The Economy Guy

The very sad news that Benazir Bhutto was assassinated in Pakistan has some overriding implications that I want you to be aware of.  Pakistan is our friend in the fight against terrorism, and it a troubling country also because it has a strong Muslim fundamentalist group in the country.  Bhutto’s death is one of those triggers that could spin out of control, without a good view of what the future holds.  Watch the future news in Pakistan over the next month.

Oil and Gold both benefited from unrest in Pakistan, as did the Bond market (a flight to safety).  However, hidden in the background is the resumption of the freefall of the US Dollar.  The Euro sprouted wings, and is now going to test its next technical point at $1.47, probably tomorrow, and if it breaks through, will test the all time highs of $1.49.  Oil and Gold also increased in value due to the fall in the Dollar.

In the news Today.

Citigroup will be writing down another $18.7B in assets on its balance sheet – caused by those nasty, dirty sub-prime loan instruments out there.  The dribbling of the losses of the financial system continue.  Right now, the financial institutions are their own worst enemy – by not coming forward with the entire truth.  The forget that the market has a memory of about one day long, and then gets on with the newest news.

There is a rumor out on the street that Citigroup will be slashing their dividend.  No surprise.

For those of you interested in mortgage rates, the 30-year fixed is now 6.17% and the 15-year is 5.79%.  I hope you can all see the relationship of the 10 Year US Treasury to the 30-year fixed mortgage.  Both have gone up over 1/4% in the past 2 to 3 weeks.

My Personal Concerns.

I am quickly coming to the conclusion that inflation is going to get much worse next year.  My measure of inflation is determined by all the things I purchase in my life.  You all know that one of my soap box speeches is all about gasoline.  I’m sick and tired of its continuous rise in price.  I think we’re getting ripped off by the oil companies.  Besides that – gasoline is a measure of all other energy prices that everyone in the US pays.  It includes heating oil (for those cold souls in Boston), natural gas for the rest of us, and electricity for everyone.  I strongly suspect we are going to see large increases in all those utilities.