Today the ADP National Employment Report stated that private sector jobs fell by a much larger than expected 693,000 in December. This report stunned on the downside and is a prelude to the Bureau of Labor and Statistics report which comes out on Friday. The market also suffered its worst one day since early December. We’ve been on a relatively stable rally from the November 15 bottom yet 2009 will once again show us that there is much more market volatility floating in the economy. Much of the volatility will come from the stimulus plan and also, the liquidity floating in the system.
Monetary Policy: Monetary Policy Slamming on Breaks. What do you do when banks don’t want to lend? Become the consumer. Government getting ready to spend to stimulate the economy.
Monetary policy is a delicate game of cat and mouse. You raise rates, you lower rates, or you jawbone a little and normally, the markets respond to the Fed like a conditioned hamster looking for a piece of food. Yet the Fed has lost this power. What happens when the public gets a look behind the curtain and realizes there never was any sort of wizard? What happens is extreme market volatility unlike anything we have seen in nearly a century. Now maybe at this point with consumers closing up their wallets, not buying cars, putting away the American Express credit card, and finally deciding to exercise restraint, flooding the system with credit may be counterproductive.
10 FDIC Charts and Graphs Highlighting Bank Problems: FDIC Analysis Examining 2009 Future of over 8,000 Banks Insured by the FDIC.
With all the problems occurring in the banking system, it is rather astonishing that so few have failed in 2008. At least that is the perception being put out there for us to digest. Yet the failure of one IndyMac or Washington Mutual is the equivalent of 100 smaller bank failures all at once.
The Federal Reserve and U.S. Treasury Determined to Sink the U.S. Dollar in 2009. Why Gold and U.S. Dollar went up in 2008.
2008 will go down in history as the worst global market for countless investments since the Great Depression. It was significant even with the late rally which occurred after the November bottom. What this signifies is that market volatility a sign of a very unhealthy marketplace will continue in 2009. Yet the more important point to consider is that the Federal Reserve headed by Ben Bernanke and the U.S. Treasury which will be under new leadership soon, have been showing no signs that they are interested in preserving the value of the U.S. Dollar (USD).
There is a danger in having power. Credit at least many decades ago was seen almost as an extension of the morality of the borrower. That is, the way credit was given many times reflected the capacity, collateral, and character of the borrower. Main Street is already feeling this recession like the worst since World War II and credit is tight for most average Americans just like it was back then. In this recent bubble, all 3 historical credit factors were disregarded. Capacity was never examined in many cases. Collateral? Not much collateral with zero down mortgages. And character was never evaluated. How can one expect unethical lenders to judge the character of a borrower? Their primary concern was getting a fee.
U.S. Treasury Summary of Receipts and Outlays for the U.S. Government: If Your Budget Looked Like this, You would be out on the Street.
It comes as no surprise that the U.S. government spends more than it takes in. We all know this. But what are the funding sources for the U.S. government? Meaning, who cuts their monthly pay? It is easy to get caught up in the talk of large numbers but you have to think of the budget of our country as you would any other budget. Most Americans are trying to make it buy with wages that are stagnant while the government spends as if it has a no-limit American Express card.
Dow Jones Industrial Average on Pace for top 3 Worst Performing Year since 1896: Understanding one of the Most Followed Industrial Averages.
The Dow Jones Industrial Average (DJIA) is closely followed by those here at home but also those around the world. It is the oldest continuing U.S. market index. The DJIA is the best-known market indicator simply because it has one of the longest histories and many have grown accustomed to following the index. Since the U.S. Treasury and Fed want to punish savers and force people into the markets or to spend, it is important to understand what moves the markets. There are many indicators that give a better overall glimpse of the market yet the DJIA is still closely followed.