Bonds continued their massive drive upward in value (decrease in interest rates), and the 10 Year Treasury is now exploring whether it might break through 2%.

The Dollar continued its massive fall in value, falling another 3 to 4 cents today – that’s about 14 cents in 3 days – a massive route of the Dollar.

Gold continued climbing upward and ended today at $869.  Do you remember when it was about $700 just a very short time ago.  What a massive rally has taken place.  I hope the readers got their fair share of gold.

Oil fell and is threatening to breach $40/barrel on the downside.  Gasoline is acting contrary to oil right now.  Gasoline has stayed in the range of $1.00 to $1.10 while oil is blowing from $40 to $50 – a much bigger percentage swing.  Something is going on in the gasoline market – and I wonder if it’s speculation??  The oil and gasoline market are important to watch now as they strongly influence the US economy as a whole, and hit our individual pocketbook directly at the pump.

OPEC has announced that they will cut production by 2,200,000 barrels per day.  The reaction of the oil market was irrational in my opinion.  The price of oil fell.  The reason given was that oil market players were disappointed that the cuts were not greater.  A rational response would have included an estimate showing how much less demand exists, or will exist, in the world given the economic slowdown.  But, I’m not surprised because markets are irrational (just like people.)

Bonds continued their record breaking increase in value – but only a little gain today.

The Dollar fell a little today, and gold gained back some of yesterday’s loss – based on the stock market movement.

Oil and gasoline were the BIG MOVERS today with oil dropping below $47/barrel.  This is over $100 drop in price of oil in the last 4 months.  Would you have bet on this big a move?

If my analysis is correct, the Congressional decision might just delay the inevitable – and this is common for Congress to make a trade-off that delays the pain.  They can get more votes, but at what cost?  Remember that you pay ALL the bills in Congress.  Are they representing your interests the way you want them to?  If so, tell them so.  If not, them them so.  Become engaged citizens and make your voices heard on all key issues facing the US right now.  You can easily send messages to Congress via their website.

The Dollar strengthened, and gold fell.

Oil and gasoline fell to new recent lows, and this means cheaper gasoline coming down the pike to us all.

The Post Office has plans to lay off 40,000 employees.  This will be the first layoff in the post office EVER.  I wonder if this is politically correct and whether or not they will be allowed to lay people off under the new administration.

Oil hit a new low today – lower than $60 per barrel.  This means lower gasoline prices for you – Hurrah!!!!!  More importantly, it means that Russia is now producing oil for a greater price (over $60/barrel) than it sells it for.  If this brings economic hardship to Russia, that’s just not good for world stability.  Watch for greater turmoil within Russia.

• The home owner must be 3 months behind in his/her payments
• The home owner’s mortgage must be greater than 90% of today’s home value.
• The interest rate can be reduced so the monthly payment is 38% of the household income.
• Or, the mortgage can be extended from 30 years to 40 years.
• Or, some principal amount can be “deferred.”  (I wonder what deferred means.)

4 million mortgages, or 9% of all borrowers, are are behind in their payments or in foreclosure.  2 million of these mortgages are controlled by Fannie/Freddie.

There is no bottom in sight for housing prices as of today.

Bonds barely moved today – and that’s great news.  In fact, the 10 Year Treasury Note fell 0.01% in its interest rate – and that very slight reversal in course is nice to see – as a top in interest rates of the 10 year duration could be near.

The Dollar and Gold both moved sideways in a well worn track.

Gasoline and Oil fell again, and this time to near term lows.  The Oil price is saying that a recession is going to happen, and it will hit not only the US, but the entire world – therefore demand will drop significantly, and the price is anticipating that right now.  Naturally, this price action is fairly irrational, but it is nice to see at the same time.  As humans we like seeing prices decline when they help us, and hate seeing prices go up when they hurt us.  That’s our feeling about Oil and Gasoline right now.

JP Morgan wrote off $3.6B in bad loans – mortgage loans, credit card loans, and all other types of loans – across the board.  This tells me two things: (1) that the drip, drip, drip of bad news will continue – as JP Morgan is one of the strongest banks in the US (what about those other banks??), and (2) we are beginning to see reasons other than real estate mortgage losses creating losses in banks.

Retail sales were down 1.2%, and this is the third monthly fall in retail sales.  Three months in a row is enough for me to declare that the general public is voting with their pocket book.  This is a sure sign that a recession is here – as consumer spending is about 3/4 of the GDP calculation.

Oil fell below $75/barrel today, and that’s about half of its peak.  Isn’t that amazing?  Do you think this is “negative irrational exuberance?” Or, do you think this is just what it’s worth in today’s environment?  

Here is your question for tonight.  How low will the number of purchase mortgages go before the market turns around?  I know, this is a tough question, but some of you are very close to this situation, and probably have an answer.

Bonds prices went the opposite of stock prices, so bond interest rates ended at a very good position, with the 10 Year Bond ending at 3.75%.

Oil hit a near term low, falling almost $7 during the day, and ending down almost $6/barrel.  Gasoline also fell in price, but I still bet you haven’t seen those prices roll into your gas pump yet.  

The Dollar strengthened also to a near term high of $1.4391.  The dollar is now going to test a very important point in the technical curve, and the result will say whether the dollar strength is permanent or just a temporary rally.

Gold also fell in sympathy with oil and the dollar.  Gold could be another great buy in a few days – we’ll see if the market provides that opportunity.

In the news today….

Integrity Bank of Alpharetta, Georgia was closed by the FDIC late last Friday.  It is the 10th bank to collapse.  It had $1.1B in assets and $974 in deposits.  The bank had 5 offices in the region, and will be taken over by Regions Bank.  

Gustav missed New Orleans, and immediately the market showed that it had over-estimated the severity in cost of this storm.  The reaction was indeed a reaction.  Stock prices raced ahead as oil price plummeted.  The oil price action during the day suggested that the oil price could have fallen too fast, and too far.  Another storm would cause a retracement of today’s price action.  (And there are more storms out there.)

Lesson for today…..

It’s a slow day in the market news, so let’s talk about the volatility of the market.  During the summer months, people take vacations, and stock dealers are no different – they leave their desk when their customers leave on vacation.  Generally, the summer months have less volume (number of stock traded) than during the rest of the year.  Another slow time of the year is around Christmas and New Year.

A low trading volume can turn into a high volatility – and that’s what we’re seeing in the markets.  It won’t be until a little later this month that normal volumes will return.

Bonds moved sideways today, and Gold fell just a little

The Dollar strengthened today across the board.

Oil and Gasoline fell significantly today.  I will now make another EconomyGuy call.  The current market in oil is being driven by speculators – just as it was when it hit $140/barrel.  I bet you don’t hear that one on the evening news.  However, the speculators are now pushing oil down.  When the fox (the SEC) watches the henhouse (the FOREX), the hens (you and me) still get eaten.

Bernanke went on to say that inflation would moderate in late 2008 and throughout 2009.  I interpret this as a “hint” as to when he will be raising rates – sometime in 2009.  It might even be later than I thought it would be, i.e. the first quarter of 2009.