The Economy Guy

Issue: 11/06/07 Tuesday

Today was a VERY interesting day.  The DOW and the entire stock market went up (just at the end of the day), but more indicative, most currencies hit NEW HIGHES against the dollar, and Oil hit a NEW HIGH, and Gold is soaring again.

The odd man out in this picture is the stock market.  There were enough “bargain hunters” that they drove the price of stocks way up.  However, a little common sense says they are wrong.  The true impact of the sub-prime market meltdown is still NOT known.  The whiplash effect on individual companies (think Citibank) are coming out one company at a time.  A lot of people are very nervous.  The US stock market is like a bouncing ball – up and down.  Today it was up.  I would bet on down tomorrow given my “bouncing ball” theory.

The currencies are a direct measure of  what people think about the US Dollar.  They don’t like to hold it.  Did you see the press late yesterday saying that some German supermodel didn’t want to ever be paid in dollars.  BTW, she gets advice from some financial advisor in Newport Beach, CA.  So, it’s not just a foreigner making up her mind; it’s also Americans.  Much to my surprise, the Swiss Franc gained about 1 cent against the dollar today; a might jump.  The Canadian dollar powers ahead – faster than other currencies.  It’s value is $1.0865 to the dollar.  Do you remember a month ago when it broke parity (1 to 1)????  It’s gained over 8% in one month.  Not a bad investment – huh????

The secondary measure of distrust in the US dollar is being displayed by gold primarily, but also by oil.  Oil has its own problems with supply that is on and off again, and these supply issues also have a negative impact on oil prices.  Gasoline is just a manipulated market – and I report it to you so you know what’s coming down the pike regarding future gasoline prices.  THEY ARE GOING UP.  I also want you to get upset with this issue as it hits most people where it hurts.

Here are Tuesday’s closing details:

DJ30 – 13,661 (Up 118 points)
10 year US Treasury Bond – 4.36%  (Up 0.04%) – slow creeping up.
Euro 1.4558 – a new high
Gold closed at $824 per ounce. (Up $13) – a new recent high
Oil Closed at $96.70 (Up 2.72) – a new high
Gasoline is $2.44 (Up 0.05)