Friday, August 3, 2007

Bad Finish

The end of the week always seems to provide some perspective, even if it occurs as an afterthought. I've been saying right along that the markets were shaky and Friday's figures indicate that I've been very much on the right track, so pay attention!

Head for the hills. Today was another in a continuing series of ugly trading sessions.

Dow 13,181.91 -281.42; NASDAQ 2,511.25 -64.73; S&P 500 1,433.06 -39.14; NYSE Composite 9,370.60 -248.73

Prior to the market opening, the Labor Dept. announced that July payrolls came in well below expectations of 135,000 new jobs, with the addition of just 92,000. According to some people's fudgy math, this translates into a 0.8% annual rate of growth which, by some accounts, would be sufficient to keep real GDP growth at the expected rate of 2.75% for the second half of the year. Dream on. The labor figures have been cooked, fried, refried, baked, grilled and fricasied to a point at which they are scarcely believable.

The day dawdled on until about 2:00 pm, when the floodgates opened and sellers spilled blood into the streets.

Market internals took a turn from nearly OK to horrific. Declining issues overwhelmed advancing ones at a 5-1 clip. New lows were once again beyond reason, with 792 issues (that's a whopping 13% of the whole market) hitting the skids. There were just 126 new highs.

Once again, the spreading contagion from the credit markets made it sensible to leave stocks alone. The US financial system, already under stress from years of government spending waste and an enormous trade deficit, is in tatters from the largely-unregulated mortgage business that is forcing people into foreclosure at record numbers.

While the big wigs in Washington - people like Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke - continue to spread the word that risks from the sub-prime mortgage mess are "contained" and "not serious", investors are taking whatever profits they have and leaving town.

The credit crunch even has people in the oil pits worried. Seriously, if there's going to be a recession - and it looks like it could be a long and serious one - there's no way oil will be able to maintain its current pricing structure. At some point, the demand side of the equation will send oil and gas prices tumbling. Crude for September delivery lost $1.38, closing at $75.48.

The precious metals finally made headway, as the future looks all the more certain - gloomy - which is good for gold bugs. Gold rose $7.80 to $684.40, while silver added 16 cents to $13.16. A good hedge would be to buy as much silver as possible as soon as you can.

Happy hunting.

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