The Economy Guy

Stocks fell today as corporate earnings were disappointing. In addition, the international market is negatively affecting sentiment as the Dubai bond default rattles markets and the downgrading of the Greek national debt strengthened the Dollar.  Bonds moved sideways.

The Dollar gained significant strength again today – and pushed gold, oil and gasoline down.  The Dollar could continue its upward rise on the unsettling news for other nations.

Gold fell signifcantly, and I can report that I sold my gold last Friday.  I am now waiting for gold to continue falling – where I will buy back in again.  My price point?  It’s anywhere below $1100/ounce.  If gold goes below $1050, it is a definite buy.  If it fall below $1000/ounce, it is a buy with both hands opportunity.

Oil and gasoline continued their downward plunge.  This should result in lower pump prices if the current levels hold for one more week.

In the news today……

You are creating a toxic substance – yes every time you breathe, you create CO2, and the EPA yesterday declared that CO2 is a toxic substance – and therefore they have the right to control it.  I’m wondering what they will do to stop you breathing???  On the more serious side, the EPA has written a 600 page set of guidelines on what they could do to regulate CO2.  These include mandating auto mileage requirements, CO2 emission requirements for factories, etc, etc.  My opinion – is very simple – CO2 is the source of life, just like oxygen.  The world can’t live without it.  To declare it a toxic substance is ridiculous and pushing the credibility of the EPAs science beyond reason.  Why am I bringing this up to you?  It’s going to cost YOU more money when these regulations start biting.

US and UK could lose their AAA rating – so says Moody.  If these nations do not reduce their deficits, and recover the money lent to their financial institutions and raise interest rates, they will be downgraded as soon as 2013.  So, what happens if the US loses its AAA rating?  Interest rates go up.  More risky investments – like US Treasuries (which have always been the world’s least risky investment) – need to pay higher interest rates to attract investors.

Consumer Credit – fell $3.5B in October.  This was a surprise as prior months had declines of $10B to $15B.  If this trend continues, it means that the consumer’s credit will start growing, and will be part of pulling the US out of recession.  That’s what’s heard on the street.

Tonight’s Dinner Conversation…..

Unemployment – how fast can it get fixed?  That’s the topic for tonight.  We need to grow 17 to 20 million jobs in 5 years to get back to a 4 to 5% unemployment rate.

What GDP growth do we need to create that many jobs?  The economists think we need 15% GDP growth each of those 5 years to accomplish the required growth.  That’s a lot of growth.

So, what conclusion can you reach regarding unemployment in the US over the medium term (5 years)?

Socialism vs Capitalism – There were two vultures sitting on a fence looking for their next meal.  The first vulture said “Be patient, our next meal will be coming along soon.”  The second vulture said “Patience hell – let’s go kill something!”

Here are the last numbers for today:
Dow Jones 30 Industrial – 10,286 (down 104 points)
10 Year Treasury Bond – 3.39% (down 0.06%)
Euro – $1.4707
Gold – $1130 (down $33)
Oil – $73.08 (down $0.83)
Gasoline – $1.92  (down $0.02)