Tuesday, October 14, 2008

Financial Stocks Up

The market broke out and then flamed out. Financial shares are up 3% but the NASDAQ is down. The short term is uncertain but, historically, bank shares lead the way out of recessions.

The price of gasoline is dropping quickly but it has a long way to go before making people happy. A year ago, the average price was around $2.75 and 6 years ago it was around $1.25. This morning, the average price is down to $3.12 and it is headed to $2.60 in a couple of weeks. The decline from the peak to the current price represents a savings of $4.33 per day for each man, woman and child in the USA. This $1,600 per person per year is much bigger than the $1,000 welfare checks proposed by Obama.

It is impossible to predict the future but it is reasonable to expect lower fuel prices, already coming down the pipe, to have a positive effect on consumer spending. The recession will put 2% of the people out of work temporarily but these people will draw unemployment insurance. The savings of the masses will be larger than the losses of the few.