The Economy Guy

Today was one of those days that should be remembered in the future. The DOW went down 387 points due to lack of confidence in the sub-prime mortgage market.

The trigger was the French Bank BNP Paribas stopping trading in 3 funds that invested in US sub-prime mortgage because the market value of the funds could not be determined. The European Community Bank added $130B to bank overnight trading to calm the market, but this had just the opposite effect. (You can tell that these central bankers are working in uncharted waters.) The US Fed added a greater than normal $24B in overnight funds.

Now that’s what I call inflation.

The US Bond market jumped up, and became a haven of security in these turbulent times. (Don’t worry, investors will forget about today around 8AM tomorrow.) The 10 year bond interest rate fell .07%, but this was only half of what it lost the last few days.

The currency market was interesting. The US Dollar strengthened slightly as people thought the US was a haven for security. (This attitude will change sometime in the future when foreigners realize that the US Dollar is not a haven for security, but just the opposite.)

Here’s the closing details:
DJ30 – 13,270 (down 2.83%)
10 year US Treasury Bond – 4.79%
US Dollar - $1.3661/Euro. About 2 cents off the record high.