Wednesday, January 30, 2008

Shocked Investor: The Illusion of the DJIA - Updated

Interesting stats on how the skyrocketing price of Gold could really be just an illusion for people in Canada.  Any gains realized in USD translated to CAD could be quickly lost.

Sounds like CAD is a hedge against US-based inflation, the common reason for buying gold as a hedge?  So instead of buying gold, you should stock up on cash?  I'm a bit confused... that's not how it's supposed to work.

Consider also the appreciation of gold in 2007. While the price of an ounce of gold has gone up by 18% in USD and by 11% in Euros in 2007, it has not appreciated at all for those investors in Canada and Brazil

Source: Shocked Investor: The Illusion of the DJIA - Updated

When Money Market funds are paying out more than a 1 year GIC you know there are issues with the markets... and it's going to get worse before it gets better.  Today's MM rate - 4.21%... and the spread should go higher when Canada's central bank follows it's US masters and chops rates a bit more.

I was expecting the Fed to disappoint with a .25 cut, but as soon as they chopped .5 off the rate I ditched my short holdings, which have been ticking me off ever since the last emergency cut.  Basically the Fed, now sitting at 3%, seems to be determined to chop until they either hit zero or positive market sentiment returns.  Somehow I think 0 is in the cards...

With China revaluation of the Yuan, (currently at 7.19 per USD according to Yahoo, give or take the bank spreads) it appears that this could be a contributing factor to US inflation.  As China fights inflation with an increasing Yuan, this would deflate the value of their USD holdings and increase the costs of exports.  Wal-Mart is going to have a tough time trying to put smiley faces on increasing import costs, though it could be good for export businesses in the US (think manufacturing?)

It seems as though the middle of the teeter-totter could break at any moment, with 2 - 500 lb gorrilas sitting on each side.  According to some articles, this decrease, if it hits 6, could pose a danger to China's staggering economic growth, though it's a lucky number in Chinese.

"The number six, liù, is considered to be a very auspicious number because it is a homonym of the word for "flowing" or "smooth," liū. This is the reason why the Western ominous number combination 666 does not get the hairs on the back of Chinese people to stand up. The "devil's number" is a particularly lucky one in the Chinese language, as it sounds close to the words meaning "things are going smoothly." People often pay extra to have this string appear in their telephone number. Basically, it seems that the more times a lucky number is repeated one after another, the more potent will its fortune-bringing effect be."

This can't be good for offshore companies...

In other news, or in more of the same news... more downgrades.

Bond insurers' possible downgrade spurs market angst seems to indicate that another wave of writedowns are going to hit the market next month.  However, after reading more about mining stocks and various concerns about South African stakes, plus the skyrocketing price of gold, I see that there could still be some upside to the gold miners in Canada.

Though short term, it doesn't look that anything's got upside, except for some highly-manipulated small caps.

Somebody was on the right side of the trade with Kelly Services.... 200 shares traded, up 31% today.  Damn market orders...

Of course, if you are on the Ultrashort side, you had a 9% gain in FXP today... but the word "ultra" is probably just another way to say "weapon of mass destruction" in your portfolio, unless you're a day trader with a good eye for trends and a good ear to the ground for emergency rate cuts...

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