Weekly Market Update – June 16, 2008
John Thomas
June 17, 2008
NOT MUCH MOVEMENT LAST WEEK: The markets did not move much: The Dow was up 0.80% and the S & P 500 was down 0.05%.
NEXT INTEREST RATE MOVEMENT WILL BE UP?:
The Fed’s increased public anti-inflation 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 Fed’s concerns about inflation are now dominant.
IN EUROPE: At the European Central Bank (ECB), they have made it clear that inflation is their number one concern and they aren’t thinking about a cut in rates. Jean-Claude Trichet, 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: This past week, once again, the Wall Street Journal asked a panel of Wall Street economists whether we are in a Recession. 52% say yes. That’s the bad news. The good news is that this same group was asked the same question in April and 76% said yes. It looks like economist opinions are as volatile as the markets.
DEBT CAN BITE YOU AT ANY TIME, AND COMPOUNDING WILL KILL YOU:
This past week, Prince Charles paid off a family debt more than three centuries past the statute of limitations. Charles paid 453 pounds and 15 pence ($885.04) which King Charles II failed to pay to the Clothiers Company in Worcester, England, in 1651! Charles II had commissioned uniforms for his troops to fight Oliver Cromwell’s forces that year. Prince Charles didn’t pay interest, and Clothiers did not insist on it. If interest was taken into account, he would have owed approximately $90,000 U.S.
SIZE OF PROFIT:
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. 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’s net profit margin in its most recent quarter was 25%.
BANKS MORE PREPARED: 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. 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. Doug is a certified financial planner. 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
If you would like to apply for a Mortgage Loan, you can APPLY ONLINE HERE, you can call John Thomas at 302-703-0727.
John R. Thomas – NMLS 38783
Certified Mortgage Planner – Primary Residential Mortgage, Inc.
302-703-0727 DE Office / 610-906-3109 PA Office / 410-412-3319 MD Office
248 E Chestnut Hill Rd, Newark, DE 19713
