Congratulations! You’re A Bank Owner!
Stocks started up over 400 points this morning, but ended down 77 points. Most people expected another up day for stocks today.
Bond interest rates roared ahead today – with the 10 Year Treasury Bond ending over 4%. (I want to thank several readers for pointing out that the bond market was closed yesterday – as I missed that fact.) The US Treasury Bond curve is steeper now than for a very long time (the difference in interest rate between 2 year notes and 30 year bonds). This indicates that the bond market thinks inflation is coming, and is preparing in the only way it knows how – by increasing long term rates.
The Dollar fell today, and Gold went sideway – still representing a decent purchase price.
Oil and gasoline gyrated up, and then down today. This market is just so much fun to watch.
In the news today….
The news continues to be dominated by the government bailout of the financial sector. Paulson has stated he will be purchasing shares of banks – and started with the biggest banks (including two major banks that didn’t need his help – according to the experts) – who have agreed to selling shares (and options for future shares) to the US Treasury. Welcome to the world of shareholding – now the US Citizens are the proud owner of bank shares. The remainder of banks should be swarming into this problem very shortly – as the Treasury announced they are opening up this deal to lots of banks.
The bond market continues to expect the FED to cut the FED Funds Rate later this month. This surprises me because the rhetoric tends to say “everything is getting better – so let’s wait on any rate changes.” We’ll see. If rates are dropped again, that means the FED thinks we really DO have a big problem, and it is CONTINUING.
Tonight’s Dinner Conversation….
I want to emphasize (as I did yesterday) that Hank Paulson did NOT (and I mean NOT, NOT, NOT) want to purchase bank shares, but wanted to buy those “toxic securities” when he first brought his “bailout” plan to Congress and the President. Aren’t we supposed to have the best and brightest as the Presidential appointees – especially Secretary of the Treasury? Why would Paulson have been so adamant about buying “toxic securities?” Let me ask this question another way around – “Which of the two ways (buying bank stocks or buying toxic securities) is better for the financial community?” Or, conversely, “which of the two ways is better for the taxpayer?” Here’s a second question – “Which of the two ways solves the liquidity problem (the problem that banks don’t want to lend money)?”
I know I am asking you to think outside of the box regarding these questions, but it is a fun exercise for your cerebral cortex.
Here is an even more important question – “What problem (outside of the illiquidity problem) STILL exists, and is driving the US economy into the tank?” Okay, that’s an easy question – it’s the housing market – houses are still be foreclosed on, and prices are still falling. Here is the fun question to debate with your dinner companion on this topic – “What is the government (President, Treasury, FED, Congress) doing to solve the housing problem?” Idle chatter does not count. Only concrete plans that are, or will be implemented count.
And, if you want to get very political – “What are the two candidates proposing to do to solve the housing problem?” While I don’t want you to have an argument about this “political” question; I do want you to debate the pros and cons of each candidates proposals. Isn’t this how you can learn whether or not a candidate really knows what he’s talking about – or just blowing hot air???
Here are Today’s numbers:
Dow Jones 30 Industrial – 9311 (down 77 points)
10 Year Treasury Bond – 4.02% (up 0.16%)
Euro – $1.3637
Gold – $840 (down $3)
Oil – $78.63 (down $2.58)
Gasoline – $1.88 (down $0.03)
