Double Standard
The stock market had another gaining day – up 173 points. Most of the news today has already been discounted – so it didn’t have any great impact.
Bonds moved sideways as the bond market anticipates another reduction in the Fed Funds rate later this month.
Everything else moved sideways.
In the news today….
Jobs lost in November was 250,000. This is a rise in lost jobs for November, and I expect December to be just as bad. However, the December job loss figures (when it comes out) will be tempered by the gain in temporary employment due to Christmas. So, it won’t be reported as bad as it really is. The truth naturally will come out about February 2009 – just so you know what’s coming before it comes.
The GDP from the Service Sector lost ground last month, but that’s no surprise. The Service Sector consists of hotels, restaurants, and other service jobs. The total GDP is comprised of the total value of the following sectors: Consumer Spending, Industrial Production, Service Sector, and Government Spending. The first 3 areas are falling, and Government Spending is way up via the “bailout” planssss already passed and going to come.
Good news – Productivity increased at a 1.3% annualized rate in the 3rd Quarter. This was a decline in productivity increase, but is still good news as this affects our standard of living. Any increase allows companies to maintain their profitability while allowing slight wages increases.
More good news – Wages were up 2.8% (annualized) in the 3rd Quarter after being down 2.6% in the 2nd Quarter). This means that inflation (at least wage inflation) is not out of hand. Price inflation (CPI) is also not out of hand right now, as commodity price falls (think oil, grains, metals) have fallen so far recently. The sweet spot for our economy to chug along (and I’m not stating this is a good thing in the long run because I don’t think it is) is for wage inflation and general CPI inflation to be in the 2 to 4% range annually. So, we’re about there right now. My prediction is that CPI inflation will start to move out of this range sometime in later 2009 as the government spending starts to kick into the economic money situation.
Tonight’s Dinner Conversation…..
The GAO announced today that the US Treasury TARP spending (that’s the $700B Congressionally approved bill) has some MAJOR problems. They are:
• No controls on the Treasury decisions – Congress is supposed to appoint an oversight committee, but hasn’t done so. Are you getting your money’s worth out of Congress on this issue? I doubt it. In addition, Treasury refuses to make public where the money is going.
• No monitoring of any bank’s use of the funds – If $700B was being invested by an investment bank, there would be thousand of people watching the books, but the Treasury isn’t watching the banks use of the funds. Why?
• No way to know if TARP is working – kind of a fundamental issue. The public were promised we needed to act or the “sky would fall.” However, now that action has been taken, how do we know it’s working? There is some good news (like LIBOR coming down, and the commercial paper market working now, etc.) but nothing other than heuristic statements. I believe we deserve more than just platitudes.
If these problems existing within a single bank’s lending practices, there would be all kinds of investigations, as they are against existing laws. However, there are NO law requiring the US Treasury to act the way we expect banks to act – so they can do whatever they want to do.
Tonight’s question is: “What can YOU do to make your voice heard by your Congressperson and Senator?” I believe that YOU are responsible!!!!!! Here’s why I say this. We live in a democracy and YOU elected the representatives who agreed to pony up this money. Ultimately, the people have the ability to change anything and everything. This is an awesome responsibility that we all bear.
Here are Today’s numbers:
Dow Jones 30 Industrial – 8591 (up 173 points)
10 Year Treasury Bond – 2.67% (down 0.02%)
Euro – $1.2705
Gold – $771 (down $13)
Oil – $46.79 (down $0.17)
Gasoline – $1.04 (down $0.02)