Yesterday, the Fed announced that they would keep interest rates at essentially zero until the summer of 2013. This is the first time I can think of that they attached a timeline to their decision making. The market was happy about the thought of free money for a couple more years. There are some similarities to previous market crashes happening right now.
This is from Stansberry Research:
There is no shortage of folks who claim to have bought stocks after the market crashed in 1987. I am not among them. I was a young pup with only five years in the business. While I was certain it was a good time to buy, I was scared to death to do so. The market had collapsed. I had just witnessed all benefits of fundamental and technical analysis dissolve before my eyes. I just couldn't pull the trigger.
A spike in gold prices prompted the U.S. Mint to suspend the online sale of gold collector coins Tuesday for the first time in recent memory, a mint spokesman said.
That turned out to be a good thing. After the initial bounce off the lows, the market came back down and retested the bottom one month later. The same thing happened after the flash crash last year. We had a solid bounce followed by a retest of the lows just about one month later.
That seems to be the normal course of events following a market crash. Stocks fall to levels beyond what can be explained by traditional analysis. They put on a wicked bounce, which wipes out anyone who stayed short for too long and encourages those investors who tried to bottom fish in the midst of the decline. Then, stocks come back down and make a slightly lower low.That is the ideal time to buy.
Take a look at this chart from 1987...
Stocks bounced about 15% in the days right after the 1987 crash. Six weeks later, they came back down and made a lower low.
Last year's flash crash was similar. The S&P 500 fell from 1,180 to 1,060 in a matter of minutes. Stocks bounced higher over the next few days and nearly regained all the lost ground. Six weeks later, the S&P made its final bottom around 1,020.
Here's how things look today...
The market has crashed. No one knows for sure where the bottom will be or when stocks will finally bounce. From a sentiment standpoint, we ought to be close.
Given the current extreme oversold conditions, a bounce higher could be huge. The S&P 500 could run all the way back up to 1,250 or so (the former support level on the chart) before running into resistance. That's a gain of about 12% from yesterday's closing price.
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From Simon Black:
It's all about supply and demand. Increased demand for the Swiss franc coupled with expanded supply of dollars and euros has caused the franc to surge over the last weeks and months. It wasn't too long ago that it would take 1.20 francs to buy a US dollar. Now it takes $1.40 to buy a single franc.
I can think of a lot of words to describe the performance of the US dollar. Farce. Joke. Lunacy. Embarrassment. Disgusting. But it's more clearly summed up like this: the price of a Big Mac is in Zurich is now so high (at $17.19) that a minimum wage employee in Minneapolis, Minnesota, would have to work for nearly 4-hours in order to afford it.
This is what stability looks like to Ben Bernanke.
I can think of a lot of words to describe the performance of the US dollar. Farce. Joke. Lunacy. Embarrassment. Disgusting. But it's more clearly summed up like this: the price of a Big Mac is in Zurich is now so high (at $17.19) that a minimum wage employee in Minneapolis, Minnesota, would have to work for nearly 4-hours in order to afford it.
This is what stability looks like to Ben Bernanke.
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Marc Faber has been pretty tough on the Fed before but he really went after them yesterday.
"The best [the Fed] could do for markets would be to collectively resign…I think sometimes the best is to do nothing. I welcome the decision, at least today, that they aren't doing anything worse than what they have already done."
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I think it's crazy that someone can project anything out to 2050, but I thought this was an interesting article from Business Insider. It's good to see they still think the US will be near the top in world trade by then.
The 10 Countries That Will Dominate World Trade In 2050
Despite a 20% decline during the financial crisis, world trade is expected to increase from 61% of global GDP in 2010, to 86% in 2050, according to a new report by Citigroup.
Despite a 20% decline during the financial crisis, world trade is expected to increase from 61% of global GDP in 2010, to 86% in 2050, according to a new report by Citigroup.
Trade is defined as the combined value of both imports and exports in a country, including both goods and services. More significantly, trade is set to transform with most growth coming from emerging markets.
China will be the world's biggest economy by trade as early as 2015, and developing Asia will become the world's largest regional trade corridor in the same period.
These projections however hinge on GDP growth, improved productivity, rising incomes and the fewer protectionist measures.
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These projections however hinge on GDP growth, improved productivity, rising incomes and the fewer protectionist measures.
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I personally own some gold coins with numismatic value. Here is one reason why I think their prices are about to rise.
A spike in gold prices prompted the U.S. Mint to suspend the online sale of gold collector coins Tuesday for the first time in recent memory, a mint spokesman said.
The move affects only the gold numismatic products sold to collectors and not the gold bullion coins sold to investors, Mint spokesman Mike White said from Washington.
Sales were suspended at midday for re-pricing, which was expected to be completed by late Wednesday, he said.
Asked when that had last happened, White said, "not in recent history that I can remember.''
The move affects only the gold numismatic products sold to collectors and not the gold bullion coins sold to investors, Mint spokesman Mike White said from Washington.
Sales were suspended at midday for re-pricing, which was expected to be completed by late Wednesday, he said.
Asked when that had last happened, White said, "not in recent history that I can remember.''
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