Posted on 08/11/2003 4:18:52 PM PDT by arete
Home l Broadcast l Market Monitor l Top 10 l Storm Watch l Sitemap l About Us |
||
|
||
Interest Rates Continue Higher Now that the enormous Treasury auction of $60 billion is out of the way from last week, we can take a look to see how the dust is beginning to settle. On Friday I commented that this week would probably see money slide back into Treasuries, but it doesnt appear that the decline in bond prices has found a bottom yet. The 10-year note was 31/32 lower in price for a yield of 4.35% and the 30-year Bond fell 17/32 for a yield of 5.27%. The market is pricing-in the anticipated second-half recovery with higher interest rates. Its fascinating to see headlines that read, U.S. Treasuries Decline on Concern Rebound Is Gaining Speed and a comment from a bond analyst that reads, Market participants fear more robust data than expected, pressuring bond prices. Treasuries may not firm-up as much as I anticipated, since the bonds and notes from last week are still sitting in primary bond dealers inventory. It will still take more time for the bond market to absorb the additional supply that the primary dealers have to sell. Also, last week I was not aware that the Treasury will be borrowing MORE money tomorrow. According to CBS MarketWatch, The U.S. Treasury said it will offer $15 billion worth of 4-week bills on Tuesday to refund (refinance) $8 billion in bills maturing August 14th and raise (print) $7 billion in new cash. See how easy it is if youre running a bit short on funds a mere $15 billion to bridge the gap for a few more weeks. I dont know how long it will take for the market to absorb all of the supply, but we will know when bond prices begin to firm. Economic Recovery On The Way All of the good economic news is supposedly pushing bond prices lower (I think its all the supply) so the higher interest rates are justified by all the improvements in the economy. Tomorrow the Federal Reserve is expected to leave interest rates unchanged, but market participants will be listening closely for near term guidance. If the statement from the Fed is overly bullish on future growth it could send Treasuries even lower which would raise long-term interest rates. If Mr. Greenspan was trying to keep interest rates low, he shot himself in the foot on July 15th when he gave his testimony to Congress. I doubt very much that he will let that happen again. If anything, I have a gut feeling that the Fed statement tomorrow will be somewhat cautionary and possibly start talking about deflation again. They keep talking about an economic recovery, but its not showing up in the bottom line earnings numbers. Earnings certainly didnt break any records for the second quarter, so all the economic good stuff had better show up in third quarter earning reports or stocks go hard-down this fall. Today the Dow Industrials remained close to breakeven for most of the day with a final spurt in the last half-hour to close with a gain of 26 points at 9,217, the broader S&P 500 added three points to close at 980, and the NASDAQ got the best bounce today after the 4% sell-off last week by adding 17 points to close at 1,661. With all the good economic news slated for later this week, we could see a final blow-off before stocks head south. Lots of Numbers Wednesday, Thursday and Friday On Wednesday the retail sales numbers will come out and it is expected to show July sales coming in 1% higher than June. Then on Thursday it is expected that the initial jobless claims will remain below 400,000 for a fourth consecutive week, indicating an improvement in the job market. Then we will get the CPI and PPI numbers, and let me guess there is no inflation! OK then! And finally, we will get a Fed report on industrial production and capacity utilization that will no doubt continue bragging about the incredible productivity numbers we are enjoying. If I had more time I would enjoy addressing each one of these issues. Oops, almost forgot the consumer who also reports at the end of the week with the latest release of the University of Michigans consumer sentiment index. I have to believe that sentiment will come in lower due to rising interest rates. Tomorrow the market direction will probably be dictated by the Fed statement, then economic data should take center stage later in the week. Gold, U.S. Dollar, Treasury Auction Prior to the Treasury auctions last week I said that I thought the markets were being conditioned to receive Treasury paper. Could it simply have been a coincidence that the dollar strengthened and gold took a dive just prior to the auctions? It was obvious to me when I saw the big take-down on the spot price of gold on the Friday just prior to the auctions that things were being set-up. Now that the debt is sold, the opposite is happening. Here are the charts to make it easy to see. You can see from the charts that the dollar began to strengthen and gold began to decline five days before the Treasury auctions, remained in a tight range through the debt sales, and now they are both doing what they should have been doing. The dollar is headed lower again and gold is moving higher. Just in two trading days since the big bond offerings were completed the price of gold has risen by almost $10 per ounce. Monetary stress is a very good thing if you are a precious metals investor. In parting today, please go back to the top of the WrapUp and take a look at the chart of the HUI Index. That is one gorgeous chart! In November 2000 the HUI Index hit a low of 36 and today closed at 180.16! In less than three years the Unhedged Gold Bugs Index has increased by a whopping 500%. Ill bet you wont hear that number reported on CNBC! Its game on for the Golden Bull and the Silver Streak! © 2003 Mike Hartman
|
||
Home l Broadcast l Market Monitor l Storm Watch l Sitemap l About Us l Contact Us
|
Copyright © 1997-2003 James J. Puplava Financial Sense is a Registered Trademark
P. O. Box 503147 San Diego, CA 92150-3147 USA 858.487.3939
Please direct corrections and technical inquiries to webmasterDisclaimer & Privacy Statement
The central planners keep piling more and more IOU's on top of the old IOU's. Incredible.
Richard W.
First Hour of the Roger Arnold Show
Second Hour of the Roger Arnold Show
Richard W.
Richard W.
Hey, good to hear from you. How's life on Johns Island?
Richard W.
It's a jungle out there
Disorder and confusion everywhere
No one seems to care
Well I do
Hey, who's in charge here?
It's a jungle out there
Poison in the very air we breathe
Do you know what's in the water that you drink?
Well I do, and it's amazing
People think I'm crazy, 'cause I worry all the time
If you paid attention, you'd be worried too
You better pay attention
Or this world we love so much might just kill you
I could be wrong now, but I don't think so
It's a jungle out there
The sure sign will be when Steven W. stops posting. Personally I'd also look for a VIX above 30.
Richard W.
Interesting that they let rohry out of the old-aged home and steven w. out of the asylum on the same day. Hummm.
Richard W.
I watched "The Gangs of New York" yesterday. Had an interesting line in it -- something like, "Half of the poor people can always be paid to kill the other half".
Richard W.
I was expecting to see some gravitation towards a nominal rate too. I, like Mike didn't take into account the fact that the bonds only went from the FED to the brokers. When these bonds finally do start getting sold on the 'street' the yields will reach some norm.
Should I just take some money from savings, start trading in the new account, and not close the old account until it's all cash, only taking out the part over the minimum for now?
I'M SO CONFUSED !!
Richard W.
That ought to be interesting. Don't let them take you into the swamps or marshes no matter what they tell you about how much fun you are going to have. :-)
Richard W.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.