Economic Update – Glimmers of Good News?

Are the recent economic initiatives by the U.S. government putting the country on “the road to hell,” to quote a certain Czech politician whose own government imploded recently? It is worth noting that good intentions are known to be a common paving material on the road to that unpleasant destination. Or will our ultimate destination be a little less dramatic? The recently announced plan to get rid of toxic assets on the books of financial institutions through public-private action seems to be getting a positive, if cautious, reception. “We’re still learning about the plan, pretty much like everyone else,” Neil Freeman (pictured), chairman & CEO of Chicago-based Aries Capital, told CPN. “But it’s encouraging. With the government as a partner, it seems to offer a mechanism that will encourage private investors to participate.” If it works as expected, Freeman noted, one strength of the plan would be that it would offer private investors–specialists who know their way around the complex financial structures, rather than the government–a relatively low-risk way to dig down into the assets and mine them for whatever value they may still have. That said, he added, the “devil is still in the details. We’re looking at it to see if it makes sense for us to put up some capital and participate, and we will make that determination before long.” New housing figures on Wednesday from the U.S. Department of Commerce about new housing sales were also positive. According to Commerce, February new home sales nationwide were up 4.7 percent compared with January, though that still represents a 41.1 percent decline from February 2008. An important factor in the uptick was a relatively low median sales price of $200,900, which is about the same as it was in late 2003. Durable goods orders were also up 3.4 percent in February. The equity markets seemed to move upward early in the day on Wednesday in response to these glimmers of good news, but it moved into negative territory later and only emerged positive again toward the end of the day, lead by banks and homebuilders. The Dow Jones Industrial Average was up 89.6 points, or 1.17 percent, while the S&P 500 was up 0.95 precent and the Nasdaq was up 0.82 percent.