More Of The Same
Today was a mini-repeat of yesterday. Stocks, after being slaughtered yesterday, were killed today. Bonds continued their value gain (decrease in interest rates) and ended below 4.0% for the 10 Year Treasury.
The Dollar continued it losing ways.
Oil continued up, and set another new high of $142.60; but, gasoline (always being difficult) lost one penny.
In the news today….
Consumer Confidence fell to a 28 year low in May. The metrics, while being meaningless – only an indicator, came in at 56.4 from 59.8 the previous month. The lowest this metric has ever been was 51.7 in 1980. If it blows through that number, it will be a great indicator of how lousy people are feeling about the economy. What fun to wait and see.
AIG, the world’s largest insurance company, is going to write down $5B from its subsidiary insurance companies from bad subprime mortgage bets. AIG had previously announced $15B in write downs, so this just more of the same drip, drip, drip……
Merrill Lynch will take a $5.4B write down for the 2nd Quarter 2008. Then is must go out (somewhere) and raise enough capital to stay in business. More fun.
Morgan Stanley is being downgraded by Moody’s rating services. More fun.
Tonight’s Dinner Conversation….
This week was a very interesting week – unless you own stocks. The first 3 days were really boring, but Thursday and Friday shook the financial world. If you are an investor, you couldn’t hide from this week.
So, the question for you tonight is “What’s really going on? And, what’s causing all this chaos?”
Hint for tonight’s conversation: Is it possible that the truth of the US economic situation is becoming visible? Can the US stand the truth? What would happen if the truth were stated up front? Is there an island of moral certainty anywhere in the sea of finance?
I was happy to see a headline showing another BEAR market confirmation today. (The S&P 500 is now down 20% from its high; a BEAR market confirmation) After my BEAR confirmation yesterday, the financial press must have jumped on board.
Here are today’s numbers:
Dow Jones 30 Industrial - 11,347 (down 107 points)
10 Year Treasury Bond – 3.99% (down 0.04%)
Euro - $1.5795
Gold - $931 (up $16)
Oil - $140.21 (up $0.57) - a NEW HIGH OF $142.60.
Gasoline - $3.50 (down $0.01)
With all the news about being on the cusp of a bear market the market is facing a strong headwind on Monday. Inverse EFTs have worked well for me last week. People are talking about a bounce; I don’t know.
I have heard rumors of the same theory that there may be a small bouce the next few weeks. Possibly the chart may indicate this, but the fundamentals are only getting worse for the US economy.
There may well be another dead cat bounce in the near term but how long could it last? The Fed has no more ammunition, the economic news will only get worse, more bank writedowns will be on their way…
Thanks John and David for your comments. I tend to agree with David that there could be a bounce (a small one today) but this Bear Market has now been confirmed, and is being announced on the news. So, it has a little further to go. I’m in this for the long term, so i ignore the bounces, and look at the trend. The trend is your friend!!! The inverse ETF play is very clever, and i commend you on your investments. I hope you get very rich.
Tom