Trillion Dollar Loss
The stock market can be so much fun. Today was one of those days as stocks didn’t like the housing data and plunged 283 points. Bonds did its thing, and you should be getting used to bond and stock values going in opposite directions, as interest rates fell to just above 4%.
The Dollar and Gold stood still today.
Oil and gasoline climbed a little – if you think $1/barrel to be “a little” - as rumors of major oil derivative company in Tulsa going bankrupt.
In the news today…..
Existing home sales fell 2.6% from May to June. This is the news that rattled stocks today. The stock market was expecting a slightly smaller fall in sales. From my own viewpoint, 2.6% doesn’t seem like a big drop in sales volume – does it to you?? Also, EconomyGuy readers are totally aware of the forces at work moving the housing market lower. These forces have not changed one iota.
Unemployment claims rose 34,000 last week to 406,000. Remember my arbitrary opinion that anything over 400,000 unemployment claims was VERY BAD news for the economy, and was a continuing pointer to our recession.
The new Minimum Wage Law came into effect today with minimum wages rising from $5.85 to $6.55/hr. Here is an interesting thought for you – 40 years ago the minimum wage was $10.06 if you adjust it up for past inflation. That means that anyone trying to live on a minimum wage is much worse off today than in the past. Also, remember that this upward adjustment will be hitting many small businesses across the USA, and each of these businesses will be making their own economic adjustments in the near future – and those decisions will only push us deeper into our recession.
Spain adjusted its GDP forecast down to 1.6% per year because of the recession gripping that country right now. I’ve included Spain as an example of just how international a recession can be.
The CEO of PIMCO (the world’s largest bond dealer) stated today that there are $5Trillion worth of US mortgages that are currently in the category of “risky.” He predicts that $1Trillion of these mortgages will default before the housing crisis turn the corner. Putting his comments into the recent world of Fannie/Freddie who hold half of the US mortgages, that means that Fannie/Freddie will be accepting the loss of $500B (half of the $1Trillion) in the next few years – and more to the point of how that affect YOU – the US taxpayer will be picking up that tab as it is presented. (I hear the US Mint is looking for volunteers to carry the new money being printed to banks because there’s just so much of it – just kidding.)
Here are today’s numbers:
Dow Jones 30 Industrial – 11,349 (down 283 points)
10 Year Treasury Bond - 4.02% (down 0.13%)
Euro - $1.5680
Gold - $923 (no change)
Oil - $125.49 (up $1.06)
Gasoline - $3.03 (up $0.03)
