The Economy Guy

Stocks and bonds sort of moved sideways today, trying to understand the news – which they didn’t.

The Dollar went sideways too.

Gold and Oil had large decreases in price today, and to be honest with you, I don’t understand why this is happening, other than normal trading by speculators.

In the news today….

The big news today is the Secretary of the Treasury Paulson came out and said that the FED should be in charge of regulating all those agencies that screwed up so much during the housing bubble.  In other words, the FED should be in charge of the mortgage industry, financial institutions like merchant banks, etc.

Do you think it’s a good idea to have (ex-Goldman Sachs head) Paulson making up these rules???  I don’t.  Here’s why.  It’s too much like letting the rabbits carry the lettuce.   Do you really think that Paulson would put onerous rules on Goldman Sachs???  Well, he isn’t.  Get that really straight.  He isn’t.

If you can stay awake while reading his recommendations, you will come to the conclusions that if ALL his recommendations are instituted, THEY WOULDN’T HAVE STOPPED THE HOUSING BUBBLE AND SUBSEQUENT SUB-PRIME MORTGAGE MELTDOWN.  How good can all these new regulations really be????

The fact that the FED is coming out and saying we need all these regulations means that we are in DEEP SHxx TROUBLE.  I hope it is obvious to all EconomyGuy readers that there is something desperately wrong with our system.

The one area that needs the most regulation is the Futures Market.  Today’s Futures Market is too much like the wild west.  The SEC is in charge of this market, and the FED isn’t.  The FED needs to be deeply involved as the combination of money supply and futures market. Together they are incendiary, and should be regulated by the same body – ergo the FED.

Also in today’s news….

The FED is studying the “Nordic Bank” solution as an alternative to how to “take over” those banks that are slipping into an illiquid bankruptcy.  The Nordic countries had many of their banks go under in the 90’s, and solved the problem by nationalizing the banks.  The Nordic Bank solution guarantees that shareholders receive NOTHING from a bailout and ALL THE SENIOR MANAGEMENT is fired.  Sounds good to me, as the shareholders are responsible to holding the management accountable for the performance of the bank.  If they fail in that duty, they should pay the ultimate price.

Citibank is splitting off its credit card operation from its consumer banking operation.  Why would it be doing that???  Not obvious to me except that today its credit card operation is probably more healthy than the rest of the bank.  In the future, it should be as spoiled as the banking side.  The only thing I can guarantee is that some senior managers will make a fortune out of splitting off the operation.

Did you notice that the price of corn has gone up this year???  Well, next year farmers are going to grow 7% less corn, and grow more soybeans – as this will be more financially lucrative for them.  That should mean that corn prices will shoot through the roof, as the biofuel producers bid up corn prices.  Also, corn is a major feed component for cattle and other livestock.  Watch those prices go up too.

Here are yesterday’s Numbers:
Dow Jones 30 Industrial – 12,263 (Up 46 points)
10 Year Treasury Bond – 3.43% (Down 0.03%)
Euro – $1.5787
Gold – $922 (Down $15)
Oil – $101.58 (Down $4.04)
Gasoline – $2.63 (Down $0.09)