I always try to understand just what happened during the week on Saturday afternoon. It’s not hard to get caught up in the trading and the circus of events that effect the market during the week, but I always try to get a Chicago Cubs game in and think about what happened over the last week and what might happen next week.
This week:
1. The price/barrel of crude oil fell to almost $115 and I wonder where it is headed and will it get there fast enough to spare some important industries. The airlines and the US auto industry have been decimated by high oil prices, though I would contend that the higher gas prices only hastened the problems the auto industry has to deal with….expensive oil or not, The Big Three are hamstrung by the legacy costs associated with pensions and retiree health care.
2. Even though the government would like you to believe there is no inflation, one trip to the supermarket will have you thinking otherwise. Of course, the government reports inflation as a core rate, which means they exclude energy and food costs. There are a number of explanations for excluding these two items, mainly having to do with the price cycles these items have. On the other hand, the average American spends an awful lot of their income on food and gas…..and there are many economists peg inflation rate much higher….see the blog Shadow Government for more on this topic.
3. And then we have Fannie Mae and Freddie Mac and the credit mess that Wall Street foisted upon us. It just burns me up that we are bailing out an industry that got so out of control they were handing out money to anyone who could fog up a mirror. And yet, the Wall Street Journal reports that there may up to 1 trillion in CDO’s out there to deal with. The credit problems have spilled over into other credit markets, too. Most notable would be credit cards, auto, and prime mortgage loans….of course, up until several years ago, the Glass-Stiegel act kept the Wall Street crowd out of the banking business. Do you think the guys who originally wrote the bill might have known what they were talking about? I have greatly enjoyed watching those involved in the crisis attempt to blame each other for the problems we are currently experiencing. Was it the Fed? Was is the Treasury Department? No, you hear, it was Alan Greenspan alone….as if he were out to somehow avenge some problem? The truth is that there were many people involved, all acting poorly and incompetently, that gave us the problems we have.
4. Does it strike you as unusual that during the nearly 8 year reign of the oilmen that run the government the price of gas doubled. I understand that there were all kinds of mitigating factors…but the price of oil DID DOUBLE…for whatever reason.
5. The earnings reports that have come out over the past week have not been inspiring…but somehow, the market always find a way to shrug off all the bad news and rally some.
