Toby has been explaining economics to me again, although he has to go slow and say it several times to get the info in my now dark honey blond hair. My hair may be a bit darker, but it is still blond. He explained how the Federal Reserve is "making" money and he sent me this link to help me understand:
This is from Jim Jubak on MSN Money. He is one of the financial guys I read. http://articles.moneycentral.msn.com/Investing/JubaksJournal/fluke-credit-crisis-was-a-heist.aspx?page=2
Everything changed March 18 (at least for the short run; in the long run, probably not quite so much). That's the day the Federal Reserve announced it would buy $300 billion of U.S. Treasury notes.
There's nothing subtle about this: The Fed is printing money in order to stimulate the economy. At least that's the theory. Over the next year, we'll find out if the real economy responds to theory. But in the short run, the Fed's move has had powerful effects.
It sent the U.S. dollar lower against the euro by 3.2% and the yen by 2.3% as investors anticipated that lower U.S. interest rates and higher U.S. inflation will result from adding $300 billion to the money supply. Gold rallied, jumping 6.6%, as did oil and, indeed, just about every commodity and every stock linked to a hard asset.
The effect was so strong that on March 19, as the indexes fell, commodity stocks rallied, with investors snapping up commodity stocks as hedges against inflation. Shares of Devon Energy (DVN, news, msgs) climbed 3.1%, Freeport McMoRan Copper & Gold (FCX, news, msgs) moved ahead 5.7%, and Potash of Saskatchewan (POT, news, msgs) gained 2.5%.
In my opinion, we're still in a bear market until the economy proves otherwise. A first-quarter earnings season that's likely to be very ugly is set to begin in just about a week and a half, and the market could easily give back all it has gained in recent weeks -- and then some. I'd still use this rally to sell any stock you've been waiting for an exit
Toby also sent me this link to explain more on how this "printing" of money will effect oil and such. I may be a ding-a-ling when it comes to economics, but I do find this interesting. Even I knew that printing money could lead to inflation and possibly other problems. We will see.
Hearing Toby talk economics is kind of like when Buck talks hockey. I don't know a thing about hockey and I have to really concentrate, but I do like to be informed.
Now it is time to change gears - kick it up a notch - the GGs are coming to spend the day with Booboo.