“Consumer confidence fell to a five-year low this month as Americans confronted the grimmest jobs outlook since late 2004, while data also showed a record drop in home prices in February.
Contributing to their slumping confidence in April, consumers expected that inflation would accelerate to a pace last seen in the early 1980s. The news cemented the prevailing view that the Federal Reserve, which is to open a two-day policy meeting later on Tuesday, would signal an end to its aggressive campaign of lowering interest rates.” (Via Reuters)
The fact that consumer confidence is at a 5 year low is not that alarming as it has been roughly six years since the last US downturn.
What is very interesting is that consumers are already thinking about high inflation similar to that of the 1980s. There hasn’t been any hard economic evidence that inflation is going to get out of control, although there are some warning signs that it *could* eventually happen in this cycle.
One thing is for certain, if consumers perceive inflation and are not confident, the stimulus cheques mailed out to millions of Americans will end up in bank accounts instead of the economy. Hindsight is beginning to make that decision look very irrelevant indeed.
US President Bush is currently holding a news conference addressing the US economy at the White House.
One of his main points was to call out Congress for blocking his proposals to address the (economic) problems.
He called on Congress to pass sensible and effective bills in order to keep the economy moving forward through focusing on energy, food prices, mortgage payment and student loans.
Bravo, Mr. Bush. In essence you have just stated that “I tried, you wouldn’t listen! So now it’s your problem Congress, deal with it!”. Energy, inflation, the housing mess & student loans are no longer the problem of the President. So what exactly will you be doing, Mr. Bush, for the next 8 months?
The chart on the left shows that rice prices are up. WAY WAY WAY UP. That’s more than 3X the price per tonne in the past few months.
Rice is the food staple of the world. More people eat rice than anything else. So when the price moves in such a material fashion, we should definitely be taking notice.
Rice, like oil, is used as an input for many goods (and we’re not just talking about Rice Krispies). With such a dramatic move, it won’t take long before prices for many products begin to move higher in tandem.
Crude oil prices are hovering close to $120/bbl, at record highs. With the low interest rates currently being pursued in North America, it is no longer a question of if we’ll see inflation, but how soon.
If we do begin to see inflation before the economy recovers, expect to hear a whole lot about Stagflation.
Here’s the good news: It looks like a bubble. Not a quick shock like in the 70s, but a bubble. A bubble just like Tech in the 90s. A bubble just like Real Estate from the past few years. Bubbles can last for years, but eventually will pop and bring relief to an inflated market. The only concern is how long will we have to suffer, and at what cost?
Reuters has an article on President Bush’s recent comments at a summit with Canadian Prime Minister Stephen Harper and Mexican President Felipe Calderon.
He said: “We’re not in recession, we’re in a slowdown”
This, ladies and gentlemen, is reason number #452 that Mr. Bush will go down in history as one of the worst US presidents.
Now, technically he’s right (ghastly, I know). The textbook definition of a recession is at least two quarters of negative growth in an economy. We’re not there yet, but all the signs on the road point are pointing to one, perhaps even a deep one.
The reason that this comment strikes me so hard, is the tone. He knows a recession is on the horizon. His advisers have shurley briefed him on that. He could have made a statement on things every day americans need to do in order to protect themselves during tough times. He could have made a statement calling for americans to rally and support the economy. Instead, he asked Congress not to raise taxes. That might be a good idea, but not an inspiring one.
“Google Inc. blew past Wall Street expectations this quarter, posting revenue of $5.19-billion (U.S.), a 42 per cent jump over the same period in 2007 and 7 per cent higher than the previous quarter.
Net income – adjusted for generally accepted accounting practices – for the first quarter was $1.31-billion compared to $1.21 billion in the fourth quarter of 2007. Earnings per share amounted to $4.12 on 317 million diluted shares, compared to $3.79 for the fourth quarter of 2007.” Via [Globe & Mail]
I find this a bit curious. Very interesting.
Google’s bread and butter is advertising, it’s their only real source of revenue. They have made a killing doing the best job and using the brightest people. I think its great.
What’s curious and interesting is this unexpected increase. Usually in a economic downturn, marketing and advertising are the first costs to be cut. Firms would rather trim those budgets than fire workers. It’s much easier to later increase spending compared to training new staff.
So now in the midst of all this economic doom and gloom, here’s feisty Google posting up some big numbers. So is the doom and gloom over exaggerated? Or is Google just that good? Very interesting…..
There’s nothing really new or exciting in the headlines this morning, so I thought I’d talk a little about oil.
I’m not really a big fan of technical analysis. Personally I think it’s ridiculous to believe that past prices have any indication on the future. However, sometimes charts are handy to make a point. So here we go. Are current oil prices justified, or are they silly?
Markets prices tend to become silly when things get too heated or too cool. Technical analysts will call this a Top & Bottom and will try to time when it happens in order to maximize profits. I’ve never seen concrete scientific evidence that this works, but the overall idea of silly prices is valid.
Crude oil is now trading at record prices of about $115 USD/bbl. Is this justified? Have the costs of producing this product doubled in the past two years? Has world demand doubled?
I don’t think so.
The big catch with silly prices is that they are no longer functioning in a logical sense. The price of oil could double again before the hoarde of masses begin to realize that things have gotten silly. When they do, the reversal will be quick and hard. Beware of Silly Prices.
This morning Oil rose to a record above $114 a barrel in early trading. Its important to note that the rise was due to the drop in value of the US dollar relative to other major currencies. So while most news agencies and talking heads have been screaming about high gas prices, I will go the other route.
The fall of the US dollar is an important part of any recovery. As the dollar drops, US Assets (companies, resources, stocks, etc…) will all look relatively cheap to foreign investors. Those foreign investors will then spend money acquiring things away from the US economy, keeping it afloat.
Here’s where things start to get interesting. Forget the uproar down south about foreign workers taking jobs away from Americans. At this pace, in a couple of years we’ll see massive uproar on American companies being taken away from Americans. This is the free market at work. Prepare to live with it.
Normally I’m not a big fan of needles. However, when the prescription is from the Bank of Canada, I’ll make an exception. Today the bank of Canada will be adding about $2 billion in short term Treasury Bills into the market. Sounds boring, eh? Well its not.
Ever since the beginning of the Credit Crunch™ people have been scarred and moved their short term investments from Commercial Paper & Banker Acceptance to Treasury Bills. As the Canadian Govt is still running surpluses, supply has been tight and rates tumbled as the price rose (classic supply/demand). The 1 month T-Bill has been as low 1.2% institutionally a few weeks ago. This morning with the new injection, we’re back in the 2.90% range. Just a quick note that although many sources will be quoting that 1 month Bill at 2.90%, as a retail investor, expect a much lower quote. I’ll save that explanation for another day…. unless you ask my in the forum.
Reuters reports that Bankruptcy filings by American consumers and businesses soared 38 percent in 2007 to a total of 850,912.
This really isn’t a big deal. No really, even though this appears to be another cog in the great wheel of recession, it could be worse.
Firstly, the data is for 2007. Things were flying high in 2006 so it is really no surprise that bankruptcies are up a little, and 38% isn’t 380%. For example: 2005 saw over 2 million bankruptcies, although that did happen to be just before the feds made it harder for people to file. So take that number with the proverbial grain of salt.
Taking a look at this morning’s headlines:
US home foreclosures are up 57%
Oil is at a record high of $112.
Corn & Rice futures are at record levels trading in Chicago.
Now I don’t want to sound like Mr. Negative and scare you, but things aren’t exactly looking too good for the US Economy. The US Dollar stinks, interest rates are low (this is good for people with loans, but foreign investors like high interest rates), and commodity prices are rising.
The most important thing that people should now be paying attention to are JOBS.
