The Economy Guy

Stocks and bonds went sideways today mostly.

The Dollar had a large jump in value.

Gold continued its breakout today with a small gain.

Oil and gasoline fell, as traders started to believe that we aren’t out of the woods yet, and the recession will continue to mean weak demand for oil.

In the news today….

CPI – was unchanged for last month.  That’s compared to the previous month.  That’s a trick that the headliners want you think about.  In reality CPI is compared to the previous year, and April was down 0.7% from a year ago.  This was the BIGGEST decline since 1955.  It’s what you don’t hear on the news that endangers your money.

Air Travel – is expected to drop 6.7% this summer compared to a year ago.  Just another sign of the times.

$22B TARP money going to Insurance Companies – like Allstate, Hartford, Prudential, Lincoln, and many, many others.  My advice to our readers is to insure that YOUR insurance company will be around for YOUR lifetime.  If there is a doubt that it will be around, maybe you are with the wrong company.  Don’t risk your insurance planning.

But, why is TARP money being given to Insurance Companies now?  No good reason has been given.  This frightens me more than if there was some sort of explanation.

Yesterday’s Stock Market – was driven by a big uptick in the insurance company stocks.  This was clearly “insider trading” and should be investigated, as the TARP announcement came out today, and that can’t be a coincidence.

Consumer Confidence – rose in April, even more than the “economists” thought it would.  Who cares????  This is a flaky statistic at best, and completely subjective at worst.  Oh, by the way, the statistic shows that the “consumer” is pessimistic about the economy as the figure is 67 and anything less than 100 is pessimistic.  I bet the news doesn’t report that little tidbit.

Tonight’s Dinner Conversation….

Are we past the worse?  Are the “green shoots” being talked about in the financial news really sprouting optimism?  Is the housing crisis leveling out?  Is the GDP leveling out?  Is unemployment leveling out?  Is anything growing?

Some of the key questions that add up to a complex answer to a complex question.

Here are some MACRO facts for you to ponder in your answer?

1. Consumer savings is about 10% better (was negative, now positive and growing) than prior years.  Since consumer spending accounts for 70% of GDP, a 10% change in consumer spending patterns means an approx 7% decline in GDP.
2. The housing meltdown has drained about $7TRILLION worth of equity out of housing values.  This drain stopped the refi and heloc spending hiatus that preceded our crisis.  So, the consumer doesn’t have anywhere else to go to get more money or credit.
3. Credit is tightening.  
4. The big banks are NOW leveraged at about 25 to 1.  And Geithner wants you to believe that the banks are okay.
5. Commercial Real Estate loans are going back to the banks just like housing has been.
6. Credit Card delinquencies are increasing as people are losing their jobs.
7. Unemployment is 8.9% and rising – projected to hit 10 to 11%.  Underemployment is much higher.  People being “trained” by our stimulus bucks are taken off of the unemployment count (did you know that?)
8. Student loans are more delinquent as people can’t find employment.

I can paint a picture that the worst is over.  I can also paint a picture that we are just in a breathing period, and the worst is yet to come.  What do you think will happen? – not what do you want to happen.
 

Here are the last numbers for today:
Dow Jones 30 Industrial – 8269 (down 63 points)
10 Year Treasury Bond – 3.12% (up 0.02%)
Euro – $1.3491
Gold – $931 (up $3)
Oil – $56.50 (down $2.08)
Gasoline $1.68 (down $0.04)