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Wednesday, January 30, 2008

Wait for it . . . wait for it . . .

Challenge Accounts:

Sharebuilder Balance: $130.77

optionsXpress Balance: $583.49
ING Orange Savings Balance: $2.06

Ok, the big bit of news is waiting for the Fed to announce it's decision today, in regards a rate cut. We'll get that at 2:15 pm today. Well, I should say, this is the big popular bit of news.

I still believe that regardless of the Fed's decision, we are already in a recession. Therefore, of more interest to me, is the GDP (Gross Domestic Product) numbers. The GDP is the technical indicator as to what decides whether or not we're in a recession or not. But I believe that fundamentally, we are already in a recession. Thus far, it's mild. Our inflation isn't too bad yet, and our unemployment numbers are still holding up.

What's that you say? I'm nuts for thinking our inflation isn't bad? Am I crazy? We've reached $100.00 oil that isn't figured into some of the numbers. Food prices are through the roof. And I'm saying our inflation is low?

As I've often said, I remember the 1979 through 1983 recession very well. During that recession we had our inflation numbers and unemployment numbers in the double digits. For more than a year. As it stands, our inflation right now is 4.08%. Which, to be sure is a rise. But it's still far below the 9.28% of January 1979. From that month, it then went into the double digits, steadily increasing to a peak of 12.61% in November of 1979. It did not return to the single digits until May of 1981.

Our unemployment numbers right now are 5%. In January of 1979, it was 5.9% It then stayed from 7 to 9% until 1982, when it exploded to nearly 10.1% in September of 1982 and stayed in the double digits for 10 months.

So while we are not that bad off yet? We are definitely not well off. I believe that fundamentally we are already in a recession. Consumer confidence is extremely low. Housing numbers have been released, that likes of which are reminiscent of the great Depression. Folks are watching their home values plummet. And consumer confidence as it relates to the inflation rate will reflect and manifest itself in consumer spending.

So while we all wait for baited breathe on what the Fed does at 2:15 today? The more important and interesting questions is how will consumer confidence with the current inflation rate relate to consumer spending, and in the end, our Gross Domestic Product. Because you think inflation is bad now? You haven't seen nothing until you see 12% inflation, and 10% unemployment.

* * *

Challenge Accounts:

Sharebuilder Balance: $130.77

optionsXpress Balance: $583.49
ING Orange Savings Balance: $2.06

Total Trades and Investments: 1
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 1
Average Drawdown: $86.51
Accuracy Rate: N/A
Average Reward: $0.00
Risk Reward Ratio: N/A

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders

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