PPI Drops….Sort Of
Stocks retested their lows for a 3rd time, and rebounded in the last hour with stocks rising 151 points on the day. Stocks went up due to these technical reasons – and not for the news. Bonds continued their soaring valuation with interest rates falling 0.15% – a massive move.
Oil and gasoline continued their downward spiral – but just slightly today. Gold fell, and the Dollar strengthened.
In the news today….
The Producer Price Index (PPI) – the measure of wholesale price inflation – fell 2.8% in October, the biggest fall EVER since this index was created 60 years ago. Sounds good for inflation??? Well, let’s look closer. The fall was caused by the massive decrease in oil and related energy prices. When energy and food are removed from the calculation, the “core” PPI was UP 0.4% which says that everything else is still increasing in price, and at a high clip. If this continues, when energy and food are stop falling, inflation will be truly large.
Paulson, in his testimony to Congress today said that the $350B (first release of the $700 TARP funding) wasn’t enough to purchase and neutralize all the toxic debt – and part of why he didn’t purchase the toxic waste – only purchased stock in the banks. Let’s think about this a minute. If $350B wasn’t enough, what was enough? He didn’t say. That toxic debt is still there, alive and well, and part of the each bank’s balance sheet. This gives you a measure of the magnitude of the securitized mortgage market toxic debt right now – and – and – and it’s getting worse as housing prices continue to fall.
The more I think about the actions of our government, the more I think they are just “guessing” what to do, and are acting like a bunch of amateurs. Where are the professionals??
Here are Today’s numbers:
Dow Jones 30 Industrial – 8425 (up 151 points)
10 Year Treasury Bond – 3.54% (down 0.15%)
Euro – $1.2617
Gold – $733 (down $9)
Oil – $54.39 (down $0.56)
Gasoline – $1.14 (down $0.04)
