Wow!
WOW!!!! Stocks closed under 8000 today – falling 427 points. This is a VERY BAD sign for the stock market. This means that the recent lows were tested – 3 times – and failed to hold. The bottom is going to be MUCH lower than today’s level. The next stopping point is 7000, but isn’t very strong. A stronger point is 5700. Does that scare you?
Bonds gained massively today (decreased interest rates) falling well below 3.5% to 3.4% for the 10 Year Treasury. Mortgage rates have been rising lately with the 30 Year Fixed Rate being around 6.5%. This sudden decrease of the 10 Year Treasury should stop that rising rate, and should also start lowering the rate. The 2 Year Treasury today hit a level that hasn’t been seen for 30 years.
The Dollar strengthened (as people continue to flock to the Dollar) as the stock market collapsed.
Oil and gasoline continued their collapsing prices with oil now under $54/barrel. Gasoline should be getting much cheaper at the pump throughout November.
Gold was counter to the trend, and closed up slightly. It was up massively earlier in the morning. Gold is poised to break out into higher territory provided the stock market does not continue its straight line plunge in value.
In the news today…..
The Consumer Price Index (CPI) fell 1% in October. THIS WAS THE BIGGEST FALL IN CPI EVER. I am very excited about this because this is a real measure of DEFLATION. The cause of the drop was lower energy prices – no surprise there. In fact the CORE inflation rate was negative 0.1% - that’s without energy and food. And food actually had a positive inflation impact – in other words food costs more in October. This means that when oil stops dropping like a rock, inflation will grip the United States and you will immediately forget about these bad times – because they will just get worse. Sorry for the bad news, but that’s what coming.
More on DEFLATION – If you look at the S&P 500 stocks, you will see that they have lost $6.7 Trillion (that Trillion) from their high mark in October 2007 – that’s just 13 months. This $6.7Trillion went to “money heaven”, and is a deflationary (a reduction in the money supply) drag on the economy. The US Government has not put as much money into the economy as has gone to “money heaven” so the overall NET situation today is DEFLATIONARY, and the CPI report confirms this. My recent count is that the US Government has put $5Trillion into the US Economy through its stimulus and bailout policies.
Housing Construction annual rate of 791,000 houses was reached in October. This is the SAME RATE OF HOUSE BUILDING AS IN the 1950’s. I view this as very good news – unless you’re in the housing industry. The number of new houses must be very small to minimize the amount of supply coming onto the market – as the total housing supply is still so high that house prices continue to decline.
The FED signaled another Fed Funds Rate cut today. Get ready for cheaper money.
Tonight’s Dinner Conversation….
Have you noticed over the last few weeks that I’ve said “lowest since xx years,” or something similar??? I hope this is starting to trigger some thoughts in the back of your mind. Like - “Is this a new record?” “Is this going to get worse?” “Is this the way it was back in the Great Depression?”
My take is that we are in such an EXTRAORDINARY situation right now that we are living through something that the grandchildren of the youngest people living today will be talking about when they are retiring – that’s 80 years from now.
We won’t be comparing this event to The Great Depression – it will be it’s own point in history.
Here is the question for tonight. What would you NAME this era – something that describes it for posterity!!!! As economyguy readers, this will put you WAY AHEAD of the deadheads on the TV trying to tell you what’s going on.
Here are Today’s numbers:
Dow Jones 30 Industrial - 7997 (down 427 points)
10 Year Treasury Bond – 3.39% (down 0.14%)
Euro - $1.2495
Gold - $735 (up $3)
Oil - $53.62 (down $0.77)
Gasoline - $1.11 (down $0.03)
