Optimism Reins
Optimism reins!!!! Stocks ended up, as did gold, the Dollar, oil and gasoline.
Bonds went the opposite way as people took their year end profits, and interest rates rose. This should be temporary. Mortgage rates have followed bond interest rates down, and now the 30 year fixed rate mortgage is 5.10%, and the 15 year is 4.83%. Further decreases are possible.
Economic News from 2008 …..
Here are the economic highlights for 2008. They’re all bad unfortunately. Good things like Gold being up on the year doesn’t make the headlines in my opinion.
1. Real Estate Meltdown – housing prices falling off a historic cliff was the trigger for the “bad debt” meltdown.
2. Wall Street Massacre – all the key investment banks on Wall St got hit – some much worse than others, like Lehman Bros. The Fannie/Freddie bailout highlighted the intersection of greed and politics. One key lesson coming out of this mess was the lack of oversight by the supposed watchdogs – like the SEC, etc.
3. Congress passes $700B TARP – this act gave a “green light” to the FED and the Treasury to continue their bailout of Wall St, big banks, etc. Unfortunately, the action of our elected officials provided more fuel to the burning fire of believed incompetence of Congress. Legitimate economic alternatives were recommended by esteemed world economists and not considered, but Congress chose to act in a great haste.
4. Stocks plunge globally – the US stock market (and all other world markets) plunged much further and farther than anyone was willing to predict at the beginning of 2008. This wiped out half of most investors in Wall St instruments (stocks, bonds, etc.)
5. World economies hit – all nations got hit with the economic run to safety – remember Iceland? Oil exports got hit hard – Russia, Venezuela, Iran. Banks had to be saved throughout Europe.
6. Oil prices hit all time high (~$150), and then plunged to $34. The high oil price helped push the US consumer over the brink, and the low price has not helped the consumer at all as other worries (like keeping your job) has taken number one position on the economic worry list.
7. Food prices soar. Along with the oil price rise, food commodity prices hit all time highs. When Wall St collapsed, the food commodities came down too, but retail prices remained high and continued to go up.
8. Big 3 Auto Companies Bailout – this provided more fear (desperation of the government?), and more anger (why are they being bailed out?). Are this the first steps in nationalization of our industries? Only time will tell. An interesting side note in the auto bailout is the role of the labor union (UAW) and its interaction with politics – again only time will tell the truth.
9. Madoff Ponzi Scheme – it is hard to believe that a “Ponzi Scheme” could be running for decades and drain $40B to $50B from the wealthiest individuals and charities without being even investigated by the SEC.
10. Money Market Funds found unsafe – a general belief of the public was the money market funds were as safe as cash under the mattress. When Lehman Bros went bankrupt, the Reserve Primary Fund which had invested heavily in Lehman saw Money Market redemptions of $40B to $50B per day, and this drove the money market dollar down to 97 cents. Lesson learned.
Here are Today’s numbers:
Dow Jones 30 Industrial – 8776 (up 108 points)
10 Year Treasury Bond – 2.24% (up 0.16%)
Euro – $1.3988
Gold – $884 (up $14)
Oil – $44.60 (up $5.57)
Gasoline – $1.06 (up $0.13)
