DOW + 272 = 11,043
SPX + 26 = 1,162
NAS + 33 = 2,516
10YR YLD = 1.90%
OIL + 1.14 = 81.38
DEC GOLD – 45.00 = 1594.80
DEC SILVER – 1.25 = 29.97
The 30-year U.S. Treasury bond briefly lost more than 2 points in price to yield 2.99 percent. The benchmark 10-year U.S. Treasury note was down 21/32 in price to yield 1.90 percent.
The euro dropped against the dollar and yen.
Oil rose, just when I started dreaming it might drop below $3 dollars a gallon at the pump.
Gold futures fell, on course for their largest monthly slide in three years as investors scrambled for cash. In late trading, December gold has move back up to 1625 an ounce.
European leaders have not been able to agree on the next steps they will take to deal with Europe’s debt problems. Over the weekend they talked and pledged to take bolder steps but there was no agreement on what those bolder steps should be. The immediate issue is whether Greece will default or if it will be bailed out; and if it is bailed out, who pays. Greece needs the next $11 billion dollars in bailouts within the next week or there will be a default. Greece must meet certain requirements for the bailout. Auditors will determine if the Greeks meet those requirements. The auditors have left the country and nobody knows when they will return.
Germany is scheduled to vote on Thursday to decide if they will authorize the next round of bailout payments. German leaders want banks and private institutions that hold Greek bonds to take a bigger loss on those holdings to reduce Greece's debt burden. European officials have also talked about increasing the size of Europe's $600 billion rescue fund by allowing it to take loans from the European Central Bank.
Following weekend meetings of the World Bank and the International Monetary Fund, the general, not quite specific idea is to increase the bailout fund to $2 trillion dollars and have somebody take a 50% haircut on Greek debt. The Greek authorities have yet to convince creditors that they can fix a "budgetary hole" in their public finances for 2011-12, or successfully implement a vast privatization scheme demanded by bailout partners. The Greek people are conducting massive, nationwide strikes and protests because they feel they being cheated.
There are still many unanswered questions:
If Greece is bailed out, who pays?
How much is needed to bail out Greece?
How big is Germany’s blank check?
If Greece is bailed out, then how much would it cost to bail out Portugal, Italy and Spain?
What is the difference between the Greek people going on strike and another day at the beach?
If the auditors return to Greece, can they get a taxi?
If $600 billion dollars is not the answer, who will bailout the ECB and the IMF?
Do any of the bailout proposals address the underlying problems?
What was the question?
The mere fact that people were still asking questions and not throwing chairs at each other was taken as great news in the stock markets in Europe. Major indices in German, France, and the UK moved higher; and that optimism spread to Wall Street.
The general feeling is that there will be a bailout; the price of the bailout is not a major consequence. Of course, if the week passes without a bailout, then all hell will break loose, but don’t worry, because there will be a bailout and the problem will be kicked down the road.
Today, President Obama said the Europeans "haven't been as quick as they need to be" in finding a solution, and that the financial crisis is “scaring the world.” This weekend, Treasury Secretary Turbo Timothy Geithner called the European Debt problem the "most serious risk now confronting the world economy." The message seems to be that officials have been scared into a recognition of the severity of the world's problems and are now prepared to act.
I watched several hours of TV newscasts over the weekend, there was almost no mention of the most serious risk now confronting the world economy. There was a brief report on the nasty week in stocks; some retired guy in Ohio or somewhere was interviewed and he said he was concerned but didn’t know what to do and then he rode off in a golf cart. I saw a couple of stories about people looking for jobs in this economy. There was a fleeting reference to the possibility that maybe the economy could double-dip back into a recession.
Friday afternoon, I got a call from an old friend. He had been listening to the Friday radio show. He asked me if I thought we were headed for a double-dip. I said no – we’re in a depression.
He seemed surprised. He asked if I was aware of the technical definition of a recession and a depression. I tried to assure him I knew the definitions.
The National Bureau of Economics Research's (NBER) Business Cycle Dating Committee is given the unofficial role of serving as arbiters over what is and is not technically a recession or a depression. The definition of a recession is two consecutive quarters of a decline in real GDP. Although the NBER admits not all recessions exactly match that definition – and there are other factors the NBER considers.
In the recent downturn beginning in December 2007 and ending in June 2009, real GDP declined in the first, third, and fourth quarters of 2008 and in the first quarter of 2009.
The committee announced in December 2008 that the recession began one year earlier, and it announced in September 2010 that the recession had ended -- more than one year after the fact.
In September 2010, the committee announced that "any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007. The basis for this decision was the length and strength of the recovery to date."