The Economy Guy

I am going to spend the majority of today’s Economy Guy talking about the markets.  Usually I talk about the news, and give you the story behind the story, but today the story is the markets – all of them.

Stocks gave up a little of that gigantic gain they made yesterday.  This doesn’t look good for the future of stock.  We’ll just have to wait and see.

Bonds, on the other hand, made back most of their loss in value of yesterday.  There are a lot of rumors flying around that the FED move yesterday to inject $200B into the investment banking sector just isn’t going to work.  Also, the recession appears to be on schedule to be happening, and current data and anticipated future data are expected to reinforce that belief.

The currency markets were the ones to be in.  The Euro set a new high of $1.5550+ and is clearly headed to test the $1.56 level very soon; maybe tomorrow.  The Yen broke down to the 101 level, and is clearly poised to test the 100 level.  The Swiss Franc his a new high of 1.012.  (Amazing that the Swiss Franc is almost equal to the Dollar.)  Big money is being made in this market.  People are selling their non-Dollar currencies if they were borrowing them to pay debts in lower interest rate currencies.  Now the loss in the value as the non-Dollar currencies increase in value.  This are very important moves that the Dollar is making (downward) and they are setting the stage for a major shift in import/export across the globe with the US.  The Dollar must fall further to make that really happen, but we could be within 10% of that target.

Oil hit a new high of over $110/barrel.  Can you believe that??  I guess you can every time you go to the gas station and fill up your tank.  I hate that trip.

To show you how out of whack the bond markets are in, consider this.  The 30 Year Fixed Mortgage is now 6.37% and the 15 Year Fixed Mortgage is now 5.72%.  These mortgage rates have been rising even while the 10 Year Treasury Bonds have been falling in interest.  Why??  There is a very high volatility in the Treasury market, and there is a huge risk cost built into the mortgage prices as we see the liquidity meltdown going on with the banks and financial institutions.

Here are today’s Numbers:
Dow Jones 30 Industrial - 12,110 (Down 46 points)
10 Year Treasury Bond - 3.48% (Down 0.11%)
Euro - $1.5552 – a NEW HIGH
Gold - $981 (Up $5)
Oil - $109.92 (Up $1.17) Oil futures hit a NEW HIGH of $110+ today.
Gasoline - $2.73 (no change)