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
Chinese Tech Stocks CCP Paranoia and Best AI Tech Stocks ETF - 26th Oct 21
Food Prices & Farm Inputs Getting Hard to Stomach - 26th Oct 21
Has Zillow’s Collapse Signaled A Warning For The Capital Markets? - 26th Oct 21
Dave Antrobus Welcomes Caribou to Award-Winning Group Inc & Co - 26th Oct 21
Stock Market New Intermediate uptrend - 26th Oct 21
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
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

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

This Week in Reality for the Financial Markets

Stock-Markets / Financial Markets Jul 27, 2007 - 03:37 PM GMT

By: Andy_Sutton

Stock-Markets The past few weeks have seen a rude ending to the gala ball which Wall Street, the media and most of America has been attending for the first half of 2007. The drops have come like sudden, swift punches in the stomach. Hard, well-placed and in many cases, almost out of nowhere.

The Ups..

The US dollar index got a fast and steady reprieve from the sub-80 area yesterday, rallying a good bit against most of the majors. Admittedly the dollar was well oversold at those levels, but we've seen a trend reinforced here. The lows are getting lower as are the highs. I have a visual rendition of this phenomena on the main page of my site It paints a pretty grim picture for the buck. How about that strong dollar, Hank?

Oil has been very strong, even in the face of broad weakness in the commodities in general. Save for a thrashing earlier this week, the black gooey stuff has held up very well right around $75/barrel. All this without a single hurricane or a war in the Middle East. Keep in mind that last year's $78ish high was blamed on the mid-summer conflict in the land of sand.

The Downs...

It would finally appear as though the debacles in subprime credit are now starting to be recognized by the markets. It is important to emphasize that this process is only beginning. Much effort and jawboning have gone into keeping a lid on this so far. The really scary thing is that there are now former housing bulls going on the record as saying that this is going to get a whole lot worse. Prices are going to fall further and faster and inventories are going to go higher.

For reference, Eastern PA was considered a fundamentally strong market. In two counties bordering New Jersey, there are now nearly 5000 homes for sale when last year there were just 700! Anyone who thinks that prices will remain stable given this type of supply dynamic needs find David Lereah from the National Association of Realtors for a few rounds of cocktails followed by a therapy session.

The DOW, Nasdaq and S&P 500 got slammed yet again today as new home sales once again failed to meet even the most tepid expectations. A bit of very unsettling news came in the form of admissions that the problem is not just contained to subprime credit. Prime mortgages are starting to see delinquencies, defaults and foreclosures. This does not bode well for the value of any type of packaged real-estate paper.

The Ridiculous.. .

What continues to blow my mind is the exit strategy that much of this money is using. It is going from the frying pan into the fire. Treasuries have been the one winner of late, pushing yields on the 10-year well under 5% back to 4.79% This might (emphasis mine) throw a rope to the housing market, but any rope going in that direction might as well be a noose as opposed to a lifeline.

It has been well-documented that the world is awash with money. The one true bear market right now appears to be in fiat cash. The perception that Treasuries that yield well under the REAL inflation rate are 'safe' is patently absurd. However, there is SO much money and it needs a home. So it washes from one end of the pool to the other.

Going Forward...

Not much of this really matters to the person on the street. This will shake out for the little guy in the form of higher prices going forward as the Fed is forced to crank more and more liquidity to keep the ship from listing too much. All the while, the mediacracy will be busy telling everyone that there is no inflation, prices are stable and wages are rising much faster than the cost of living. In his testimony to Congress last week, Bernanke spoke a great deal about inflationary expectations. The gist of what he was saying was something like: "If we can keep the people fooled into thinking there is no inflation, then they will behave as if there is no inflation which allows us to continue to create inflation".

By Andy Sutton

Andy Sutton holds a MBA with Honors in Economics from Moravian College and is a member of Omicron Delta Epsilon International Honor Society in Economics. He currently provides financial planning services to a growing book of clients using a conservative approach aimed at accumulating high quality, income producing assets while providing protection against a falling dollar.

Andy Sutton Archive

© 2005-2019 - 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