Prediction Time
Stocks bounced straight up today, closing up 187 points. This was because JP Morgan decided it could pay more for Bear Stearns; rather than $2/share, they could pay $10/share. My discussion of this purchase showed that $10/share is still probably a fair price. Where are the ruthless people on Wall St? The FED didn’t like the idea of paying more than agreed previously. JP Morgan could have toughed it out, and ended up with a billion dollars more in its net worth account. There is clearly more here than meets the eye.
Bonds got slammed today, and gave up all their gains (decrease in interest rate) that they earned last week.
The Dollar got stronger today, and we’ll have to wait and see if it continues to strength throughout this week. The Dollar fell too far, too fast and we are seeing a natural recovery before the long march continues.
Oil fell a little today, and gasoline increased a little. Gold fell a dollar. We’ll see what the future holds, but I believe it will hold much higher prices for all these commodities.
In the news today and the Easter weekend…..
The Japanese economy is slowing and getting worse. The Japanese economy is mildly expansionary. However, as exports decrease and imports (think oil) increases, Japan could easily be following the US into recession.
Some people think that those sub-prime mortgage securities have fallen too far, and consider them a bargain. The state pension funds of PA and SC both are buying these junk securities. Not too much to hurt their portfolio if it all implodes, but enough to see if some money can be made.
The Central Bankers of the world (and the FED refuses to acknowledge they are part of this discussion) are talking about having the Central Banks purchase those sub-prime mortgage junk securities – thereby solving the big problem that hangs over the entire economic system of each country. Watch out tax payers; I think you are about to be chosen as the loser in this deal.
The US Treasury is reducing the denomination of its smallest bonds from $1000 to $100. This will allow the “little guy” to purchase Treasury Bonds more easily, directly from the Treasury. I get very suspicious when the government trys to help the “little guy”. I guess that bonds must be reaching their peak value, and now its time to sell them to the general public.
Prediction Time
Everything is so rosy today, that I thought it would be appropriate to make a prediction on the severity of our recession. This severity prediction will naturally be ahead of all the economists in the US; so you get it first. Recessions can be mild (our usual recession) or severe (like in 73 to 75). I think this recession will be more severe than any recession since WWII. In other words, this recession could approach the Great Depression in its severity. The Bear Stearns fiasco will be just the first of many, many bank failures – mostly smaller and medium size banks.
Dinner Conversation
The US Geological Survey believes there are 500Billion barrels of oil under the oil of our northern states and part of Canada. The US is using about 5Billion barrels of oil per year. That means there is about 100 years worth of oil here at home. WHY ARE WE SO WORRIED ABOUT OIL???? Now that oil is selling near $100/barrel, it is economically worthwhile to get that 500Billion barrels.
Here are today’s Numbers:
Dow Jones 30 Industrial – 12,548 (Up 187 points)
10 Year Treasury Bond – 3.52% (Up 0.19%) - a Huge Move
Euro – $1.5422
Gold – $919 (Down $1)
Oil – $100.86 (Down $0.98)
Gasoline – $2.64 (Up $0.04) – gasoline continues it climb in spite of the fall in oil prices.
