Gold Moves Back
Stocks got scared today after yesterday’s big run up, and ended down 293 points. As much as everything changes, it stays the same. We are now in a lower sideways movement. Tomorrow should be interesting too.
Bonds got that excess stock market money in its role as a “safe haven”, and the 10 year treasury interest rate fell to 3.36%.
The Dollar gained some strength and held onto its gains from yesterday. We are probably in a new trading range on most currencies, and currencies will await news on the
Commodities in general are in a decline. This makes the FED very happy as they say that this will have a dampening affect on inflation. We’ll see. Oil and gasoline had major moves downward today, and are acting a lot like they have topped out. Maybe we’ll see more of a rational market without NEW HIGHs coming up every day.
Gold got killed today. Gold was down $59. The obvious reason for this major move is profit taking given the massive price increase over the past 3 months. I’m wondering if the IMF has started their gold sales. The fundamentals haven’t changed. The US Dollar is still inflating and in a firm down trend against all other currencies. Gold should continue its road upward in the future.
In the news today…..
Fannie Mae and Freddie Mac is getting an injection of $200B for home loans. In addition, the mandatory cash cushion required by both institutions is being lowered from $20B to $13B. This will allow these institutions to purchase and guarantee $2T (that’s trillion) worth of new mortgages this year. Is this a “threat to the global financial system?”
Bear Stearns announced today that French banks will have to write down more bad loans this year. I didn’t know anyone was working in Bear Stearns anymore. I was surprised to see this announcement.
Paul Volcker, a formed FED Chairman, said today that the financial crisis is not over yet. He talked about the recent FED move to help JPMorgan buy Bear Stearns, and asked “if we are lending and protecting these institutions, shouldn’t they be regulated? Yes”, was his answer. Not real comforting in his words.
Here are today’s Numbers:
Dow Jones 30 Industrial - 12,099 (Down 293 points)
10 Year Treasury Bond - 3.36% (Down 0.09%)
Euro - $1.5622
Gold - $945 (Down $59) - if anyone has an insight on what caused this route in gold, I would be interested in hearing from you.
Oil - $104.48 (Down $4.94)
Gasoline - $2.56 (Down $0.10)
Hey Tom,
Great article as always. I was wondering if you had heard any more on the purchase of Bears and Stearns. I have not been able to find confirmation but a friend said he had heard in MSNBC that the shareholders were rising up to block the sale.
Paul
Paul,
Yes, you are right. Some of the shareholders are saying “foul.” I think they are just poor sports. The biggest shareholder in England is one of them; he owns about 9.6% of the Bear Stearns shares. I don’t think this will come of anything as the purchase was orchestrated by the FED, and the FED has the backing of the US Government. It’s hard to fight city hall. Of course, in our suit happy society, anyone can sue - and i would expect someone to do just that.
Also, i have no sympathy for the shareholders/employees who lost money. Their Board of Directors lied, and the employees should have been close enough to the problems over the past 6 months to see that they should have diversified their 401K holdings out of Bear Stearns stock.
Tom