The Economy Guy

Issue: 10/11/07 Thursday

  
The stock market went insane today.  It was up BIG in record territory, and then it dove into negative territory, ending down 64 points.  What caused all that tenseness and terror???  Well, it was our friends in Europe and the Middle East.  It turns out that the European Central Bank said that inflation in Europe was picking up, and they may have to raise interest rates before the end of the year.  Oil supplies weren’t has high as people thought they should be, so oil prices jumped to over $83.  And, the dollar fell, of course.  Oh, and gold jumped WAY up again.

So, who’s right?  Is it possible for Europe to have increasing inflation, and the US to go into a recession, or more hopefully, just have a flat economy right now??  Yes, it is possible, but the world doesn’t usually walk that tightrope.  If it does try to walk the tightrope, someone falls off.

The chances of the ECB raising their interest rate is speculative right now.  They are as tight lipped as the Fed is.  Greenspan found out that when he talked, he moved markets.  He didn’t feel comfortable doing that.  Why??  Maybe he was old fashioned.  Maybe he just thought markets should decide by themselves where they should be, and not be manipulated by someone’s words.  Maybe he had morals and ethics.

What should you do to interpret today’s action???  Don’t get excited.  It’s just the market being the market.

Here are Today’s closing details:

DJ30 – 14,015 (Down 64 points)

10 year US Treasury Bond – 4.66%  (Up 0.01%)

Gold closed at $757 per ounce. (Up $11)

Oil Closed at $83.08 (Up 1.78)

Gasoline is $2.07 (Up 0.03)

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