NOT MUCH MOVEMENT LAST WEEK:
Â The markets did not move much:Â Â The Dow was up 0.80% and theÂ S & P 500 was down 0.05%.
NEXT INTEREST RATE MOVEMENT WILL BE UP?:Â
The Fedâ€™s increased public anti-inflationÂ discussion has led to market expectations of one or more rate hikes
by the year end. The Fed funds futures market is pricing in 75 basis points by January. The Fed outlook has changed over the last several weeks. In the April 30 policy statement, the Federal Open Market Committee hinted strongly that it was finished with rate cuts, but the market expected that a weakening economy would force the Fed to cut at least once more. Since late April, economic data have been mixed, but not as bad as many feared. The price of crude oil has continued to rise, to a point where the Fedâ€™s concerns about inflation are now dominant.Â IN EUROPE:Â
AtÂ the European Central Bank (ECB), theyÂ have made it clear that inflation is their number one concern and they aren’tÂ thinking about a cut in rates.Â Â Jean-ClaudeTrichet, the ECB Chairman, has strongly hinted that their next move is likely to be an increase in rates. If that happens, and the U. S. doesn’t match the increase, it will put added downward pressure on the dollar and likely cause oil prices to continue to go up.
ECONOMISTS LESS PESSIMISTIC:Â
This past week, once again, the Wall Street Journal asked a panel of Wall Street economists whether we are in a Recession.Â Â 52% say yes.Â That’s the bad news.Â The good news is that this same group was asked the same question in April and 76% said yes.Â It looks like economist opinions are as volatile as the markets.
DEBT CAN BITE YOU AT ANY TIME, AND COMPOUNDING WILL KILL YOU:
Â This past week, Prince Charles paid off a family debtÂ more than threeÂ centuries past the statute of limitations.Â Â Charles paid 453 pounds and 15 pence ($885.04) which King Charles II failed to pay to the Clothiers Company in Worcester, Â England, in 1651!Â Charles IIÂ had commissioned uniforms for his troops to fightÂ Oliver Cromwell’s forces that year.Â Prince Charles didn’t pay interest, and Clothiers did not insist on it.Â If interest was taken into account, he would have owedÂ approximately $90,000 U.S.
SIZE OF PROFIT:
Â According to Fortune Magazine, the average profit margin at the pump for a US gas station is 11 cents a gallon, approximately half the size it was just 1-year ago.Â The average net profit margin for the S&P Energy sector, according to figures from Thomson Baseline, is 9.7%. The average for the S&P 500 is 8.5%. Google’sÂ net profit margin in its most recent quarter was 25%.Â
BANKS MORE PREPARED:Â Â
According to the FDIC, US commercial banks and savings institutions set aside $37 billion in loan-loss provisions in the 1st quarter 2008 in anticipation of bad loans that may default.Â Banks set aside $9 billion for such loans in the 1st quarter 2007.
This is information is provided by good friend and business associate Doug MacGray.Â Doug is a certified financial planner.Â If you would like a referral to Doug please feel free to contact me (John Thomas) at 302-368-7132 Ext.12 or send me an e-mail to DelawareMortgages@yahoo.com