Market Drop/Crash Quick Comments
Stocks
Last week's drops weren't quite the crashes we had back in August where you could argue we had a crash. But, really, we're kind of splitting hairs. Something's up. While we may not drop much more this week - I don't really know - I'm wondering whether two things happened last week that we need to take note of.
First, the drop in stocks was a reaction to Bernanke's "Operation Twist" announcement where the Fed sells short-duration treasuries and buys longer-duration treasuries. Perhaps the stock market "thinks" such a move isn't such a smart move as Bernanke thinks it is.
Second, the stock market may be "seeing" something "out there" (typically 3 - 9 months) like, oh let's say, a recession - or something even worse. But the coming weeks will give us a better idea.
It's all part of the "inhuman volatility" that's going to be with us for a long time to come.
The Dollar
In spite of the US dollar's woes, and the whole idea that the dollar is going to eventually collapse to zero - someday - it's been strengthening. Just remember that it's strengthening relative to other currencies, all of which are fiat currencies which have consistently lost value to gold...but WAIT A MINUTE: ISN'T GOLD COLLAPSING?
Gold
No gold isn't collapsing. Gold was WAY OVERBOUGHT AND IS NOW CORRECTING. The correction and the intensity of it is no shock or even surprise. It's certainly not pleasant if you own gold, but it's to be expected. Oh, and silver's acting as silver always does: more volatile than gold.
Bonds
So, with all that, treasuries still attract "safe haven" money. People still buy treasuries when they're afraid to put it anywhere else. So one would have to believe that the dollar's "demise" is a long way off (since treasuries are denominated in dollars). Then again, I wouldn't bet the ranch that the dollar will hold up forever.
Summary
So let's see what this week brings us. In the meantime, I hope your assets were positioned in such a way that you're not losing sleep or having heart palpitations. If not, think about how your assets should be positioned from now on. Just remember that typically it's losing investors who react to things like this. If you're reacting, it's time to figure our why - and change your investing habits.
Last week's drops weren't quite the crashes we had back in August where you could argue we had a crash. But, really, we're kind of splitting hairs. Something's up. While we may not drop much more this week - I don't really know - I'm wondering whether two things happened last week that we need to take note of.
First, the drop in stocks was a reaction to Bernanke's "Operation Twist" announcement where the Fed sells short-duration treasuries and buys longer-duration treasuries. Perhaps the stock market "thinks" such a move isn't such a smart move as Bernanke thinks it is.
Second, the stock market may be "seeing" something "out there" (typically 3 - 9 months) like, oh let's say, a recession - or something even worse. But the coming weeks will give us a better idea.
It's all part of the "inhuman volatility" that's going to be with us for a long time to come.
The Dollar
In spite of the US dollar's woes, and the whole idea that the dollar is going to eventually collapse to zero - someday - it's been strengthening. Just remember that it's strengthening relative to other currencies, all of which are fiat currencies which have consistently lost value to gold...but WAIT A MINUTE: ISN'T GOLD COLLAPSING?
Gold
No gold isn't collapsing. Gold was WAY OVERBOUGHT AND IS NOW CORRECTING. The correction and the intensity of it is no shock or even surprise. It's certainly not pleasant if you own gold, but it's to be expected. Oh, and silver's acting as silver always does: more volatile than gold.
Bonds
So, with all that, treasuries still attract "safe haven" money. People still buy treasuries when they're afraid to put it anywhere else. So one would have to believe that the dollar's "demise" is a long way off (since treasuries are denominated in dollars). Then again, I wouldn't bet the ranch that the dollar will hold up forever.
Summary
So let's see what this week brings us. In the meantime, I hope your assets were positioned in such a way that you're not losing sleep or having heart palpitations. If not, think about how your assets should be positioned from now on. Just remember that typically it's losing investors who react to things like this. If you're reacting, it's time to figure our why - and change your investing habits.
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