Monday, stocks rose 0.8% in Asia, fell 0.3% in Europe, and closed little changed in the U.S. on moderate volume. Crude oil slipped 7% to close at 31.42 and the 10-Year U.S. Treasury Bond yield rose 2% to close at 1.97. Precious metals gained 1% while their miners shot up about three times that amount.
Tuesday, Asian stocks erased the previous day’s gains by falling 0.8%. In Europe and the U.S., stocks plunged 2% and 2.1% respectively on moderate volume. Despite the loss, all three major stock indices managed to hold just above their recent benchmark levels. The VXO jumped 12% to close at 23.04, crude oil slid 6% to close below the $30-a-barrel mark at 29.7, and the 10-Year U.S. Treasury Bond yield plummeted 5% to close at 1.86.
Wednesday, stocks fell 2.1% in Asia and 1.6% in Europe but closed 0.7% in the U.S. on moderate volume thanks to another late-day surge. This kept the major indices again from closing below their recent benchmarks. There’s nothing to see here. Move along. On severe dollar weakness, oil shot up 8% to close at 32.27, while precious metals surged over 2% and precious their miners skyrocketed 8%.
Thursday, stocks jumped 1.5% in Asia, fell slightly in Europe, and rose 0.4% in the U.S. on moderate volume. Precious metals miners tacked on another 5% gain on continuing dollar weakness.
Friday, stocks fell slightly in Asia, 0.8% in Europe, and 1.5% in the U.S. on moderate volume. The VXO tumbled 12% to end the week at 25.99. The S&P 500 index broke below its 1900 benchmark and the NASDAQ smashed well below its 4500 level. Likely stock buybacks continued to keep the Dow Jones industrial Average from breaching its recent benchmark. As evidence of that, IBM turkey stock gained 0.7% on a down day for stocks and a particularly bad day for technology.
It’s pretty clear to me at this point, that the FOMC and those who direct them have decided to let some air out of the stock market bubble. They’re trying desperately to do it without prompting a collapse. That’s a difficult, if not impossible, tight rope walk. I doubt they will pull it off. Stocks have a long way to fall before they even reach fair value. I’m still expecting and preparing for a dramatic downturn.
While it’s nice to see precious metals making a run recently, for someone who held nearly all his assets in gold and silver in 2008, I feel like I can speak from experience here. These metals hit a peak in March of 2008, but by October of that same year, these metals had seen their prices slashed in half. Those were some very tense times for someone who had also just retired.
You may recall, the mantra “flight to quality” back then which meant investor preference for U.S. Treasury bonds. As margin calls hit stocks, investors also unloaded precious metals to meet them. Precious metals miners moved in a similar way but with even greater volatility.
While prices of these miners are now well below 2008 lows, I would not be surprised to see precious metals fall 25% from these depressed levels and their miners fall 50% when panic hits. That said, I have been nibbling at these miners recently as they hit new lows. Still, I’m patiently waiting and reserving the big guns for if and when an even better buying opportunity hits down the road.
As always, these are just my thoughts. I cannot predict the future. Your investment decisions are strictly your own responsibility.