Wednesday, August 5, 2009

US Stocks Mixed In Early Trading After ADP Data

U.S. stocks were mixed on Wednesday after data showed that the pace of job losses in the private sector is slowing but still brisk.

Shortly after the opening bell, the Dow Jones Industrial Average was lower by about 23 points. The Standard & Poor's 500-stock index and the Nasdaq Composite Index were little changed.

A report from Automatic Data Processing and Macroeconomic Advisors said that the private sector shed 371,000 jobs last month, more than the 350,000 jobs economists expected to see shed but less than the number of jobs eliminated in previous months. The government will issue its reading on July employment on Friday.

Treasury prices were lower but off their lowest levels of the morning after the ADP report. The benchmark 10-year note was off 14/32 to yield 3.74%, while the 30-year bond slid 1 2/32 to yield 4.53%. The dollar rose against the yen and the euro. (more)

The Wall Street Journal Asia August 5 2009

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Prepare for a monster five year Gold Stock run

For those who don't know me, I am a firm believer that markets and sectors move almost entirely based on human behavioral and/or "herding" patterns. I wrote an article published here on in late February of this year outlining why I thought the market was about to start a bull cycle, and yet nobody knew it. Perhaps I got lucky, but that turned out to be accurate and then some, and it was certainly not based on fundamentals either. I couldn't find one solitary bull around the world, so I knew there was a good chance things were about to shift sentiment wise, and therefore market wise.

Speaking of behavioral patterns and possible shifts, let's discuss the gold sector and why I believe the third leg in the Bull market in gold is just beginning, and it is about to accelerate. If it's true that markets move based on reliable behavioral patterns, then gold and therefore the Gold Stocks are poised to have an extremely bullish shift in sentiment in my opinion. (more)

U.K. Royal Mint Doubles Gold Output as Demand Swells

The U.K.’s Royal Mint, established in the 13th century, doubled production of gold coins in the second quarter as demand surged for bullion to diversify investments.

Output climbed to 16,910 ounces from 8,030 ounces a year earlier, according to data obtained by Bloomberg News under a Freedom of Information Act request. First-half production jumped 86 percent to 45,406 ounces, the figures show.

Demand for physical gold as a store of value and hedge against inflation has increased as governments spend trillions of dollars to combat the worst recession since World War II. Bullion holdings in gold-backed exchange-traded products rose to records in the second quarter. Gold is trading about 7 percent lower than the record $1,032.70 an ounce reached in March 2008. (more)

American Incomes Head Down, Threatening Recovery in Spending

Household income in the U.S. is weakening as the influence of the government’s stimulus plan fades, prompting economists, Federal Reserve officials and a Nobel laureate to warn that consumer spending may stumble.

“Consumers have started to change their behavior and they are going to save more,” said Richard Berner, co-head of global economics at Morgan Stanley in New York and a former researcher at the Fed. “You have pressure on wages, you have employment still declining.”

Wages and salaries, which drive recoveries in spending, fell 4.7 percent in the 12 months through June, the biggest drop since records began in 1960, according to Commerce Department figures released today. The Obama administration’s tax cuts, extended jobless benefits and a one-time Social Security bonus have helped mask the damage done by the worst employment slump since the Great Depression. (more)

Crude Oil $100 Or $50?

Jay Taylor Interviews Peter Grandich

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Office Volume Down 50% to 91%; Industrial Space at Decade Low; Retail Vacancies at 7.5%

The second quarter of 2009 saw leasing and sales conditions across the U.S. office market plummet at a rate unforeseen in previous analysis by CoStar Group, Inc. In particular, CoStar confirmed that the value of Class A office buildings has declined by 57% compared with prices paid at the peak of the market in 2007.

In addition, office-leasing activity is off 39% from year-ago levels and all but three U.S. office markets posted negative net absorption over the first two quarters of 2009.

“The degree and speed at which these changes in market fundamentals have occurred are staggering,” noted CoStar Group’s President and CEO Andrew C. Florance." Florance noted that, on an inflation-adjusted basis, the average price per square foot buyers paid for office properties had enjoyed an 11-year run-up beginning at the end of 1996 to their peak in the third quarter of 2007. In the past six quarters, U.S. office buildings have lost more than half their value. (more)

US Dollar Index Showing All Sorts of Weakness

The U.S. dollar taketh...and the U.S. dollar giveth away. That's one way of looking at the flurry of activity in markets right now. The Aussie dollar is at a ten-month high. Oil is up 75% since January, with crude trading at $74/barrel. Copper is at a ten-month high. The S&P 500 has cracked 1,000 again.

Meanwhile, the U.S. dollar index is showing all sorts of weakness. The chart below tells you a couple of things. First, you can see that when the short-term moving averages cross the longer-term moving averages, it usually signals a move. We're not making this up, by the way. We asked technician Gabriel Andre why the crossing of the 50-day MA over the 200-day MA was significant. His answer below. (more)

China's USD Exit Manual

U.S. Child Born in 2008 May Cost $221,190 by Age 18

Middle-income U.S. families will spend $221,190 to raise a child born in 2008 until they become adults in 2026, according to a government estimate.

The typical two-parent family spent from $11,610 to $13,480 on each child last year, depending on age, a U.S. Department of Agriculture study shows. Households that make less, spend less, the study found. A family earning less that $56,870 a year is likely to spend $159,970 to rear a child, while parents earning more than $98,470 may pay $366,660, according to the study.

Expenses are highest for children raised in the urban Northeast, followed by cities in the West and Midwest, the USDA said. “Families living in the urban South and rural areas have the lowest child-rearing expenses,” the department said. (more)