The Economy Guy

The Stock Market reversed yesterday’s gains, and closed down 113 points today.  This was caused by the irrational belief in the Philly Fed industrial report.

Bonds gave us some relief by declining slightly in interest rate.  Interesting that I said “slightly”.  It shows how a massive move like 0.13% in one day, can be considered “not much”.

Gold hit an all time HIGH during the day.  The last HIGH was $940, and today’s new HIGH was $957.

The Euro surged forward, I’m happy to say.  I’ve been betting on this move, and it finally happened.  It’s the Yen’s turn to become stronger next.  When that happens, the dollar will test its all time lows.  We must wait a little longer to see that happen.

In the news…

The FED Philadelphia region industrial report came out, and showed a steeply declining industrial activity.  That spooked the entire stock market.  However, this report is for the Philadelphia region only.  It can’t be accurately extrapolated to the entire country, and for the market to do so – is an exercise in irrational thinking.

Bond Insurers

What’s going on just below the surface in the area of Bond Insurers is truly intriguing.  If you remember my past writings on this topic, bond insurers could have their AAA ratings lowered by their poor financial situation.  The current thinking is that bond insurers will split their portfolio of insurances between municipal bonds, and all other bonds (aka crap).  This way the municipal bonds can get their AAA rating when issued, and not be jeopardized by the aka bonds.  The municipal bond market is in a state of crisis today.  Cities and local government agencies cannot issue bonds knowing what interest rate they will have to pay on these instruments.  Some issues just aren’t accepted at all by the market.  This is the definition of a crisis.

I want to thank everyone’s messages of encouragement to talk about the inflation possibilities in our future.

Here are today’s Numbers:
Dow Jones 30 Industrial - 12,284 (Down 113 points)
10 Year Treasury Bond - 3.78% (Down 0.13%)
Euro - $1.4813
Gold - $949 (Up $11) - an interday NEW HIGH of $957 happened today.
Oil - $98.23 (Down $1.47)
Gasoline - $2.52 (Down $0.06) - gasoline at the pump continues to climb.