Recession Coming?
Issue: 9/07/07 Friday
By Global Economy Guru, Tom Harvey…
It’s time for a real analysis of what happened today. All the markets moved today. I report a diverse sample of markets at the end of this report each day. All of these diverse markets moved today. To put today’s news in perspective, the news included a real economic statistic, and not just a technical position of the market. One lesson for today is that real fundamentals can move markets as much as technical data and rumors.
Let’s start with the market moving news. A report released Friday by the Labor Department showed the nation’s payrolls shrank by 4,000 in August. It was the first decline in jobs since August 2003. The stock market is really a perverse market. In recent days, a statistic that supported a reduction in the Fed Funds rate would move the market UP. However, today’s unexpected loss in total jobs moved the market DOWN 250 points. Why is this??? Well, the news was so bad that the herd thought there might be a real recession in our future. Naturally, if the Fed thinks there is a recession coming, it will reduce the Fed Funds rate. So why was the herd so scared??
During a real recession, there is a contraction in the economy and less is purchased by consumers and by industries, people will lose their jobs, industry will produce less — and all this means that US companies will earn LESS. That will lead to decreasing profits, and lower stock prices. That is why the herd SOLD today. However, they are still a herd. One day doesn’t make a market, and one statistic doesn’t define an economy. Expect the roller coaster market to continue. What happened today, was the herd got a possible dose of reality and reacted (as if the reality was actually real) by SELLING.
I personally think that the loss in payroll numbers could very possibly be the first sign of an upcoming recession. I believe the Fed is also watching this number carefully. Therefore, I am today changing my mind, and I believe the Fed will reduce the Fed Funds rate by 0.25% on Sept 18. Predicting the future is really only for fools, so ignore what I think, and think for yourselves. Remember that statistics will be coming out every day between now and Sept 18th.
What else moved? Gold shot up to $710, and this is considered a precursor to exchange rates. Right on cue, the dollar fell around the globe, and fell fairly big. One of the startling changes was the 10 Year Bond closed at 4.37%. This is a major increase in the value of bonds. Some
Here are Today’s closing details:
DJ30 – 13,113 (down 1.87%).10 year US Treasury Bond – 4.37% (Down .13)
US Dollar - $1.3736/Euro.
Gold closed at $710 per ounce. (Up $5) This move in gold could be a bull trap. Some dealers believe that gold will be pulling back to the mid-600’s within a month.
Oil Closed at $76.70 (Up .40) Oil continues to move up, and in influenced by Nigeria
Gasoline is $1.99
