The Economy Guy

Stocks opened up, spent most of the day WAY down, and ended up 33 points.  I call this moving sideways.  Bonds moved sideways too, as did the Dollar.

Oil and gasoline rose a little.

Gold gained $14, and is coming back.  Gold continues to be a “buy”.

Unemployment Rate – rose to 8.1% from 7.6%.  This was an “unexpectedly” high increase.  More waves of layoffs are on the way.  Here’s the job loss trend: Dec – 681,000 jobs, Jan – 655,000 jobs, Feb – 651,000 jobs.  See any trend??  These numbers are just high, and will continue high for at least one or two more months – perhaps longer.  If part-time workers are included in the figures, the unemployment rate is 14.8% – a RECORD HIGH.  The work week is now 33.3 hours – a RECORD LOW.  I still contend that the unemployment rate will be 10% at the end of 2009; and I know I’m in the minority as all the “experts” are predicting the high 8%’s.

Food Stamps – the number of people receiving Food Stamps rose 700,000 people last month to a total of 31,800,000 people.  The total cost of Food Stamps at this rate is $51B per year.  This is a very big number and Food Stamps can be an important program to eliminate starvation in the US; and I just wanted all the readers to realize that one simple program, like Food Stamps, is extremely costly.

Lots of news related to Obama today……

The TWITTER co-founder has been invited to the White House to give his input on the economy, and ways to enhance its recovery.  His comment was “that this must mean they’re “really” out of ideas.”   While his comment must have been a joke (as no one would have been stupid enough to have insulted the White House), it carries a kernel of truth – as all good jokes carry.  TWITTER does not earn any money in the US, so why is he being consulted??  My conspiratorial mind thinks his communication skills will be used to continue spreading the “message.”

The liberal leaning editorial page of the Wall St Journal disapproves of the methods of President Obama.  We are now seeing some real backlash at the “change” that Obama is bringing into the US.  As you know Wall St does not like Obama’s plans for the future.  In particular, it really doesn’t like the lack of any concrete plan to fix the banks – like Citigroup – and it doesn’t like the 10 year plan ending with the largest deficit you could ever conceive of.

If you’ve listened to Obama recently, he has stated that three main programs are needed to solve the economic crisis.  They are energy independence, education and health care reform.  From my way of thinking neither education nor health care reform have anything to do with our economic problems.  Energy independence, on the other hand, is a wonderful goal as the importing of foreign oil has been one of the root causes of the crisis.  However, energy independence as it relates to solar, wind, tidal, etc. won’t even come close to creating energy independence in the next 10 years.  Only drilling more oil accomplishes that together with nuclear, natural gas and coal.  However, all these are off Obama’s list.  Instead, Obama wants to create a carbon tax – and this is just another tax which will slow our economy further.

There are some things that Obama is doing to help our economy.  The FED printing tons of money, and the Congress/Treasury spending stimulus packages all help.  The Obama Mortgage Plan is a step to try to halt the decline in housing prices by keeping home owners in their homes.  However, none of these plans solve the problem.  They are just small steps in the right direction.  The problem remains.  House prices continue to decline.  Banks are bankrupt, but won’t admit it as they won’t value their toxic securities at the price someone is willing to pay – they can’t because they would be put out of business by the FDIC.

From my point of view, what’s wrong with allowing this banks to get destroyed?  Bankruptcy is probably too harsh, but nationalization isn’t harsh – it’s just the government taking the banks over, and then selling off the assets – just like in the S&L crisis era.

The stupid past behavior of Congress forcing banks to take bad home mortgages, and the current behavior in earmarks is just a sidehow – something for the press to talk about.

Obama is presiding over his OWN “Bear Market”.  A bear market is a decline of 20% or more.  Since Obama’s day of inauguration, the stock market has declined 20%.  Can Obama be blamed for the entire 20%??  No, the market was going down no matter what.  However, Wall St is striking back against Obama in the one way that it knows how to be heard.  Wall St, meaning the big money movers in all the markets including Hedge Funds, is selling, selling, selling.  So, you can bet that if Obama’s policies were different – like a concrete plan to fix the “toxic securities” in the banking system – then the decline wouldn’t approach 20%, and wouldn’t be an “official” bear market.  However, let’s look at the facts, and we are in an “Obama Bear Market”.  All the credit and all the blame floats to the top – and that’s Obama.  Oh, by the way, this 20% drop is the fastest drop in stocks for the past 90 years – that’s before The Great Depression.  The total deflation of this 20% decline is $1.7TRILLION – now we’re talking about a lot of money.

The White House continues its battle with Rush Limbaugh, Cramer and Santelli.  During yesterday’s Press Conference, Press Secretary Gibbs said that the White House was just having “fun” with those guys.  The US is in near a catastrophic meltdown, according to our President, and he is wasting time trying to discredit some media entertainers?  That isn’t very Presidential.  It seems to me that the White House should be above this type of battle.  I recognize that previous administrations, including Republican administrations, dealt in this type of wasted effort too.  I don’t condone any of that behavior.  However, it’s even more important during this crisis that the White House stay focused on solving our economic problems.

Here are the last numbers:
Dow Jones 30 Industrial – 6627 (up 33 points)
10 Year Treasury Bond – 2.83% (up 0.01%)
Euro – $1.2639
Gold – $943 (up $14)
Oil – $45.52 (up $1.91)
Gasoline – $1.33 (up $0.02)