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Five Things You Need to Know: Don't Worry, Just Buy Stuff That Smells Good!; Remember When?; Four Dollars; Housing Containment Spreading to Latin America; And This Time They Mean Business!


What you need to know (and what it means)!


Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. Don't Worry, Just Buy Stuff That Smells Good!

The economy has slowed somewhat, acknowledges Dallas Federal Reserve President Richard Fisher, but even though the worst may not be over for housing he's not worried, according to an interview in today's USA Today.

  • We ran across this interesting and revealing [not in a good way] interview with Dallas Fed President in today's USA Today.
  • Acknowledging growth has slowed, Fisher says there are many factors at work contributing to the slowdown.
  • "One is the downturn in the housing market," he says. "The other is high energy prices. And I also think you reach a point in the business cycle where you almost have to regroup, to catch your breath."
  • Now, here's the revealing part.
  • The USA Today reaches deep into its arsenal of savvy, hard-hitting reporting to come up with this ridiculous softball lob of a question:
    "What are the positives that are helping the economy weather the housing downturn?"
  • And Fisher knocks it out of the park:
    "Americans will buy anything that looks good, feels good, smells good and tastes good. We're great consumers. And consumption is over 70% of GDP."
  • Don't worry. Just keep looking good, feeling good, smelling good and spending.

2. Remember When?

This morning on the Buzz & Banter Minyanville's newest contributor Jeff Cooper said he couldn't remember when the Dow Industrials were last up 15 out of the past 16 days. Minyanville Professor Jason Roney does remember, however.

  • So far this month the Dow has recorded just one down close and has finished higher 15 out of the past 16 days.
  • Roney said he could find just two prior occurrences since the S&P 500 came into existence.
  • See below:
    Current Dow Run

    Dow January 1992 Run

    Dow December 1970 Run

3. Four Dollars

Fuel prices are rising at a pace not seen since Hurricanes Katrina and Rita knocked out a third of the U.S. oil refining industry in 2005, according to Bloomberg. Bottom line: $4 gas coming soon to a pump near you.

  • Measured seasonally, gasoline inventories are now at the lowest level in two decades.
  • The low level of inventories for this time of year is mainly due to a combination of refinery fires, power failures and maintenance work that wasn't completed last year, Bloomberg says.
  • As well, no new refinery has been built in the U.S. in 30 years.
  • U.S. Energy Secretary Samuel Bodman warned last week the national average price for gasoline at the pump could break a record this summer.
  • However, according to data from the Dallas Fed, gasoline would need to rise to nearly $6 a gallon to drain as much household income as it did in the early 1980s.
  • That may be one reason consumers were able to withstand gas above the $3 barrier for much of last summer.
  • David Pursell, a principal with Pickering Energy Partners, told Bloomberg, "Last year, we had pump prices well over $3 for the summer and gasoline demand was up. Would $4 gasoline cause demand contraction? I think it will, but I also thought $3 gasoline would.''

4. Housing Containment Spreading to Latin America

According to the Wall Street Journal, Latin America is now beginning to show signs that the U.S. housing downturn "containment" is spreading.

  • Home construction is the principal employment industry for immigrants entering the U.S. labor market, according to the Wall Street Journal.
  • And much of the cash earned by those immigrants is sent back to family members living in countries south of the border.
  • In a recent study of 15 Latin American economies tracked by BCP Securities, the Journal says 12 showed better than a 90% correlation between U.S. housing starts and the remittances recorded by the central banks of those countries.
  • Monthly remittances from U.S. to Mexico peaked at $2.6 billion in May of last year, but due to the housing downturn have dropped every month since.
  • In February remittances to Mexico slowed to $1.7 billion.
  • Meanwhile, the housing containment may also be spreading to other industries beyond building and construction that rely on immigrant labor; the carpet industry, for example.
  • Moreover, the WSJ notes, U.S. homeowners may begin to compensate for rising mortgage payments by cutting back on services that employ large numbers of immigrants, such as housecleaning, landscaping and laundry.

5. And This Time They Mean Business!

Did you know mortgage fraud is investigated by the FBI? They do. And now when you apply for a mortgage you'll get one last chance to sign off and make extra sure you aren't making any false statements regarding income, assets, debt, or matters of identification, or willfully overvaluing any land or property, in a loan and credit application for the purpose of influencing in any way the action of a financial institution.

Have a good day!

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