Dubai Default
Happy Day After Thanksgiving
Stocks fell with momentum as Dubai defaulted on its debt. Bonds fell in interest rates for the same reason as people fled to “safe investments.”
The Dollar gained 2 cents as Dubai shook all markets. Gold fell $50/ounce but recovered significantly – ending down $13/ounce.
Oil and gasoline fell in line with the Dubai news, as commodities were not the “safe investments” that people were looking at in these turbulent times.
In today’s news…….
Dubai Default – Dubai is not paying on its bonds (and that’s $60B worth of bonds), and wants to delay its currently due payments until April 2010. This is a major shaking of the world’s financial system. Europe has the most exposure, but Citibank is one of the big US banks who is hit by this default. This means that banks must declare these bonds as high risk, and write down part of the debt. That really hurts the capital requirements of those banks. This is a BIG DEAL.
Investors around the world got scared and started a flight to quality. They purchased the 10 Year US Treasury, and US Dollar – causing a recovery of the Dollar after its recent lows last Wednesday. Concurrently, there was a selling off of Gold with a $50 drop in price at one point which subsequently recovered. Use the reaction of the market in this Dubai crisis to educate yourself on what the world does in a crisis.
Bank Examiners – blame the FED and the Treasury for very lax oversight of the banks during the real estate mortgage toxic asset fiasco and the commercial real estate meltdown. The examiners said that these US agencies allowed the risk to build without identifying it, and allowing it to built to a wildly risky point.
Mortgage Rates fell again – the 30 year fixed mortgage is 4.78% last week, and the 15 year fixed mortgage is 4.29%.
Here are the last numbers for today:
Dow Jones 30 Industrial – 10,310 (down 154 points)
10 Year Treasury Bond – 3.21% (down 0.07%)
Euro – $1.4968
Gold – $1174 (down $13)
Oil – $76.05 (down $1.91)
Gasoline – $1.93 (down $0.07)