The Economy Guy

The market got a boost today from the “Stimulus Package” talks, and ended up 108 points.

The 10 Year Treasury took it in the shorts as the rate increased 0.21% (IN ONE DAY), ending up at 3.64%.  Bond prices were just doing their normal thing as people took money out of bonds to put in the stock market.  Stocks were deemed to be less “less risky” today than they were yesterday.  Stocks are just irrational, but they do have their impact on other markets.  This hit to the bond market means you’re going to have to wait a little longer to do that REFI on your real estate.

The Dollar got kicked around today, and the rest of the world’s currencies (except Japan) increased in value.  Oil prices increased as the “Stimulus Package” is expected to increase oil demand.  Gold took off and increased $24 to $907, as the gold market felt its oats.

In today’s news…..

The Stimulus Package is the news item of the day.  Let’s dissect it like a frog.  First of all, it’s not a done deal – but close to a done deal.  The House approved their version of the package and is sending it on to the Senate for approval. The Senate will make changes – just because.  They say they’ll get it to the president for signature sometime in February.  I thought this was URGENT.  Speaking of urgent, the IRS says they probably won’t get to sending out those checks until June – because they’re just too busy.  Second, the package

is targeted (about 2/3’s of the $150B package) at the lower income earner because that person will spent his tax rebate check immediately – or so it’s assumed.

Here is a way to look at the Stimulus Package that you won’t find in any news article today.  Is it fair?  According to Congress, it’s fair – that’s the whole point of “compromise”.  Remember that Congress is that body who has an 11% approval rating, and is dying to do something to get re-elected next November.  So, my antenna goes straight up when I know it’s Congress who’s doing all this good.

We don’t know the details very well – only the headline.  And, the Senate will change it anyway.  But, here’s what we know.  This is positioned to give the “poorer” folks in the nation a tax rebate of at least $300, and probably a lot more.  One catch – that poor person or family must be earning money.  (Let’s assume that means they get a W-2).  What about the retired folks out there???  Well, they’re screwed.  No earnings means no tax rebate.  So, how about a 90 year old retired WWII veteran who is living on his Social Security and pension totalling $17,000 a year?  He gets NOTHING.  Is that fair?  I would think that person would spend his tax rebate just about as fast as any “poor” family if he got one.  Why is he eliminated?  Politics – that’s why.  What about the illegal immigrant who is earning enough to get a tax rebate.  He’ll get it.  Is that fair?  Of course, that can’t happen in Arizona where an employer can’t hire an illegal immigrant, but it sure can happen in other states.  Is this a way to sneak in aid to the illegal immigrant community in the US?  Congress fairly unanimously thought illegal immigrants should have amnesty immediately last year, and so did the President.  The same people are rowing this boat.  I’ve included this thought to provoke you.

French Bank loses $7.5B this week

Society Generale lost $7.5B due to a rogue trader in France.  He got caught yesterday.  I know you say, “It’s France, who cares?”  How safe is your bank?  This $7.5B is on top of the billions lost on the sub-prime loan fiasco.  The interesting point is that the Federal Reserve didn’t have a clue what was going on earlier this week, BUT THEY SHOULD HAVE.  There was enough smoke early in the week to know a foreign institution was doing something BIG.

Existing Single Family Houses Sales going Down

For all 2007, existing single family median house prices declined 1.8%  Not much in my opinion.  The quantity of houses sold declined 13% over 2006.  While the real estate market is really LOCAL, the overall national price decline just hasn’t started to be a big problem — yet.

Here are today’s Numbers:
Dow Jones 30 Industrial - 12,379 (Up 108 points)
10 Year Treasury Bond - 3.64% (Up 0.21%)
Euro - $1.4768
Gold - $907 (up $24)
Oil - $89.41 (up $2.42)
Gasoline - $2.28 (up $0.03) - could have been worse, because gasoline inventories came in much higher than expected.