The Old Ball and Chain

There were 178,000 new jobs created last month, with the Unemployment Rate dropping to 4.6%, the lowest since August 2007.  The bond market is seeing this as a good sign, giving back almost all of the losses from the last two days. Investors seem pretty eager today to jump into debt holdings, without selling off equities (stocks).  Speaking of debt, here is a fun fact: the national debt has doubled in the last ten years, but the payments have stayed the same because the interest rates have been so low.  The debt is now so large that if we were to balance the national budget and generate a $50,000,000,000 (billion) surplus each year without incurring any new debt, it would still take 460 years to pay it off.  Kind of makes 30 year loans seem like child’s play, doesn’t it?

I see interest rates holding these levels until the 16th when the Feds meet again.  Have a great weekend!

Recipe for Low Rates

Yesterday I touched on Retail Sales not showing any growth in July, and yet over the same period consumer debt has increased.  This chart illustrates that first point of Sales have tapering off over the last four months.  This morning the news is focused on Europe’s stagnant economy (France GDP is 0% and Germany actually contracted 0.2% in Q2).  The recipe for disaster is compounded by the region’s massive overhanging debt and questionable ability to repay.  Glad we don’t have those problems here in America.

At any rate, despite the Federal Reserve continuing to sell off their holdings of mortgage backed securities, interest rates look to be staying low for awhile.

Gambling on Government Garble

On the heels of yesterday’s “assumption” by the markets, today Fed Governor James Bullard said that interest rate hikes “should come sooner rather than later”. Not much reaction from Bonds, but Stocks have retraced yesterday’s euphoric steps higher.  Such is life when you are gambling on statements from government officials.

Reports out today show that foreclosure activity is down 50% from this time last year.  Personal Spending is up 0.2% and Personal Income is up 0.4%.  This is the second month in a row that we are collectively earning more than we are spending; way to go USA!