Economic Update: December 2013

 

Hello,

               A car dealership in Orange County recently made history with the first car sold using bitcoins: a pre-owned Tesla Model S. What is a bitcoin, you ask?  In short, it is an electronic currency that could be used internationally, making foreign exchange fees a thing of the past.  Before there is wide-spread acceptance of bitcoins, a few major issues must be addressed:

·         Bitcoins are publicly-traded as a commodity, but there have been wild swings in value ($13 to $1200).  The currency is currently too volatile.

·         Security is also a major issue as bitcoin accounts can be hacked and robbed.  The Winklevoss Twins, better known for their Facebook battle with Mark Zuckerberg, have developed a bitcoin security solution called “vaults”, and it looks like . When you need to access your money, just punch it a few times and bitcoins will pop out. Those twins are geniuses.

·         Bitcoins can also be used for illegal & harmful purchases such as illicit drugs, hiring hit-men, money-laundering, or paying to watch a Kristen Stewart movie.  There need to be controls to prevent these activities.

 

I hope you find the news below informative:

 

Economic news:

• As of December 6^th, our current national debt is $17,227,010,669,351.90.  The National Debt only increased $77.9 Billion in November versus $409 Billion in October.
• Government Shutdown: The total cost of the shutdown is estimated to be between $2 to $6 Billion.  The political standoff cost tax payers $2 Billion in back pay to federal workers for work they never performed.  Adding to the cost are lost revenue for national parks, IRS, and other shuttered government services that affected businesses and thus GDP growth.
• Debt Ceiling Deadline: I have no update.  The revised deadline is still February 7^th, 2014.  We will probably have more news on 2/6/14 when Congress procrastinates and pulls another last-minute all-nighter while the rest of the nation realizes politicians are like diapers; they must be changed often and for the same reason.
• Q4 GDP: Experts believe that the government shutdown may shave 0.2 or 0.3% off current quarter growth to 1.9%, a far cry from 2.4% predicted back in early October before the shutdown.
• Housing: Anyone who has visited new development model homes in Orange County already assumes this: The Chinese are buying all the new homes…in cash.  A recent article by CNBC confirms what many home shoppers already know.  As long as housing supplies remain low and cash reigns king, home shoppers may not have an opportunity to buy a home in the near future.

• Mortgage rates: Mortgage rates are on the rise again, but only slightly.  The 30-year fixed rate rose to 4.26%, up from 4.25% a week ago.  Rates spiked to 4.33% last Wednesday, but lowered earlier this morning.
• Commodities: Gas prices have been slightly on the rise, and the average state-wide price per gallon is $3.58 for regular unleaded.

 

Employment news:

• National unemployment: The nation added 203K jobs in November with unemployment decreasing from 7.3% to 7.0%

• Furloughed government workers returned to work in November, and contributed to the decrease.
• Job gains occurred in Transportation & Warehousing, Healthcare, and Manufacturing.

• California Unemployment: The state added 39,800 jobs in October.  Unemployment fell from 8.9% in August to 8.7% in September, and stayed even at 8.7% in October.
• Unemployment by Counties:

• Los Angeles County unemployment rose to 9.5% in October from 9.3% the month before.
• Orange County unemployment remained flat at 5.8% in October compared with September.
• Inland Empire: Unemployment dropped to 9.8% in October compared to 11.7% a year ago.

 

Upcoming Events:

• The Institute of Internal Auditors, Orange County Chapter

o    Topic:                    “What Internal Audit Risks Exist in a Shared Services Environment & How to Audit Them”

o    Speaker:              Sal Sarabosing Jr., Sr. Director of GSS Transition Management & Corporate Compliance

o    Location:             Equinox (1980 Main Street, Irvine, CA)

o    Date:                     Tuesday, January 14^th, 2014

o    Time:                    11:30am – 1:00pm (1.5 CPE)

o    Registration:      https://chapters.theiia.org/Orange%20County/Events/Pages/Luncheon-Meeting-Jan-14,-2014.aspx

 

Bitcoins may be the currency of the future, and has recently received some legitimacy from the Federal Reserve.  Ben Bernanke feels that bitcoins “may hold long-term promise” as an international payment system.  No kidding.  It would also save our government the trouble of physically printing more money when they need more cash. 

 

Wishing you a Happy Holiday Season,

Barnaby