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The unemployment data released this morning (Oct. 8) are dismal, but the stock market is up, as many expected. That's because the Federal Reserve has said it will keep money flowing and interest rates declining as long as unemployment remains high. Thus, bad news on Main Street is glorious news on Wall Street. Already, the banks can borrow from the Fed at effectively zero percent short term interest rates. But with unemployment continuing weak, the Fed is expected to use quantitative easing, or the artificial lowering of long term rates, which are already at record lows. This morning, the government announced that the economy lost 95,000 jobs in September; the unemployment rate stayed at 9.6%. The government said private sector payrolls rose by 64,000 in September, but government payrolls dropped 159,000. However, that 64,000 private sector gain is extremely suspect. On Wednesday, the Automatic Data Processing (ADP) report indicated that there were 39,000 private sector jobs LOST in September. The government reported that the private sector added 428,000 jobs from new businesses that are not counted in the main surveys. This is purely a computerized estimate. It, too, is suspect.

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Comments

SurfPuppy619 Oct. 8, 2010 @ 1:53 p.m.

That's because the Federal Reserve has said it will keep money flowing and interest rates declining as long as unemployment remains high

Looks like we will have the money flowing freely for the next 3-5 years then.

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Don Bauder Oct. 8, 2010 @ 6:43 p.m.

Response to post #1: This is quite possible. But you wonder how low interest rates can go. Personally, I think the bond bubble just HAS to break at some point because rates can't go lower. This may be awhile, though. I would think the stock market would rally on for awhile after bonds crater, but as interest rates rise, as they must, stocks will run up against resistance, too. Gold? I think it should continue to do well as the dollar sinks, but it, too, will suffer at some point as rates rise and the dollar recovers. Best, Don Bauder

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SurfPuppy619 Oct. 9, 2010 @ 8:30 a.m.

Gold? I think it should continue to do well as the dollar sinks, but it, too,

Gold has had an incredible run the last 5 years, but what goes up must come down, and gold will come down.

The thing with gold is you never know WHEN it will go on a run, despite what the Monex and other precious metals companies push.

Gold was at or around $300 for a couple of decades. When I see metals go thru the roof, in a relatively short period of time, I will always think back to the Hunt brothers run on Silver back in the 70's......

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Don Bauder Oct. 9, 2010 @ 10:24 p.m.

Response to post #3: I have never bought an ounce of gold or a gold stock. But I think it has legs for awhile. Best, Don Bauder

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