The Economy Guy

Stock dropped dramatically at the opening of the market today, and swept upward throughout the day to end up 35 points.  Why? You ask?   Well, S&P came out today and said that all those financial institutions are near the end of their liquidity write downs.  Do you believe that?  Well, the market did.  I don’t.  Carlyle Capital is rumored to be about to be taken over by the banks that lent it a bundle of money – as Carlyle lost a bundle on the sub-prime meltdown mess, and the banks want their money back.  This shook the market at the beginning as it is proof that the FED moves are NOT working.  I think this is closer to the truth.  (Oh, by the way and in the spirit of full disclosure, today I sold the overwhelming majority of the stocks that I own; much to the chagrin (“but, you won’t be owning any stocks!!!”) of my stock broker.  I did this based on the confirmation of the bear market a couple of days ago.)

Bonds are amazing.  If you remember yesterday I said that bonds were having excessive volatility??  Today they swung from 3.40% to 3.55%, ending at 3.54%.  That 0.15% swing is EXCESSIVE in classic bond markets.  We live in interesting times.

Yesterday I predicted that the Euro was poised to break through $1.56, and it did it today, ending at $1.5621, and hitting a new high of $1.5625 along the way.  The currency traders are now looking at $1.60 as the next barrier for the Euro to rise to.  If this happens quickly, the Dollar would be classified as being in a rout.  From a purely technical viewpoint, the Dollar is still losing value “in an orderly fashion”.  By “orderly” I mean that there is no “gapping” in the price history.  Gapping is when the value of anything closes at one number, and opens at an entirely different number – and there has been no trading in between those numbers. (For example, the Euro closed today at $1.5621 – and IF it opened tomorrow at $1.57, and kept going up – that would be a gap.)  If a gap ever occurs in Dollar trading, the currency market will be no longer “orderly”, but will be in chaos – as will the future of the US Dollar.  I’m telling you this, so you can look for it yourself.

Gold hit a new high today of $1001, and closed at $994.  Gold is in, and the Dollar is out.

In the news today….

Retail sales were down 0.6% in February, and this was worse than predicted by the world’s greatest economists.  Retail sales represent how much money private individuals are spending in the US Economy, and it represents at least 2/3 of the total economy.  In a related move, “most economists say that a RECESSION is here.”

Where were these great minds four months ago when I told you the same thing?  All they have to do is read the EconomyGuy.  The readers of the EconomyGuy can be content in knowing that you are months ahead of the thinking of the greatest economics minds in the US.

Import prices rose 0.2% in February – not so bad, I hear you say???  Well, that follows a 1.6% rise in January, and a year over year rise of 13.6%.  Now 13.6% is a BIG NUMBER in anyone’s book.  But, they are only imports – you say???  Yes, only imports, and a big chunk of that rise is in our imported oil prices.  However, all other imports are rising too.  Even those from China – though not as fast as the rest of the world.  What does this mean to you and me???  It means that INFLATION is here, and we’re definitely seeing it in the import sector.  Soon you will be seeing it in the domestic sector too – even through the exceptionally misleading CPI.

Secretary of the Treasury Paulson said today that the US needs “tougher oversight on mortgage originators by the credit rating agencies.”  Basically, Paulson is saying we can’t let the sub-prime mortgage mess ever happen again.  Where was he when it happened the last time around??  He was the head of Goldman Sachs, an investment banking financial institution – just like the ones who thought up this mess.  So, he’s blaming the mortgage originators!!!!!  And, he’s blaming the credit rating agencies!!!!!  Well, they both have a lot to answer for; that’s for sure.  But, so do the financial institutions that greased the skids by pouring money into the mortgage originators, and then selling all that “securitized sub-prime mortgage paper.”  Also, I will end by saying that having the credit rating agencies have oversight of the mortgage originators is like letting the cat in the chicken coop.  (Paulson is saying that “business as usual” is great – don’t create a big NEW bureaucratic organization to oversee this business – just hold the “already failed” business construct more accountable???)

Dinner Conversation for Tonight

Chrysler announced today that it will be shutting its doors for 2 weeks during the summer – so all the employees can have a great vacation.  Think about this announcement.  If business were brisk, would Chrysler be doing this??  No!!!!!!   This is just another sign of our “recession.”  I wonder if anyone will start using the word “depression” soon?  Will you??

Second Dinner Conversation for Tonight

I have been excessively lengthy in writing the EconomyGuy today.  Here’s why.  I sense a shift in the nervousness of ALL the markets.  That’s why I report on all the markets.  All the markets are moving much faster and further than they have in the recent past.  I am concerned at this trend, and I sincerely hope I am wrong in being nervous.  However, if this increased volatility and ever increasing “NEW HIGH’s” that I report (below every day) continues, we could be in for some big surprises as the FED and the US Government doesn’t have a lot of tools left to handle the situation.  The FED has shown panic in my opinion by its actions over the past 3 months.  What else could happen??  That’s for you to discuss among yourselves.

Here are today’s Numbers:
Dow Jones 30 Industrial – 12,146 (Up 36 points)
10 Year Treasury Bond – 3.54% (Up 0.05%)
Euro – $1.5621 - a NEW HIGH
Gold – $994 (Up $13) - Gold reach a NEW HIGH OF $1001 interday today.
Oil – $110.33 (Up $0.44)
Gasoline – $2.68 (Down $0.05)