A Little Good News
The stock market shot ahead 179 points today because of the “great” Retail Sales figures reported this morning. However, the news isn’t all that good, but that doesn’t stop market sentiment. However, this is just another “sideways” move by the market in the range of the 12,000’s.
Bonds and gold moved sideways. Oil and gasoline increased again a little bit.
In the news today…..
Retail sales were up 0.3% in January. The majority of the move came in “gasoline station sales”, meaning gas prices strike again. Also new car sales pushed the number up. In December there was a 0.4% decrease, so a 0.3% increase over December still is less than November. However, this news was all it took for the stock market to ignite.
Another mortgage insurance company is being hit hard by our housing meltdown. MGIC writes PMI mortgage insurance, and lost $1.5B in the 4Q 07. Anyone who gets a loan for less than 20% down, must have PMI insurance, and this company is obligated to pay the mortgage payments when the home owner doesn’t. When the homeowner defaults (foreclosure), MGIC shares in the total loss with the bank. Who ever thought about this eventuality?
President Bush signed the “Rebate Bill” today. This $168B gift to the taxpayers is meant to kickstart our stalling economy. A recent survey shows that 19% of recipients plan to spend their rebate on “things”, whereas the majority will pay off bills or put it in savings and investments. The final bill signed into law today fixed some of those problems that I complained about when the House passed its version of the bill. The final bill does pay a rebate to people on Social Security and disabled Vets. To get your rebate you must file your 2007 tax return and have a valid Social Security Number. (The final bill doesn’t solve my other identified problem – illegal aliens paying taxes with a valid SSN will receive the rebate. The Federal Government is admitting that SSN’s are a lousy way of identifying people.)
And now a general comment on the economy.
The FED recently dropped the prime rate 125 basis points (1.25%) WHILE the CPI (inflation measure) is above the FED comfort level. The FED is “hoping” that our recession will drag commodity prices down and with it drag the CPI down. There is no indication that this “hope” will actually happen. Further rate cuts will only worsen this problem. If the FED is wrong in its “hope”, inflation will start sooner and higher than anyone wants. We must wait to allow this untold story to unfold.
Here are today’s Numbers:
Dow Jones 30 Industrial – 12,552 (Up 179 points)
10 Year Treasury Bond – 3.69% (Up 0.02%)
Euro – $1.4573
Gold – $910 (Down $1)
Oil – $93.27 (Up $0.49)
Gasoline – $2.39 (Up $0.02)