Once again Washington is shooting itself in the foot with this new economic stimulus. The expectation that throwing additional money at the economic crisis will somehow convince the American public to run out to the stores to spend the $1,000 they will be receiving will not have a material effect. Not even close Washington. As Ross Perot once stated not so eloquently, there will be a great sucking sound as people use the money make a single mortgage payment or two car payments, or keep their last credit card alive. Of course, he referred to the jobs going down to Mexico with the NAFTA deal, but I decided it also applies to the meagre and meaningless stimulus. As I mentioned last week, the only saving grace for the U.S. economy will be returning people to work by getting our jobs back….The last American manufacturer of a TV, as I recall, was Zenith. Now they are manufactured all over the World, but not here in our own backyard. The foreign car market has dominated the industry and even they are cutting back production because the unemployed consumer does not consume anything. This past week 589,000 stood in the unemployment line for the first time. I wonder how many of those own a home, temporarily as I see it, with a mortgage, and are two car families (soon to be one car as the other is repossessed). Bring back the jobs Washington by attaching penalties to foreign imports on everything from pencil sharpeners to automobiles. Search as one does for anything at Wal-Mart made in the U.S.A. and one finds snack foods and agricultural products. Everything else has a foreign name on the label.
Interest rates: March Treasury bonds closed at 12919.5 down 10.5 points as reality sets in that U.S. rates cannot go much lower with only a little room in the 10, 20, and 30 year paper. The Fed Funds rate at zero to one quarter percent emulates Japan’s move some years ago which provided no help to the Japanese economy for years thereafter. The new stimulus package requires money, which the Federal Reserve earnings the old fashioned way, they print it. The trillion dollar budget deficit will no doubt move to two trillion dollars and with a smaller income generated by income taxes, the only true income the government earns diminished sharply by the unemployed labor force, I see no future in the U.S. economy for some time. Bonds were overdone recently after I had suggested taking profits on the long positions I recommended months ago as the reality that the Fed will have to sell bonds and other paper to make up the deficit being created right now in Washington as we speak. Stay out for now.
Stock indexes: The Dow Jones Industrial Average closed at 8,077.56, down 45.24 while the S&P 500 gained 4.45 points to close at 831.95. The Nasdaq closed at 1477.29, up 11.80. For the week the Dow lost 2.5%, the S&P lost 2% and the Nasdaq lost 3.4% so Fridays gains for the S&P and Nasdaq were basically short covering in front of the weekend. The anticipation that Washington would be deciding on a new economic stimulus package gave a little hope to the markets on Friday. Of course I see no hope that a stimulus package will accomplish anything but add to the budget deficit. See my overview and implement hedging strategies immediately.
Currencies: The dollar gained against the euro and concern grew over the economies of the Euro zone countries. As the consumer of the world, a recession in the U.S. impacts the economies of its trading partners and while the U.S. rate is nearly zero, its trading partners are probably looking at further rate cuts themselves and that kept pressure on currencies. We prefer the sidelines with the exception of the Swiss Franc which we would buy on any further declines.
John L. Caiazzo
(951) 693-9600
www.acuvest.com
futures@acuvest.com
Information provided is from sources deemed reliable but not guaranteed. Futures and Options trading involve a high degree of risk and may not be suitable for everyone. John Caiazzo is a registered commodities broker with over 40 years experience in investments and opinions are his own and not of the Futures Commission Merchant he introduces his clients to.
