STOCK MARKET WATCH, Thursday 29 January (#1)

http://www.financialsense.com/Market/wrapup.htm

Mr. Greenspan Speaks

It is always fascinating for me to see all the players in the market jockey for position prior to announcements or speeches from the U.S. Treasury, the Labor Department, or any other entity that influences the financial markets. Today everything has been drifting sideways in anticipation of the remarks from Federal Reserve Chairman Alan Greenspan. Throughout the morning and early afternoon stocks, bonds, and the U.S. dollar have remained very slightly in positive territory, however the dollar has dipped the line a few times. With about a half-hour to go before Mr. Greenspan’s statement the Dow Industrial Index sits at 10,615 and the NASDAQ at 2,120. Treasury bonds are up about 0.5% and the 10-year note is up by 0.3%. Commodities were tame in the early morning hours, but have increased in volatility as the day progresses. Right now the markets seem to be pricing-in expectations of continued stimulus from the Fed due to weakness in employment and excess capacity in manufacturing, along with the notion that they see “no signs of inflation.” Now we wait to see if anything significant has changed in the Fed’s outlook, and how market prices will react to the statements.

The Federal Reserve announced they would leave interest rates unchanged, however some of the rhetoric regarding future interest rates was changed ever so slightly, and that minor change put all the traders into action. In prior statements the Federal Reserve has said they could leave rates unchanged for a “considerable period.” In today’s statement they rephrased it by saying they could be “patient with raising interest rates,” but removed the “considerable period” portion of the phrase. Market participants read this as a sign that perhaps the Fed is laying the groundwork for higher interest rates in the near future. The stock market did not like the prospects of higher rates. Within 15 minutes of Greenspan’s statement the Dow Industrials dropped 100 points and the NASDAQ shed 20. Treasury bonds sold-off in a big way reflecting expectations of the higher interest rates in the not so distant future. The dollar strengthened with implications of higher interest rates. It just doesn’t look right when I see stocks down, bonds way down, and the dollar way up. Who the heck is buying dollars when stocks and bonds in the U.S. are headed lower?

In the News

The economic news today wasn’t very good. Durable goods orders were expected to gain 2% in November, but the report shows orders to be flat versus the prior month. Weak durable orders imply that corporations do not need capital expenditures, therefore economic stimulus from corporate spending will be subdued moving forward. Another very negative economic development is starting to happen in housing. For the month of December new home sales were expected to increase by 1.7%, but the Commerce Department reported today that new home sales actually declined by 5.1% - a big surprise. Capital spending could slow even more from corporate America, and it will be difficult to keep consumers in the game with weakness in employment and without cash-out re-financing to buy the big ticket items. If the markets are correct today that interest rates will be going higher in the near term, it will put even more pressure on new home sales. In November new home sales declined 2.8%, then declined 5.1% in December. If this is the beginning of a trend, it’s headed in the wrong direction if we are looking for economic improvement.

Fuel for the Fire

By the closing bell, the Dow Industrial Average fell by 141 points or 1.3% to close at 10,468 and the NASDAQ Composite dropped 38 points or 1.8% to close at 2,077. Every major sector and broad index is bleeding red ink today, except for the Dow Jones Utility Index which posted a gain of almost 1%. Treasury debt was lower across all maturities with the 10-year note falling 0.9% which moved the yield from 4.08% to 4.19%. I have my doubts that this trend of rising interest rates is going to last. If the cost of debt service goes up significantly, you can kiss an economic recovery goodbye. In the end I believe the powers that be would like to see a lower dollar, however in the near term stability is needed for the global system to absorb the dramatic changes in valuations. In the near term they will “talk the dollar stronger” rather than actually having to raise interest rates. I do not believe the Federal Reserve will raise interest rates by choice. The day will come when bond buyers begin dumping Treasuries because of a falling dollar (inflationary pressures). When that day comes, the bond market will force the Fed to raise rates. In the meantime, the powers that be will continue in their attempt to extinguish the fires by pouring more gasoline on our fiat paper dollars!

Check out the charts! Notice the plunging lines when Greenspan open his yap.

The DJIA crawl on the thoughtscreens whenever bu$h was speaking on Terrorvision! The longer he bleated, the more the Dow dived. Now, Greenspan says next to nothing and get the same effect. Hmmmmmmm.

Oh, yeah: Good Morning, Marketeers! And thanks for all you do on this thread EVERY DAY!

:donut: all around,
dbt

As the election approaches, Bush will likely flap his gums more. That's going to be one tall order for TV news's data wranglers to nix the stock numbers every time Bush utters a word.

and likewise - :donut:

"When Bush speaks live, markets take a dive!"

For all you DU marketeers, have a round on me:

:donut: :donut: :donut: :donut: :donut: :donut: :donut:

Great toon and interesting article. I found it interesting that the shorts in gold could not pressure the price down early in the day. Looking back, the rally in gold did not coincide with the relative flatness of the dollar - sort of up and down all morning within a tight range.

There was that little bit about Japan looking to diversify their dollar reserves and the speculation of gold that I posted late in the day. I really didn't think much about it until later in the evening.

Here it is again:
http://www.forbes.com/markets/newswire/2004/01/28/rtr1231050.html

The US Federal Reserve (news - web sites) left interest rates on hold at 1 per cent on Wednesday but tweaked the accompanying statement, leading investors to conclude that it was softening its signal that rates would remain low for some time.

In the statement, the Fed's open market committee dropped the expression it has used since August - that policy can remain accommodative "for a considerable period".

<cut>
The markets concluded that dropping the expression "considerable period" gave the Fed more leeway to tighten policy in the near future, though the change is also compatible with a simple technical refinement of the statement to avoid making a specific time commitment. "It is easier for the Fed to drop the 'being patient' phrase when they think they want to hike than for them to drop 'considerable period,'" said Peter Hooper, chief US economist at Deutsche Bank in New York.

story

WASHINGTON (Reuters) - New orders for long-lasting U.S. manufactured goods were unchanged in December and new home sales fell as a strong quarter for economic growth closed on a soft note, two reports showed on Wednesday.

The Commerce Department (news - web sites) said orders for durable goods -- items like refrigerators and cars meant to last three years or more -- were flat in December after falling a revised 2.3 percent the previous month.

Analysts had been expecting a solid increase of 2.0 percent and the data raised questions about the strength of the manufacturing recovery that had been evident in other reports.

BROAD WEAKNESS

The durable goods report, which provides a key reading on the health of the manufacturing sector, showed weakness across a broad range of products.

story

LONDON (Reuters) - The dollar retraced some of its earlier gains against the euro on Thursday after rallying to a one-week high following a signal from the U.S. Federal Reserve (news - web sites) it was preparing the ground for eventual rate rises.

<cut>
Fed chairman Alan Greenspan (news - web sites) and U.S. Treasury Secretary John Snow are also speaking at 10:30 a.m. EST in Washington.

story

http://quotes.ino.com/chart/?s=NYBOT_DXY0

Last trade 87.12 Change +0.15 (+0.17%)

related article

http://www.forbes.com/markets/newswire/2004/01/28/rtr1232767.html

Dollar firms on Fed statement, but gains seen limited

TOKYO, Jan 29 (Reuters) - The dollar firmed on Thursday as an unexpected change in the wording of the U.S. Federal Reserve's statement after its policy-setting meeting suggested the central bank may be a step closer to raising interest rates.

The greenback posted broad-based gains on active short-covering after the Fed dropped the phrase referring to a "considerable period" of loose monetary policy from its statement, while keeping its interest rates unchanged.

But active follow-through sales were limited as the market was careful about holding on to large dollar-long positions before the Group of Seven (G7) industrial powers meet next week, traders said.

"The Fed's statement surprised the market at a time when the focus has been on the G7 meeting," said Hideaki Furumaya, head of the corporate desk at Trust and Custody Services Bank.

"But it's premature to become too bullish on the dollar as the market really doesn't expect the credit tightening to happen very soon," he said.

<snip>

The dollar hovered just above 106 yen steady from the late-U.S. level but up from the overnight low near 105.50.

Its topside was blocked by heavy sell orders rumoured to be lined up above 106.40 yen, traders said.

"The perception that there is strong selling interest in the dollar/yen rate really hasn't changed," Furumaya said.

...more...

Greenspin's comment's may have momentarily lifted the dollar from its lows, but he has no rabbits left in his sack and words will only go a short distance. It appears that he has ceded his powers to the politics of the BFEE and will do whatever they say until after November (and then beyond). His credibility is on the line, but does he care? Nah... He's just an old man that has sold his soul. So sad.

Hope all you Marketeers have a Great Day!

Hey, Ozy! Loved your 'toon today :D

About those words going a short distance - are you going to catch his statements at 10:30 this morning? If someone can follow his pronouncements, would you please post them here. I am a bit concerned about how the BoJ's initiative to diversify their dollar holdings and Greenspan's comments will be reconciled by the markets. Any forward speculation?

eeekkkk! My readings of the leaves are almost always off by a huge margin :D

I will be looking for the text of the 10:30 words and will post as soon as I find them (I don't have cable and I don't watch the tube (except for the 6:00 lies) so get all my news from the net.

I read 54anickel's news link and it looks like there will be no immediate action on the BoJ's part regarding gold - whether their words have the power to move the market... that has yet to be seen as it appears that others are watching them closely to see if they continue to intervene in the currency market before the G7 meeting. If they do make a move into gold, you might see a price run-up in there, and if anyone takes them seriously (about more gold holdings), you will see the results quickly. If the BoJ does diversify, it might mean that they are attempting to stabilize their currency for a stronger more forward position and would indicate to me that they were "un-tying" from the dollar. I would not think that they would do that as they have sunk a lot of yen into the US currency and it would destroy their holdings there.

So, I guess if you want me to call that one - I'd say "it's just words" - until I actually see some action on their part, it means dooda.

On the Greenspin and Snowjob talk you will probably hear the cheerleaders. Greenspin will do a gobblygook thing about patience and improved job market and no inflation with several unintelligible words mixed in and Snowjob will say that the "strong dollar" policy is still working.

The clouds have settled around the leaves for now - hope the message is clearer for others than it was for me :)

:hi:

see them diversifying into gold. The speculation in the gold market started by the man not giving a direct answer to a leading question. :eyes:
http://www.forbes.com/markets/newswire/2004/01/28/rtr1232513.html
snip>
CHICAGO (Reuters) - Gold rose to two-week highs Wednesday on speculation that Japan might boost the amount of bullion it holds in order to diversify its foreign reserves.


It is the talk of diversification that has me a bit worried. JMHO, from what I've pieced together of EU and BoJ discussions, that the BoJ will tolerate "some" strengthening of the Yen in an effort to relieve some of the dollar pressure on the euro. EU does not want to play the currency game (want to protect the image of the euro), but I think there is something in the works where the world will give in and allow the dollar to devalue, stepping in when needed to keep it orderly.

that something is up - but I think it will probably come from the G7 meeting -

The EU is watching the BoJ closely to see if they what they are going to do - quit intervening or intervene more heavily (remember they upped their budget for that) - and it will depend on how the BoJ sees their markets in relation to China.

As long as China ties to the dollar, Japan basically has to do the same - or they will slide back into recession.

I guess the big question is: What does an "orderly" slide look like and what will be the result of that slide?

Early movement today. Gold spiked down to around $402 a few minutes ago.

Now at $398/oz

Eyeball next support level of $395 then $380.

Not as pronounced yet in the dollar - trading near session highs.

I'm glad I was setting my coffee down when I saw that cartoon, ozy--spit-takes are not good for the monitor!

Thursday means job reports--
8:30
Initial Claims were at 341K--expecting 335-340K

4th Quarter Employment Cost Index--previous 1%, expected .9%

10:00
Help Wanted Index for Dec. was 39, expected to rise to 40

Market is still reacting to the Greenspin and it could go either way; futures are mildly up at this point.

:donut::donut::donut::donut:

:donut: :donut: :donut: :donut: :donut: :donut:

Luckovich is right on! Start your day the stinky way.

I am waiting for the next shoe to drop when both Greenman and Snowjob testify at 10:30 this morning.

Death by paper cuts...
8:30 U.S. 4-week initial jobless claims up 750 to 346,000
8:30 U.S. weekly initial jobless claims off 1,000 to 342,00

8:30am 01/29/04 U.S. AVG. CONTINUING JOBLESS CLAIMS LOWEST SINCE 8/01

8:30am 01/29/04 U.S. Q4 EMPLOYMENT COST INDEX UP 0.7%

8:30am 01/29/04 U.S. Q4 BENEFITS UP 1.2%, WAGES UP 0.5%

8:30am 01/29/04 U.S. 2003 EMPLOYMENT COSTS UP 3.8%

http://cbs.marketwatch.com/news/newsfinder/default.asp?doctype=-2&scid=0&siteid=mktw

figures. Of course, personally I think they could have used a bit of a more upbeat tone. :D

http://www.mcall.com/business/ats-ap_business13jan29,0,5091258.story?coll=sns-business-headlines

will back off before the G7 meeting.

http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1073281400584

snip>
Analysts said the upcoming G7 meeting was adding to the pressure on the yen as investors bet that the Japanese authorities might back away from intervening in the run-up to the meeting in a bid to head off criticism by its G7 counterparts.

"At the time of the September meeting, BoJ intervention virtually stopped in the week ahead of the meeting and did not resume until a full week after the meeting," noted Adam Cole, senior currency strategist at Credit Agricole Indosuez. "We expect pressure on the BoJ to step back from the market to rise ahead of the G7 meeting, paving the way for a break of Y105.50."

snip>
There was interest in the New Zealand dollar after the central bank surprised the markets with a quarter-point rise in interest rates.

The NZ currency first fell as the US dollar jumped higher following the Fed's statement. But the Reserve Bank of New Zealand's announcement came out shortly after and the NZ dollar bounced sharply.

From US$0.6795 ahead of the Fed, the NZ dollar slipped to US$0.673 before recovering rapidly to US$0.678. It was at US$0.6745 on Thursday in Europe in still choppy trading conditions.

The bank noted the strength of the currency, but implied its decision was based on concerns about domestic inflationary pressures.

more...

here as a point to ponder. Take it for what you will. I found the conclusion a bit scary. It was linked to goldismoney, but has nothing to do with gold.
Don't want anyone thinking I'm obsessed with gold or anything. :loveya:

http://www.amconmag.com/07_14_03/cover.html

<cut>
To understand where the American economy is headed as the dollar drops in value, it is best to think of American workers as populating the three ships:

On the “A” ship are those talented enough to add value regardless of the strength of the dollar—perhaps 1 percent of our working population.

On the “C” ship are those in hard industries that have survived a decade of the strong dollar—about 20 percent of our workers.

On the “B” ship is everyone else.
For the past 10 years, the United States government has worked to keep the dollar strong, following a policy set out by Clinton Treasury Secretary Robert Rubin, former CEO of Goldman Sachs. Under the “strong dollar policy,” “B” ship America luxuriated in cheap imports, an increasingly large fraction of which— roughly one-fifth—was bought on credit.

But foreigners have had their fill of lending us dollars. Since March 2001, the dollar has fallen in value compared to most major currencies, and it promises to drop much further. That means “B” ship America will soon be paying higher prices for the goods it buys, while borrowing fewer dollars.

How low is the dollar likely to go? - funny they should ask, being conservative and all

Here's the scary part, if they think this is a good thing:

Based on the results of the 2002 election—when Republicans ran on military security—economic security might be a political winner. Conceivably, it might be more popular with voters than a return to traditional fiscal conservatism because it would subordinate the pain we face to national purpose. Might it be the secret destiny of the Republican Party to become the political arm of a military-manufacturing-security complex like the one President Eisenhower warned of 40 years ago?

But I particularly liked this one, though I do not follow the logic of looting by trial lawyers (unless cause is found to go after Halliburton et al):

Fifth, a decline in the dollar could upend American politics. Democrats will be tempted to lurch Left, which could result in looting by trial lawyers and government unions. Within the Republican Party, what happens is anyone’s guess. The only thing that can be safely predicted is a purge of the glib globalism that understands little about economics, nothing about national wealth, and less than nothing about comparative labor productivity.

Each spells the death of the Republican party as we know it. I infer that this to mean that the Republican party would lurch right and boot anyone who does not agree with Cheney and DeLay.

In other words, a little sacrifice?

But but but Amurrcans' way of life is a blessed one! We don't DO sacrifice!

The last sentence of "secret destiny" is spot on.

Wonder if that was intentional?

They all died of a disease caused by unsanitary telephones.

(For the uninitiated, a planet shipped all its "worth less" people off-planet--including the folks who sanitize public phones. Those people, however, managed to be the founding race on a planet called "Earth")

If you can stomach to click on something called "American Conservative." I did, and it was an interesting read.

NEW YORK - Stocks are set to open higher Thursday, a day after the Federal Reserve (news - web sites) left short-term interest rates at a 45-year low of 1 percent but dropped its plan to keep rates low "for a considerable period."

Dow Jones futures rose 33 points recently, to 10,498. Nasdaq futures were 4.5 points higher, and S&P futures were up 2.8 points.

story - focusing on international markets

The market has run-up on smoke and mirrors. Since it was irrational exuberance fed by a few leaders, is it possible that those who led the run-up will also lead the crash? They don't want the devastation brought on by Chimp so a major correction would certainly make the '04 election of Chimp more difficult?

Alternatively, even a minor correction would have the market about where it was when * took office, think anyone will notice?

It may be time for me to start taking medicine or avoid this place because I have become increasingly paranoid over the past three years.

It's the last stage in the greif process. I went thru it in Jan 2001, when my country was destroyed by five traitors. It just takes time.

I never equated the effect that the Selection had on me to the standard grief stages but now I realize how I went through the whole process.

It took me a long time

They had gone down substantially three years in a row (historically extremely rare)? Or because company profits (the driving force behind almost all stock movement) have gone up substantially in the last several months?

The problem with why you can't answer your question is because it has a false premise ("The market has run-up on smoke and mirrors"). When I buy a stock, I'm buying the profits for the next "x" years - the higher the anticipated profits, the higher the stock price.

TO assume that every company and every market analyst and every economic number released is somehow colluding to fake the numbers and artificially drive up the S&P IS somethnig very like "paranoia".

This should not be read to imply tat I don't think we're due for a 5% drop.

Being inverse to the price of the stock. Why would the insiders been bailing for the last couple of years if stocks are on the way up?

The other issue I see is how many companies do you see that report GAAP earnings? I know Apple Computer does, which is why I feel comfortable with their numbers. But how many others have switched to Pro Forma earnings with the usual "beat expectations by a penny?"

It's a side effect of all the options that are being paid now as such a substantial part of insider compensation.

You see, if I receive options as part of my compensation, that doesn't show up as an "insider purchase" because I haven't purchased anything... And, of course, I'm not exercising my options as the price is going DOWN because there is no money to be made there.


So now the stock start going up again and I decide "maybe I ought to exercise some of these options and take a little profit". When I BUY the stock using the options? THAT purchase doesn't get reported on the SEC Form 4 because I'm not buying the shares on the open market. I'm buying treasury shares direct from the company so it never shows up as insider buying. Whenever I decide to SELL a few shares though? I have to do THAT on the open market, file a form, and it DOES get reported as insider selling.

As stock prices move higher you see more and more of this because more options are "in the money". And since most executives now PURCHASE shares by exerciseing the option and NOT selling the resulting shares - you never see their "buying" activity in that "insider buy/sell" ratio.

Also (believe it or not, not there are several studies to back it up), insiders don't actually do much better than average investors at picking buy/sell points. The quote I remember is "unless you've got inside information "hot" as a new cure for cancer - it's actually quite difficult to predict how a stock will perform".


As for your second point. I'm afraid I don't see what you're saying. "pro forma" accounting does not fall outside of GAAP. Almost all companies report using correct principles. The only exception I've seen is how to report the cost of options, and for most companies I invest in directly that isn't an issue (options wouldn't even be a rounding effect for most of them).

with this deal?

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=114&topic_id=4848

They have to determine whether it was "normal" speculation. The BankOne Yahoo board had some rumors about JPM for some time and rampant speculation a couple days before the deal was announced. Was the trading the result of "lucky" investor speculation? Or insider knowledge? I say "lucky" because I've seen that activity on back stocks before when NOTHING was being planned and suckers lost their shirts - I woudn't play on that field.

Still, I've been watching it (it has potential implications for my bank as well at some point in the future) and will let you know if I hear something.

actually that was back in the early days of bank de-regulation and interstate banking. I went through 8 "mergers" in the 11 years I worked there. I remember one customer coming in and hollering, "This bank changes names more often than I change my shorts!" Then he proceeded to close all of his personal and business accounts - big bucks. Moved it all to a smaller, local bank that has yet to be changed. It has grown, opened many new branches but no merger-mania there to this day. It's where I bank now, I love the place.

It used to be the case that we had one or two 5% dips and one 10% almost every year. It's part of what I would consider the "normal" process.

But things haven't been "normal" for quite a while.

Since March (11th?) of last year the market has been virtually straight up (with only the occasional 2% step-back).

So, given the proper "shock" it could pull back 10% within a week or two and not be a terrible thing (but damaging to bush, of course) and wouldn't scare me off of my investing philosophy. I'd think 3-5% is much more likely (to the point of "expected", but I don't play short-term moves).

As mentioned in the post above, insider trading is at its highest levels since the Enron-inspired selling rush two years ago. Evidence suggests that some companies are pumping their share price to have cash reserves. (Cash-on-hand is what saved companies like Southwest Airlines after 9-11.) Insider selloffs suggest the same thing. One could deduce that securities are valued less than cold hard cash. If I am missing something here, please tell me.

Also - How do we determine how much stock is being bought back by their issuing firms?

Stock buybacks are not the same thing (in fact are the opposite) of hording cash. I also don't see how "pumping" the stock price helps with cash reserves?

I also don't see the massive insider activity that some fear-mongers in the press are looking at (see my post above for a quick response).

if it were not so lop-sided.

Do you believe that "the Market" is made up of and driven by small-timers like you and me? It's not.

I've quoted this before, from Greg Palast's The Best Democracy Money Can Buy, out of the 3.5 trillion "out there" in stocks and treasuries, 2.9 trillion of it is held by the top 1%.

Do the math.

Julie

There are huge amounts of dollars in pension funds (FAR exceeding half a trillion) and that money is NOT owned by the "top 1%". And that's just an example. Of course the riches few have the most - that's the definition of "richest". But part of getting rich is that you DON'T throw away those riches just for public opinion.

There is exactly ZERO percent chance that there are billionaires ivnesting in something they KNOW is worthless just to get some peabrain elected. They won't commit ten million like Sorros to elect the guy, but they'll give up tens of billions to prop up a market when they know they'll lose those investments "when the crash comes".

Anothe part of getting rich is that you are rarely STUPID.

to me. Not a sensible way for an individual to protect assets.

Let's see. The wealthiest 1% ahve $2.9T of a $3.4T market....


Sounds to me like there isn't any money for there to BE a pyramid. There would have to be much larger sums (split many more ways of course) at the bottom of the pyramid.

Over the last 70 years or so the "victims" have been the people who are NOT in the market. When companies make profits it benefits the people who OWN those companies. Why I would not want to be one fo those people is beyond me. My mattress just doesn't pay well enough and a bank CD sure aint going to do it.

And the fear mongers who are pushing gold now? THAT's the pyramid scheme. Nobody EVER makes money in gold in the long run except the people who mine the gold.

very interested in seeing how that 3.4 is divvied up with among institutional investments.

The largest mutual funds BY FAR are the ones that are regular holdings in 401(k) programs and pension funds.

I've also worked with the trust/asset management departments of a couple med-large banks and know the types of clients they see are not all fabulously wealthy people. They're plumbers and electricians and cops and teaches who spend 40-50 years saving and the rest of their life enjoying the fruits of that labor.

fine.

As someone who didn't do so well, once burned, twice shy.

Paying attention, stop losses etc. will avoid another catastrophe for me but IMO the market is just a shade different from gambling. Now that it is up smaller investors will think it's safe and get screwed again. Whether by design or accident the market is not a safe place for money one can't afford to lose.

You are a strong proponent of the stock market and seem to watch it much more carefully then I do, so forgive my question if it is too basic. With the federal deficit skyrocketing won't there come a point that the government will have to raise rates just to attract lenders? When (if?)that point comes, won't there be a major adjustment in the stock market to the "safer" bonds. Safer is in quotations because it assumes the US won't default.

I'm not sure if I remember your situation, but if you were the one who owned all the tech stocks you WERE gambling. Buying shares at 100 time earnings in the hope that it is the next Microsoft (not necessarily what you were doing, but it IS what drove up the Nasdaq) really is gambling.

In a well balanced portfolio, the 2000-2002 fall wasn't really that big a deal for a long-term investor (not that I didn't lose sleep). Forget who is in the white house and focus on the next 30 years.

Up until the mid 80's 5-10% holdings in gold was considered an important piece of a well balanced portfolio as a hedge against inflation.

That idea was poohed upon in the later years by two things, the know manipulation of the gold market and more recently the fallacy that the cycle of inflation has been overcome forever through "proper" monetary policy.

Gold may or may not make a comeback. There are many contributing factors as gold attempts to make it's way back onto the scene. Hedging and price manipulation has been exposed and the court cases are set for this year, the global interest in gold, especially the Mideast and Asia markets, uncertain times in an ever increasing dangerous world.

I take offense to your comparing a metal, with thousands of years of history of having monetary value, to a pyramid scheme. It is not something new like the dot.com schemes, it has a proven record. It certainly does not deserve to be placed in a category such as the likes of Enron.

It just isn't appropriate as a core holding. The crazy suggestion is NOT "hey, you need a hedge against inflation" it's "don't buy gold stocks, don't buy gold futures, just boy bullion and put ALL your money there"

Gold already HAS "made a comeback". But it isn't (and CAN'T be) an investment that will return 8%/year for 30 years. And "comeback" is relative.

You see, gold has TWO values.

1) It's own intrinsic value as a material that you can DO things with - THAT won't change and doesn't diminish.... it also doesn't increase rapidly unless a new use for Gold is discovered.

2) As a store of value. And in that sense it's no different than any other currency (fiat or not)... it's worth what people are willing to exchange for it. If the world goes to hell in a hand basket, people won't want to trade food for gold or weapons for gold... they'll want to trade food for weapons, or labor for food, or livestock for manufactured goods. Gold's use as a medium of exchange works just like a fiat currency... it's worth what people SAY it's worth. So it relies on the same societal faith in value that the dollar/euro/yen does.


It certainly wasn't my intention to give offense. As I said, gold DOES have intrinsic value that a piece of paper saying you own a money-losing company does not (CAN not). But the run-up in gold founded on the psychology of mass panic is no less an increase in real value than the psychology of speculative stock investing. When a commodity is trading at an all-time high and pumpers tell you to buy buy buy because it's going to double this month and go way up from there... it actually IS very much like Enron (the investing side - not the value side). The fact that it can only crumble to $100/oz or $200/oz and NOT to zero is small consolation to those who lose the money. Just look where gold went the last time we got here?

territory. There are basic fundementals that support a rise in gold. You want to trash those speculating it skyrocketing to 800 or 900 per ounce - do it in the Economic forum, not here please.

We post articles, analysts quotes, etc that support a reasonable increase in gold. It is no different than those articles speculating on a rise in any of the companies listed on the DOW or S&P.

I would like you to begin posting links and sources to some of the information you are giving. Starting with:

"The fact that it can only crumble to $100/oz or $200/oz"

Were it to crumble that low, it would put every mine out of business based upon their operating cost per ounce.

We do not post trash, pulled out of our butts here regarding gold, again that's junkers turf.

PS No disrespect meant to Junker either. Many of his posts are based on sound fundamentals. Others are effected by the impending doomsdaily feeling that many share.

But that was who I was talking about. I don't mean that this daily thread is too full of that.

It is no different than those articles speculating on a rise in any of the companies listed on the DOW or S&P.

I agree. But if a stock index had gone up 35% in the last nine months and there were people touting "fundamentals that support a rise in" that market, it would not be unreasonable for me to question that assumption.


Sure values can fall below production costs... and, yes, it would drive some out of business... that's what happenes to companies when their stock price falls too far as well, without the ability to raise capital they fall apart (see. Nasdaq 2000). I'm not predicting it, I'm just saying it CAN'T go to zero like a stock can. A company can take on more debt than they are worth and go out of business with LESS than nothing. Gold holds SOME value (whether it be 100$ or $250 wasn't the point).

But I wasn't naming YOU either, was I? :-)

I was talking specifically about "fear mongers who are pushing gold now", and he is not the only one (though those threads ARE what I had in mind). I have no problem with people advocating gold as an inflation hedge or "weak dollar" aid. Or even a "market play" if you think it's going to take a short-term pop - as long as you don't plan on holding it forever.

All I'm saying is you CAN'T "invest" in gold for the long term. I'm in my 30's... I can't put $10,000 in gold and expect it to be worth $160,000 when I retire.... which is what a balanced stock portfolio WILL produce in that period of time (at a very reasonable 8%).

Over the LAST thirty years or so Gold has gone from around $150 to quite a bit higher than here and now is around $400. With inflation that really isn't ANY return at all (it's probably negative) which is what you should EXPECT from a commodity, it doesn't REALLY change in value much at all... fluctuations are at least as much an indication of the change in value of what you are using to measure gold's value (in this case, the dollar).

you simply move it.

There are markets, currencies and investments all over the world. The wealthy are not limited to America. Thing Big Picture.

And as to the words from Palast's book, let me look here....

Sorry Frodo but I'm going to go with the statement from Palast because his source onthat data was Dr. Edward Wolff, director of the Income Studies Project at the Jerome Levy Institute in New York.

Here's another interesting factoid Palast offers up, same page of his book as the previous one I posted that you found so disagreeable: The world's 300 richest people are worth more than the world's poorest three billion.

BTW, have you read Palast's book? He's actually very astute and well educated in economics.

Not wanting something to be untrue doesn't make it so.

Julie

http://www.fundresearch.de/partnercenter/partnercenter_detail.asp?KAGNr=113&BerichtNr=77356

Check out the UniEM Fernost - Chinese WuMart - and Sinagold love those names - HA. The returns have been pretty impressive. Although I would never invest in a WuMart that looks like it's a WalMart from the description.

75.07% during the past five years -- compared with funds investing in European stocks, which fell 11.76% on average during the same period. During the past three years and year, the fund returned 21.66% and 32.50%, respectively.

Remember not long ago when they put China Life on the market? A target market of over a billion people?? Oh yeah, that sounds like a good investment.

Lots of good places to weather a storm happening in the US investment world.

And you cna get gold anyhwere. I like gold, nice and shiney. ;-)

Julie

To give you that million dollar smile :evilgrin:

That's right Doctor, I want them filled with boullion. ;-)

Since the world's poorest 3 Billion have almost nothing between them I would not find it hard to believe that the richest 100 have more money - let alone 300.

But reading something in a book doesn't make it so either. There's no way that 85% of the US market is held by 1% of the people. Top 10% I would easily believe. I'd need a statistical link.

If, on the other hand, this is WORLD markets, then I might buy it - since contrary to what some believe about America, it's totalitarian countries where the rich get richer and the poor get NOTHING.

the kind of pay I want for my next job. :evilgrin:

On edit add:

Now THERE'S a Pyramid scheme:

• Bush II's proposals to privatize Social Security would redirect $100 billion per year of payroll taxes (the largest levy paid by 80 percent of Americans) into financial markets where, from 1983 to 1998, 53 percent of market gains flowed to the top one percent of households.

through November. I believe the idea was to get the recession out of the way and be in a full recovery by election time. Not a bad political strategy, really.

Might have worked if Bush's economic plan was sounder. But his policies are all short-term politics. In the long run, they're destructive -- he's allowed job flight, given the tax cuts to people who won't spend it, and let the dollar plummet. It's catching up with him sooner than he expected.

Dow 10,494.66 +26.29 (+0.25%)
Nasdaq 2,074.34 -3.03 (-0.15%)
S&P 500 1,129.64 +1.16 (+0.10%)
10-Yr Bond 4.209% +0.014

10:02

Dow 10,485.25 +16.88 (+0.16%)
Nasdaq 2,069.88 -7.49 (-0.36%)
S&P 500 1,128.92 +0.44 (+0.04%)
10-Yr Bond 4.211% +0.016

way to the basement, or is it yet to come in the next week or so?

:scared:

They're a fairly consistent bunch. Their message: the fundamentals DO NOT support these averages; and historical parallels portend a market "correction". Warren Buffet tends to agree by his own assessment.

10:14
Dow 10,490.29 +21.92 (+0.21%)
Nasdaq 2,064.38 -12.99 (-0.63%)
S&P 500 1,128.79 +0.31 (+0.03%)
10-Yr Bond 4.221% +0.026

is up, foreign currency stuff. Once they get beyond dollar vs whatever, I get lost.

http://business-times.asia1.com.sg/story/0,4567,106401,00.html

Pre G-7 jitters favour yen in cross-trades

that just recyle around themselves.

Perhaps I am running on candle-power here :)

If so, that would only add to the pressure to buy yen versus the euro - especially if the latter can't get back above 133 yen in the short term, and the more important 135.50-70 yen area in the bigger picture. After all the polite post-G-7 meeting noises are over, we believe that the Chinese won't be shifting their fixed yuan peg anytime soon, although the huge pressure to buy yen is unlikely to diminish.

Consider this too. In their latest 2004 forecasts, Standard Chartered Bank strategists expect the euro to peak against the US dollar by mid-year, but for the yen to continue firming till the end of 2004. Net effect: the euro could end 2004 some 15 per cent lower at about 112.50 yen - versus yesterday's levels of just above 132 yen.

Seems like they just omitted where the dollar index would be with any of this :)

what they are speculating regarding who's buying what. Think it's that talk of buying yen that's throwing me. First they go into that 133-135 yen schpeel, then the euro "lower" at 112 vs 132.
This is yen per euro, isn't it? I'm loosing it and need more coffee.
:crazy:

?

http://biz.yahoo.com/c/e.html

Jan 30 8:30 AM
Chain Deflator-Adv. Q4
Actual -
Briefing Forecast 1.1%
Market Expects 1.3%
Prior 1.6%
Revised from -

Jan 30 8:30 AM
GDP-Adv. Q4
Actual -
Briefing Forecast 5.3%
Market Expects 5.0%
Prior 8.2%
Revised from -

Jan 30 9:45 AM
Mich Sentiment-Rev. Jan
Actual -
Briefing Forecast 103.2
Market Expects 103.0
Prior 103.2
Revised from -

Jan 30 10:00 AM
Chicago PMI Jan
Actual -
Briefing Forecast 62.0
Market Expects 62.1
Prior 59.2
Revised from -

but....
Dow 10,515.70 +47.33 (+0.45%)
Nasdaq 2,067.48 -9.89 (-0.48%)
S&P 500 1,131.50 +3.02 (+0.27%)
10-Yr Bond 4.209% +0.014

Dow 10,485.11 +16.74 (+0.16%)
Nasdaq 2,055.89 -21.48 (-1.03%)
S&P 500 1,128.20 -0.28 (-0.02%)
10-Yr Bond 4.238% +0.043

Whew! Crazy morning here in the great north. 2 hour delay for the schools and me with an early morn. dentist appt. Oy! Then a quick meeting on the phone with my party chair--a great lady who I love and admire--on our continuing efforts to overthrow the government and now I am finally checking in!

I did have my dentist put on CNBC cause it was a long appt and I was dying to catch some of the news. Maybe he's hoping my investments do well too cause of the bills I manage to acquire there. ;-) So he turned it up real loud so I could hear it over the noise he made inside my head with all his power tools. He's very thoughtful.

So much info to digest here in the thread. It seems the focus ain't the stock market so much as gold, currency and treasuries. That's more like it!! heh heh 54anickel I share your interest in the gold market. My dentist smiled braodly when I informed him I am long on gold.

I can only reel from the hoardes of info hitting from all sides (not just the $$ part of my world but political too!), wonder what the hell is coming next and post this update:

10:46

Dow 10,512.00 +43.63 (+0.42%)
Nasdaq 2,068.66 -8.71 (-0.42%)
S&P 500 1,131.70 +3.22 (+0.29%)
10-Yr Bond 4.216% +0.021

Now I go and get busy on some prep work for the brunch I'm doing for Senator Stabenow on Saturday. Levin will be there too so I'm quite happy about the whole thing. Looks like Debbie will rake in lots of campaign $$ judging by the RSVP list and that's good for our local party. I like to keep close accounts of just who owes us what in the way of political favors. :-)

Will check back in--hope all are having a good day.

Julie

edit to add:

Gold - it's like my favorite old dog, can have a nasty bite at times and p*ss on me at will, but I can't help but love the old fart. :7

And no, he's not really THAT bad.

http://www.forbes.com/business/newswire/2004/01/29/rtr1233885.html

Snow, Greenspan laud financial literacy

WASHINGTON, Jan 29 (Reuters) - U.S. Treasury Secretary John Snow, joined by Federal Reserve Chairman Alan Greenspan on Thursday at an event to hail the importance financial literacy, said it was vital to Americans' future economic security.

Snow said that becoming more knowledgeable about economic issues was necessary "to ensure that today's young adults understand how important it is to save, and how to prevent themselves from identity theft, in the same way that they understand the basics of physical health or road safety."

Snow and Greenspan appeared together for the inaugural meeting of the Financial Literacy and Education Commission, created as part of the Fair and Accurate Credit Transactions Act, which was signed into law in December.

Now that should move the markets!

And often "unlearn" something old thanks you smart folks.

My attention is fragmented. And my boy is saying, "Outside." So I must go. Be well Marketeers. I'll look forward to seeing you all later. :hi:

Ozy

Little spike back up right now, but the overall trend isn't good

Dow 10,487.63 +19.26 (+0.18%)
Nasdaq 2,057.05 -20.32 (-0.98%)
S&P 500 1,128.64 +0.16 (+0.01%)
10-Yr Bond 4.224% +0.029

Dow 10,460.08 -8.29 (-0.08%)
Nasdaq 2,050.28 -27.09 (-1.30%)
S&P 500 1,125.49 -2.99 (-0.26%)
10-Yr Bond 4.226% +0.031

Gettin' kinda ugly.

Julie

Ah the Enterprise, we hardly knew ye! ;-)

Washington Agreement increase is being discussed. Here's something I didn't realize from the article.

"Japan has the lowest proportion of its reserve in gold of any industrial country except Canada."

Now I know that China's gold reserves are extremely low, unless they aren't considered and industrialized country, Japan would be looking to buying an awful lot. Along with China, who have already stated they were going to build their oil and gold reserves.

http://www.forbes.com/home_europe/newswire/2004/01/29/rtr1234171.html

Dow 10,475.18 +6.81 (+0.07%)
Nasdaq 2,054.36 -23.01 (-1.11%)
S&P 500 1,128.13 -0.35 (-0.03%)
10-Yr Bond 4.209% +0.014

Checkin' out...taking young Miss to violin lessons.

Catch you marketeers in the AM!

Julie

Lots of rock climbing today!
Dow 10,510.29 +41.92 (+0.40%)
Nasdaq 2,068.23 -9.14 (-0.44%)
S&P 500 1,134.11 +5.64 (+0.50%)
10-Yr Bond 4.197% +0.002

A bit late, but just come out.

http://www.forbes.com/markets/newswire/2004/01/29/rtr1234745.html

NEW YORK, Jan 29 (Reuters) - Holdings of U.S. debt by foreign central banks leaped again in the latest week to touch a record high, driven mainly by purchases of agency bonds.

The Federal Reserve said on Thursday its total holdings of Treasury and agency debt for central banks abroad rose $5.61 billion to $1.114 trillion in the week ended Jan. 28. That total is up 23 percent compared to a year ago.

The breakdown of the Fed's custody holdings showed central banks bought $541 million of Treasuries, taking their total holdings to $884.6 billion. They bought $5.07 billion in agency debt, likely including a Fannie Mae five-year note sale last week, taking those holdings to $229.4 billion.

more...