Inflation Marches On
Stocks moved mostly sideways awaiting tomorrow’s FOMC meeting, ending down 42 points. Bonds did the same, as did the Dollar. Gold dropped $10 as the news is only “good” for the economy – can you believe that??
Oil and gasoline dropped a lot. Oil fell more than $3 – even though there’s a storm off of Texas in the Gulf. We are definitely seeing the speculation coming out of the oil price, and it has about $20 further to drop if it is all to come out. We’ll see.
Gasoline hit $3.00 for the futures price (at the refinery), and that means you should be paying no more than $3.40 at the pump. Do you see that??? Neither do I. This is just a trick of the oil companies to keep their profit in their pocket, not your pocket. Fast to go up, and Slow to come down.
In the news today…..
The FDIC warned that 4 small banks had to raise more capital – or else. This is just the shot across the bow before the FDIC comes in and re-organizes the bank. You will hear the news soon.
The FDIC closed the 8th bank to fail in 2008 – First Priority Bank of FL.
Consumer Spending was DOWN 0.2% AFTER adjusting for inflation. Before inflation adjustment, consumer spending was 0.6%. So, the lesson for today is about INFLATION. You see that prices are starting to increase at such a fast pace that it turns positive “consumer spending numbers” into negative numbers. What does that mean to you? It means Consumer Spending is falling “in real terms” - and that is bad news for the economy. It means you are paying more for your goods. It means that the new baseline for this year is the jumping off point for prices next year. In other words, if prices go up 6% this year, and next year price increases are “officially announced via CPI” as 6% - you will then be paying over 12% more than last year. It just adds, and adds, and adds. This is very much like drip, drip, drip. Herein lies one of the major lessons of inflation – it just keeps hurting. It is just like compound interest – your friend normally when you’re saving – but your enemy when it’s inflation.
Here are today’s numbers:
Dow Jones 30 Industrial - 11,284 (down 42 points)
10 Year Treasury Bond - 3.97% (up $0.02)
Euro - $1.5580
Gold - $908 (down $10)
Oil - $121.41 (down $3.69)
Gasoline - $3.00 (down $0.08)
