Relief At The Pump
Stocks tried to surge up today as Congress was voting on passing the Fannie/Freddie bailout legislation. But, they ran out of steam, and ended up only 30 points today.
Bonds are getting clobbered with the 10 Year Treasury now sitting at 4.15%. This is a 0.4% jump in rates in about one week. I can smell inflation in these numbers.
The Dollar continued gaining against most currencies. Higher interest rates and lower oil prices are driving the Dollar higher.
Oil and gasoline continued their precipitous drop with oil now standing below $125/barrel. Gasoline wholesale prices have fallen almost 50 cents from its high – have you seen those pump prices coming down, or just stagnating???
Gold got clobbered today, falling $26.
In the news today…..
The FED Beige Book (a report from the 12 Fed regions on economic activity) gave a fairly true picture of what’s going on in the real US economy. Consumer spending is “sluggish or slowing” and was influenced by the IRS rebates. (Guess what’s coming without the rebates???) Inflation is “elevated or increasing” and this is really starting to spook some of the markets (except stocks so far).
I listened to some of the debate in the House of Representatives prior to the vote on the bailout legislation for Fannie/Freddie. The words being used were exactly as I stated yesterday – “might not need any money, or maybe it’s $25B” The politicians pushing the legislation either understood the importance of saving Fannie/Freddie, or had some other items in the legislation that they really wanted to pass (and really didn’t care about the Fannie/Freddie law). The opposition (and amazingly there were politicians against this legislation) talked about the bill that will be passed onto the taxpayer being up to $5 Trillion.
For you mortgage followers: the 30 Year Fixed Rate Mortgage Rate is 6.59% and the 15 year is 6.10%. That should startle you if you’ve been following these. A massive jump. Mortgage rates follow the general interest rates in the market, and general interest rates have been jumping recently. The general rates are driven by inflation, and higher interest rates is the natural market force to counter inflation. You see – we don’t really need the FED to raise the Fed Funds Rate to fight inflation – it’s happening naturally – by market forces.
Here are today’s numbers:
Dow Jones 30 Industrial – 11,632 (up 30 points)
10 Year Treasury Bond – 4.15% (up 0.05%)
Euro – $1.5695
Gold – $923 (down $26)
Oil – $124.44 (down $3.98)
Gasoline – $3.03 (down $0.11) – Seen any pump prices coming down yet????
