Buried Under Debt
Stocks went up slightly again today, and the stock market appears to be in a sideways trading range.
Bond values went up (lower interest rates).
The Dollar lost a whole cent again, and this shows the relationship between stocks and the Dollar.
Gold also rose on the back of the stock market.
Oil and gasoline rose dramatically, as oil reserves apparently are very low in the US.
In the news today…..
Mortgage Applications – are rising. These are increases in loans to buy homes, and also refinance loans.
Mortgage Rates – fell last week to an average of 5.15% for a 30 Year Fixed Mortgage.
Corporate CEO Compensation – is just as high as it has even been. The total compensation of salary plus exercised options keeps these executives with plenty of plush loafers. Should society be outraged? The press thinks so, and ACORN at the white house urging sent out protesters to executive homes of bailed out companies earlier this year. However, if the taxpayer hasn’t put their own money into a company – then I think only the share holders are being screwed. The shareholders have a responsibility to create their own town hall meeting environments at the next shareholder meeting – and vote out the directors who are allowing these huge compensation packages – when the company is tanking and share values are falling.
Oil Futures – the Commodity Futures Trading Commission will be instituting new rules on trading positions in energy markets to limit trading positions. Why would they be doing this? I have maintained for a long while that the oil price is manipulated by speculators. I believe this action confirms my assertions.
Tonight’s Dinner Conversation…..
What’s the FED up to? Here are some of their recent announcements.
- Complete the $300B purchase of US Treasury Bonds
- Extend the TALF loans (securities backed by consumer and business loans) from December, 2009 to June, 2010.
- Purchase $1.25TRILLION of mortgage backed securities.
It’s this last one that hits me between the eyes. The first two have the rationale of stabilizing the financial markets – and have been successful to date.
The last one is meant to bail out the banks that hold those mortgage backed securities. Bail them out again??? Why?? Is the financial system about to come apart at the seams???
One other conclusion: The FED is not starting, or even thinking about starting, and exit strategy from their dumping of Trillions of Dollars into the financial community. If they don’t pull it back, it will eventually become inflation. The longer they wait, the more probable the inflationary outcome.
Here is what Warren Buffett just said about our debt load – “We’re going to be buried under this debt load!” And he backed it up by showing:
- Congress is now spending 185% of what it takes in
- Our deficit is a post WWII record of 13% of GDP
- Our debt is growing by 1% a month
- We are borrowing $1.8 trillion a year
So, what are the Chinese doing about this future??? They are pretty smart in my opinion. They are now changing their Dollar asset buying habits by switching from buying US Treasury Bonds to buying hard assets – like commodities, real estate, etc. When inflation hits, hard assets will go up with the inflation, and they will be protected. I think we can learn a lesson from the Chinese here.
Here are the last numbers for today:
Dow Jones 30 Industrial – 9279 (up 61 points)
10 Year Treasury Bond – 3.46% (down 0.06%)
Euro – $1.4228
Gold – $945 (up $6)
Oil – $72.42 (up $3.23)
Gasoline $2.03 (up $0.03)