The Economy Guy

 The stock market felt the pain of the economy, and fell 206 points today – lots of volatility this week.  Bonds increased in value and ended with the 10 Year Treasury Bond below 4%.

Oil and gasoline moved down again today, the Dollar stayed the same and gold rose a little.

In the news today…..

I love the way the government calculates GDP.  It just keeps revising it until the truth finally comes out.  Here is a great example.  Today, the government declared that 2nd Quarter GDP came in at 1.9%.  This was disappointing to the markets as they expected a much higher number as this was the quarter of the IRS rebate checks!!!!  So, the economy is doing worse than people had expected, or hoped for.  I know you’re not surprised!!!!

AND, at the same time, the government revised the 1st Quarter 2008 GDP to 0.9%, AND revised the 4th Quarter 2007 GDP to –0.2% (it was +0.6% previously).

You see there is a big difference between MINUS and PLUS GDP, because it influences a lot of decision in and outside of government.  So, 4th Quarter GDP was negative???  Remember that two quarters of negative GDP is the classic definition of a RECESSION.  So, if the government revises the 1Q GDP to negative sometime in the future, we would have been in a recession a long time ago.  Truth has a way of raising its ugly head – even through revised figures.

Inflation was reported as +4.2% for 2nd Quarter 2008.  This number is just way too high for the FED, but they can’t do anything about it (like raise interest rates) because they’re stuck in this recession right now.  Wages were up 0.7% in the 2nd Quarter, and this is a low number, so there is no wage inflation going on right now.

Alan Greenspan today said that the housing crisis “was nowhere near the bottom” and also said we are “right on the brink of a recession.”

Dinner Conversation Tonight….

The weekly jobless claims for last week came in at 448,000!!!!!!!  Remember to think that anything over 400,000 is just plain bad news for the economy, and further pushes us into the recession.

Here is a graph of the weekly jobless claims made over the past few years, so you can put these statistics into context:

 Please note the steady rise since July 2007!!!!  You can also see this number is highly volatile, BUT the trend is very clear over the past 9 months.  

The question for you to discuss is “Where will this trend stop?  And, when will it stop??  And, what will make it stop??”

Here are today’s numbers:
Dow Jones 30 Industrial – 11,378 (down 206 points)
10 Year Treasury Bond – 3.98% (down $0.07)
Euro – $1.5607
Gold – $923 (up $10)
Oil – $124.08 (down $2.69)
Gasoline – $3.07 (down $0.07)