The Economy Guy

Stocks soared upward today ending up 246 points.  The huge profits by Wells Fargo Bank was the impetus, as well as a misreading of the Jobless Claims numbers.

Bonds lost value (increased interest rates) as money flowed into stocks from bonds (a natural progression under normal conditions).

The Dollar strengthened further.

Oil and gasoline rose, but are still in their sideways channel.

Gold fell $3, and remains in a neutral position.  I continue to await a testing of the $850 to $860 price level.

In the news today…..

Jobless Claims fell last week to 654,000 claims – down from the previous week’s 674,000.  The world cheered!!!  While it is a good sign that the number fell, the number is still way too high.  With this number of claims, the unemployment rate will continue growing.  Remember, that anything over 400,000 claims is bad news.

Trade Deficit was down 28.3% to $26B in February.  This is the smallest trade deficit since Nov. 1999.  And, this is very good news as a balanced trade deficit should be our goal.  In fact, a trade surplus should be our goal to pay off all those previous deficits.  However, a continued deficit continues to provide money for other countries to buy our soon-to-be inflated US Treasuries.  The current trade deficit is about half of what our trade deficit was at its peak.  This was created by decreased imports and increased exports.  I personally question if we can continue increasing exports in the current world economic conditions and having a stronger Dollar at the same time – both weigh negatively on exports.

Bank Stress Tests – are a SHAM.  The government came out today (with a trial balloon in my opinion) stating that ALL the 19 banks being “stress tested” will PASS.  And, if they don’t, they will be given more money to make them solvent – so don’t worry.  

As part of the stress testing, the US Government auditors are assessing the banks’ assets, and probably will force some banks to sell “specific” assets to strengthen their balance sheet – and this is just plain “government coercion!!!!!” in my opinion.

Let’s look at the test, and why I’m calling it a SHAM.  One of the “stressful” parameters in the test is the US Unemployment figures.  The stress figure is 8.4%.  Well, I’m here to tell the government that the actual unemployment rate today is 8.5% – even more stressful than their very tough stress figure.  Why didn’t they use a truly stressful figure like 12%.  Many economists are predicting a 10% unemployment rate in 2010, so that’s not even “stressful.”  Naturally, the answer to my question is “The government wants to prove to the generally uneducated and stupid public that the banking system is just fine, and they can confidently trust those banks with what’s left of their savings.”  This is a great example of the government saying to the public “You can’t stand the truth!!!!”  (Thank you Jack Nicholson for that great line.)

Here are the last numbers for today:
Dow Jones 30 Industrial – 8083 (up 246 points)
10 Year Treasury Bond – 2.93% (up 0.08%)
Euro – $1.3160
Gold – $883 (down $3)
Oil – $52.24 (up $2.86)
Gasoline – $1.48 (up $0.04)