Thursday, May 06, 2010

Today in numbers and what they mean...

Setting aside for the moment a near 1000 pt drop in the DOW over the space of about 15 minutes (that was probably at least partly a technical glitch) today was the latest in a string of very ugly days as the world appears to be finally taking notice of the oceans of red ink out there.

Some quick numbers for consideration...

The DOW ended down 347.8 or 3.4%
The S&P 500 down 37.2 or 3.24%
The NASDAQ down 82.65 or 3.44%
Oil down 2.81 to 77.21 per barrel (It was over $86 just last week)
The Euro was slammed, dropping to 1.2529 to the dollar

The only things that rose were the dollar which made new highs for the year against the Euro and and the Pound, US high grade bonds which rallied across the curve and gold which rose 33.20 to $1209.80 oz an advance of some 2.8%.

Conclusions... there is a growing alarm at the vast amount of sovereign debt in the world and the possibility of a cascading debt crisis. As per normal in times of alarm there was a flight to the dollar and the most conservative of dollar denominated securities. However this time, unlike in 2008, we are also seeing a large move into gold which has been rising steadily for well over a month. Of particular noteworthiness is that gold has been rallying IN TANDEM with the dollar. This has been going on for weeks and does not appear to be an aberration. If in fact gold, which has historically done the opposite of the dollar, is in the process of decoupling from the USD it could signal investors increasing concern over US sovereign debt levels and the anticipation of large scale intervention by the FED and other central banks around the world. In effect gold may be in the process of becoming once again the world's defacto reserve currency.

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