The Economy Guy

Issue: 11/28/07 Wednesday

Today was the day for the stock market.  Yesterday the Dow went up 215 points, and today it went up an additional 331 points.  The sentiment that pushed the market up was a “hint” by one of the Fed members that the Fed Funds will be decreased by 0.25% on December 11th.

Here’s what I think about today’s stock market.  The bond market has already discounted the reduction in the Fed Funds rate.  The stock market players just don’t listen to bonds, so they just got the message.  I think stock market players are just plain slow.

The stock market players listened to only one news piece.  It didn’t listen to two other “negative” news issues.  Existing home sales continue to decline, and shoppers are buying less this year compared to last year.  The sale of “durable goods” (things like refrigerators and TVs) fell 0.4% last month – another sign of a slowing economy.

My conclusion is that the stock market is showing some “exuberance” – not too “irrational”, but questionable.

Another piece of good news is that oil is dropping in price quite quickly.  It’s down to about $90 now, and let’s wait to see where it stops.  Gasoline is also falling, but not enough yet.  It fell $0.10/gallon yesterday, and it needs to drop another $0.28 before I start to feel more comfortable, and my rage gage stops pegging.  Gold fell a little, and currencies moved sideways.

All in all, it should be a very interesting week in stocks.  I can’t be surprised by anything happening.  Two big up days should be followed by either a down day, or a sideways day.  But I’m not betting on it.

Do you know what caused the Great Depression – and how this will affect you today?  Do you want to know the similarities between then and now?  Do you want to learn how the Federal Reserve worsened and prolonged the depression?  Do you want to know what legacies we are paying for today because of the depression?  Sign up (if you haven’t already done it) at economyguy.com, and you will be notified when a live FREE teleconference will be held in January.  Tell your friends and relatives too.  You’ll be doing them a favor.

Here are Wednesday’s closing details:
DJ30 – 13,289 (Up 331 points)
10 year US Treasury Bond – 4.03%  (Up 0.08%)
Euro $1.4843
Gold closed at $807 per ounce.   (Down $14)
Oil Closed at $90.62 (Down $3.80) – this was a significant drop in price
Gasoline is $2.28  (Down $0.10)