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Weekly jobless claims dip 6000 to 462000 - MarketWatch
BEFORE THE BELL: US Stock Futures Lower On China Inflation Worries - Wall Street Journal
Mexico's Slim becomes 'world's richest' person - The Associated Press
Trade gap narrows unexpectedly in Jan. - MarketWatch
SNB Leaves Rates, Swiss Franc Strategy Unchanged - Wall Street Journal
![Freakonomics[Revised and Expanded]](/images/21xRHBWYYML.jpg "Freakonomics[Revised and Expanded]")
This Traveler IQ was calculated on Monday, December 14, 2009 at 12:15AM GMT by comparing this person's geographical knowledge against the Web's Original Travel journal's 4,891,786 travelers who've taken the challenge.
The economy shrank at a 6.3 percent pace at the end of 2008, the worst showing in a quarter-century.
More than 5.5 million are getting jobless benefits
As usual major media news outlets put a positive spin on a the negative news this morning. I think this short term bear market rally will be coming to close soon. Then we are off to testing new lows.
With all the recent Fed actions, is there any one who here believes that inflation will not go out of hand in the near future? While I don’t think that we will see double digit interest rates, I do expect rates to trend higher (8-9%) within a few years.
I recently came across this blog post that shows a historical chart of the Fed Funds Effective Rate between 1954 and 2008. Paul Volcker, the Fed President at that time had to raise interest rate all the way to 20% to fight off inflation. But that drove the economy into a deep recession.
I recommend reading The Bear Facts for a look back at the early 80’s.
As an investor you would naturally ask how do we tackle inflation? What is the best way to invest in the inflationary environment?
This article posted on Global Economic Trend blog gives some ideas
# In hyperinflation the last place one wants to be is in cash.
# Commodities in general are a standout.
# Gold is a standout.
# Precious metals are a standout.
# Property is a winner.
# Equities are a winner.
# Treasuries are distinct losers if not an outright short.
# Foreign currencies
# Energy
I recommend investors to consider the following stock investments
1) Vanguard Precious Metals and Mining (VGPMX)
It’s down 66% from peak. I think this is a great safe way to play precious metals. The fund recently added Newmont Mining (NYSE:NEM).
2) Double Gold Long (DGP)
DGP has been performing well recently since Fed’s announcement of backing Mortgage treasury bonds.
Also while you are there, take a look at this article.
Gold railles to near $960 an ounce on Fed’s announcement.
3) U.S Oil Fund (USO)
As Oil continues to perform well, USO is a great fund to be in. Fed’s recent action not only helped Gold, but also Oil and other commodities.
As of Feb 2009
300M Number of Americans
3.19 Average Family Size
93.65M Available “Family units”
126M Housing Units Available
32M Excess Homes on Market
11.6M Total Unemploymed people (pop size of Ohio)
http://finance.yahoo.com/tech-ticker/article/204158/The-American-Economy-What-the-Jobs-Housing-Numbers-Really-Mean?tickers=^dji,^gspc,XHB,SPY,DIA,QQQQ,IVZ
Interesting stats from White House on our past budget and future projections.
BUDGET YEAR SURPLUS OR DEFICIT (-) AS PCT OF GDP
2008 -$459 bln -3.2
2007 -$162.0 bln -1.2
2006 -$248.2 bln -1.9
2005 -$318.3 bln -2.6
2004 -$412.7 bln -3.6
2003 -$377.6 bln -3.5
2002 -$157.8 bln -1.5
2001 $128.2 bln 1.3
2000 $236.2 bln 2.4
1999 $125.6 bln 1.4
1998 $ 69.3 bln 0.8
1997 -$ 21.9 bln -0.3
1996 -$107.4 bln -1.4
1995 -$164.0 bln -2.2
1994 -$203.2 bln -2.9
1993 -$255.1 bln -3.9
1992 -$290.3 bln -4.7
1991 -$269.2 bln -4.5
1990 -$221.0 bln -3.9
Recent budget projections:
White House, released Feb. 26:
2009 -$1,752 bln -12.3
2010 -$1,171 bln - 8.0
2011 -$ 912 bln - 5.9
2012 -$ 581 bln - 3.5
2013 -$ 533 bln - 3.0
2014 -$ 570 bln - 3.1
The National Bureau of Economic Research said Monday that the U.S. has been in a recession since December 2007, making official what most Americans have already believed about the state of the economy .
http://biz.yahoo.com/cnnm/081201/120108_recession.html
10/08/2008
U.S Fed leads global coordinated rate cut, eases by half point to 1.5%
Bank of England cuts from 5% to 4.5%
ECB cut by a half-point to 3.75%
China cut by 27 basis points
http://biz.yahoo.com/rb/081008/business_us_interestrates.html
10/07/2008
Hong Kong cut base lending rate by 1% point
10/06/2008
Japan holds rates steady, notes mounting Global crisis
Australia rate cut stuns, markets thirst for more
http://news.yahoo.com/s/nm/20081007/bs_nm/us_financial_centralbanks
We at VitalTrends.info applaud the FED decision in leaving the Fed Funds rates intact at 2 percent.
The U.S. central bank’s unanimous decision leaves the interbank overnight federal funds rate at 2 percent, where it has been since April. It said “downside risks to growth and the upside risks to inflation are both of significant concern,” surprising many in financial markets who had expected the Fed to signal greater worries on growth.
http://biz.yahoo.com/rb/080916/fed_rates_decision.html
Hasn’t our Government done enough to amplify the current credit crisis? I just read on Marketwatch.com that market increased the bets on a rate cut tomorrow when Federal Reserve board members meet. This will be the stupidest thing to do in this ever-sensitive market environment. I strongly believe that this is not a prudent way to resolve the current situation. Politicians and Govt officials alike are really good in putting band-aids (short term solutions) to issues. This is more than likely not going to work in the longer term. Japan was a case in point. In the midst of a post-real estate bubble burst in Japan in the mid 80s, Japan cut the rates aggressively which they thought at that time will pull the economy back from the doldrums. And we learned from the history that was a huge mistake. Japan has been in Deflationary mode in the last decade or so.
Interest-rate futures have jumped as the market showed signs it expects the Federal Reserve to reduce its benchmark rate at its meeting to 1.75% from 2%.
If we want a full recovery, Fed or Treasury should avoid intervening the markets on a daily basis. Let the market figure it out. It will take time but eventually things will return to norm. We have accumulated ton of toxic debts in the last few years. It can’t be cleared out over night. Fed’s actions will only guarantee to make the markets more volatile, reduces further confidence in managing this global crisis and in our free market capitalism.
Currently, Dow and S&P futures are indicating a much lower opening tomorrow. If Fed cuts the rates before the bell, buckle-up we are in for another wild ride.
Bloomberg.com (c) Futures Data
Presidential/VP candidates reaction to Freddie, Fannie bail-out
Biden: Protect taxpayers in mortgage rescue
Obama calls for changes in Mortgage Giants
This is a bail-out of creditors - China, Japan, Russia and PIMCO at the expense of Shareholders and U.S taxpayers
By now, most of you must have heard the breaking news in the Financial sector. 
Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and CEO of Fannie Mae (FNM) and Freddie Mac (FRE) held some some high level meetings yesterday to discuss the U.S bailout of the two mortgage giants.
U.S government cannot let Fannie and Freddie fail because foreigners own $36 billion of that outstanding debt. If these mortgage giants fail and the foreigners start pulling the money out of the system, this house of cards will come crashing. So, the charade goes on. Freddie and Fannie are the most corrupted, mismanaged and badly run organization in the country (10 times worse than Enron).
After all, it is sad that taxpayers are the one who has to bite the bullet and pay for this expensive bill. But wait, Federal Reserve can just crank up the printing presses and roll out those juicy new dollar bills. Problem solved. That is until it finally implodes. At some point, those foreigners will be pulling out their money as they would not be that dumb to stick around till the very end. The way our govt run our system is beyond comprehension.
Bill Gross bond guru from Pimco holds a major chunk of these distressed debts. in his note to his clients he said “The bill for our collective speculative profligacy, obvious in the deflating asset markets, can be paid now, or it can be paid later. The tab will be less if paid up front, than if swept under a rug …”. Gross plea is heard well by Fed and Treasury. This is the same person who sold short on the very same asset securities last year and made money. Now he wants U.S govt to come bail him out? Interesting.
Strangely, ut Financial sector reacted positively after the market hours (except of course Freddie and Fannie stocks) in the hopes that this bailout will save rest of the Financial industry. Freddie and Fannie stockholders equity will be wiped out if this plan goes through tomorrow.
My bet is that Financial stocks will initial react positively and then will come crashing back to earth. This is a repeat of Bear Sterns saga which will only end ugly.
Sources:
http://www.fool.com/investing/dividends-income/2008/09/05/bill-gross-to-treasury-please-help.aspx
WASHINGTON (AP) — The economy shifted to a higher gear in the spring, growing at its fastest pace in nearly a year as foreign buyers snapped up U.S. exports and tax rebates spurred shoppers at home.
The Commerce Department reported Thursday that gross domestic product, or GDP, increased at a 3.3 percent annual rate in the April-June quarter. The revised reading was much better than the government’s initial estimate of a 1.9 percent pace and exceeded economists’ expectations for a 2.7 percent growth rate.
I like Barry’s take on the GDP numbers
GDP is out, ticking higher to 3.3% rather than 2.7%
And if you believe that data, I also have a bridge for sale in Brooklyn.
Why the beat on the headline figure? Aside form the usual inflation nonsense, there were two other factors: Exports, which rose to 13.2% (versus earlier reported 9.2%) and Inventories, which also played a part in the apparent strength.
This is my prediction for the outcome of the 2008 Summer Olympics games. China will lead the gold medals table followed by U.S and Russia.
Here are some interesting facts
Wall Street soared Tuesday after the Federal Reserve left interest rates unchanged at 2% and assuaged some of the market’s fears about the economy. The Dow Jones industrial average shot up more than 330 points, and all the major indexes had gains approaching 3 percent. The next FOMC meeting is on September 16 and there is a 69.5 percent probability the Federal Reserve will leave rates unchanged, according to Fed Funds futures. The FOMC statement was less hawkish than expected.
After market hours, Whole Foods, Priceline and Cisco reported their Q2 earnings. Cisco beat the earnings expectations and stock edged up 7% in the extended hours trading. But Priceline and Whole Foods reported dissapointing numbers. While I think Cisco did great in the last quarter, I would put more emphasis on the earnings results of consumer stocks Priceline and Whole Foods. Consumer makes up 70% of U.S economy. Any sign of weakness in consumer spending (travel, food, retail etc) is a bad sign for the fundamentals of this economy. I still think we are going into a recession.
In other news, commodities plunged again as oil continue to break from its trend. U.S Dollar sold off on the Fed decision to hold rates.
U.S economy contracted in the 4th quarter of 2007, the first quarter of negative growth since 2001 recession. This GDP number came to 1.9% for last quarter. Economists projected 2.3% growth. If it were not for the stimulus check, growth would have been even lower. Based on this information we can predict that 2nd half of 2008 is going to be bad if not worse. (Update: Weekly applications for jobless benefits soared to 448,000 last week, highest level since 2003.)
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From Marketwatch.com (just the highlights)
WASHINGTON (MarketWatch) — Boosted by stimulus checks from Uncle Sam and big drop in imports, real growth in the U.S. economy accelerated in the second quarter to a 1.9% annual rate, the Commerce Department reported Thursday.
Consumer spending was supported by the largest increase in disposable personal income in six years, thanks largely to about $80 billion in tax-rebate checks from Washington.The economy was held back by the crumbling housing market and by a huge drop in inventories. Investments in equipment and software also fell during the quarter.
Inflation ticked higher. The personal consumption expenditure price index rose at a 4.2% annual rate, while core prices (which exclude food and energy) rose 2.1%, not far above the Federal Reserve’s implicit target zone.
The economy has grown 1.8% in the past year. In nominal terms, the economy grew 3% in the quarter to an annual rate of $14.26 trillion. As the economy slowed, businesses cut their inventories by $62 billion in the second quarter. The change in inventories subtracted 1.9 percentage points from growth.
