The Economy Guy

Stocks finished the week going down today as traders took their profits from the previous gains.  The market ended down 148 points.

Bonds moved sideways.

The Dollar significantly strengthened, and is now at the level where it was prior to the FED announcement that it will buy long term Treasuries.

Oil and gasoline both gave up some of their recent gains as we approach the weekend.  The week was a positive gain for oil and gasoline, and the price increases are already showing up at the pump.

Gold gave up some its “FED announcement” gains, but is still ahead of where it started.

In the news today…..

Good news in the market – at last:

1. Consumer Spending – up 0.2% in February.  It was up 1% in January.  This two month run is very important as at least 2/3 of our economy is driven by the consumer.  If this trend continues, it looks like the consumer spending has bottomed.  But, has it???
2. Personal Savings – was down 0.1% in February to 4.2%.  Personal Savings had to decline to pay for the increased Consumer Spending as consumers earned less in February as more people were being let go.  I have predicted that Personal Savings will increase back to the 9% range within a year or two.  As this increases, consumer spending must go down by the same amount of money, or be replaced by increased wages to keep Consumer Spending constant.  And we don’t want “constant”, we want a growing Consumer Spending. So, if Personal Savings does increase in the future, that percentage will come out of Consumer Spending – and that just doesn’t help our GDP calculation.
3. Consumer Confidence – increased in February.  This is a more subjective measure, but it is encouraging to see an improved confidence.
4. Jobless Claims – rose to a record last week (as reported yesterday), but my look at the chart of jobless claims says that this measure of the economy is flattening off – rather than growing as it has over the past 6 months.  It is imperative to have this measure not only flatten off, but to decline back to the “normal” level of about 400,000 claims per week.

So, does this mean we are out of the woods, and the future is rosy??  Not yet.  Increased unemployment just makes those previous statistics worse, as less money is earned by the American worker, and I believe unemployment is increasing.  The jobless claims even at no increase in the future is way too high.  If it stays there, we will have continued increase in the unemployment rate as long as this measure if above 400,000 per week.

Jobless Rate – is above 10% in the following states: Michigan, S. Carolina, Oregon, N. Carolina, California, Rhode Island and Nevada.  The number of states over 10% unemployment has increased from 4 to 7 in two months.  The smallest unemployment rate is in Wyoming.

Tonight’s Dinner Conversation

The S&P stock index is up over 20% from the current low.  This is a measure of a “bull” market for stocks.  The question for you to ponder is whether we are in a new BULL market, or just a BEAR market rally.  Here is something to chew on:

1. Stocks have fallen about 50% from their high
2. Stocks must rise 100% just to get back where they started
3. Stocks have risen about 20% of that 100% already.
4. My prediction was that we were going to have a stock rally in the spring, followed by another decline in stocks in the 3rd and 4th Quarter of 2009.  I’m sticking to that prediction.
5. Lots of financial experts have stated that the bottom has been reached, and now we are in a bull market.

Here are the last numbers for today:
Dow Jones 30 Industrial – 7776 (down 148 points)
10 Year Treasury Bond – 2.76% (up 0.03%)
Euro – $1.3294
Gold – $925 (down $17)
Oil – $52.38 (down $1.96)
Gasoline – $1.49 (down $0.04)