Wednesday, August 25, 2010

Market Observations: Where's my helmet?

Market Trouble
Today we saw the DJIA returning to four digits and touching 9,937 before staging, perhaps with the aid of the Working Group, an afternoon recovery to 10,060. We also saw the S&P well below 1050 for most of the day, and as low as 1042. Please note, that these numbers are coming off 1122 on August 10 for the S&P and from 10,719 on August 9 for the DJIA. In other words, these twelve trading days have shaved off over 7% in either market.

The worst news today is that July new homes sales absolutely plummeted to a new record low:

"New home purchases fell 12 percent from June to an annual pace of 276,000, the weakest since data began in 1963," reports Bloomberg.

The Commerce Department also reported that the average sales price has plunged 13.2% since July 2009. Median home price of $204,000 is the lowest since 2003.

New homes sales are down over 32% compared to a year ago. Considering that we are experiencing record-low mortgage rates, this is very, very, very bad news. Seriously, think about it: homes are the cheapest they've been in seven years and rates are practically the lowest ever, and yet new home sales are off 32% year-over-year. Either banks aren't lending or people aren't asking, or both.

Other news:
Gold is up nearly $90 in the last 30 days, and the dollar is strengthening too. That's a pop to the face of those who still call gold a "commodity." As for the real commodities, the usual mysteriousness is summarized nicely here, where you'll also see mention of the over 6% move in silver in the past two sessions, including a solid 3% silver rally today that pushed prices to $19.07/oz. Both metals are at two-month highs today. I say "mysterious silver" because you never know what to expect with that one, even more so than gold, which is mysterious enough on its own.

The Bankster Report offers no investment advice other than the obvious observation that when it comes to fiat money, history has spoken only in repetition and never in contradiction: fiat fails. But, for those interested in some technicals and opinions on these precious metals, here are some links:

There's gonna be a big metals rally starting in the fall!
There's gonna be a big metals crash starting in the fall!

Silver technicals look good.
Silver technicals look bad.

Silver is a mystery.

Gold technicals look good.
Gold technicals look bad.

Gold is going through the roof!
Gold is going to crash and burn!

And, of course, here's an article found by our like-fellows over at Zero Hedge, to whom this Bankster Report is permanently linked on the left hand side: Gold Bubble? What Bubble? Also, from la contra costa, we have this: "Investors warn about gold bubble burst."

Some analysts are calling for a short-term upside in silver to $21.50. This is would a rather big move, as silver over $20 is the psychological equivalent of gold over $1000. That's also a very hefty 13% from the current price. Not everyone shares this opinion.

This is what a market is made of, lot of opinions. Excluding, of course, the gold market, which happens to have lots of opinions and then about 33 central banks, too. But never mind that! New short-term (6 month) calls on gold range from $1300 to $1365 from the so-called serious market makers such as Goldman Sachs and others. In my opinion, short term should not be one's concern.

However, probably in the shorter-rather-than-later term, the commerical and residential real estate bubble in China will be coming to some moment of truth. As legendary investor Jim Chanos has called since last year, this one's gonna be bloody. If you don't know anything about what's happening in China, check out these videos:

Empty Skyscrapers
The World's Biggest Mall
Empty Cities


1 comment:

  1. As a Mogambo Guru Junior Ranger. I say to buy gold, silver and oil, “Whee! This investing stuff is easy!