Catching Up
Hello Economyguy Readers.
I have been out of communication while my wife and I have been making major changes in our life by selling our big home. Lots of chaos, and lots of moving. We want to create a bohemian lifestyle where we can travel from place to place for a few months at a time, and enjoy different cultures. Now that sounds nice, but try to get through the bureaucracy of creating a post office box and change of address at the same time – sound simple? It isn’t, and I won’t elaborate.
To catch up for the past two weeks, I will provide a narrative of what’s happened, and how that impacts you.
The Markets
Stocks tanked, and then recovered for the past 6 days. Today was the turning point for the stock market. The fundamentals are being dictated by the earnings reports of companies currently coming out. Could be interesting. The technicals are “bearish”. Stocks have hit a technical confirmed bear market, and this should be negative for stocks. Assuming this bearish stock indication is correct, it foretells a double dip recession.
Treasuries have been telling another story. Interest rates for the 10 Year Treasury fell to about 2.9%, and have now recovered up to over 3%. The lows produced extremely low mortgage rates for you who needed to refi. Where did this move come from? It came from the European (Greek and Spanish) debt crisis, and people pumped money into Dollars, and bought the strongest instrument on the face of the earth – the US Treasury. (How long will that epithet last? That is a story for another time.)
The Euro (the anti-Dollar) fell to as low as 1.20/$, and has now significantly recovered to 1.27/%. Remember that it fell from about 1.5/$ – so it has a long way to go back to. And, why would anyone with a sound mind want Euros? Well, something who thought that the Dollar might fall, would want Euros. The Europeans have actually tried to constrain their spending – while not in extremes – it is a good start to stem the excess spending and excess debt. The US is not doing anything like that, and it is apparent that the Dollar is being tarred and feathered in the foreign exchange market right now. But, maybe the Euro is just having a technical rally because it fell off a cliff from 1.4/$ to 1.2/$. Time will tell.
Gold fell from about 2240/ounce to as low as 2190/ounce, and has recovered a little to 2207 as of today. I personally still believe in gold, and see the current hiatus as a technical movement as the rapid move up has been breathtaking. I see a bright future for gold over the rest of the year. July is the slowest month for gold price growth historically.
Oil and gasoline are showing the weakness in the Dollar by staying exactly where they were two weeks ago. Gasoline has fallen a little, but oil is stable – even with the Gulf Oil spill and the possibility of less drilling in the near term.
The Economy
Where to start…. Unemployment is still very high, and new job growth is dismal – that is the best word that I can churn up for what’s going on. No one likes that fact we are not growing jobs. Greenspan has stated that factories have stopped their inventory rebuilding program, so that means that factories are not producing as many goods as they did the first to quarters of this year. A slowdown in other words. Stimulus spending has stopped, and is on hold as politicians are holding back on stimulus spending until the year 2012 when there will be a Presidential election. No more housing stimulus money, No more auto stimulus money. No more unemployment money for those who received it for long periods (90 months?).
The government continues to spend like a drunken sailor. Deficits are reaching to the stars, and this will end badly for America. As a tidbit, HUD has a program where they are giving $196M to governmental organizations (like cities) to buy houses on the HUD books at a 25% discount (watch out for appraisal shocks coming into the market place) so that we eliminate homelessness. Imagine that. The government is giving money to buy their foreclosed houses, and get them off the books – sounds like it could be illegal if a private citizen did it.
States and counties and cities are busting their budgets and creating deficits that they MUST reel in. That will mean some hard decisions with respect to employment and services.
All this portends that we are going into a double dip recession, and it will be happening right NOW. The second half of 2010 doesn’t look pretty. 2011 isn’t much better – or could be even worse.
Politics
We are in an election year, and posturing is the norm. Lots of words, and you can’t believe anyone. So, think before you vote. I still recommend voting out all incumbents.
The biggest bill coming forward is the Financial Reform Bill – and this was written by the Democrats in control, and it hides lots of ugly partisan sections. It is flawed massively. Just get mad when it passes, and vote out the scumbags who are responsible. Are there some good section? I don’t know because I haven’t read it – but , what’s new – none of the senators or folks in Congress have read it either.
Did you know that some of the Healthcare legislation is still be revealed – even though it’s law today. Like a provision for all financial transactions over $600 to documented to by a 1099 form. Why? Well, some of the better minds out there say it is to easily enact a VAT, and know all the transactions that it will apply to. Just to put the record straight – I am AGAINST a VAT tax in America. Everything will jump up in price immediately, and you will see instant inflation – and I can tell you today, and no one will like it.
Here are the last numbers for today (and changes from yesterday):
Dow Jones 30 Industrial – 10,367 (up 4)
10 Year Treasury Bond – 3.05% (down 0.01%)
Euro – $1.2743
Gold – $2207 (no change)
Oil – $76.60 (down $0.44)
Gasoline – $2.07 (down $0.02)
