THE WEEK WAS FLAT ON THE DOMESTIC EQUITY side. By the numbers, for the week ended Friday, April 8, 2011, the Dow Jones Industrial Average closed at 12,380, up 4 points, representing almost no change from the previous week. The Standard & Poor’s 500 closed at 1328, down 4 points, and the NASDAQ Composite closed at 2780, down 9 points.
Politicians came to an agreement late Friday evening that avoided shutting down the government. Each side trumpeted the success of favorite programs, or the saving of what’s been described as $39 billion. If these decisions didn’t weigh so heavily on the future of our country, at least the posturing and grandstanding of Congress would provide a bit of comic relief.
This continuing uncertainty, both at home and abroad, sent gold to new highs, and oil to new highs for the year. In the last couple of days, however, fear and profit taking have sent the market down 2% and change.
Kerri Shannon, writing for Seeking Alpha, has suggested a real inflation rate of 9% to 12%, compared to the 3% or less suggested by the feds. Gasoline prices are up 19% over the last year, and the producer price index was up 1.6% in February, double the January increase and more than twice the expected 0.7%.
Wholesale food prices were up 3.9% in February, the largest monthly increase since November 1974, and up 7.3% in the last twelve months. Given these increases, it will be tough for retailers not to raise prices, as they have been absorbing most price increases so far.
Stephen Moore, writing in the Wall Street Journal, offers insight into why so many states are operating at or near bankruptcy. According to Moore, there are 22.5 million government employees, and 11.5 million manufacturing employees. In 1960, manufacturing employed 15 million, and government 8.7 million.
“More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining, and utilities combined. We have moved decisively from a nation of makers to a nation of takers”, says Moore.
The future? Surveys of college graduates are finding that more and more of our top minds want to work for the government. In recent years only government agencies have been hiring, and government employment offers near lifetime security in this era of economic turbulence.
In economic news, the Institute for Supply Management’s service sector index dropped in March to 57.3 from 59.7. Any number above 50 is a positive, though this change indicates a slowdown. Initial jobless claims dropped to 382,000 last week, and consumer credit increased in February by $7.6 billion.
According to a very unofficial survey of several mortgage brokers, business is booming in terms of new loan applications. A larger number of these loans won’t be placed compared to three or four years ago, due to actual underwriting, but the activity is encouraging. Apparently, the buyers are those who are taking advantage of foreclosures and lower prices to become homeowners.
Quotes of the week:
“Unforgiveness is like drinking poison, in the hopes that someone else will die.”
-Unknown
“When the people find that they can vote themselves money, that will herald the end of the Republic.”
-Benjamin Franklin
No comments:
Post a Comment