Isn't it terrible how bad the economy is?

The DOW is only about 300 points off of its highest ever (11,723 as of Jan 14, 2000). 

Construction and Consumer spending was up in March.  

US economy grew at 4.8 percent.

Unemployment is at 4.7 adn there are concerns among some economists that wages will be going up, increasing the cost on pretty much everyting.  

New US Home Sales jump about 14% in March (even though the housing market has been jumping back and forth lately).

Okay, maybe the economy doesn't suck right now. Maybe the only thing that does suck economically right now are teh oil prices. And the easy overnight fix for that can be a lifting of the gas tax on teh federal level - would save drivers about 20 centers a gallon. And if states followed suit, we could be looking at a bigger tax cut.

Jordan .

Shush, Jordan!  Don't you know the economy is not something we speak about unless it's BAD?  Geez!

Susan 

     
“Half a truth is often a great lie.”

Ben Franklin

after Friday, we're only 150 points off from an all-time high on the DOW.

I don't think we'll hit 12,000 this year, but early next year, I think we'll hit it (assuming that there are no major tragedies or conflicts). Oh, and the price of oil seems to be on its way down too.... 

Jordan .

Now seems like the appropriate time to give this warning.  Do NOT be tricked!  Fool you once...

Susan 

     
“Half a truth is often a great lie.”

Ben Franklin

So I'm a little concerned with the large drops in the DOW and Nasdaq all last week and today. Why is everyone worried about inflation all the sudden? It seems like everyone is jumping on treasury bonds right now and ditching stocks. The job market seems good now, so what gives? I wonder if the federal reserve will raise interest rates again or not. 

R_Flagg

It's simple - it's oil. Increase in oil prices mean an increase in getting EVERYTHING done - from shipping to the parts to a location to building the thing to shipping the thing to somewhere else so it can be sold adn everything in between.

I don't think I've said this publicly here, but I've been saying/thinking for months that the rise in oil was going to hamper this economy tremendously. Yeah, we complain about paying more at the pump, but the price of crude oil has an effect on everything around us - not  just at the pump. Every fast food restaurant, every business, every laborer, everthing has to increase their prices becuase of transportation.  Increased prices = inflation, and the consumer pays every dime. (Which is why it's stupid to be taxing oil companies for their "windfall" because they will just pass this onto us, and guess what - more inflation.)

So you jump off of stocks and to a more secured thing (like bonds) because with inflation comes a fed rate increase.

I also read a story this morning somewhere that talked about the comparisons of the 1987 stock crash and how what happened then seems to be happening again, so I think that's a concern.

B needs to jump in on this because he could probably give some of the nitty-gritty details.

Everything in the economy is running in my opinion perfectly, except for oil prices. Get a handle on oil, and you will see everything run smoothly. Continue to let oil go down this road that we're going and expect bad things to happen. And after watching the House reject opening up the coastal waters to do drilling, it's obvious our govt doesn't get it.  

Jordan .

I agree that the oil prices are having an effect on the economy. I did read a report today that said most oil companies have recovered from Katrina. Shell released a statement today that they just reopened the Mars platform, the largest platform hub that produces about 40% of all oil from the gulf. Partial production has resumed and full production should be restored by the end of June. This will supposedly provide huge a jump in oil and natural gas production. I would hope this news would calm fears of rising oil prices.

I also read news today that there is talk of a report being released detailing slow economic growth. There will be more to come in the following days.

R_Flagg

Don't know about nitty-gritty details, but here's my take:

The mainstream business press is blaming inflation for the equity selloff, but that seems unlikely.  The US market drop the past two weeks has been led lower by declining commodity prices, including energy, which would imply anything but inflation.

Speculation is that this drop is similar to some others we've had the past few years.  The reason usually doesn't become apparent for a few weeks or months after it ends, and it usually ends up being some hedge fund getting in trouble and liquidating positions.  Since media types can't say that they don't know what's happening, they just make stuff up.

The trade has been to sell risk and buy security.  US markets are actually down less than five percent, but copper producer Phelps Dodge is down 22 percent and emerging markets like Brazil, India and Russia are down 15-30 percent.  US Treasuries are fractionally higher.

thanks B - that explanation is nitty-gritty to me.

R_Flagg - yeah, the oil companies have recovered from Katrina, plus they've increased their oil supplies after having to clean out their tanks for yet one more government intrusion. Luckily, Bush temporarily lifted a few intrusions, but that really isn't going to help that much.

The problem is China and India who have pushed demand up. Throw in other things. Let's not forget that oil companies only make 10 cents per dollar, while the US govt makes about 18 cents per dollar, and each state makes between 10-40 cents each dollar. The remaining goes to the people who pull the stuff up and ship it to refineries.

So, methinks still that oil is the reason for the inflation. Throw in a weak dollar, and increasing federal debt, and it all adds up to people jumping off to buy treasury bonds. I think it's temporary though esp since oil prices seem to be falling.  

Jordan .

double post alert - came acorss this story and thought it might shed some light on the current stock market drop

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke said on Tuesday that he had made a mistake by talking with a television reporter who then repeated his remarks, an incident that roiled financial markets and heaped criticism on the Fed chief's head.

"That episode you refer to was a lapse of judgment on my part. In the future, my communications with the public and with the markets will be entirely through regular and formal channels," Bernanke told the Senate Banking Committee.

In the low-water mark of Bernanke's almost four months in office, CNBC television anchor Maria Bartiromo said on Monday, May 1 that Bernanke had told her that he was disappointed with the views of some investors that he was dovish on inflation.

The conversation took place the previous Saturday, the night of the White House correspondents dinner -- an event that many reporters and their guests treat as off the record.

But her revelation of the conversation on live television caused a storm of speculation about whether the Fed would pause in its almost two-year interest rate hike campaign or keep going.

It also sparked criticism of Bernanke for sending confusing signals, since it came hard on the heels of his earlier testimony to Congress, when he discussed the prospects of the Fed pausing as it reviewed the economy.

Financial markets remain unsettled by the outlook for inflation and Bernanke said this was among the factors that had hurt stock prices in recent weeks.

..... 

Jordan .