Cash For Clunkers Crunching
Stocks soared today on Bernanke’s statement. Bonds got scared an raised interest rates.
The Dollar fell to a recent LOW.
Gold rose sharply, and oil and gasoline rose on the good economic news.
In the news today……
Ben Bernanke – said today that we are on the verge of coming out of our recession – and everyone listened – and stocks went up. Oh my goodness. I have explained before that it doesn’t take much of anything to get out of this recession. The $700B “Stimulus” package didn’t do anything, but the $3B Clunkers money probably was enough to get us into positive GDP numbers. So, why all the celebration??? Probably because everyone is so scared!!!!!! Scared that the market and the economy would take forever. Something else to remember for big Ben is that he is up for “re-appointment” by Obama next year, so he wants to look good.
Home Sales – in July rose 7%. This is 4 months in a row of gains. This is just fabulous news, and it is driven by the bargains out there being snapped up by speculators and first time home buys (taking the $8K government tax credit). But, don’t break open the champagne yet – the home prices MUST stabilize before you start sipping. The median price of a home in the US is $178,400 today (a fairly meaningless number.)
Tonight’s Dinner Conversation……
“Cash for Clunkers” I’ve promised you some thoughts on this government program, and I want to set the scene before the final numbers come in from the government.
The government allocated $3B for this program, and that money appears to have been spent in about one month – pretty fast. Either there was a pent-up demand, or the $3500 to $4500 “free money” was enough to tip the balances of people who just rushed out and bought a new car. And, it doesn’t really matter anyway.
I bet that the average discount is $4000, and that would equate to 750,000 vehicles if all that $4000 was efficiently spent by the government – in other words, there was no “overhead” cost, or inefficiencies. If I am wrong, and every car got $4500, then the number of cars that could have been purchased was 666,666 vehicles.
So, the efficiency of the US Government can EASILY be calculated by an approximation of the ratio of actual cars in the program divided by 750,000 or 666,666. The inefficiency would be 1.0000 minus the efficiency. (Okay, I know I’m using some very advanced mathematics here, but just trust me. I promise not to use any calculus, unless you insist upon it.)
So, what is the efficiency or inefficiency of the US Government as measured by the Cash for Clunkers program? We don’t know yet, because the final numbers haven’t been announced yet. But when they are announced, I can promise you that I will report it.
What would you say if 30% or 40% of the money never made it to the car buyers, but was used up by the government??? That is the questions for you to discuss tonight.
Here are the last numbers for today:
Dow Jones 30 Industrial – 9506 (up 156 points)
10 Year Treasury Bond – 3.56% (up 0.12%)
Euro – $1.4335
Gold – $955 (up $13)
Oil – $37.90 (up $0.99)
Gasoline $2,99 (up $0.01)
