Stocks fall, dollar and bonds up, precious metals and oil stay high
Posted on 08 March 2011 with 4 comments from readers
Today is the Hedge Funds World conference in Dubai, the best attended annual event for serious investors with Professor Nouriel Roubini our guest this year.
Are oil prices about to top out and correct? Who knows? Libya was a shock. Bahrain more predictable. But what about Saudi Arabia? Two days of protest are slated for this Friday and March 20th.
Stocks down
On Monday the US markets all finished down but did not crash. The dollar strengthened slightly. That is what you would expect as selling stocks buys dollars. A stronger dollar is bad for precious metals but they moved only very, very slightly off their new highs.
Silver is remarkably strong, having touched $36.90 and gold is $10 off a new high of $1,444 only set yesterday. It will be interesting to talk to the hedge fund managers today for their sense of where this is all heading.
ArabianMoney has been expecting a stock market reversal for ages. We underestimated the rocket fuel of the Federal Reserve. Yet rocket fuel it has been and when it is exhausted there is the return to earth. And the higher you go the harder you fall.
Bubble trouble
To switch metaphors the 20 per cent surge in the price of oil in recent weeks has surely been the needle to burst the investment bubble with stocks overbought on many criteria. Or perhaps it has not quite happened at these price levels and we need to wait again for a day of reckoning.
We doubt that really. The global economic recovery was weak by many standards before the oil price spike, so it is likely holed below the waterline again now. $105 oil might be every bit as damaging in today’s environment as $147 in July 2008, and of course it may well go still much higher. $200 oil by June options have soared in price.
The latest issue of the ArabianMoney newsletter looks forward to investment opportunities arising from this crisis in Arabia and what it means for gold and silver prices (click here).
4 Comments posted by readers:
Think the US Government is honest? Visit http://www.marketwatch.com.us and read “The 2008 Crash Isn’t Over, Only Covered Up,” by Paul B. Farrell.
(I know, it’s a dumb question.)
I’m going with Louise Yamada on oil. $140. How could i argue? On metals, she’s faking it. Louise doesn’t have a feel for the curve there, or she’s reading her lines. I’d go with the later. There is no price horizon view for this case, monetizing metal, globally in the 21C. But it’s still the golden rule. China will one day set the price, or together a basket will. The metal will transform into the rule of economic law once again, he who controls the gold makes the rules. 10,000 oz? A certainty. $50,000 oz? Arguable. No one can say. When this crystallizes, if its for the good, the immeasurable tax by asset stripping will have ceased.
There’s this notion that America will fold at $100 bbl. In the North East old folks will freeze. Alright, unlock the reserves. Then what. The Great American Century can not run on cheap oil. That century is over.
America, instead of falling by the way-side, needs a new plan.
“has been expecting a stock market reversal for ages” and like Prechter missed the biggest equities move in history.
At least you are big enough to come out and face it, good on you!