The Economy Guy

Issue: 10/17/07 Wednesday

By Global Economy Guru, Tom Harvey…

The market kind of went sideways today. However, the big mover today was the bond market. The 10 year bond reduced in interest rate to 4.55% – and it was a huge move down – 0.11% in one day.

The bond market has been boosted as players look to a potential Fed Funds rate cuts on Halloween. Bond traders report that the huge drop-off in housing was “no surprise here,” but the “reality” was enough to convince them that rate cuts are “in the offing.” Another issue is the ongoing concern over the $100B bail-out fund being created by the banks, the “how much worse can it get?” question; a question which is being heightened as other institutions say they will join in.

The members of the US Congress got the message, and got scared. Today 40 members told Pelossi that they could not support the Armenian Genocide declaration. The power of the ballot wins one for the people. Those 40 members got the message loud and clear that their stupid idea could cost them their next election. This was the major event shaking today’s market.

All the markets were soothed by the Congressional action today. Oil stopped going up, as did gasoline. Gold barely moved, and the DOW fell a little, but the NASDAQ went up a little.

The economy is starting to show signs of slowing down.

The economy logged slower growth in the early fall as troubles in the housing and credit markets weighed on companies and individuals alike, the Federal Reserve reported Wednesday. The Fed’s fresh snapshot showed that business activity around the country was more subdued, but the report didn’t suggest that such activity is in danger of collapsing.

BTW, did everyone see the wonderful news that Social Security benefits would be increased by 2% next year? Remember that Social Security increases are determined by the CPI (Consumer Price Index) change in one year. Did your cost of living increase only 2% this year? Mine didn’t. Just the increase in gasoline is MUCH more than 2% for me. Since the Social Security Administration was so kind as to announce its annual increase, I am taking this opportunity to drive home how crazy the CPI really is. One of my most important pieces of advice to you is to use your own experiences in assessing anything. This includes your cost of living. Just look around, and I’m sure you are seeing price increases creeping in. Did you read the article about how much wheat flour has increased this year? You’ll start to see that reflected in your baked goods costs very soon. Corn went up a lot too because farmers can sell corn as a fuel now.

Here are Wednesday’s closing details:

DJ30 – 13,893 (Down 20 points)

10 year US Treasury Bond – 4.55% (Down 0.11%)

Euro 1.4210

Gold closed at $763 per ounce. (Up $1)

Oil Closed at $87.40 (Down 0.21) Not a big move, but the trend downward is welcome.

Gasoline is $2.15 (Down 0.03)