Friday, 8/9 Market Wrapup (Bounce Back for Gold)

Financial Sense.com ^ | 08/09/2002 | by Scott Middleton

[Lazamataz]

 
Weekday Commentary from Scott Middleton
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 Bounce Back for Gold

Nyquist Column 8/06 Update on Iraq		Jim Puplava on location Updated 8/8
Spin City Smoke & Mirrors by James E. Sinclair, Chairman & CEO, Tan Range Exploration $30 Billion IMF Loan to Brazil is Total "Spin City Smoke & Mirrors" Major Operation was in place to Squeeze Equity Shorts and to Rally Securities Market in order to SAVE Major Derivative Dealers Facing Potential Credit Worthiness DOWNGRADES.

Friday Market Scoreboard  August 9, 2002
Dow Industrials		33.50	8745.50
Dow Utilities		1.32	237.94
Dow Transports		18.65	2351.65
S & P 500		3.18	908.64
Nasdaq		10.40	1306.12
US Dollar to Yen			120.17
US Dollar to Euro

.9705

 Gold

3.8

316.20

 Silver

.03

4.67

 Oil

0.19

26.86

 CRB Index

1.21

211.82

 Natural Gas

0.02

2.761

08/09

08/08

Change

  HUI (Amex Gold Bugs Index)

Close
YTD

119.5

112.67

6.83
83.30%

52week High

147.82

06/03/02

52week Low

59.86

11/26/01

  XAU (Philadelphia Gold & Silver)

Close
YTD

66.13

61.70

4.43
21.50%

52week High

88.65

05/28/02

52week Low

49.23

11/19/01

All market indexes

The Week in Graphs
Storm Watch
Geopolitical News in Focus
Energy Resource Page
Precious Metals

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 Market WrapUp for the Week 
Monday  l  Tuesday  l  Wednesday  l  Thursday  l  Friday

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^{Friday, August 9, 2002 Market WrapUp}

Follow The Bouncing Ball
Today’s market bounced between gains and losses all day after WorldCom Inc. said it found another $3.3 billion hidden in a binder titled “special income.” Unfortunately that didn’t fit in with GAAP standards and the auditors had to count it against the $3.8 billion in revenues improperly accounted for. Total revenues now improperly accounted for at WorldCom is over $7.5 billion and counting. It's hard to think that back in the telecom heyday, Sprint had agreed to merge into this fiasco. Guess for once someone can thank good ole Uncle Sam for blocking the way.

Gold prices closed out a solid week with addition gains as the dollar weakened against other currencies, boosting demand for the metal from overseas investors. Also playing a part in the price of gold is the current price, as it approaches the $320 to $325 ounce, a lot of short positions are being unwound. If gold pushes closer to that level next week, look for a pretty large battle to be fought to keep prices below the benchmark.

The Rate Debate
You can chalk this week’s market performance up to heightened rate cut expectations. It’s hard to imagine that those expectations have any basis in reality. Considering the sources of those calling for a rate cut, Morgan Stanley among others, it won’t be a surprise if this was simple posturing to help the markets along this week. Besides as it should be, the Fed is generally far more concerned about credit conditions than they are about the stock market. With credit spreads at levels not seen since the 1970’s, lowering rates could do more harm than good at this point.

Even with the revelations from WorldCom Inc, the Dow and the S&P were able to squeak out gains and finish with the largest one-week advance since September 28th. The Dow added 33.43, or 0.4 percent, to 8745.45 today. The S&P 500 rose 3.18, or 0.4 percent, to 908.64. The Nasdaq Composite Index shed 10.40, or 0.8 percent, to 1306.12. Five stocks rose for every four that fell on the New York Stock Exchange while four declined for every three that advanced on the Nasdaq Stock Market. Some 1.25 billion shares traded on the Big Board, according to preliminary statistics, the fewest since July 8.

Treasury Markets
The 10-year Treasury note soared 1 1/8 to yield 4.26 percent while the 30-year government bond surged 1 22/32 to yield 5.11 percent.

© Copyright Scott Middleton, August 9, 2002

[Lazamataz]

Market Wrapup is delivered...

[Torie]

You haven't become a gold bug have you as a new hobby? Stick to guns. I am quite sure that is more within your area of expertise. JMO.

[Washington-Husky]

Are two people posting Market Wrap? (Steveegg has another thread of today's Market Wrap....)

[Torie]

Er, maybe I shot from the hip here. I withdraw the previous remark if this is just an informational post (just what info is useful is another matter).

[dennisw]

Thanks .... I like the wrap-ups from this website.

[tubebender]

Wife and I just spent three days gambling at a couple of casinos in the Redding Ca area. We will write this off as seminars on investing in futures.

[Orion]

Don't count out a rate cut. Sir Prints-a-lot is pretty reckless with his rate cuts, and he has the added advantage of a stupid public that believes the next rate cut will do what the first 11 did not. This is the only time in the history of the FED where the markets are worse off a year into an aggressive easing program.

Sell the cut. There will be the initial pop by all the CNBC doofus' and mutual fund managers, but after that, it is going to be down, down, down.

Easy Al has painted himself into a corner. He knows that once you start blowing bubbles, you have no choice but to keep blowing.

On Tuesday morning, take a look at some of the slightly out of the money puts on your sexier stocks (techies, telecoms, and bios) and when Al.com slugs the dollar, yet again, those puts will become temporarily cheap, and then you will make your money back 2-3x, when the euphoria wears off.

The wheels are coming off the bus. With rates this low, what is going to happen when the US$ tanks? Rates will be tightened, stocks will tumble, and real estate will spring from the 30M platform, and do a belly-flop.

How about that gold spot? It is a vote against the US$.

How much longer can we prop up JPM?

[arete]

He knows that once you start blowing bubbles, you have no choice but to keep blowing.

I heard that the economy has Sir Alan "spooked". He's bailing as fast as he can and the ship is still sinking. This is "not a good thing."

Richard W.

[imawit]

You got that right on JPM and for that matter Citigroup and Fleet. Did you know that Citi actually did go bankrupt in 93. Their profits on derivitives is what saved them.

This is just to keep things cool up to the elections and with enough gyrations, the banks may suck enough out of the market to be a little better. But how can one honestly give Brazil 30 Billion when their total debt is between 140 to 270 Billion. Obviously this will only keep their interest only (I bet) payments up thru November.

[Nuke'm Glowing]

Bump. Enuf said as your post says it all.

[razorback-bert]

The New York Stock Exchange has published a 30 page book (magazine? catalog? direct mail piece?) called Your Market, Straight Talk for Investors. The publication, which at first blush appears to be part GAP ad, part CNBC transcript, provides words of reassurance for investors along with pictures of regular people who have no visible signs of 401(k) hemorrhaging. Straight Talk offers tips, including a couple of paragraphs on seeking independent analysis and where to find SEC Filings. It also offers a crash course in the NYSE’s long history of promoting sound corporate governance. What the publication does not mention, however, is the benefits of saving the old fashioned way, by earning a few percent at a time, compounding year after year. It does not mention that intermediate term Treasuries aren’t all that stodgy when compared to intermediate term expectations for stocks in the 6-7%, at least as predicted by a number of folks (who aren’t even hard core bears!).

The photos are nice, though.

[arete]

I made a point today of catching as many TV pundits as a could. Overwhelmingly, they were very bullish -- outnumbering those advising caution by about 6 to 1. I got the impression that the bullish ones were trading the market and were trying to get as many people to pile in as possible. Looks like this rally still has legs for no other reason than the traders have taken long positions right now. Later of course, they will dump fast and furious and leave the investors they sucked in holding the bag.

Jimmy Rogers who has at least some objectivity, says that the rally could last from one week up to a month or two longer. He just didn't know, which shows you the nature of this market. It's a casino. The market is trading on external things like the election, Greenspan's upcoming knighthood (wouldn't want the embarrass him), PR to keep the consumer spending, and a spin campaign of monumental proportions to get investors back into the market.

I'm just going to sit and watch cause there is way too much manipulation going on for my blood -- and money.

Richard W.

[lodwick]

Martin Weiss agrees with you guys. From todays free newsletter:

A new rally began this week -- but this one is doomed to
fail just like the last one. And when it does, we could
see the Dow, the Nasdaq, and the S&P fall to new lows
-- AGAIN!

After all, the economic fundamentals grow worse by the day.
Wall Street promised investors that the economy would be
humming along by now, but IT'S NOT.

The market rallied partly on news that consumer credit
expanded. But is that really a healthy sign? It just means
that consumers are piling on more debt -- to the tune of
$8.4 BILLION in June.

Already, personal bankruptcies have reached epidemic
proportions. And as we reported last week, there is a new
law in the works that will make wiping out debt harder
for consumers. If that happens, expect the consumer
spending frenzy to come to a screeching halt.

And in a sign that consumers are finally starting to pare
back, retail sales slowed in July. Even behemoth Wal-Mart
missed its forecasts -- store sales grew at a 4.5% rate
compared to the 5% - 7% growth it promised Wall Street.
Most other retailers didn't even perform that well. Target
sales grew by just 1% -- missing its target. Gap's sales
fell 8%, and department store J.C. Penney's sales dropped
2.2% in July.

Businesses certainly won't be accused of a buying binge.
Factory orders in June declined 2.4% and spending on new
technology has fallen off a cliff since the tech boom went
bust. As a result, productivity grew at a sluggish 1.1%
rate in the second quarter of 2002 compared to the 8.6%
gain it made in the first quarter of this year.

Clearly, the economy isn't revving up. It's barely breathing.
And if the economy slips back into recession, there's no way
that corporate earnings will recover. And if that happens,
the stock market dive that we've seen so far will be tiny
in comparison.

[EVO X]

Clearly, the economy isn't revving up. It's barely breathing. And if the economy slips back into recession, there's no way that corporate earnings will recover. And if that happens, the stock market dive that we've seen so far will be tiny in comparison.

I came to a conclusion today after going to a NFL preseason game. A fair number of Americans are being taken advantage of. At $55 a ticket, $20 parking, $3.50 for bottled water, $4.00 hot dogs and mega bucks for a beer I understand how the stock market got way over priced. I was just amazed that people would buy water for $3.50 when there were perfectly good water fountains through out the facility.

[arete]

Kind of makes you wonder doesn't it? Maybe it is time for a reality check.

Richard W.

[EVO X]

Kind of makes you wonder doesn't it? Maybe it is time for a reality check.

Ditto

[STONEWALLS]

"What the publication does not mention, however, is the benefits of saving the old fashioned way, by earning a few percent at a time, compounding year after year."

.....(Chuckle!)....yep, I'm sure they don't want to talk about saving the old fashioned way alright....that requires postponing immediate gratification to achieve long term gain...the credit card junkies out there in the malls don't want to hear that....BUT...it wasn't always that way in America...anybody here old enough to remember "stamp day" in elementary school?....how it worked was that one day a week you bought a stamp for a nickel, dime or quarter and pasted it in a little book....when your book was full it represented $18.00 in stamps and you would swap it in for a $25.00 government bond.....this was during the Korean War and it was considered patriotic and taught the child the virtue of saving at the same time....can you imagine the kinds of holy hell that would break loose if such a program were offered in public schools today?....

Stonewalls, (who still has some of those old bonds salted away in his lock box and likes to get 'em out and look at them every so often)...

[Dukie]

"Stonewalls, (who still has some of those old bonds salted away in his lock box and likes to get 'em out and look at them every so often)..."


I understand the enjoyment of nostalgia, Stonewall, but remember that Korean war vintage Series E bonds, which accrue interest value for a maximum of 30 years, have long since stopped earning interest.

Cash 'em and buy new bonds.