The Economy Guy

Stocks and bonds went sideways – I guess everyone is exhausted from the past few days of frantic activities.  However, once these players catch their breath, anything can happen.

Oil pulled back to about $90 a barrel – and that’s good news.  If it could stay at that level, gasoline would start coming down in about a month from now.  We’ll see.  Gold pulled back $19 as people took profit from the big recent run up.  The Euro pulled back from testing its all time high, and is now resting at an expensive $1.4650.  I expect some movements in currencies in the next few trading days.

In the News…

The Consumer Price Index (CPI) for all of 2007 was up 4.1%.  Now that’s a big number.  The “core inflation” was only 2.4% – so people are saying the Fed is happy, and not worried.  (Core inflation excludes food and energy from the calculation.) Let’s think about that a minute.   If during all of 2008, the core inflation stayed at 2.4%, and food/energy prices didn’t move up or down, then the CPI would be 2.4% (as the food and energy would neither add nor subtract from the calculation.)  However, everyone would still be paying $3.00 per gallon for gasoline, plus today’s food prices, plus all other energies.  So, if the Fed acts as if inflation just DIDN’T happen, they are wrong, and you are being misrepresented.  Watch for this type of misguided logic in the press.

The Fed Beige Book was released today.  It is a compendium of the economic activity in the 12 Fed Districts in the USA.  The conclusion was that growth was continuing, but was slowing down.  Nothing in the Beige Book contradicts any possible Fed decision to lower the Fed Funds rate by 0.50%.

It is rumored that the next market crash to hit our financial institutions will be delinquent credit card payments.  To put this in perspective, if the delinquencies increase significantly, you will continue to see banks declare multi-Billion-dollar losses.  Companies like Citibank might not survive an onslaught of credit card delinquencies.

For those of you in the housing business, the 30-year fixed rate mortgage is 5.62%, and the 15-year fixed rate mortgage is 5.07%. It could be time to start thinking about refinancing your (higher than 5.62%) mortgage.  Also, if we actually enter a recession, those mortgage rates could easily get even lower.  Here is a spot of happiness for all of you with good credit scores.

Here are today’s Numbers:
Dow Jones 30 Industrial – 12,466 (Down 35 points)
10 Year Treasury Bond – 3.71% (Up 0.01%)
Euro – $1.4650
Gold – $882 (down $19)
Oil – $90.84 (down $1.00)
Gasoline – $2.28 (down $0.05)