  My cynical side would say that the teacher’s union isn’t looking out for its members too well.  My compassionate side would feel very sorry for the teachers who won’t receive their full pension.

US Treasury and US Labor – looking at YOUR 401K and IRA.  Here is a direct quote.  I have been warning about your money, and worry about not letting big brother getting its hands on it.

The Department of Labor and the Department of the Treasury (the “Agencies”) are currently reviewing the rules under the Employee Retirement Income Security Act (ERISA) and the plan qualification rules under the Internal Revenue Code (Code) to determine whether, and, if so, how, the Agencies could or should enhance, by regulation or otherwise, the retirement security of participants in employer-sponsored retirement plans and in individual retirement arrangements (IRAs) by facilitating access to, and use of, lifetime income or other arrangements designed to provide a lifetime stream of income after retirement. The purpose of this request for information is to solicit views, suggestions and comments from plan participants, employers and other plan sponsors, plan service providers, and members of the financial community, as well as the general public, on this important issue.

This means that Uncle Sam is eyeing your TRILLIONS of Dollars, and wanting to convert them into annuities.  Why would they want to do that?  So, you can buy the US Treasuries that must be sold to keep America afloat.  Sounds good – sort of, doesn’t it?  Well no, not to me.  When, not if, inflation hits, your annuity won’t be worth the paper it’s printed on.

Tonight’s Dinner Conversation……

Housing – what a wonderful topic.  What has changed?  Remember those good old days when prices were going up?  Well, do you also remember how easy it was to get a loan?  You’ve also probably heard that it’s really tough to get a mortgage right now – right?  Well, the requirements for a home mortgage have certainly significantly increased.

But, is it all that different right now?  I just read where someone got a conforming loan (that’s one that will be guaranteed by the US Government), and they DIDN’T HAVE TO HAVE AN APPRAISAL.  Yes, you read that correctly – no appraisal.  Why?  Because the mortgage company was going to sell the mortgage in a day or two, and then YOU would be taking the risk as the taxpayer.  This is just like the good old days.

So, in reality, even though there is a lot more regulation, nothing has changed.  We are driving down the mortgage highway, just as before.  We drove off of the cliff before, and not we are driving faster, and it’s raining.  Where is the Congress to protect the US economy?  Throw out all these scumbags – they are asleep at the switch.

And, if you didn’t think that was bad enough.  Fannie and Freddie have hundred of billions in losses built up on their books – I think it’s about $800B.  The amount is increasing every day.  Since the US Government owns these institutions, and they are nothing more than another Federal Agency – why doesn’t this loss carry over to the US Budget?  Why aren’t we showing this $800B in the budget deficit calculation?  Politics, of course.  But, it is coming.  Congress is just NOT RESPONSIBLE in its actions.  So throw these scumbags out.

Here are the last numbers for today:
Dow Jones 30 Industrial – 10,002 (down 268)
10 Year Treasury Bond – 3.61% (down 0.03%)
Euro – $1.3762 – Dollar gains about 1.5 cents
Gold – $1064 (down $48)
Oil – $73.10 (down $3.88)
Gasoline – $1.95  (down $0.09)

Stocks were up a lot today on good earnings news – and in the face of a lot of skepticism on Wall St.

The Dollar lost some of its recent gain, and the rest of the markets moved accordingly – gold up, oil and gasoline up, bonds up.
In the news today…..

Wild Card – I have warned about a potential war in the middle east with Iran.  The US is preparing for something; that’s for sure.  The US has moved 4 Patriot Batteries into the Middle East area (these are anti-ballistic missile, ABM, defense systems.)  In addition, the US is moving ABM equipped frigates into the eastern Med.  These are the most sophisticated weapons that the US has in its arsenal, and the US wouldn’t be moving them there if there wasn’t some sort of threat.  So, what is the threat?  I have always suggested that a strike against the Iranian nuclear facilities was a possibility – either by Israel and/or the US.  The movement of these systems is something that is planned months in advance – so there is some long term plan at play.  Stay tuned.

UBS could fail – if the UBS/IRS deal falls apart – this according to the Swiss government.  If the US drops the US license to operate, then UBS could go bankrupt.  I consider this a political move in Switzerland to allow the sharing of UBS client information with the US authorities – a politically dangerous move.  This came after a Swiss Court ruled that giving the private banking info to the US was unconstitutional in Switzerland.

China Import Trade Sanctions – could be coming as China is mad at the US for selling arms to Taiwan in the sum of $6.4B, and Boeing, Lockheed Martin, Raytheon could be targeted.  Of these – Boeing would be hurt most as it sells lots of airplanes to China.

President Obama – unveils a 2011 budget of $3.83TRILLION which would have $1.56TRILLION.  That means that 40% of this budget will be borrowed from future generations.  This is just the sign that will worry the debt markets – US Treasuries.  When these stop selling to foreigners, and the FED stops buying them, or aiding in their purchase – WATCH out below.

Tonight’s Dinner Conversation…..

Should big banks be broken up?  It has been proposed that Commercial Banks and Merchant Banks be separated.  In other words, the traditional role of banks to take deposits and lend funds should be separated from the risky business of hedge funds, and trading on the bank’s own account.

What do you think should be done to protect the US from a future meltdown?  Remember, that nothing has been done to prevent what happened in 2008 from happening again.

Here are the last numbers for today:
Dow Jones 30 Industrial – 10,186 (up 118)
10 Year Treasury Bond – 3.65% (up 0.04%)
Euro – $1.3934
Gold – $1106 (up $23)
Oil – $74.80 (up $1.91)
Gasoline – $1.93  (up $0.02)

Stocks fell today, closing January at a loss, based on worries about our debt and economy.

Bonds, Gold went sideways.

The Dollar continued to gain against the Euro reaching $1.38/Euro.

Oil and gasoline continued their downward fall as the economy is questionable.

In the news today…….

5.7% GDP 4th Q – and this is good news???  Well, it should be; the number is just really big, n’est-ce pas?  This reminds me of the 3Q GDP where it was first announced as 3.5%, and then revised to 2.7%, and then revised to 2.2%.  I wonder what will happen with this number?  It’s interesting that the first number makes the government look good.  Well, the fact is that about 3/4 of the 4Q GDP increase was from an inventory buildup.  So what? – I hear you say?  Well, here is the so what!  Inventories built up because they were depleted during 2009, and rebuilt in 4Q 2009.  This was a one time event, and will go away in 2010.  In fact, if there is weak demand for “stuff” this year, it will go away entirely as inventories are depleted again.  That’s the so what!!!  So, ignore that sound out there – it’s only the chest beating of the birdicus politicianus – or chest beating political lame duck.

$8B Railway Network – this is one of President Obama’s ideas for stimulating jobs.  Sounds good in a speech – right?  Well, let’s look behind the headline.  The $8B project will just get studies done across the US.  It won’t lay one foot of track, let alone any rolling stock.  It will take another $100B+ to complete this project.  Are you willing to spend the $8B on a project when you KNOW that you must spend another $100B+ to complete it?  And, if you decide to stop the project, you can just throw that $8B expenditure away????  This is NOT full disclosure.  This is NOT having a transparent government.  This is pure deceit.  Of course, this is better than building a “bridge to nowhere” or funding ACORN with Billions – but, come on now, let’s really build some infrastructure if we are going to spend some money.  Where is the next Hoover Dam?

$5000 per worker hired – that’s the President’s new idea for job creation.  He will offer small businesses $5000 per worker hired up to a maximum of $500,000 (that’s 100 new hired workers for those of you who don’t want to do the math).  Sounds good on the surface – just like the previous article.  But, think about this for a second.  What is going to stop fraud from entering the picture here?  Let’s say there’s a small business out there, and the boss hires 100 workers one day, and let’s them go the next day – does he qualify for the $500,000?????  Or, maybe you just need to be a friend of Obama to get away with this one.  Let’s say you are ACORN and you are going to hire census workers anyway – but now you can get another $500,000 for each 100 workers.  You just hire them under the name of different small businesses.  Great scam, I think.  Of course, this is all speculation, and we must read the fine print (if there is any) before really coming to a conclusion.  I just don’t trust these politicians.  There has been much to much graft and payoffs to special interests for my liking.

Greek Bonds – have risen in interest rates due to the Greek Tragedy that’s happening because Greece can’t balance its budget.  Greek 10 year national bonds have risen from 4.99% to 7.15% in 6 weeks.  That’s over 2% rise.  Enormous in any market.  Could this happen in the US?  Well, let’s think about this for a second.  Greece is a unique situation – right?  It is part of the EU, and it’s performance is dragging the Euro down with it.  But, the key problem is that Greece’s budget deficit is 13% of GDP?  Hum!!!!!  Where is the US budget deficit?  Just a teaser.

EU comes to Greek assistance – if the IMF doesn’t.  Remember that Plan A was for Greece to use IMF aid as the US is the major source of funds in the IMF, whereas if the ECB (European Central Bank) comes to the rescue, it’s 100% European money.  However, things have deteriorated so badly – see previous article on Greek interest rate rise – that the ECB couldn’t ignore the catastrophe.  They are now Plan B.

Tonight’s Dinner Conversation…..

Climategate, aka “Cap and Trade”, has shown how unethical the scientific community can be in order to further a cause.  The weather researchers at East Anglia University in the UK broke the law when they didn’t release emails and research about their “global warming conclusions.”  But, they won’t be prosecuted because the offense occurred more than 6 months ago – as per UK law.  Too bad, as far as I’m concerned.  These scumbags should be sent to prison to entertain the real hard criminals.

Here is my main gripe.  I was educated as an Engineer, and took way too many science classes.  These classes drilled into me that finding the “truth” was the objective of research.  Over the history of science, physicists and mathematicians sometimes found the truth, and sometimes found an approximation of the truth (think of Newton versus Einstein – both approximations of the “truth”).  In no case, was it acceptable, encouraged, or glossed over in any way to fake the data, and draw pre-existing hypotheses into fact.  However, some folks did that, and were drummed out of the community for it.  It took years to resurrect some of the great scientists of the world when they went against the teachings of the church.  It was considered blasphemous to do that.  So, to see these scientific weather professors faking the data to prove “global warming” when it appears we are in a “global cooling” phase of the earth’s climate, is just dead wrong.  However, if the “Cap and Trade” crowd rule the earth, then these fake scientists will probably stand right next to President Obama to receive their Nobel Prize.  Let’s hope that the “truth” will come out, and everyone can then draw their own conclusions.

However, there is BIG MONEY behind this clouding of science.  Cap and Trade is not worth Billions; it’s worth Trillions.  Al Gore is making hundreds of millions of Dollars from this fake science; does that sound right to you?  Perhaps the next President can tax Al Gore’s windfall profits as being “unethically created” and help pay back the US Taxpayers for their pain and suffering.  Well, that was just cynical, as I was drawing a parallel to our President’s attack against the big 50 banks as being just as “unethical.”

Here are the last numbers for today:
Dow Jones 30 Industrial – 10,067 (down 53)
10 Year Treasury Bond – 3.61% (down 0.05%)
Euro – $1.3863 – down a full cent.
Gold – $1081 (down $3)
Oil – $72.70 (down $0.94)
Gasoline – $1.91  (down $0.01)

Stocks fell today, and this is more technical than anything else.  Bonds, Gold, Oil and gasoline all went sideways.

The Euro continues to fall about 1/2 to one cent per day – a steady drip of lost value.  Is this going to stop?  Some experts think it will stop soon, and reverse course.  We must wait and see.

In the news today…..

Bernanke gets appointment – getting 70 to 30 vote as reappointment Head of FED.  Not a rousing endorsement of performance, but he did make it over the line.  I predicted Bernanke would make it, and now it await Geithner’s fate….

New home production – is about 350,000 homes per year.  This compares to a “normal” production of 1,000,000 to 1,200,000 homes per year.  We are at a very low rate of production in the USA.  The Shadow Inventory is predicted to be 1,700,000 homes right now, and will come on the market.  The Shadow Inventory of used homes will weigh on the sales of new homes.  In one to two years, home production will need more land, and will start buying lots, as they are working their way through their land inventory right now.   The prices of homes have fallen to a “norm” in the rent to home price ratio.  This is good news, but prices will fall further in 2010.

Swiss UBS – deal with the US IRS fell apart yesterday.  A Swiss court ruled that the deal was unconstitutional to the Swiss Constitution on Bank Secrecy.  Interesting isn’t it?  Now the lawyers should have a field day.  A bunch of Americans were identified by UBS to the IRS, and the IRS went after them.  Can you sue UBS in Switzerland?  Who knows.

Foreclosure problem spreading - One in eight Las Vegas homes went into foreclosure in 2009 as cities in four Sun Belt states (NV, FL, CA, AZ) accounted for all top 20 foreclosure hot spots, according to RealtyTrac’s 2009 Metropolitan Foreclosure Market Report. California accounted for nine of the top 20 metro foreclosure rates, followed by Florida with eight, Nevada with two and Arizona with one. Less expected was a massive jump in Provo UT and Boise City, ID – which both saw foreclosures up more than 100% from 2008. “While it was expected that cities from states with the highest levels of foreclosure activity would top the charts, there is evidence that we’re entering a new wave of foreclosures, driven more by unemployment and economic hardship than what we’ve seen over the past few years,” RealtyTrac said.

SEC allows Money Market Fund NON-Redemption – In a nearly unanimous vote, Money Market Funds now have the ability to suspend redemptions, courtesy of the SEC’s just passed 4-1 vote. This explains the negative rate on bills: at this point, should there be another meltdown, money market investors will not, repeat not, be able to withdraw their money purely on their own desire. As the SEC noted: “We understand that suspending redemptions may impose hardships on investors who rely on their ability to redeem shares.” Too bad investors’ hardships considerations ended up being completely irrelevant.

Joke of the Month…..

The SEC (and this is true) requires that public companies disclose to the public what “global warming” can do as a risk to their company.

Here are the last numbers for today:
Dow Jones 30 Industrial – 10,120 (down 116)
10 Year Treasury Bond – 3.66% (up 0.02%)
Euro – $1.3968 – falling, falling, falling….
Gold – $1086 (up $1)
Oil – $73.88 (up $0.21)
Gasoline – $1.92  (down $0.01)

Today stocks moved sideways most of the day, moving up at the end on the FED statement of a strong economy.  Bonds, the Dollar  moved sideways too.

Oil and gasoline fell significantly as new recent lows are being reached.  Let’s hope this continues, and actually shows up at the pump.

Gold also fell, and will now test a significant point of resistance with the next test being the 1040 to 1060 level.  Great news as a buy is coming into view.

In the news today…..– today, and made two interesting statements to boot.  First, they dropped the statement made last month that the housing market was showing signs of improvement – this means they see no improvement right now.  Second, they confirmed they were going to drop their mortgage securities buying program at the end of March, BUT they would consider changing that decision if the economy needed it.

FED Leaves Rates Alone

New Home Sales – fell 7.6% in December.  I suspect this was due to the very cold December that swept across the US.  In any case, it isn’t very good news for the housing market.

November Factory Orders – were revised downward from 1.1% to 0.6% gain.  The change was due to a mistake in the original calculation.  I find this very interesting, and the point I would like to make to the readers is “Don’t trust what the government statistics that are published.”  As you can see, mistakes are made.

FDIC Going Bust – as you can see in the following chart, the FDIC is losing money too fast.  It plans on selling some of the assets that it’s acquired from the bust banks, and sell them at fire sale prices, but that will only bring in $2B to $3B.  Their next stop will be to Congress – asking for a top up.  PS – that’s YOUR money.

FDIC Going Bust

Tonight’s Dinner Conversation…..

Would you like to learn about a trick that the FED and Government are pulling right under our noses?  Well, here it is.

The FED has a $1.25TRILLION budget to purchase mortgage securities from Fannie/Freddie, and this is the program that Bernanke announced would be stopped in March.  The problem is that mortgage rates are expected to rise when the FED stops buying the mortgages.  Why is the FED buying those mortgages?

Well, the conventional wisdom is that Fannie/Freddie can then sell those mortgages (to the FED) and is able to purchase more new mortgages and keep mortgage rates down.  That all sounds good – doesn’t it?  But, isn’t there another agenda going on here?  Yes!!!!!!!

Guess what Fannie/Freddie does with the money it gets for the mortgage securities?  It buys US Treasuries.  

Let’s also look at those big banks who have taken TRILLIONS to bolster their reserves.  What do they do with that money?  Either deposit it with the FED at the overnight rate, or buy US Treasuries.

Now, here is the problem.  How many US Treasuries are issued in a year.  Well, last year was a boom for issuing Treasuries, and this year will be one too.  We’ll probably issue at least $1.9TRILLION in Treasuries, and maybe more in 2010.  The news would have you believe that the Chinese are buying all our Treasuries, so there isn’t any problem – right?  Well, ALL foreigners bought only $400B worth of Treasuries last year.  That leaves a bunch left over for US folks/agencies/banks to buy.

So, the big trick is —- the FED is bolstering banks and Fannie/Freddie, so that it can bolster US Treasuries, and thereby keep interest rates low.

Only one question???  What happens when this merry-go-round stops?  For example, in March when the FED stops buying mortgage securities?  

Here are the last numbers for today:
Dow Jones 30 Industrial – 10,236 (up 42)
10 Year Treasury Bond – 3.64% (up 0.01%)
Euro – $1.4021 – down a half cent.
Gold – $1084 (down $14)
Oil – $73.65 (down $1.06)
Gasoline – $1.94  (down $0.03)

Last Sunday, I had the honor to lead an economic discussion with a group of economyguy readers and friends.  This group of highly educated and financially sophisticated individuals represented the core values that investors across America have.  As individuals, they were interested in all types of investments, and we interested in how the future US economy will affect those investments.  This was a very stimulating and fun get-together, and I can say that it is very encouraging for me to see the thoughtfulness that these people put into their investments.

Everything went sideways today, except the Dollar which strengthened significantly.  Now it is surprising that no other markets moved in sympathy with the US Dollar – they have in the past.  So, if they didn’t move today, watch out for tomorrow.  The moves could be significant.  Which direction, you ask?  Down in the DOW and down in gold, oil, gasoline.  Bonds are fickle, and harder to call.

In the news today……

2010 Budget Deficit – is projected to be $1.35TRILLION, and this is compared to the 2009 deficit of $1.4TRILLION.  This presents a massive problem for the US, as we must pay for this deficit by selling bonds, and who is going to buy them?  I suspect that foreign money is drying up, and that less and less foreign nations will buy the US Debt.  There are discussions in Congress and the White House to require your 401K and IRA buy these bonds – and fight any suggestion of this with your last breath as it is a big con.

Ukraine Election – will happen in a week, and will result (whichever Presidential candidate wins) in a reversal of the Ukraine independence movement, and a discussion on how the Ukraine can reunite with Russia.  I am highlighting this event as it shows how Russia is increasing in real influence in the world.  Russia is a force to reckon with, and will be more so in the future.

Japan downgraded – as their debt to GDP ratio is expected to grow to 115% over the next couple of years.  Japan has one of the highest debt obligations of any 3rd world country, and is showing the inability to have policy flexibility sufficient to deal with their debt.  In my opinion, this is the first sign of Japan slipping down the slope of economic destruction and malaise.

China – told some of its bank to stop lending for the remainder of the month, and is increasing bank reserve requirements.  The reserve requirement increase will have the effect of slowing loans, as banks must keep more of its money as reserves.  This is all part of the Chinese management of its economy which is considered to be overheated – so China is cooling it off.

AIG being investigated – again, and this time by the TARP special investigator.  The key character, front and center, is Tim Geithner, our Secretary of the Treasury, when he was head of the NY FED during the bailouts – and AIG’s in particular.  There will probably be new leaks of what actually happened, and this will be bad news for poor old Tim.

Headline News…..

The FED will consider dropping the FED Funds Rate at its next FOMC (FED Open Market Meeting).  They are talking about replacing the FED Funds Rate with an interest rate associated with the interest paid on excess bank reserves.  The FED Funds rate has been around for the past 20 years.

I naturally get suspicious when any governmental body wants to change the rules and measures we use.  So, I will be looking for the meaning behind the change.

If any of you have some insight, I would appreciate hearing from you.

Here are the last numbers for today:
Dow Jones 30 Industrial – 10,194 (down 3)
10 Year Treasury Bond – 3.63% (no change)
Euro – $1.4077 – down almost a cent.
Gold – $1093 (down $2)
Oil – $74.59 (down $0.57)
Gasoline – $1.97  (down $0.03)

All the markets moved sideways today.  Stocks are flirting with technical support areas to determine if this market will bounce up again, or die a painful death by losing a significant amount of its recent gains.  On the news front, everyone is waiting to see if Congress and the President will be changing course, or not.

In the news today…..

Existing Home Sales – fell 17% in December.  This is a disaster. The drop was the greatest drop in over 40 years. Surprisingly, the drop was caused by first time home buyers who were getting the $8000 tax credit – even though this program expires in  April, not now.  The median sales price was $178,300 – up 1.5% over the prior year.  But, since first time buyers weren’t buying, and they normally buy lower priced homes; the median price would be skewed higher.  So, was there really an increase in home prices?  I don’t think so.  The one and only measure of a solution to the home glut is a reduction in home inventory to “normal” levels.  We are far from that even right now.

Goldman Sachs – warns the FED that it is too early to start raising interest rates.  They say it would be a disaster for the markets.  If you are one of those people who think that Goldman controls the FED, then you can see what will happen at future FED meetings. No interest rate hikes soon.

Ben Bernanke – is more likely to be reconfirmed as the FED Chairman.  The White House and Tim Geithner lobbied all weekend for Ben, and this increases his odds of being confirmed.  Best quote:  “He’s the best we’ve got.”  I personally doubt that statement.  I still feel that Geithner has a great chance of losing his job.

Wild Card???? – Osama bin Laden made a broadcast that could be the trigger to start more attacks against the west.  If this comes to pass, I wonder who will die?  Do these poor souls have any faith in our President to protect us?  If any Americans die, then you can bet the right wing will launch an all out assault on the President for not keeping Americans safe.  Listen for the phrase “If the President had allowed water-boarding, we would have known about this attack before it happened, and we could have prevented the loss of life.”  If the attack Is big enough, you can bet that all markets will react to the news.  Generally, there is a rush to the Dollar, and you can see gold strength as a bastion of safety.

Tonight’s Dinner Conversation…..

State of the Union Speech – there are rumors coming out of the White House that President Obama will be suggesting another package of spending to help Americans.  Should be interesting to analyze, as this will cost money, and will add to the deficit.  How much – is the key question.

It is hard to argue against increasing child tax credits for the poor, and helping with student loans.  However, these measure don’t attack the main issues in the economy.  The questions to ask are “What caused the poor to need more child tax credits?”  “Why do students need help with their student loans?”  Then look at the proposals, and you will definitely see that the solutions being proposed by the President don’t attack the causes.

The main problems in the US from the population’s perspective is unemployment – in other words, jobs.  The President is smart enough to know to give lip service to the jobs problem, but will he be able to propose anything that actually would create jobs?

Here are the last numbers for today:
Dow Jones 30 Industrial – 10,197 (up 24)
10 Year Treasury Bond – 3.63% (up 0.03%)
Euro – $1.4152
Gold – $1095 (up $6)
Oil – $75.12 (up $0.58)
Gasoline – $2.00  (up $0.04)

Stocks are down big again, with the S&P as a negative for 2010.  Stocks feel because the bank profits aren’t as good as they must be to sustain a rally in stocks.

Bonds, Gold, and the Euro all went sideways today.

Oil and gasoline declined again today, and this continues to be good news (unless it signals the double dip recession is here and alive).

In the news today……

Unemployment – rose in 43 of the 50 states last month.  

Investing in General……

Here are some rules you might consider when you invest in stocks.  I think they have some wisdom in them, so I’m sharing them with you.  Thanks to the Casey Report for these ideas.

Rule #1: Be skeptical.

Rule #2: See Rule #1.

1) When you talk to the company, how do the people make you feel? If they come across like used-car salesmen, you should probably trust your gut reaction.

2) Ask questions any company exec should know the answer to. Any CEO or president who doesn’t know how many shares his or her company has issued & outstanding, or how much cash the company has in the bank, is either dishonest or incompetent. Probably both.

3) Always review a company’s financial statements. Balance sheets and income statements tell stories, loud and clear. If a company is spending more money on Taj Mahal-like offices than it is putting into the ground, there’s a clear red flag. Disclosure requirements result in a lot of stuff going into the MD&A statements that go with financials.

4) Learn. You may not have time to get a degree in geology, but you can learn a few basics to help to have a general understanding of the business. If you don’t know that open pit grades don’t work in mining veins, you shouldn’t be investing in mining companies.

5) Grow a network, ask for help. Investors can build networks. The fact that so few investors go through the trouble of doing so leaves the field wide open. Investors are important to company people, so they try to be helpful.

6) Remember Rule #1 – be skeptical. A good investor relations person or other corporate storyteller gets paid for painting glowing pictures of riches merely waiting to be picked off the ground by the fast-moving investor… you. Understanding that it is their role to tell a compelling story leads to the logical conclusion that it is your role to separate the facts from the fiction.

Here are the last numbers for today:
Dow Jones 30 Industrial – 10,172 (down 217)
10 Year Treasury Bond – 3.60% (down 0.01%)
Euro – $1.4133
Gold – $1091 (down $12)
Oil – $74.23 (down $1.85)
Gasoline – $1.97  (down $0.02)

Stocks tanked today as a result of President Obama blasting the banks, and wanting strict guidelines on what they cannot invest in.

Bond lowered in interest rates, and the Dollar moved sideways.

Gold fell to below $1100/ounce.  This is the first buy range for those of you who want to buy gold.  The “buy” signal for significant buying is $1050 or lower, and I am waiting for that to happen.  If Gold goes below $1000/ounce, it will be a “buy with both hands” signal.

Oil and gasoline fell, and that’s good news for us all.

In the news today…..

Initial jobless Claims – rose last week and were counted at 482,000.  This number is way too large for a recovering economy, so it is a poke in the eye to all who say that we are coming out of the recession.  This also means that the national unemployment rate will undoubtedly rise when it is next calculated.  The 3rd Q of 2009 showed a significant slowing in the jobless claims number, as companies slowed their layoffs.  Many economists thought this meant that companies were poised to start hiring.  This isn’t proving to be true.  Companies slowed their layoffs because they had made all the layoffs that they wanted to make, so they could make their profit numbers.  However, as the economy isn’t picking up, so the companies aren’t hiring.

Congress and the Max Deficit – Congress proposed to increased the cap on spending at $14.3TRILLION, and increase of $1.9TRILLION.  The spending is still out of control, and the message from Mass was clearly to shut down the spending, and get it under control.  Congress isn’t doing this, and that’s why I say “Throw all the scumbags out!!!”

Interesting Tidbit – you can buy an app for your Iphone that translates a baby’s cry – any baby – into one of five distinct categories – hungry, annoyed, tired, stressed, bored.

Russia’s Central Bank – is busy buying Canadian Dollars and Gold to diversify itself away from US Dollars.  Is this a political move, or an economic move?  I believe it is the latter, and they are pointing the way for future Dollar values.

US Mortgage Rates – fell to 4.99% for a 30 Year fixed rate loan.  This is 3 weeks of falling mortgage rates which follow the falling bond market interest rates.  The recent all time low for 30 year fixed rate loans was 4.71% in early December.  The FED has fed $1.25TRILLION into buying mortgage back securities in play to lower mortgage interest rates.  Now, that’s a lot of money.

GM Dealers – are fighting to get back their franchises that were cancelled by either GM or Chrysler last year.  700 dealers are going for binding arbitration to try to get back their dealerships.  GM Chairman says that hundreds of them will get their franchises back through this process.  Huh???  Why did GM and Chrysler cancel them in the first place if there is a valid case for them to remain a franchise.  Is this just another sign of lousy management in these companies?  I think so.

Tonight’s Dinner Conversation…..

A smaller Obamacare Bill is being proposed by the Administration and the Democratics in Congress.  This has been caused by the Mass (home of the original Tea Party) election and the “Scott heard round the world.”  The idea being proposed is to drop out some of the proposals in the existing bill, and then get some Republican support, and pass it.

I fear that the Democrats missed the message from Mass.  The message was “throw that bill away, and start over.”  They don’t want to start over; they want to just slightly amend (reduce?) the bill, but keep the government control pieces in place.

Here is the topic for tonight’s discussion.  Is this a government control health care bill?  It doesn’t have the “public option” in it, so it isn’t government control – right?  I heard this argument on the radio, and it really got me thinking.  What makes the proposed legislation to be a “government control” takeover of the health care industry?

My answer is that there are many, many, many government committees and regulators being legislated inside this bill, and those bureaucrats are the ones who will determine what REALLY happens with health care – whether its the public option, or the current insurance company versions.  Those bureaucrats work for who???  The government, of course.  They rule!!!!  That tells me that the legislation is a government control mechanism, AND I believe the Democrats won’t touch that aspect of the bill.

What is being proposed by the Tea Party crowd?  Start again.  They aren’t saying that health care doesn’t need reform.  They are saying that health care shouldn’t be destroyed by government control methods.  The Republicans have made dozens of legitimate, cost saving proposals for health care, but the Democrats have ignored all of them.  The next few months should be interesting.

Here are the last numbers for today:
Dow Jones 30 Industrial – 10,390 (down 213)
10 Year Treasury Bond – 3.61% (down 0.05%)
Euro – $1.4095
Gold – $1094 (down $18)
Oil – $76.04 (down $1.70)
Gasoline – $1.98  (down $0.06)