The Economy Guy

Stocks fell again today.  Down 147 points.  This is a little steeper than the normal sideways movement that we’ve come to expect.  This could be the first leg of a downward bear market in stocks.  Stock traders are taking our recession a little more seriously now, and the Dow 30 Industrial index shows it.  Have you taken a look at the graph of the Dow 30?  It really looks like a head and shoulders move to me, and if it is (as viewed by a professional), you better sell every stock you own.

Bond interest rates fell again today, as bonds provide a safety net for stock investors.  The 10 Year Treasury is now 3.54%, and this is good news for mortgage rates over the next few weeks – providing bonds keep these gains.

The Dollar fell again this morning, but recovered most of its loss by close of the market.  In the mean time, the Euro made a new high.  The dollar looks more and more like it’s in a free fall.  When we see this condition, the free falling will stop when we least expect it, and it will be a big surprise.  In the mean time, enjoy making money in other currencies.

Gas, Gold and Oil moved sideways today – just to rest from their smoking trajectory recently.

In the news today…..

Consumer Confidence is at its lowest point since 2002.  The consumer is in “full defensive mode.”  This is another notch in the proof of the “recession is here theory.”

Washington Mutual (WAMU) is asking for outside equity money.  This is another example of the trouble that banks are TRULY in.  WAMU is asking investors outside of the US if they want to inject some cash into the bank.  In other words – sell their bank.  This is truly bad news, and this is just one of so many banks that are in trouble.

63,000 jobs were lost in February.  This is the most jobs lost in the past 5 years, and took the market by storm.  This is probably the news that sent the stock market plummeting.  Oh by the way, the January number of jobs lost was revised upwards from 17,000 jobs lost to 22,000 jobs lost.  That makes the Feb numbers that much worse.

Tonight’s Dinner Conversation

Remember the big advice that I’ve been making about the FED bailing out the banks by having two $30 B auctions each month “for as long as needed.”  Well, the FED is now increasing the $60 B/month auctions to $100 B/month.

Why would they be doing that?  (This is for you to fill in this blank.)  Is there any scenario where this could be “good news.”

Do you have any idea how much money $100 B/month really is?  Well, if they do it for an entire year, it’s $1,200 B – and this number is much greater than our annual fiscal deficit and our annual trade deficit.  Does the word inflation – as in a smoking printing press – come to mind?

What affect does the creation of inflation have on other markets?  HINT: how about our exchange rate with other currencies?  Does anyone see any correlation here?

Here are today’s Numbers:
Dow Jones 30 Industrial – 11,894 (Down 147 points)
10 Year Treasury Bond - 3.54% (Down $0.08)
Euro - $1.5350
Gold - $975 (Down $3)
Oil - $105.15 (Down $0.32)
Gasoline - $2.69 (Up 0.04)