The Economy Guy

Stocks were up today, and took the Obamacare vote as something that was good for stocks

Bonds and the Dollar were sideways.  Gold was down slightly today.  Oil and gasoline were up slightly.

In the news today……

5 Banks Closed – last Friday, and this bring the total to 37 banks so far this year.   140 banks last year.  The closure rate is predicted to accelerate as more banks take the write downs of commercial real estate loans.

Has America lost its AAA rating?? - yes, according to the bond market.  Warren Buffett’s Berkshire Hathaway and a handful of other companies have less risk than US Treasuries, and the bond market (being real money) pays less interest on Berkshire than Treasuries (for 2 year notes).  The bond vigilantes are alive and well.  This is the first sign that the US is losing its ratings.  When bond buyers want a higher premium for US Treasuries – that’s not a good sign.  I took this warning as the time to sell off some bond funds that I owned.

Obamacare passes- 219 to 212.  The winners are the 32 million uninsured people (except those who don’t want healthcare insurance, but will be forced to pay for it anyway – as one poor woman said on the radio this morning “I can’t afford healthcare insurance, and I’ve allocated my money to pay for medicines.  If I must also pay for insurance, I will have to stop taking my medicine”.)    The pharmacy companies are the BIG WINNERS, as they will get a windfall of new revenue.   Insurance companies are the second big winners as they will get 32 million new customers but will have to add new benefits – the cost of which they will pass onto you very, very soon – hold you pants; that sucking sound is the increase in healthcare insurance that’s about to hit.  (Don’t you just wonder how Pharceuticals and Insurance Companies made out so well???  Is this the change you wanted?)  The losers are medicare recipients as $500B will be taken away from Medicare – and there’s no way that won’t result in reduced benefits.   Walgreen’s in Washington state has said it will NOT take any more Medicare patients into its prescription services – do you get what’s going to happen all over the place?

5 of G-7 Countries Debt/GDP – will be over 100% by 2014.  Only Germany and Canada won’t be that high.  This will drag the world into a continuing recession, or worse.  Greece is just the tip of the iceberg.  My opinion:  Not a pretty picture.

Future Labor Force – is rosy for the US.  Look at the following chart.  It shows that in the next 40 years, the US is projected to grow at a faster % rate than other major places in the world.  Naturally, the US economy must get itself into a position by take on this new labor force, but given we can grow our way out of the deficit spending we are in, we have a much brighter future than most of the world.

Tonight’s Dinner Conversation…..

Gold Purchasing Power – is an interesting topic.  I never thought of gold a money, but that is exactly what it is.  The Dollar on the other hand is a currency – not money.  Only the politicians and the FED call the Dollar – money.  They want us to think that the Dollar has some intrinsic value.  In reality, it is just a piece of paper with a promise to pay something to someone sometime.  Good luck collecting.  Money is something with an intrinsic value – and gold is money.  Here is an interesting chart showing the purchasing power of gold.

If you look at the world through “gold colored glasses” then you will see that the world is in a great deflation.  Things are getting cheaper.  Now I can buy the deflation story that economists are spinning – but they mean Dollar deflation.  Imagine what you will be able to buy for a few ounces of gold in the future.

Here are the last numbers for today:
Dow Jones 30 Industrial – 10,786 (up 44)
10 Year Treasury Bond – 3.66% (down 0.03%)
Euro – $1.3552
Gold – $1099 (down $8)
Oil – $81.29 (up $0.61)
Gasoline – $2.26  (no change)