Unusual Market Action
By blackhedd Posted in Bond market | commodity prices | Economy | inflation | Stock Market — Comments (0) / Email this page » / Leave a comment »
Remember a few days ago, I suggested here and here that: A) commodity prices worldwide are in a bubble; B) bubbles always burst; and C) when this one does it’ll be bad news because so many global investors have piled on?
As I write at about 1:45pm EDT, every major commodity that is traded on world markets is down sharply. It’s been a long time since I’ve seen anything like this.
Keep reading...
Coal prices were the canary in the mine (if you’ll pardon the expression). Coal is used to manufacture steel, and steel manufacturers finally starting balking at higher coal prices, because they knew their customers (automakers, consumer-durables makers, and construction companies) wouldn’t be able to pass the cost increases along.
So last week, the price of coal collapsed, taking the stock prices of many coal-producing companies with it.
This morning, two things happened: coal prices did not rebound from the sharp selloff and have fallen another three percent or so today. And the perception has started to take hold that a stronger dollar is in the future.
At this moment, almost every commodity is down one percent or more. Crude oil is down nearly 3%. Wheat and soybeans are down between 4% and 6%. Gold is down more than 8%.
And the US stock market has fallen sharply after starting the day in positive territory. Treasury bonds are sharply higher.
Update: 2pm EDT. I should also note that concerns about capital inadequacy at Fannie Mae and Freddie Mac have both stocks down more than 20%, which is scary. That was probably the trigger for the stock-market decline. As I've said to several people privately in recent days, the equity-capital of the US financial industry as a whole may actually be far lower than it looks. There's a possibility that it's near zero.
Batten down the hatches. We’re in for a wild ride.
By blackhedd Posted in Bond market | commodity prices | Economy | inflation | Stock Market — Comments (0) / Email this page » / Leave a comment »
Remember a few days ago, I suggested here and here that: A) commodity prices worldwide are in a bubble; B) bubbles always burst; and C) when this one does it’ll be bad news because so many global investors have piled on?
As I write at about 1:45pm EDT, every major commodity that is traded on world markets is down sharply. It’s been a long time since I’ve seen anything like this.
Keep reading...
Coal prices were the canary in the mine (if you’ll pardon the expression). Coal is used to manufacture steel, and steel manufacturers finally starting balking at higher coal prices, because they knew their customers (automakers, consumer-durables makers, and construction companies) wouldn’t be able to pass the cost increases along.
So last week, the price of coal collapsed, taking the stock prices of many coal-producing companies with it.
This morning, two things happened: coal prices did not rebound from the sharp selloff and have fallen another three percent or so today. And the perception has started to take hold that a stronger dollar is in the future.
At this moment, almost every commodity is down one percent or more. Crude oil is down nearly 3%. Wheat and soybeans are down between 4% and 6%. Gold is down more than 8%.
And the US stock market has fallen sharply after starting the day in positive territory. Treasury bonds are sharply higher.
Update: 2pm EDT. I should also note that concerns about capital inadequacy at Fannie Mae and Freddie Mac have both stocks down more than 20%, which is scary. That was probably the trigger for the stock-market decline. As I've said to several people privately in recent days, the equity-capital of the US financial industry as a whole may actually be far lower than it looks. There's a possibility that it's near zero.
Batten down the hatches. We’re in for a wild ride.
