The Economy Guy

Stocks fell today on the poor economic news, and poor earnings continuing to come out – ending down 138 points.  President Obama tried to talk the market up, but couldn’t overcome reality with his optimistic words.

Bonds gained again – their normal cycle in a down stock market.

The Dollar, oil/gasoline and gold all went sideways today.

In the news today…..

Retail Sales – fell 1.1% in March.  This was much greater than expected (or more accurately hoped for).   The surprise of falling retail sales hit stocks hard as a much smaller fall was expected to say that the “bottom” had been hit, and the economy was at a plateau.  The fall was caused by less auto sales.

Wholesale Inventories – fell in March.  This is good news as less wholesale inventories will mean greater manufacturing in the future when the economy does come back – but it isn’t now.

Wholesale Prices – fell 1.2% in March.  This was mostly caused by falling energy prices (like a 13.1% reduction in gasoline prices), and we can’t expect energy prices to fall forever.  Remember that we have been tracking oil and gasoline prices and they have been firmly in a “sideways” track – meaning the price isn’t going up or going down.  The wholesale price decline wasn’t caused by general wholesale price reductions on everything we use in retail sales – so it won’t be coming through to the commercial level as price decreases.

Conclusion – Don’t listen to the people who are predicting the future, and are “wishing” the economy out of its slump.  Listen to the statistics that measure the actual economy and then make up your own mind what is really going on.

Tonight’s Dinner Conversation…..

The CFO of Goldman Sachs, Viniar, said today that he is cautious about the future of the US banking sector.  Here is what he said. Remember he is talking on an investor call when Goldman Sachs has announced very high profits for the 1st Quarter.

In a conference call with investors, Viniar said there are still “headwinds” in the broader sector tied to declining asset values.

What he means is that housing prices have not stopped falling, and housing prices indirectly (but very closely linked) affect those toxic mortgage securities that the big banks are holding.  Falling housing prices mean falling toxic mortgage securities.

This is coming directly from someone who should know this relationship very well, and confirms what I’ve been telling you over the past year.

So, the question for you is: “Would you invest in the finance stocks of the US?” and why?  A related question is “Will the stock market make new highs, or continue downward?”

Here are the last numbers for today:
Dow Jones 30 Industrial – 7920 (down 138 points)
10 Year Treasury Bond – 2.79% (down 0.06%)
Euro – $1.3258
Gold – $892 (down $4)
Oil – $49.41 (down $0.64)
Gasoline – $1.46 (down  $0.01)