The Economy Guy

 Stocks tried to go up today, after starting down.  But in a last minute lemming leap, it fell over a cliff during the last 5 minutes to lose 204 points.  

Bonds, the Dollar, Oil and Gasoline sort of went sideways today with a downward bias.

Gold continued its slow upward journey, increasing $13 in price today.  Gold continues to be a buy of a lifetime.

In the news today….

The FED will be dishing out $125B (that’s billion) to the big 9 banks over this coming week.  This $125B is part of the $700B bailout bill.  The FED negotiated the details of the lending to the banks over this past weekend.  I didn’t know they were negotiating – did you?  What about all that “transparency” talk from Paulson??    I bet you’d like to know what the details of the negotiation really are.  Remember when Paulson had the CEO’s of these 9 banks in the same room, and wouldn’t let them leave until they ALL signed a document saying they would borrow from the FED?  Well, the details of that document have now been agreed.  How interesting.  You would think on the surface that if the FED is lending out money to the banks, it would be making a profit on that lending.  I wonder how much this negotiation will cost the taxpayers.  Since there are no details of the negotiation in the press today, you can bet that it WILL cost the taxpayer something.

Rumors continue to fly that all the other banks in the US are okay.  When I hear those type of rumors, I get scared – real scared.  The money going to the big 9 banks is bolstering those banks’ reserves, and will allow them to gobble up (that’s sort of appropriate for Halloween) the small banks.

Tonight’s Dinner Conversation….

How low will the stock market go before it turns around?  I can confidently predict that the stock market WILL turn around.  I cannot predict when it will reach the bottom, or what the bottom is.  I am asking you to have that conversation over dinner.

Here is some interesting background for you to ponder.  The Dow Jones 30 Industrial Average has lost 42% from its high.  Interesting.  I hear you asking – isn’t 42% enough?  Maybe not.  Here is a reference point for your consideration.  The Japanese stock market is measured by the Nikkei Average.  It ended last night at 7163.  The high for the Nikkei was 38,000 in 1990.  7163 is an 81% drop in that index.  A more recent high for the Nikkei was just last year.  The Nikkei was 18,000 at that time.  Using the year ago high, the Nikkei has fallen 60%.

So, maybe, just maybe, the DOW has more to fall.  But, that’s for you to discuss.

Here are Today’s numbers:
Dow Jones 30 Industrial – 8176 (down 204 points)
10 Year Treasury Bond – 3.73% (up 0.03%)
Euro – $1.2541
Gold – $743 (up $13)
Oil – $63.22 (down $0.93)
Gasoline – $1.48 (no change)