The Economy Guy

Stocks decided to give up some of their recent gains, and closed down 112 points.  This must be very predictable if this market is to continue going sideways.  Also Bernanke gave some scary (he didn’t mean to) words to Congress again today.

Bonds fell significantly in interest rates as the market took to heard that we are really going into a recession, or we are already there.

The BIG STORY was that the EURO, GOLD and OIL all hit NEW HIGHs today.

In the news today….

Bernanke told Congress that there “could” be some bank failures coming up.  You got that story right here yesterday.

The US Treasury approved a plan for the IMF to sell some of its $98B horde of gold.  Why would the US want to do that?  This is opposite what it has stated previously.  Well, the idea is to raise some money so the IMF can cover those lousy loans they have put out.  However, if you think about this a minute, the sales of LARGE quantities of gold has a depressing force on the price of gold.  The US Government has historically wanted to suppress the price of gold, and here’s a new way to make it happen.  The US Government does NOT like the idea of Gold surging toward $1000.  That is like poking a sharp stick in its eye.  So, this could easily be a ploy to prevent that from happening.  The US Government has never beat the market – any market – especially the gold market.  It has slowed the progress of the market, but never stopped it.

Your Dinner Conversation for Tonight

Saving the best for the last, here is today’s revised 4th Q 2007 GDP number: 0.6%.  I know, I hear you say, “That’s the same it was last time around.”  You’re right!!!!  BTW, a positive number implies that the Recession didn’t start last year – right??  (Remember that a recession is defined as 2 consecutive quarters of negative GDP growth.)

Well, here is the detail behind the headline.  If you drill down one level to the components that make up the GDP, you will find that in this revision the “export” component was 0.5% greater.  That means that all the “domestic” components were 0.5% less – in order for the total to stay the same.  If the “domestic” is 0.5% less, the domestic portion must be DARN CLOSE TO ZERO.  This is as close to the first quarter of a recession that you can get without declaring it.

Here are today’s Numbers:
Dow Jones 30 Industrial – 12,582 (Down 112 points)
10 Year Treasury Bond – 3.72% (Down 0.14%)
Euro – $1.5204 – a NEW HIGH – again and again and again.
Gold – $968 (Up $7) – a NEW interday HIGH of $970
Oil – $102.59 (Up $2.95) - a NEW HIGH – GET USED TO IT.
Gasoline – $2.50 (Up $0.02)