In the news today…..

Private Employers – laid off 371,000 workers in July.  This was down from 463,000 in June.  If you listen carefully to the news media, you would think this was a great result.  We are coming out of the recession, and this is just one more indication.  I beg to differ!!!!  We are still laying off people.  As long as we are laying off people, the economy is getting worse – no matter what people are saying.  As long as total unemployment keeps rising – and it will according to the President – we are in a bad economy.

By the way, I bet you didn’t see it reported that future planned layoffs is an increasing figure.  This means that companies (even as we come out of the recession??) are planning on cutting jobs to make their profit numbers.

Definition of Recession – is two quarters of negative GDP growth.  What that means is when we get ONE quarter of positive GDP growth (even 0.1%), we are “officially” out of the recession.  Have you ever wondered why it takes two quarters to be in a recession, and only one quarter to be out of it??  Well, the answer isn’t surprising – it’s all politics.  The politicians prefer to look good, and not bad.

Because of this definition, I believe we will be “out” of the recession in the 3rd Q of 2009 – and at the same time we will have continuing increase in unemployment and falling house prices.

30 Year Mortgage Rate – is 5.17%.  It fell last week, and is now at a place where you should seriously consider a refi if you are in that position.  As the 10 Year Treasury continues its increase in interest rates – the mortgage interest rate will follow as sure as day follows night.

Here are the last numbers for today:
Dow Jones 30 Industrial – 9281 (down 39 points)
10 Year Treasury Bond – 3.76% (up 0.09%)
Euro – $1.4419
Gold – $966 (down $3)
Oil – $71.92 (up $0.55)
Gasoline $2.05 (down $0.01)

Bonds moved sideways.

The Dollar lost some ground today.

Oil and gasoline gained a little.

Gold gained $7 today – a nice day, but I declare it a sideways move.

In the news today…..

President Obama is off to the G20 Meeting in London.  What’s going to happen?  Well the news so far has been about the disagreements among the various leaders.  This is probably mostly grandstanding for their individual constituents.  For example, Germany’s leader, Merkel, is saying that stimulus is stupid as it leads to inflation or hyperinflation, and the Germans know more about this than most countries.  France’s Sarkosy is telling Obama that he is WAY TOO Socialist – and this coming from France is almost laughable – but he’s serious about it.  Is there anything that will be agreed at this meeting?  Probably not in the area of economic stimulus.  Most countries are just mad at the USA because we started this mess.

But, way back in the shadows of the meeting is something that could get agreed.  It’s the international regulation of the financial institutions that caused this mess.  And here is where the dirty little secret may be hidden from the public.  The idea on the table is for the IMF to regulate international financial institutions, and our FED/Treasury would dance to the tune of the IMF.  This is not the same question of whether or not the US Dollar will remain the world’s reserve currency.  For now, that question is settled; it will remain the world’s reserve currency.

Are we willing to give up our financial sovereignty????  That’s the secret question being asked, but totally ignored by the press.  See if you can find this story in your press readings.  The real discussion will be between the idea of the IMF being in charge versus each nation being in charge and harmonizing “how” to regulate within their borders.  Conspiracy theorists are saying this could really be a big step toward a “one world government.”

Housing Prices fell 19% in January 2008 to January 2009.  And the price fall is ACCELERATING.  This is the real bad news.  This one measure of the US economy is probably the most important measure today as it drives everything else.  I am sorry to say that our economy is still tanking in spite of the fact that this measure is a “lagging” measure of the economy, and not a predictor of the future.  It just doesn’t look good.  If we were looking for a more positive picture it would include the stabilization of home prices in a few areas, rather than a drop in all areas as was reported.

2009 Predictions

I continue to believe that the economy will have a negative GDP growth each quarter of 2009 with the first quarter being the worst number.  2010 should turn this around, and we will have positive growth in 2010 overall, but probably less than 1% growth.  Another way of describing our condition is that we are having an L-shaped recovery, and not a u-shaped or v-shaped recovery as many have predicted.  An L-shaped recovery is one where there is little or no recovery when we hit the bottom, and that’s what 2010 will look like.

I continue to predict that unemployment will hit 10% in the 4th Q of 2009, and will stay at 10% throughout 2010.

The stock market has seen a recent “bear market rally” and as the poor economic news continues to disappoint everyone, the market should retest its lows.  It probably won’t crash through those lows, but it certainly should hit them again.   When it hits those lows, that’s the time to jump back into stocks.

Inflation remain the hardest thing to predict.  We have seen no inflation so far in 2009, but have seen the slight increases in prices that could be a precursor to inflation.  I’ll continue to watch inflation closely.  I am predicting that inflation will hit in the 4th Q 2009.

Bonds are a very complex story.  US Treasuries will be controlled by the FED in the foreseeable future, and remain at low interest rates.  Corporate bonds are a different story, and depends on the underlying business.  Some bond holders will lose some of the capital as they will be asked to take a “haircut”.  For example, this will happen to GM bondholders.  Why hasn’t this happened to Wall St firm bondholders?  I suspect that no one wants to face the fallout of that happening – probably a renewed credit crisis.  However, it is definitely “unfair” to ask GM bondholders to take a loss, and not have unsustainable bank bondholders to do the same.  How about Citigroup?  How about B of A?  It depends on the results of the “stress test” that the government is performing right now.

Tonight’s Dinner Conversation…..

I am very grateful my wife suggested having a “Dinner Conversation” part of this article.  Here is today’s thought.

Barney Frank, one of the scumbags in Congress who caused our housing mess, has come up with a bill that gives Secretary of Treasury, Geithner, the power to set the pay of ALL employees of companies that receive TARP money or Fannie/Freddie money.  Can you imagine what this means?

1. Total control (prosecutor, judge and jury) of everyone’s salary in that company.
2. The need to expand the Treasury to establish a department to evaluate everyone’s compensation and establish “reasonableness.”
3. The ability to SET an employee’s salary.
4. Oh, by the way, did I mention this power is RETROACTIVE?
5. This is socialism at its core.

So, the question for you tonight is “Is this the type of CHANGE that you voted for (if you voted for Obama), or is this the type of America you want to live in?”

Don’t get too excited yet.  The bill has to pass the Senate before it would go to the President for signature.  And, you can bet that Obama would sign it, and not veto it.  Would you want our President to sign or veto a bill like this?
 

Here are the last numbers for today:
Dow Jones 30 Industrial – 7608 (up 87 points)
10 Year Treasury Bond – 2.69% (down 0.03%)
Euro – $1.3287
Gold – $925 (up $7)
Oil – $49.90 (up $1.49)
Gasoline – $1.42 (up $0.03)

All other markets went sideways.

In the news today….

The Conference Board came out with Consumer Confidence for last month, and it hit an ALL TIME LOW.  If this measure had been around during the Great Depression, I’m certain that a measure of 38 would have existed during the Depression.  Remember that 100 is neutral.

Case Schiller came out with their Housing Prices summary again, and guess what??  In October house prices were down 19% over the previous October.  But, last October house prices were already falling that means the total price fall from their high is about 25%.  And, it isn’t over yet.

Tomorrow – What’s happened of economic importance during 2008????  I’ll summarize it tomorrow – as a summary for the year.
 

Here are Today’s numbers:
Dow Jones 30 Industrial – 8668 (up 184 points)
10 Year Treasury Bond – 2.09% (down 0.01%)
Euro – $1.4074
Gold – $870 (down $5)
Oil – $39.03 (down $0.99)
Gasoline – $0.89 (up $0.01)

In the news today…..

The dramatic fall in bonds is pushing down mortgage rates.  The 30 year fixed rate mortgage is now 5.53%, and the 15 year is 5.33%.  If you need a mortgage, or were thinking about it – now is the time to dust off those files and starting thinking again.  Contact your favorite mortgage broker, and get started.  Wouldn’t it be great if the rate kept falling???

Here are Today’s numbers:
Dow Jones 30 Industrial – 8591 (up 173 points)
10 Year Treasury Bond – 2.67% (down 0.02%)
Euro – $1.2705
Gold – $771 (down $13)
Oil – $46.79 (down $0.17)
Gasoline – $1.04 (down $0.02)

In the news today….

The official body to declare “recessions” has declared this a recession with its start date at December 2007.  EconomyGuy readers can be proud that you were the first to know.  While I didn’t use all the smart people and the large number of computers to come up with this information, I did tell you that it sure looked like a recession from where I lived.

Here are Yesterday’s numbers:
Dow Jones 30 Industrial – 8149 (down 680 points)
10 Year Treasury Bond – 2.72% (down 0.24%)
Euro – $1.2609
Gold – $777 (down $44)
Oil – $49.28 (down $5.15)
Gasoline – $1.11 (down $0.10)

How is the economy doing today??????  (HINT: It stinks)

There are 10 million people jobless in the US – the most in 25 years.  I predict this number will hit 15 million in 2009.

How are our taxpayer investments doing to save the economy of the world?????

The Treasury has said it will NOT tell anyone WHO is borrowing the $2 Trillion it has lent out recently – NOR will it tell anyone what security it has taken for those loans.  In other words, we the people do not have any “transparency” (promised by both Bernanke and Paulson) of the dealings of our money.  In my opinion, this stinks since the amount of trust of the people in the management of our money by Washington is at an all time low.

Why is the market going down??????

The election is over, so I’ll get more political.  There is a rumor going around by the Republicans that the wealthier Democrats are selling all their shares so they won’t have to pay the higher tax that President-Elect Obama promised during the campaign.  Let’s think about this rumor a minute.  Why just Democrats?  Are Republicans stupid?  No, they would be selling too.  So, any run on the market by individuals is bi-partisan.  However, their motivation is real – save taxes.  Obama has been asked recently if he was going to institute the higher taxes – and he has avoided the question.  That’s interesting – why would he avoid the question?  I don’t know.

Here are Yesterday’s numbers:
Dow Jones 30 Industrial – 8871 (down 73 points)
10 Year Treasury Bond – 3.76% (down 0.02%)
Euro – $1.2760
Gold – $747 (up $12)
Oil – $62.41 (up $1.37)
Gasoline – $1.37 (up $0.02)  

In the news today…..

The number of long term unemployed rose by 122,000 people last month to 3.84 million people.  This is the highest this number has been since 1983 – and I believe it will get worse for a long time before it gets better.  The unemployment rate should be increasing very soon to reflect this increase.

Here are Yesterday’s numbers:
Dow Jones 30 Industrial – 8696 (down 443 points)
10 Year Treasury Bond – 3.71% (up 0.01%)
Euro – $1.2713
Gold – $732 (down $10)
Oil – $60.77 (down $4.53) – new RECENT LOW
Gasoline – $1.34 (down $0.09)

In the news today…..

Here is the news that points to the recession, and what you can expect to continue as we go deeper in to muck:

• Circuit City will be closing 155 stores – about 20% of their stores.
• Ford sales were down 30% last month.
• GM sales were down 45% last month.
• US Manufacturing sector hit the lowest level since 1982 (when we were in a deep recession).  I think we will be getting much worse than 1982, so the economy will be heading for the “depression” type thoughts.
  

In the international news, the Chinese manufacturing activity was way down – because of a big worldwide slowdown on exports from China.  The Chinese have dropped their interest rates several times in the last month to try to counteract this bad news for its economy.  You see – the Chinese have a big problem.  They must continue to create a lot of new jobs, and the export market was their engine to create those jobs.  They must continue to create those jobs because the country folk still want the “good life” that they see their cousins having in the cities.  The Chinese are concerned about turmoil of the population – so you will see a lot of activity in China to keep their economy going.

Here are Yesterday’s numbers:
Dow Jones 30 Industrial – 9325 (down 5 points)
10 Year Treasury Bond – 3.97% (down 0.07%)
Euro – $1.2649
Gold – $727 (up $9)
Oil – $63.91 (down $3.90)
Gasoline – $1.36 (down $0.13)

In the news today….

The 3rd Quarter GDP was announced today, and came in DOWN 0.3%.  Remember that anything negative for two quarters in a row is a “recession” officially.  This is the first negative quarter – officially.

Here are Today’s numbers:
Dow Jones 30 Industrial – 9180 (up 190 points)
10 Year Treasury Bond – 3.94% (up 0.07%)
Euro – $1.2944
Gold – $739 (down $16)
Oil – $65.96 (down $1.54)
Gasoline – $1.47 (down $0.07)

In the news today…..

Existing Home Sales in September rose 5.5% over August – and most of the sales came in the West.  Does this mean the housing crisis is over?  Nope!!! – the easy answer.  Here’s why:

1. Housing prices kept falling – 9% year over year.
2. The new house inventory is 9.9 months – too large to declare any turnaround.
3. The future is a recession – and this is bad news for any housing sales.
4. There continue to be record foreclosures – and used houses compete with new houses.  The entire housing market must turn around, not just new homes.
   

The FED is thinking about bailing out insurance companies now.  The first two companies that they have talked to are MBIA and AMBAC.  If you remember, I talked about those two companies months ago.  They are the ones who insure cities/counties/companies so AAA ratings can be put on bonds.  This just looks more and more like a bailout.

Here are Today’s numbers:
Dow Jones 30 Industrial – 8379 (down 312 points)
10 Year Treasury Bond – 3.70% (up 0.17%) – a major increase in interest rates
Euro – $1.2618
Gold – $730 (up $16)
Oil – $64.15 (down $3.69)
Gasoline – $1.48 (down $0.10)