The Real Black Friday Was the Collapse in the Price of Oil
The Friday after Thanksgiving - a typically light day of trading in the stock market, given the holiday festivities - proved to be anything but light for oil, gold and bonds. Oil, sometimes referred to as "black gold," fell over 10%, giving new meaning to "Black Friday."
Meanwhile, gold, after some positive action in recent weeks, fell almost 2%, and the yield on the 30-year treasury slipped over 1% (a rather dramatic move for bond yields) pushing the price of the bonds up 0.27%. Which left us with stocks flat, gold down, oil down even more, leaving the long bond to save the day and hold the fort while we all recovered from turkey and all the trimmings.
(And let's not forget silver - that unique combination of precious metal and commodity - which fell over 6% on the same day.)
So what happened? Well, we can keep it simple by reminding ourselves to repeat the "D" word over and over again until it sinks in: DEFLATION. Let's go. Repeat: DEFLATION.
There's simply no escaping the fact that, despite the increase in food prices and some other consumer items, prices for many other items continue to deflate. Or if not outright deflating, then hitting a counter-wave of deflation if they've been trying to reflate, as we're now seeing in residential housing. The Great Deleveraging begun in 2007-2008 has not run its course. If you remember the "D" word (again, repeat: DEFLATION), Friday's price action should not have come as a shock.
Next stop on the "D" train (a famous subway line in New York City, by the way): China. The "D" word, a dirty one at that for the Communist Party leadership, continues to pound the Chinese economy, such that even the leadership's lies about GDP and other economic gains can hardly be taken seriously anymore. And with the November 21st cut in interest rates, you can bet that the leadership has reached the end of its rope, given the fact that such interest rates cuts will do no more there than what they do here: fuel speculation. As for the Chinese economy, it has been and will continue its devleveraging. Again, that "D" word.
Deflation still rules the economies of the world. And to believe that will stop anytime soon is to believe all the hype of not only the Chinese Communist Party leadership, but the continuing "goldilocks" story being touted by so many economists here in the good old U.S. of A.
Meanwhile, we hope you enjoyed Thanksgiving and, for some of you, a long weekend.
Meanwhile, gold, after some positive action in recent weeks, fell almost 2%, and the yield on the 30-year treasury slipped over 1% (a rather dramatic move for bond yields) pushing the price of the bonds up 0.27%. Which left us with stocks flat, gold down, oil down even more, leaving the long bond to save the day and hold the fort while we all recovered from turkey and all the trimmings.
(And let's not forget silver - that unique combination of precious metal and commodity - which fell over 6% on the same day.)
So what happened? Well, we can keep it simple by reminding ourselves to repeat the "D" word over and over again until it sinks in: DEFLATION. Let's go. Repeat: DEFLATION.
There's simply no escaping the fact that, despite the increase in food prices and some other consumer items, prices for many other items continue to deflate. Or if not outright deflating, then hitting a counter-wave of deflation if they've been trying to reflate, as we're now seeing in residential housing. The Great Deleveraging begun in 2007-2008 has not run its course. If you remember the "D" word (again, repeat: DEFLATION), Friday's price action should not have come as a shock.
Next stop on the "D" train (a famous subway line in New York City, by the way): China. The "D" word, a dirty one at that for the Communist Party leadership, continues to pound the Chinese economy, such that even the leadership's lies about GDP and other economic gains can hardly be taken seriously anymore. And with the November 21st cut in interest rates, you can bet that the leadership has reached the end of its rope, given the fact that such interest rates cuts will do no more there than what they do here: fuel speculation. As for the Chinese economy, it has been and will continue its devleveraging. Again, that "D" word.
Deflation still rules the economies of the world. And to believe that will stop anytime soon is to believe all the hype of not only the Chinese Communist Party leadership, but the continuing "goldilocks" story being touted by so many economists here in the good old U.S. of A.
Meanwhile, we hope you enjoyed Thanksgiving and, for some of you, a long weekend.
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