The Economy Guy

Stocks tried to rally this morning, but the general consensus of the President’s Mortgage Relief Plan is that it stinks.  So, the market went down, down down.  It ended down 90 – not much right??  Well, here’s the problem.  Three months ago we had a low of 7552.  Today, the market closed at 7465 – below that level.  The market is now at the same level that it was in April 1997.  That’s 13 years of stock market gains wiped off YOUR wealth.  And, as it broke the old low, it’s poised to go lower!!!!!!  This was a very ugly day for the market.

Bonds lost ground (increased interest rates) as the bad news about inflation hit the news.  The Dollar lost ground too.

Oil and gasoline gained, as they tagged onto the inflation numbers.

Gold lost $2.  It’s range for the day was $983 to $974 – closing at $977.  This might have been the break through we were looking for, but I’m still not convinced.  I still believe that gold will drop back into the $925 – $950 range, and then rally to new highs.  When it breaks out above $1000, I believe it will go straight to $1100 before it takes a breath and people start taking their profits.  (By the way, my long term prediction for gold is a minimum of $2200/ounce, and depending on the inflationary news at the time, could go to $4000/ounce.  When we get close, I will give a “sell” signal as there should be a very large sell off when it gets to that new high.  All you gold owners should take their profits at that time, and get poised to buy back in at lower levels.)

In the news today…..

Jobless Claims hit 627,000 last week.  Still very bad news, and rising unemployment coming.

Unemployment Benefits are being given to 4,990,000 people last month.  Here are some more statistics:

1. there are also 1,500,000 people getting “extended” benefits in addition to that previous number
2. the total unemployment benefits last year was 2,770,000 people – quite a rise this year???

Wholesale Prices rose 0.8% in January.  This was the INFLATION scare that hit the market.  The number was much higher than anyone predicted:

1. Gasoline was 15% higher in January, and was the biggest contributor, BUT
2. wholesale prices rose 0.4%, and this was the big scare number.  It was anticipated to be “negative.”  OOPS!!!!

Is the new administration’s inflation troubles starting to hit the economy this soon?  I can’t tell.  Don’t make up your mind on one month’s data.  Wait for two or three months of data.

Leading Economic Indicators were up 0.4%.  This should be that things will get better in the future.  But, will they????

1. This was mainly to the increase in the money supply.
2. Don’t believe this indicator – EVER.  It will get you in more trouble than most indicators.  (Lesson for today.)

Here are the last numbers:
Dow Jones 30 Industrial – 7465 (down 90 points)
10 Year Treasury Bond – 2,86% (up 0.13%)
Euro – $1.2661
Gold – $977 (down $2)
Oil – $39.48 (up $4.86)
Gasoline – $1.19 (up $0.03)