The Economy Guy

Stocks moved mostly sideways today as FED Chairman Bernanke continued
his Congressional testimony.  Bonds also lingered, and hardly moved
anywhere.

Gold was the biggest mover, but only moved up $10 to $910 an ounce.

The Dollar moved sideways, as oil and gasoline slipped back just a little
after yesterday’s massive jump in price.

In the news today….

Bernanke defended the Bear Stearns $30B FED bailout today.  He said that
if Bear Stearns had defaulted, then many, many other individuals and
institutions could have been dragged down with it.  He said that “chaotic u
nwinding” of finances held by individuals and institutions would have
decimated asset values.

In other words, there would have been a fire sale by everyone left holding
the Bear Stearns bag, and that fire sale would have pushed prices so low
that the entire US financial system could have been dragged over the abyss.
If that doesn¹t scare you, nothing will!!!!!!!!!

Germany’s BayernLB (bank) wrote off $6.9B in bad debt today.  This is

becoming so common that it didn¹t even shake the market.

Banks are borrowing $38.1B EVERY DAY from the FED using the FED’s
latest borrowing system.  That is a very big number, and it’s a DAILY number,
 so get it into perspective.  It also means that the Merchant Banks and real
banks are trying to keep sufficient cash around so they can maintain their
liquidity levels.  If they didn¹t, we would be in deep do-do.  This is the FED’s
plan to maintain liquidity levels that grease the cogs of commerce. Let’s
hope it works.  The alternative is unthinkable.

How about the jobless rate????

Jobless claims jumped 38,000 last week to a total of 407,000.  (Anything
over 400,000 is a big number and should be a warning to the EconomyGuy
readership that unemployment is going up; and the economy is NOT in good
shape.)  This is the highest number for the past 2 years.  Look at the trend
in the chart.

 “The Trend Is Your Friend.”  In other words, you can generally count on a
trend continuing in its direction until some major event turns it around.
For now, the trend in unemployment is up, and this is a MAJOR sign of
recession. 

Also, as you read the newspapers, you will see that lots of
companies are laying off right now. For example, Motorola, Dell and ATA
are laying off lots of people ­ just in today¹s news.  These layoffs will build
in the unemployment claims in the future. 

ATA went bankrupt for the second time today.  They lost their FEDEX
contract to do charter flights for military personnel, and immediately closed
their doors.  This was a personal loss as my wife and I had tickets on ATA
to fly to Hawaii, and must now get new tickets.  One point of importance
is that we charged our ATA tickets on our American Express card, and it
looks likewe’ll be getting a full refund.  

Here are today’s numbers:
Dow Jones 30 Industrial - 12,626 (Up 20 points)
10 Year Treasury Bond - 3.59% (Up 0.01%)
Euro - $1.5679
Gold - $910 (Up $10) - This is still a major buying opportunity.
Oil - $103.83 (Down $1.00)
Gasoline - $2.72 (Down $0.05)