Congressional Intervention
Stocks soared today, breaking through 10,000 on the Dow. The improvement in the Unemployment numbers were the excuse for this rise.
Everything else moved sideways today.
Bonds are an interesting story, and the government plans to sell new Treasuries next week. They will be selling 3 year, 10 year and 30 year treasuries. They used to sell 20 year TIPS (those are inflation protected bonds), but are selling regular 30 year bonds instead. Isn’t the government just yelling that they think inflation is coming, and they don’t want to have to pay the inflation adjustments in the future? I sure think so.
In the news today…..
Unemployment Recipients – fell last week to 512,000, and the markets cheered. Remember that this is still a large number, even though it’s smaller than previously stated numbers during our crisis. The stable number for our economy used to be 400,000; but now that we have so many unemployed the stable number in our “new” economy is probably smaller. In other words, this is nothing to cheer about.
GM and Opel – more on this story. I asked a bunch of questions and one of them was answered today. But, the answer was ugly. The GM president said he could use US bailout money to fix Opel. What!!!! Did I read that correctly??? I went back and read it again. Yes, I read it correctly. Maybe some of you say “So what?” I say, who allows them to use bailout money? Oh maybe the Treasury just “forgot” to put that condition in the bailout contract signed by GM. Maybe they forgot because Opel wasn’t part of GM at that time; it was part of ‘old’ GM which was going to be sold.
Of course, the news is worse. How will GM allow Opel to succeed? It will reduce the royalties that Opel pays GM. Huh??? This means that GM will be that much worse off than before, and worse off than if they sold those royalties to someone else. Who’s driving this boat???
Congress passed – the extension of the first time homeowner’s $8000 tax credit until next April, and also passed an extension of unemployment benefits. My opinion about homeowner tax credits is that this is clear government intervention and interference with the market system. It will prop up home prices artificially, and then they will fall afterwards, and they will fall further and stay low longer than if there were no government interference. Oh, by the way, your Congress just added $21B onto the national debt on YOUR behalf. I suggest you thank Congress in the way they deserve – throw out the bums.
Tonight’s Dinner Conversation…….
Who’s watching the watchers??? Here is a great story on bank regulation.
A group of federal agencies including the FDIC, Federal Reserve, and Office of Thrift Supervision just released new guidelines for how banks deal with troubled commercial real estate loans. And get this:
Under the guidelines, loans to creditworthy borrowers that have been restructured and are current won’t be classified as high risk by regulators solely because the collateral backing them has declined to an amount less than the loan balance.
You heard that right. I thought risk was what got us in this mess in the first place, and here’s the bank regulators saying that risk is not risk. It sounds too much like “It depends on what the definition of is is.”
Here are the last numbers for today:
Dow Jones 30 Industrial – 10,006 (up 204 points)
10 Year Treasury Bond – 3.53% (down 0.01%)
Euro – $1.4874
Gold – $1089 (up $2)
Oil – $79.81 (up $0.19)
Gasoline – $1.99 (down $0.03)
