Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Rally On Borrowed Money Living on Borrowed Time?

Stock-Markets / Financial Markets 2009 Jun 13, 2009 - 04:32 AM GMT

By: Anthony_Cherniawski

Stock-Markets

Best Financial Markets Analysis ArticleConsumer Sentiment is on the rise - Confidence among U.S. consumers rose this month for a fourth straight time, reflecting signs that the worst recession in at least five decades may end this year.  The Reuters/University of Michigan preliminary index of consumer sentiment increased to 69, the highest level in nine months, from 68.7 in May.


Yet consumer spending is a drag on the economy.

Don't get too excited about signs of life in the economy. Some days it seems there's good news everywhere: home sales ticking up, slower job losses, the Dow turning positive for the year. But all that misses a looming reality. American consumers, whose overspending largely got us into this mess, are still under massive pressure, owing to the record debt they racked up during the boom years.

The reason?  Household wealth has declined.

U.S. household wealth fell in the first quarter by $1.3 trillion, extending the biggest slump on record, as home and stock prices dropped.  Net worth for households and non-profit groups decreased to $50.4 trillion, the lowest level since 2004, from $51.7 trillion in the fourth quarter, according to the Federal Reserve’s Flow of Funds report today. The government began keeping quarterly records in 1952.

As a result, the personal saving rate is increasing for the first time since 2001.

The rally was sparked by borrowed money.  Is it living on borrowed time?.

SPX.png -- U.S. stocks fell, pushing the Standard & Poor’s 500 Index down from a seven-month high, as falling fuel prices sent oil producers lower and technology shares decreased on concern about semiconductor demand.  The S&P 500 has rebounded 39 percent from its 12-year low in March after the government and Federal Reserve pledged $12.8 trillion to end the first global recession since World War II. The index trades at about 14.8 times its companies’ earnings from continuing operations during the past year, near the seven- month high of 15.2 reached in May and below the 19.9 average over the last decade.

 

 

High yields in Treasury bonds attracting investors.

Bonds.png-- Treasuries rose after Japanese Finance Minister Kaoru Yosano said his nation’s confidence in U.S. debt is “unshakable,” reducing concern foreign investors will slow purchases amid record debt sales.  Yields on 30-year bonds touched the lowest level in three days. The government’s auction of $11 billion of the securities yesterday attracted the most demand from a group of investors that include central banks since the U.S. resumed selling bonds in 2006.

 

 

 

 Gold may be in for a bumpy ride.

Gold.pngGold fell the most in a week in New York and London as a stronger dollar reduced demand for the metal as an alternative investment. Other precious metals slid.   A rising dollar is putting pressure on gold.  In addition, selling pressure seems to hit the precious metal above 960.  Most importantly, deflation and not inflation seem to be driving the markets in the coming months.  Gold will still be seen as a safe haven for investors, but the road may be bumpy for a while.

 

 

 

Japanese stocks meet round number resistance.

Nikkei.png-- Japanese stocks rose, pushing the Nikkei 225 Stock Average above 10,000 for the first time in eight months, as a recovery in the equity market spurred speculation brokerages’ earnings will improve.               Simply put, the Nikkei is rising on speculation.  It has tagged a point known as round number resistance – 10,000 on the Nikkei.  If the speculators have gotten ahead of reality, we should see a pullback from here.   

 

 

 

 

China resuming public offerings of stocks, may see decline.

Shanghai Index.png-- China’s benchmark stock index fell the most in almost two months after the 21st Century Business Herald reported the securities regulator will approve initial public offerings as early as this weekend. The resumption of public offerings may allow as many as 32 companies with share-sale proposals approved last year to tap investors to raise up to 70 billion yuan ($10.2 billion), according to estimates from Guotai Junan Securities Co.

 

 

 

 

Japan needs a strong U.S. dollar.

US Dollar.png-- The dollar advanced against the euro and the yen after Japanese Finance Minister Kaoru Yosano said his nation’s confidence in U.S. debt is “unshakable” and that the currency’s global status is safe. The reason for the Japanese “confidence” is that they must keep the dollar higher at the expense of the yen.  The Japanese economy is already in trouble and a weak dollar will hurt Japanese exports to the U.S.

 

 

 

 

Mortgage markets frozen.  Housing down for the count.

Housing Index.pngMish writes, “On May 28 I wrote Mortgage Market Locks Up. Ten year treasury yields started to soar and 30 year mortgages for good borrowers jumped a full point from 4.5% to 5.5%. 
The question on my mind at the time was whether or not the mortgage action was a brief outlier. It wasn't. Things are now worse…  One problem is lenders are requiring applicants to put up $500 for appraisals and if the amounts do not come in, even if they miss by a tiny bit, the deal is denied and the applicant is out $500.”

 

 

 

The price of gasoline is eating into consumer spending.

Gasoline.pngEnergy Information Administration Weekly Report suggests that, “Despite the continuing economic recession, recent data indicate a diminishing year-over-year decline in gasoline consumption, while consumption of distillate fuel is continuing to exhibit substantial year-over-year declines.                      Gas prices are not expected to approach last summer's wallet-busting $4 per gallon, but they could eat into consumer spending just as the recession is showing signs of easing.

 

 

 

There is plenty of natural gas in storage.

Natural Gas.pngThe Energy Information Agency’s Natural Gas Weekly Update reports, “Since Wednesday, June 3, natural gas spot prices fell at most market locations in the Lower 48 States…falling to $3.56 per million Btu (MMBtu), about a 7 percent decline from the previous Wednesday’s level of $3.81.  Natural gas in storage was 2,443 billion cubic feet (Bcf) as of June 5, which is 21.8 percent above the 5-year (2004-2008) average.”

 

 

 

 

The world economy on the edge.

Last summer, one of the world's more respected economic commentators predicted that the global downturn would be much worse than anyone had reason to believe.  "I've been observing economies around the world for 40 years," said Martin Wolf, the chief economic commentator of the Financial Times. "In all that time, I cannot remember such a combination of economic challenges: the world's balance is shifting."  Watch Martin Wolf here.

The Federal Reserve needs transparency.

We are happy to announce that the HR 1207 "Audit the Fed" Bill is now one large step closer to reality, having garnered the necessary 218 co-sponsors to ensure passage. It has, in fact, 222 co-sponsors as of today and more are appearing by the hour. Please click here for the official press release.

The long-time publisher of Grant’s Interest Rate Observer notes, among other things, that, “If the Fed examiners were set upon the Fed’s own documents—unlabeled documents—to pass judgment on the Fed’s capacity to survive the difficulties it faces in credit, it would shut this institution down,” he said. “The Fed is undercapitalized in a way that Citicorp is undercapitalized.”  See video.

Our Investment Advisor Registration is on the Web

We are in the process of updating our website at www.thepracticalinvestor.com to have more information on our services. Log on and click on Advisor Registration to get more details.

If you are a client or wish to become one, please make an appointment to discuss our investment strategies by calling Connie or Tony at (517) 699-1554, ext 10 or 11. Or e-mail us at tpi@thepracticalinvestor.com .

Anthony M. Cherniawski,
President and CIO
http://www.thepracticalinvestor.com

As a State Registered Investment Advisor, The Practical Investor (TPI) manages private client investment portfolios using a proprietary investment strategy created by Chief Investment Officer Tony Cherniawski. Throughout 2000-01, when many investors felt the pain of double digit market losses, TPI successfully navigated the choppy investment waters, creating a profit for our private investment clients. With a focus on preserving assets and capitalizing on opportunities, TPI clients benefited greatly from the TPI strategies, allowing them to stay on track with their life goals

Disclaimer: The content in this article is written for educational and informational purposes only.  There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

Anthony M. Cherniawski Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in