More Records Broken
Stocks spoke very loudly today – falling another 445 points with the DOW reaching 7552. No one would have considered this possible even 3 months ago. And the bottom is another 500 points down AT LEAST or possibly much more.
Bonds made a DRAMATIC move today increasing in value (decreasing in interest rate) with the 10 Year Treasury falling 0.26% – and I consider this irrational exuberance – even though bonds are mostly rational. To show you the effect this is having – the 30 Year Fixed mortgage rate is now 6.04%, and the 2 Year Treasury Note fell BELOW 1% for the FIRST TIME EVER. Here’s another FIRST TIME event to take note of – another real signal of the deflation taking place.
The Dollar strengthened slightly in line with the stock market fall.
Gold strengthened because it’s time to strengthen – ending up $13 today. Gold is bucking the trend today by strengthening when the trend is for it to weaken when stocks fall dramatically to new lows. I read this as gold showing its strength in the face of adversity.
Oil (and gasoline) continued their death spiral downward with oil FALLING BELOW $50/barrel today. Wholesale gasoline at the refinery is now just above $1/gallon – and it will break the $1 barrier bringing your pump prices down a whole lot more. I purchased gasoline at $1.99/gallon today, and expect the price to fall another 40 or 50 cents.
In the news today…..
The big news was that Jobless Claims came in at 542,000 for the past week – way above anyone’s prediction. As I’ve said several times, the unemployment rate is going to go much higher, much faster than any of the “professional” economists are predicting. They are just surprised with each new statistic – and I must ask WHY? At least you’re not surprised. November and December are both going to be record jobless months as companies let people go.
GMAC has applied to become a bank – so they can get some of that bailout money the Treasury is handing out to each and everyone with his/her hand out. GMAC, to its credit, is trying to rein in its bad lending practices by limiting car loans to people with great FICO scores; but, do the American people want GMAC bailed out? Is this an end run around NOT bailing out the Big 3 Auto Industries (especially GM)???
The Swiss dropped their key lending rate by 1% today. 1% is a massive move that even our FED hasn’t done for many decades. Maybe the Swiss see something worse coming onto the world’s economy than we see. Should someone ask them???
Name this ERA…..
Remember to send me your best name for the current era. Something that history will use WAY in the future to describe what we’re living through. “The Great Depression” stuck over the decades. What about now.
Here is a good one that came in – “The Great Deflation”
Can you improve on that?
Here are Today’s numbers:
Dow Jones 30 Industrial – 7552 (down 445 points)
10 Year Treasury Bond – 3.13% (down 0.27%)
Euro – $1.2442
Gold – $749 (up $13)
Oil – $49.65 (down $4.45)
Gasoline – $1.01 (down $0.10)
Actually, I like the “Great Deflation” so I’ll probably start using that one. Clearly we are in an asset price deflationary environment that appears like it will last quite a while (L-shape).
I have been using “GD2″ (Great Depression 2) and “worse since the Great Depression”.
Also I think of this as the “Great Awakening” since anyone under around age 40 didn’t know/experience that home prices can decline. Now they do and it should impact their thinking going forward.
Greetings. Here’s my “entry” for “name that era”.
How about the “Great Fear, Greed, Debt Bubble” (or make that Mushroom Cloud).
I really appreciate your newsletter. Makes me feel as though I at least have an inkling of what the heck is going on in the economy and the world. Thank you.
Will we be seeing you and Christine at Maui next week?
Best regards,
Margaret Westcamp
Las Vegas