The Economy Guy

Stocks tumbled today on worries of the European (Greek) debt problems, and the strikes by Greek government workers.  Bonds moved sideways.

The Dollar surged to new highs, and gold, oil, gasoline all fell precipitously.  I’ve never seen gold fall so far so fast, as I did today (down over $50 at one point).  Getting close to a buy.

In the news today…..

Rentals – vacancy rates for homes are at 2.7% (from 2.6%) nationally, and for apartments are at 10.7%, down from 11.1%.  We normally don’t see these types of statistics, and they are interesting to note.  How do you interpret these numbers?  Well, a little common sense – homes are desired more than apartments, and more people are moving into apartments as the economy tightens its grip.

Bank of America – good news that they will be hiring 2000 people.  These new hires coming over the next 2 years will be there to do financial wealth management for B of A’s wealthier clients.  They let all there talented folks go last year.  The bad news is for people who are investing with Bank of America – do you want a newbie handling your account?  I wouldn’t, and that’ my opinion.

Toyota – is being probed by the US Government over its braking problem.  This leads to direct questions on whether or not there is a conflict of interest in having General Motors owned by the US Government.  While I hope the auto safety probes are not politically motivated, you can’t know for sure.  This is one of the reasons I have advocated against government ownership of anything private.

Moody’s warns US Government – that its $3.8TRILLION budget for 2010 doesn’t really help pay the debt off, and even makes it worse.  So Moody is warning that the US could lose its AAA rating if this type of action continues.  Bad news for us all.  Even if Moody’s (who was part of the BIG PROBLEM we had) can’t be trusted for its judgment, we should heed this advice.

OMB Projections – are VERY SCARY.  First of all, the OMB is generally optimistic in its projections.  So, you must consider these guesses as way too optimistic.  But, here is one of their latest projections.  The US Government will have continuous deficits for the next 70 years.  Yes, you read that right – SEVENTY YEARS.  Now does this put the dilemma of the US into perspective?  That one projection guarantees that inflation is coming.

California Teachers Pension Fund – is $43B short.  Yes, $43B.  Now, that’s a lot of money.  I’ve warned that pension funds are underfunded in general after the big meltdown.  This is just a warning to you.  My cynical side would say that the teacher’s union isn’t looking out for its members too well.  My compassionate side would feel very sorry for the teachers who won’t receive their full pension.

US Treasury and US Labor – looking at YOUR 401K and IRA.  Here is a direct quote.  I have been warning about your money, and worry about not letting big brother getting its hands on it.

The Department of Labor and the Department of the Treasury (the “Agencies”) are currently reviewing the rules under the Employee Retirement Income Security Act (ERISA) and the plan qualification rules under the Internal Revenue Code (Code) to determine whether, and, if so, how, the Agencies could or should enhance, by regulation or otherwise, the retirement security of participants in employer-sponsored retirement plans and in individual retirement arrangements (IRAs) by facilitating access to, and use of, lifetime income or other arrangements designed to provide a lifetime stream of income after retirement. The purpose of this request for information is to solicit views, suggestions and comments from plan participants, employers and other plan sponsors, plan service providers, and members of the financial community, as well as the general public, on this important issue.

This means that Uncle Sam is eyeing your TRILLIONS of Dollars, and wanting to convert them into annuities.  Why would they want to do that?  So, you can buy the US Treasuries that must be sold to keep America afloat.  Sounds good – sort of, doesn’t it?  Well no, not to me.  When, not if, inflation hits, your annuity won’t be worth the paper it’s printed on.

Tonight’s Dinner Conversation……

Housing – what a wonderful topic.  What has changed?  Remember those good old days when prices were going up?  Well, do you also remember how easy it was to get a loan?  You’ve also probably heard that it’s really tough to get a mortgage right now – right?  Well, the requirements for a home mortgage have certainly significantly increased.

But, is it all that different right now?  I just read where someone got a conforming loan (that’s one that will be guaranteed by the US Government), and they DIDN’T HAVE TO HAVE AN APPRAISAL.  Yes, you read that correctly – no appraisal.  Why?  Because the mortgage company was going to sell the mortgage in a day or two, and then YOU would be taking the risk as the taxpayer.  This is just like the good old days.

So, in reality, even though there is a lot more regulation, nothing has changed.  We are driving down the mortgage highway, just as before.  We drove off of the cliff before, and not we are driving faster, and it’s raining.  Where is the Congress to protect the US economy?  Throw out all these scumbags – they are asleep at the switch.

And, if you didn’t think that was bad enough.  Fannie and Freddie have hundred of billions in losses built up on their books – I think it’s about $800B.  The amount is increasing every day.  Since the US Government owns these institutions, and they are nothing more than another Federal Agency – why doesn’t this loss carry over to the US Budget?  Why aren’t we showing this $800B in the budget deficit calculation?  Politics, of course.  But, it is coming.  Congress is just NOT RESPONSIBLE in its actions.  So throw these scumbags out.

Here are the last numbers for today:
Dow Jones 30 Industrial – 10,002 (down 268)
10 Year Treasury Bond – 3.61% (down 0.03%)
Euro – $1.3762 – Dollar gains about 1.5 cents
Gold – $1064 (down $48)
Oil – $73.10 (down $3.88)
Gasoline – $1.95  (down $0.09)