Stocks rose in Asia Monday 1.2%, in Europe, and in the U.S. 0.8% on low volume as the world breathlessly awaited the words from the almighty U.S. politburo. Tuesday, stocks fell in Asia 0.4% and just slightly in Europe. In the U.S. though, hopium gave stocks another upward push of 0.7% on low volume. Precious metals dropped about 1.5% and their miners lost about twice that amount.
Wednesday was the big day. Stocks in Asia rose 0.8% and in Europe they fell 0.3%. After the big announcement that the Fed will start winding down QE this year and finish a year from now, stocks and bonds swooned 1.5% on low moderate volume, the 10-Year U.S. Treasury Bond rate rose nearly 6% to 2.3%, precious metals miners dropped about 3%, but interestingly the VXO fear index moved little.
Thursday, stocks were hammered in Asia, falling 4% and in Europe 3.1% In the U.S., stocks plunged 2.8% and the Dow Jones Industrial Index dropped decisively below the 15,000 level while the S&P 500 Index dropped below 1600, IBM broke below 200, precious metals crashed 8% (gold below 1300 and silver below 20), and the VXO shot up over 29% to close above 21. Finally, the 10-Year U.S. Treasury Bond rate rose almost 5% to close at 2.4%. The rapid rise in the Treasury rate has let some to question whether Bernanke has lost control of the long bond rate.
Friday, stocks in Asia closed unchanged. In Europe they declined 1%. U.S. stocks rose 0.3% on moderate volume for an options expiration day. The VXO retreated over 11% to close at 18.91 as fears of the previous day calmed. Precious metals and their miners recovered a little with a rise in the range of 2%. The real story for the day and week for that matter was treasury bond rates. The 10-Year U.S. Treasury Bond rate rose almost 4% more to close above 2.5%. If the Fed loses or has lost control of this rate, the fun and games played by the big companies using cheap debt to buy back stock and juice their prices will be over. Fittingly, IBM’s bloated price which peaked a few months ago around 215 closed at about 195.
For the week, stocks lost about 2%, the VXO rose 9%, precious metals crashed 10%, and the 10-Year U.S. Treasury Bond rate rose 18%. While my official preference of where to be invested remains cash, silver particularly and precious metals mining stocks certainly warrant consideration at these depressed levels. I have been accumulating positions in various associated stocks. As always, your investment decisions are strictly your responsibility.