The Economy Guy

Bonds continue to rally as the “safe haven” for money coming out of stocks.  People are just nervous and selling stocks and putting the money in bonds right now – a “safe play.”

The Dollar had a major rally today, and Gold had a major fall off in price.  Gold is now a BUY – and we bought some in our household today.

Oil and gasoline continue to plummet as a recession is clearly written on the wall.

In the news today….

Everyone is waiting for tomorrow to see what the House will do with the Senate’s bill.  It is no longer $700B, it is now $800B.  It’s so nice to be so rich.  Or, are we??

Sen. Reid caused a run on insurance company stocks today by announcing that an insurance company that everyone knew was at the brink of bankruptcy.

Unemployment claims hit 497,000 last week, the highest since 9/11 (anything over 400,000 is cause for recessionary concern.)  However, don’t get too excited because a lot of those claims came from the hurricane damage areas.

Factory Orders fell 4% last month – a lot more than anyone expected.

Commercial banks have upped their borrowing to $44.5B each day from the FED – this is about a 10% increase, and shows the strains on the banking sector from the liquidity crisis.

UBS has said they will be announcing a quarterly gain for the last quarter.  This is great news for anyone as big as UBS to have turned the “profit” corner.  This could be the first of the old merchant banks showing that things are actually getting better – in spite of their “bellying up to the trough for the bailout slop.”

Food for Thought Today….

Here is the million (or trillion??) dollar question – Will the government bailout actually work?  The core idea is for the government to purchase the toxic securities, and then everything will be hunky dory.  But, what happens if the banks still don’t want to lend to each other?  Is there another shoe out there ready to drop – that the financiers know about, but we don’t know??

For sure, the US is going into an even more severe recession.  As everyone knows, I think we are already in a recession.  But, the government numbers are going to prove it in the 4th quarter.  What does this decrease in spending in the US economy do to our liquidity crisis?  No one is talking about that.

It has been reported that there is a run on safes and guns in the US right now.  That’s because people are worried that when (not if for those folks) they take their money out of the bank, can they protect it??  A run on a bank is not a pretty thing.  Wachovia and WaMu both had “silent” runs on their banks, and that definitely PUSHED them into bankruptcy.  If a bank loses its deposits, it has to rein in loans – and that’s tough right now.