The Economy Guy

The stock market started out down, but ended up 93 points.  This week ended way up.  But, don’t get too excited about that.  This last January was the 6th worst January for an overall Dow Jones Industrial loss since 1929.  There have been 9 January’s with a loss, and 7 of those January’s ended up with a loss for the entire year.  A losing January is an excellent indicator that the stock market is going down for the year.  Reader beware.

Bonds gained (lowered their interest rate) again today, as the market still thinks the US economy is getting worse.

Oil and Gold both lost ground.  Oil fell because traders believe the US economy is tanking, and oil demand will be diminished.  Gold fell to $914, but hit $940 during trade today – another new HIGH.

In the news today…..

I smell RECESSION in the air.  Remember that a recession is defined as two quarters (6 months) of negative growth (GDP growth).  You only know you had a recession after being in it 6 months.  That is one of the tricks that our press and politicians use to NOT use the “R” word.  You can just about hear those nay-sayers say, “We can’t be in a recession because we haven’t had 2 quarters of negative growth.”  Sounds logical, but it’s totally irrational.

The unemployment rate went from 5.0% to 4.9%.  Sounds good, right???  Well, it’s not.  The government was just shuffling the deckchairs on the Titanic, hoping it would make a difference. You see once a year (right now), the government rationalizes the number of people who are working (as used in its employment data) to the number of people filing income tax returns (actually working).  This resulted in a decrease in 248,000 people who they thought were working, but aren’t; and this makes the total population of workers smaller than previously thought – and results in the decrease in the unemployment rate.

In reality, here is the data that’s closer to the truth.  17,000 jobs were cut in January.  The expert’s prediction was as “creation” of 70,000 jobs.  This is a sure sign of the “recession” that no one wants to talk about.  This has put real FEAR in the air in the stock market (fear being ignored) and bond market (good news for bonds).

The average hourly wage in the US is $17.25, a 0.2% increase in one month.  The annual rate of increase is 3.7%.

The FED will be auctioning an additional $60B of loans to banks in two sessions during February.  This is being done to “ease the credit crisis.”  These auctions are a clear admission that the US is having a liquidity crisis, and banks need the cash.  Another sign of the “recession.”

OPEC said they won’t increase the supply of oil.  In parallel, oil prices significantly fell today, as the world is seeing the US slip into recession.  OPEC won’t need to increase supply to reduce the price.  The decreased demand will do the same thing.  In other words, OPEC made the right business decision.

Here are today’s Numbers:
Dow Jones 30 Industrial – 12,743 (Up 93 points)
10 Year Treasury Bond – 3.60% (down 0.04%)
Euro – $1.4799
Gold – $914 (Down $15)
Oil – $88.96 (Down $2.79)
Gasoline – $2.28 (Down $0.07)