Some Current Indicators
Stocks showed amazing volatility starting up several hundred points, falling to negative several hundred points, and ending up 401 points. Wow – how would you like to trade with that much volatility going on? The news wall all negative – so the action was driven by irrational thinking – not facts.
Bonds remained faithful to the negative news, and gained on the news – with interest rates falling. The Dollar moved sideways.
Gold fell $35 and is a massive buy price right now. It could drop as much as another $35 where support should stop the fall.
Oil and gasoline continue to disintegrate in price. You will be seeing such cheap gasoline prices in 2 weeks that you’ll want to drive across the US – just to celebrate. Prices where I live are currently $2.99/gallon, but should be $2.00 given the wholesale price of $1.62.
In the news today…..
The Philadelphia Reserve Bank released its industrial outlook for its region, and industrial activity was WAY DOWN – and this was very scary to the market in the morning. The report points to a recession TODAY in that region. I tend to downplay regional reports, but this one was significant and was a market mover as well.
The availability of Commercial Paper (short term notes that companies use to keep themselves afloat) fell for the 5th week in a row. This is an excellent measure that the Treasury and FED actions are not working at the Commercial Paper level. A continued downward spiral of this market will close down corporate America. Watch this spot for a recovery in our banking system.
Unemployment claims were 461,000 last week. This continues to point to a recession in America.
The Consumer Price Index (CPI) fell 0.1% in August and was LEVEL in September. Great news for the government’s war against inflation – if you believe this number – but, another sign of the recession that’s gripped America.
Social Security benefits will be increased by 5.8% in January – the biggest jump in payments in a very long time. The 5.8% is calculated from the CPI for the past year, and is a much better indicator that inflation has pushed priced much higher than anyone wants.
Industrial Production fell 2.8% across America, but this number is suspect because it is strongly influenced by Hurricanes Gustav and Ike.
Citibank wrote off $4.4 in bad debts last quarter, and had a loss of $2.8B in addition. Not good for Citigroup. Drip, drip, drip.
Merrill Lynch wrote off $12B last quarter, and has a loss of $5.2B in addition. Drip, drip, drip… Merrill Lynch was purchased by Bank of America, so this isn’t very good news for BofA either.
Tonight’s Dinner Conversation…..
Here are some current indicators of our economy. What do think they forebode???
- The 30 Year Fixed Rate Mortgage is now 6.70%. That a massive jump in one week – and makes MORE houses unaffordable as potential buyers would have to pay BIGGER mortgage payments.
- GMAC is now requiring a FICO score of 700 to give a potential auto buyer an auto loan. This cuts out 40% of potential GM buyers.
- One of the provisions of the 529 Student Savings Plan is that you cannot reallocate the investment more than once per year. If you have already reallocated once this year, you are stuck in this lousy market – watching the college money evaporate. There is one loophole you should know about – if you change the beneficiary of the plan, you can reallocate at that time.
Here are Today’s numbers:
Dow Jones 30 Industrial – 8979 (up 401 points)
10 Year Treasury Bond – 3.93% (down 0.08%)
Euro – $.3471
Gold – $805 (down $35) – a Buy with Both Hands Signal – price support at $770.
Oil – $69.85 (down $4.69)
Gasoline – $1.62 (down $0.16)
Hi Tom. Always great informtion from you! Could you spend some time in one of you columns about how we really got into this mess? I have been told it really goes back to Janet Reno and President Clinton, who forced Fannie May and Freddy Mac to lower their standards of who could “afford” to buy property. Can you please elaborate on that, verify or reput it for me? Thanks.