The Economy Guy

All the markets jumped today.  Even the stock market – it started out with a big 100 point up, but ended down at the end a little.  The stock market finally smelled the inflation scare.

The 10 year Bond Market jumped (in interest rate) again ending up near 3.9%.

Oil jumped over $100 and gasoline jumped way up too.  These moves were justified (in the minds of the traders) because of a refinery fire in Texas.  You are now paying more for gasoline.

Gold made a major move up, and could close in on its all time high tomorrow.

The Euro started it move forward, but the Yen and Pound are moving sideways.

In the news today….

The UK Government took over management and ownership of the Northern Rock bank.  They had the UK version of the sub-prime meltdown.  It’s been a long time since a bank was nationalized.  The UK Government couldn’t come to a negotiated settlement with any of the potential buyers of the bank.  In other words, no buyer wanted to take on the unquantified risks of the bank securities.  The bank owes the Bank of England (who bailed it out in the last 3 months) about $110B.  Shareholders will be paid what the bank is currently worth – that means they probably won’t get anything!!!!!!!

Credit Suisse has finally admitted it has a sub-prime mortgage problem (just like UBS), and has overvalued its “assets” by $2.9B.  This is a great example of how the bad news keeps seeping out over time.

The FED is lending banks money at $60B every two weeks.  The banks offer their “securities” as collatoral, and they borrow against it.  It is rumored that banks are now putting up the “rubbish and garbage” that no one else will purchase from them.  That means the FED is now holding the (garbage) bag.  This is a very bad place for the FED to end up.

I am currently thinking about writing a special report, or teleseminar, on the possibility of inflation in the US economy.  If you think this is worthwhile, leave a comment on the blog site.  I want to cover the measurements that the US Government is currently and historically using for inflationary measures and monetary growth.  I believe you would be shocked at what I’ve found.  While the official measure show we don’t have a problem, my senses tell me that we will be having a problem later this year.  I think you would also want to know what you can do to protect and/or gain from an inflation.

Here are today’s Numbers:
Dow Jones 30 Industrial – 12,337 (Down 11 points)
10 Year Treasury Bond – 3.88% (Up 0.10%)
Euro – $1.4728
Gold – $930 (Up $24)
Oil – $100.01 (Up $4.51)
Gasoline – $2.60 (Up $0.10)