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Stagflation…and More Market Moving News

Posted by Larry Doyle on February 27, 2009 8:51 AM |

breaking-newsU.S. Economy Shrank 6.2% in Fourth Quarter, Most Since 1982  from initial report of -3.8%. Price   index in the GDP report revised up to .5% from initial   reporting of .1%

Both sides of this report, along with the recently reported higher than expected CPI (consumer price index) and PPI (producer price index) certainly seem to be pointing toward a greater likelihood of “stagflation. ” Our economy has not experienced that dreaded scenario since the early ’80s. 

Additionally, Citi Gets Third Rescue as U.S. Plans to Raise Stake IF privately held preferred shareholders do the same. What does this mean? Current common equity holders in Citi will be significantly diluted and the U.S. taxpayer is moving into a first loss position. Why is the government doing this? Very simply because Citi would otherwise likely lose counterparties willing to trade with it given the concerns of losses embedded in its holdings of toxic mortgage assets.

Market reaction? Stock index futures are pointing toward a 2% decline!

LD






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