The Economy Guy

The stock market started on the upside this morning, but leveled off, turned soft, and then plunged in the last few hours – with the Dow Jones 30 slipping 238 points.  This is VERY bad news for the pundits who think that the beginning of each year portends the remainder of the year.  Statistically speaking looking backwards, 2008 should be a negative year for stocks.

The major events that moved stocks today included “pending home sales” (see news below), fear that 4th Quarter company results will be disappointing (they are coming out in the next week), and an announcement by the CEO of AT&T that he sees “softness” in his market – What a stupid announcement; AT&T shares fell on that statement.  Doesn’t the CEO understand he’s supposed to help his share value increase???

Gold hit a NEW WORLD RECORD HIGH of $880 today.  Oil trended upwards, but everything else kind of stood still today.

Today’s News

The National Association of Realtors came out with their pending home sales index falling 2.6% to 87.6%.  To understand this index you need to know that 100% was the amount of pending home sales in 2001.  This is an indicator or a pretty sick market, with no bottom in sight.

To give you a better insight into what’s happening with home sales in the USA, here is a great graph.  You can see there is no bottom established yet.  We could easily be one, two or more years from that bottom.

Countrywide Rumor????

Countrywide Financial officially denied the rumor today that it was heading toward bankruptcy.  (Do you remember my mantra – “Don’t believe a rumor until it is officially denied.”)  Countrywide stocks fell 28% on that rumor.  This is a great lesson that rumors do move markets.  Countrywide has been hit with backing those lousy sub-prime mortgages too – they wrote off billions already.  The short sellers are making a killing on Countrywide right now.

Bernanke to Speak on Thursday

Fed Chairman, Bernanke, is to speak on Thursday.  Market players are hoping he will shed some light on whether he will be dropping the Fed Funds Rate 0.25% or 0.5% at the next Fed meeting.

This is really stupid.  Fed Chairmen (and Greenspan was the master) just don’t give anything like that away.  Bernanke isn’t as adept as Greenspan in choosing his words, but he isn’t going to hint about such a major market mover as Fed Funds Rate.

Here are today’s closing numbers.
Dow Jones  30 Industrials – 12,589 (Down 238 points)
10 Year Treasury Bond – 3.84% (No Change)
Euro – $1.4707
Gold $880 (Up $18) – a NEW HIGH
Oil $96.33 (Up  $1.24) – Oh, Oh, it’s starting up again.
Gasoline $2.47 (Up $0.04)