The Economy Guy

Issue: 11/30/07 Friday

Another non event day in the stock market, and most other markets too. Oil is now at $88.71 per barrel, and that’s great news for all consumers around the world if the price can continue to fall. It is falling because the risk premium that oil traders have bid into past prices is coming out, and the scare of a recession in the US is enough to make OPEC pause for thought.

Gold fell below $800/ounce for the second time in the near past. This should be worth watching next week, just to see what the market is really saying about Gold. Gold purchasers come from a “safe haven” play, and a hedge against inflation. Neither of those were on the financial horizon today, or this week, as far as that goes.

So here are some more newsworthy articles that you can use to spark up a dinner conversation.

The “snooty” attitude of bankers and financiers who thought they were cleverer than everyone else is largely to blame for the global credit squeeze “disaster”, Germany’s finance minister has said.
In an interview with the Financial Times, Peer Steinbrück played down the impact on Europe’s largest economy of the turmoil but said steps had to be taken to raise risk awareness. In a swipe at finance industry leaders, he said the “quality of managers” had proved a weakness. “The snooty attitude that we have sometimes seen – under the motto of ‘we are cleverer than the others’ – ended in disaster,” he said.

Those are very strong words from a politician – especially a foreign politician – and doubly especially a German Finance Minister. He is in a position to know the truth of the situation. Surprising, I seldom agree with politician, but I do agree with the sentiment expressed by this one. The Minister is upset that American financial shenanigans brought down or created losses in German banks.

Here is a counter-intuitive report on US House Prices – increasing.

Home prices nationwide posted their biggest drop in 16 years last month, according to the National Association of Realtors. But someone forgot to tell the folks in Salt Lake City. There, the median home sale price jumped 21% in the second quarter this year, versus the same period last year.

Salt Lake City isn’t the only anomaly. Prices are rising in other parts of the Rocky Mountain states, parts of Texas, the Pacific Northwest and the Southeast. Other markets defying the national meltdown include Beaumont-Port Arthur, Texas, Salem, Ore., and Farmington, N.M.

What gives? For starters, these places missed the get-rich real-estate frenzy of recent years, says Lawrence Yun, economist for the National Association of Realtors. Prices aren’t falling because they didn’t rise that much to begin with. The median price of a single-family home in Sarasota, Fla., in June was $311,000. Compare that with $228,000 in Salem, which realized a 16.7% increase in property values in the second quarter of 2007, versus the same time frame in 2006.

Yun believes states like New Mexico and Utah are finally, albeit belatedly, enjoying the run-up in property prices that began in California and swept through Nevada in the last few years.

Here are Friday’s closing details:
DJ30 – 13,371 (Up 60 points)
10 year US Treasury Bond – 3.97% (Up 0.03%)
Euro $1.4638 – profit taking continues in the currency market
Gold closed at $789 per ounce. (Down $13)
Oil Closed at $88.71 (Down $2.30) -the downtrend in oil prices continues – great news
Gasoline is $2.23 (Down $0.04) – still needs to come down another quarter dollar.