The Economy Guy

Stocks were shocked into a big loss today by the retail sales numbers.  Bonds gained on the same news, as it became clearer to a lot of people that the economy isn’t about to come out of this recession anytime soon.

The Dollar and Gold moved sideways, but both with an upward bias.

Oil and gasoline went sideways, and gasoline prices are now coming home at the pumps so you can enjoy paying more.

In the news today…..

Retail Sales – fell 0.4% in April, and March was revised downward from minus 1.3% to minus 1.4%.   This spooked the stock market as the “experts” thought it would be much better than this – as the “recession is over, and stocks will go up forever.”  When autos are removed from the % calculation, sales fell 0.5%.  All categories fell, except building materials which rose 0.3% (which can be considered the ‘small’ silver lining in this report – possibly as people are maintaining them homes, and/or building new homes.)

AIG Bonuses – remember the big Presidential and Congressional noise coming out about the AIG bonuses a few months ago?  Documents just came out showing the FED knew all about it 6 months before it happened.  But, “they didn’t notify the administration about this detail.”  And it was the head of the New York FED who lead discussions with AIG at the time.  Guess who was head of the New York FED then?  Timothy Geithner, our current Secretary of Treasury.  So, Timothy knew, and he didn’t tell Obama????  That is stretching the truth way to far for me to believe.

Foreclosures – were at 342,000 in April – up from 340,000 in March.  Two months in a row of VERY BIG numbers.  This supports my conclusion that house prices have not finished falling in the US.  Also, remember that ARM readjustments will be hitting in 2010 and 2011 – and those will also have large foreclosure consequences.  

But, housing markets are LOCAL, and no one in the real estate investment business can forget that.  In Arizona, for example, the number of houses being purchased jumped dramatically last month by 40%.  The majority of these purchases were foreclosure purchases by investors.  (Good news in my opinion.)  If you drill down further, you find that almost all of these purchases were in Maricopa County (the Phoenix area) which was hardest hit by the updraft/downdraft in prices.  The Tucson housing market didn’t see the highs, and is now not seeing the lows of Phoenix.  Tucson does not have the same jump in foreclosure purchases.  In fact, Tucson (it is reported) has had 3 months of constant median housing prices – and sort of sounds like a bottom.

So, check your local market to find out what’s happening there.  It could be very different from the national picture.

Medicare and Social Security – you naturally have heard that yesterday it was calculated that these two great programs will go bust earlier than previously thought, like 2017 for Medicare, rather than 2019.  This is a problem that has been known for decades, and our politicians in Washington have diligently avoided it.  (Throw the bums out.)

Will Obama face this problem and solve it?  His first reaction was “no”, but he would tackle it AFTER his nationalized medicine program is in place.

Just so you remember, the kind words say that the Social Security Trust Fund will run out of money.  What is that fund?  Well, it is the money everyone is paying into Social Security, and it is lent out to the government and secured with US Treasuries.  In other words, you Social Security money is NOT going into a bank account; it is being spent immediately by the government, and you are left holding an IOU, called a Treasury Note.  Well – you say – we get interest on the note.  Yes, we do, and guess who paid the interest – YOU DID.  Bernie Madoff got called on his Ponzi scheme, but Social Security is no different.  It is a Ponzi scheme that makes Bernie’s scheme look like a piker.  Money being paid into Social Security pays for those people who are receiving Social Security – sound familiar to Bernie???

The solution won’t be easy.  The age of retirement will need to be extended, and the amount of money being paid in will need to be raised.  Of course, with Medicare the government has the added option of REDUCING benefits – like letting you die instead of receiving a much needed treatment.  Isn’t governing fun!!!!!!!

Here are the last numbers for today:
Dow Jones 30 Industrial – 8285 (down 182 points)
10 Year Treasury Bond – 3.11% (down 0.07%)
Euro – $1.3592
Gold – $926 (up $2)
Oil – $57.88 (down $0.82)
Gasoline $1.69 (up  $0.02)