Watch Out Below
Stocks crumbled today, down 300 points, as traders are sick and tired of waiting for the government to decide how it is going to value the toxic securities in the banks. AIG declared a $63B loss, and got a $30 additional bailout loan (story below). The world stock markets fell today before Wall St fell. There is no bottom in sight for this stock market, and it could go much lower as the bad economic news trickles out. A couple of weeks ago, I declared we are in a new bear market cycle, and “watch out below.”
Bond interest rates fell today as safe haven buying ensued from the stock players.
The Dollar moved sideways.
Oil and gasoline fell dramatically, stopping the recent rises in oil.
Gold fell a little, as people took some of their profit to balance their stock losses.
In the news today….
Stock markets around the world fell today. The US was no exception. The main worry is the strength of the banking system, and the continued bailouts of “key” organizations, like AIG, who are too big to allow to fail.
AIG has been given $150B in bailout money so far. Today it is being given an additional $30B. The CEO of AIG said he thinks he will need more money in the future. Why?? Well, the main business of AIG is insurance, and they insured those “toxic securities” which are falling in value each day – so their future is not too bright.
The government now owns a majority of AIG, so why don’t we just “nationalize” it as we are guaranteeing its losses anyway? Politics is the answer to that question.
As part of the new $30B bailout money, we also reduced the interest AIG is paying of the previous “loans.”
Consumer Spending rose 0.6% in January. Don’t hold your breath, as I predict it will fall in future months. The biggest contributor to this increased spending was on food. Think about that a minute – are people starting to buy in food for the upcoming hard months?
Personal Savings rose to 5% in January. This increase is as I believe will continue to happen. The savings rate should get back to 9% or higher before we’re done with this crisis.
Here are the last numbers:
Dow Jones 30 Industrial – 6763 (down 300 points)
10 Year Treasury Bond – 2.92% (down 0.12%)
Euro – $1.2577
Gold – $940 (down $3)
Oil – $40.15 (down $4.61)
Gasoline – $1.29 (down $0.09)