A Long Way To Go
Stocks continued their slide downward today by shedding another 110 points. Bonds sort of made up for yesterday’s crazy rally by giving up a little value, and increasing interest rates. The Dollar went sideways except against the Yen where it lost value.
Gold gained back $17 – but, I think there will be further falls in its price in the near future. We’ll see if my prediction is right or wrong.
Oil and gasoline increased in price significantly for the first time. International tensions are pushing the price.
In the news today…..
Consider this international news. Japan’s GDP fell 2.4% in the 2nd Quarter on a year over year basis. The first Quarter 2008 was up 4.0%. It looks like Japan is slipping into a recession, and this measure is a sure sign that a global recession (in the second largest economy of the world) is started.
A recent survey of bankers said that 70% of financial institutions think another investment bank (think Bear Stearns) will collapse in the next 12 months.
1/3 of homeowners who bought in the last 5 years have negative equity in their house (their house value is less than their mortgage size.) In some areas of California, the percentage is 90% – think about that for a second. This means that if the homeowner doesn’t care, it pays to just walk away from the house, and give it back to the bank. This will have a continuing downward pressure on house prices in selected areas.
The total writedowns in banks around the world for subprime mortgages investments is $500B. (half a Trillion Dollars for you who like to think in Trillions.) I predict that this housing crisis won’t be over until the writedowns hit somewhere between $1Trillion to $2Trillion. So, we have a long way to go.
Here are Today’s numbers:
Dow Jones 30 Industrial – 11,533 (down 110 points)
10 Year Treasury Bond – 3.95% (up 0.03%)
Euro – $1.4920
Gold – $832 (up $17)
Oil – $116.00 (up $2.99)
Gasoline – $2.93 (up $0.09)
