The Dollar, Dubai and Debt
Stocks were up slightly today, and bonds moved sideways in its trough.
The Dollar, Gold, Oil and gasoline all moved sideways today too – very boring.
In the news today….
Foreclosures – will hit 3.9 million in 2009. This compares to 3.2 million in 2008. While the number is growing, the price decline in 2009 is significantly better than in 2008. Remember that house price stabilization is my KEY economic indicator for this recession. If house prices continue to decline, foreclosures will continue in significant numbers and bank stability will become worse. Those toxic securities that brought down the banks, and then the whole US economy, are still out there, and are still tied to people paying their mortgages.
Goldman Sachs – today said its top executives will NOT receive cash bonuses this year, but instead will receive company stock that it cannot sell for 5 years. Now this is a sure sign of the Wall Street reform that is sweeping through boardrooms, and is influenced by shareholders, and is a real sentiment with the general public. Excellent – this is the type of incentive pay that works for everyone in my opinion.
TARP extended one year – by Geithner writing a letter to Congress. (Yes, he had the authority to do this.) What was his motivation? Was it political? I don’t know, but what I do know is that the banking sector (the purpose of TARP is to hold up the banking sector) is still weak. So, if you think that banks are now just hunky dory – think again because Tim Geithner just voted against that attitude. Naturally, all those news sources are saying that banks are OKAY because they are paying back their TARP – but, that’s because they don’t want the US government sitting at the same table during a Board meeting.
GM continues to clean house – by getting rid of its Buick and Chevrolet brand executives. This is after getting rid of the European executive. This is probably the only way that the new GM Board can get rid of the old “GM culture.” Old GM was very incestuous – you worked your whole life at GM, and then moved up the management ranks. The new GM is bringing people in from the outside.
US Trade Deficit – was $32.9B in October. The deficit has been declining for the past 6 months straight. That’s good news. But, it isn’t good enough. The US cannot expect to trade with the rest of the world at a DEFICIT and expect the rest of the world to go along with it forever. Eventually, this must become balanced trade or a surplus trade. What does it take to get there? Increased exports and decreased imports – simple How is that accomplished? A weaker Dollar would help enormously – I wonder if that’s the FED’s plan?? Lower labor wages would help – I wonder if that’s Congress’ plan?? Less money to buy (more expensive) imports would help – I wonder if this is the FED and Congress’ plan??
My Opinion of the Dollar and Gold…..
The Dollar – is currently strengthening, and it might continue for the medium term. It started strengthening with the Dubai bankruptcy and continued with the Greek sovereign debt downgrade by Moody’s. My opinion is that these events were not “crises” and therefore, they didn’t cause a “flight to safety” in terms of people buying Dollars. More likely, there were large short coverings in the Dollar – in other words, people who had shorted the Dollar were caught with their pants down when Dubai and Spain happened – and had to cover those shorts (covering a short is the same as buying the asset – Dollars in this case.) It is very possible that the Dollar will continue to strengthen over the next 3 to 12 month. However, I am firmly in the camp that the US FED is debasing the Dollar more than other governments are debasing their currencies and the Dollar will ultimately continue to fall. The US Government has chosen to have the HIGHEST deficit ever recorded in WORLD HISTORY – and it isn’t clear at all how the US will pay off that deficit. Inflation is very tempting to any government, and our politicians have proven time and time again to take the “easy” way out.
Gold – has taken a $100 hit (from $1225 to $1125) after having an unsustainably fast rise. All (ALL) market which go straight up consolidate (that means goes down) and then either go up or go down. I’ve told you my personal plans for Gold, and that is buy back into this market after the price declines below $1100/ounce. If it happens to go below $1000/ounce, I believe Gold would become a VERY good buy. Will Gold continue to go down? I don’t know. However, I have my personal plan.
Tonight’s Dinner Conversation…..
Where will we get the jobs from? I was listening to a radio talk show this morning, and was surprised to hear that 71% of all jobs created in the US in 2009 were created in Texas. Now I find that amazing. Do you? How does Texas accomplish such greatness in the teeth of this recession?
The explanation given was that about 3 years ago Texas started to provide a state service for new companies being formed. This hand-holding service would be a sort of concierge to help pamper the way through the state’s bureaucracy – with the goal of getting all the required state bureaucratic processes complete within one month. (Some other states take years depending on the business!!!) In addition, Texas has a business tax structure that is very friendly. So, you can say that Texas is “Business Friendly”.
Also, the citizens of Texas have sort of a maverick attitude, and the following photograph aptly depict that attitude.
Texas Nobel Prizes
Most of you know that I don’t have a lot of respect for the lack of morals and lack of accomplishments in Congress, and that I espouse that we should “Throw the Bums Out” at the next election. And, I mean ALL of them – every single one. Would we be throwing the baby out with the bathwater? I don’t think so; we will have a bunch of new babies that we need to “raise.”
Here are the last numbers for today:
Dow Jones 30 Industrial – 10,406 (up 69 points)
10 Year Treasury Bond – 3.48% (up 0.06%)
Euro – $1.4733
Gold – $1132 (up $1)
Oil – $70.54 (down $0.13)
Gasoline – $1.84 (down $0.02)