Wednesday, September 22, 2010

Markets Are in a Seriously Confused State

First, a bit of a correction, or, an explanation, at least.

When I posted the losses in gold and silver in yesterday's post, I was taking the quotes from CNN/Money, where I usually get the information. Looking at a chart from, I see that the price level I quoted was just about the low of the day, quoted just at 2:15 pm, right as the Fed made their announcement. Ditto for silver.

Immediately, gold and silver shot through the roof, and the NY Globex close was 1286.80. Being that Kitco gives the close at 5:30 in the afternoon, and I usually write this about 4:00-4:45 pm, I cannot guarantee the accuracy of the gold and silver quotes, though I will endeavor to do so from here on out.

Now, on to today's events...

After a positive open, stocks were down most of the remainder of the day as the true ramifications of the fed's overt hinting at QE2 and fresh numbers on housing reached the Street about 10:00 am. The FHFA House Price Index [PDF], a gauge of residential housing prices in America, came in with a 0.5% decline for July, off a revised 1.2% drop in June. That's a 1.7% drop in residential housing in just two months, or a full year run-rate of 10.2%. The news was not received very well.

The Index is a government gauge, meaning it is subject to tweaks and revisions and is probably a more conservative approach than most would use. The Index tracks conforming, conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. It also excludes, multi-family units and condos, among others, so it is likely to be a more conservative estimate than say, NAR data. To get an idea of just how conservative the measure is, consider that the index is only 13.7% below the April, 2007 peak.

Dow 10,739.31, -21.72 (0.20%)
NASDAQ 2,334.55, -14.80 (0.63%)
S&P 500 1,134.28, -5.50 (0.48%)
NYSE Composite 7,210.85, -35.10 (0.48%)

Once again, the markets took on small losses, but decliners submerged advancing issues in a big way, 3712-2027. New highs continued to dominate new lows, 313-52. Volume was at about the same levels as yesterday, still well off traditional readings.

NASDAQ Volume 2,193,723,500
NYSE Volume 4,082,509,750

Crude oil for october delivery fell 26 cents, to $74.71. The latest reading on gold was $1291.50, officially a new record. The spot silver bid was $21.15.

As there are numerous schools of thought now that the Fed has made it abundantly clear that they will proceed with dollar debasement in hopes of reviving inflation (a soundly stupid idea), there are many more questions than answers about where this is all leading. The best guesses - and they're all just guesses at this point - are for sustained inflation in food and energy prices, courtesy our friendly, evil central banking cartel, which seems hell-bent on salvaging the defunct credit structures of the past 40 years and keeping the insolvent mega-banks open for business, regardless of whether or not they have to starve half the global population to do so.

If the current economic scenario seems like some dysfunctional Orwellian nightmare, it's probably because it is. Keynesianism has burst upon the system in all its glory and is slowly eroding the value of all fiat currencies, one by one and often in unison. Eventually, it will end badly for those in power: the Fed, the president, congress, princes and kings of Euroland and probably the Chinese and Indians as well.

Welcome to the financial world of the future, where you don't know the value of anything.

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