The Economy Guy

Oil and gasoline dropped, but I bet you still don’t see gasoline prices below $3 at the pump yet.  It should be soon, if the futures price of gasoline is passed onto the buyer.

Gold stayed steady today. That great opportunity to buy could be around the corner.  On the other hand, $804 is not such a bad price as is.

In the news today…..

US Unemployment Rate went up to 6.1%.  How high does it have to get for you to get concerned?  This is a serious question – as even if you think you’re insulated from the economy, and many of you are – enough unemployment will affect you.  84,000 jobs were lost in August.  July and June were revised up to 60,000 and 100,000 from the previously reported 51,000 each month.  (How much can you trust government reported statistics?)  The main result of this statistic is that the FED must keep the Fed Funds Rate where it is, and won’t raise it for longer than anyone thought.

9% of home mortgages are in trouble – either behind in payment or in foreclosure.  However, sub-prime mortgage delinquencies are improving.  It is the ARMs that are worsening – currently 11.3% of ARM mortgages are in trouble.  These are staggering percentages.  That means that a whole lot of homes will go on the market at a fire sale, or foreclosure – driving prices down further – especially in the most troubled states – CA and FL.

Alan Greenspan has warned that we are making a mistake by having the US Government be the lender of last resort – too soon.  The crises we face can be worked out by having investors take the hit, rather than the US taxpayer.  His example of the Bear Stears sale being backed by the FED to JP Morgan’s purchase.  My opinion is that when Alan Greenspan speaks – we should listen – carefully.

Banks are borrowing over $18B per day from the FED.  That’s been going on for many weeks now.  Why do they need the money?  That is the key question to answer.  And is your bank borrowing?  Ask them.  The FED won’t publish the list of banks borrowing.

Silver State Bank of NV is being shut by the FDIC, the next bank to fall – this could get boring as there will be at least one bank announcement each week for the foreseeable future.  The bank had $2B in assets, but a bunch of bad real estate loans.

News to Ponder Today …..

The government may take over Fannie and Freddie this weekend.  It is rumored they will put them two giants into a “conservatorship.”  I’m wondering what a conservatorship is???  Anyone know??  

Congress passed a law that allowed the US Treasury to purchase stock and make loans to Fannie/Freddie, but didn’t mention a conservatorship.  My first question is “Is this legal? Or, is this just another expanded for of a bailout?”

Hold onto your wallets.  This is sure to cost you more than you ever thought.  All money given out by the government comes from your wallets – one way or another.