This week in the marketplace
BY
PAUL RENDINE
Last week saw a marketplace roiled by losses in Europe and Asia, and another collection of weak U. S. earnings reports, all combine to push stocks lower as the market continued to flirt with the lows of last year. Bad news from a series of other companies, including those in the financial, technology, and manufacturing sectors, also helped to push the market20to its lower limits, as well.
The financial sector was hit even harder when one of the nation’s larger credit card issuers announced that it expected to post an even wider loss in 2009 as, in its opinion, an increasingly dismal unemployment rate, combined with home prices that will fall another 10 percent, would continue to “chip away” at the psychological “wealth effect,” causing more emotional negatives to keep on doing their work of driving the markets down, if for no other reason than the expectation of continued earnings and revenues declines.
Asian and European markets added to the international economic declines with losses posted for the first time in technology, electronic, and chipmaker manufacturers in Japan and Korea,. while data confirmed that the UK was officially in its first recession since 1991. Meanwhile, crude oil futures prices continued to decline, while the prices of gasoline continued to slowly inch up. I wonder where that disconnect is?
Oil prices continue to fall on economic and supply concerns
The futures prices for crude oil continued to fall last week, as well, pressured by rising inventories and increasing concerns about how much more severe the global economy might find itself. Prices “tracked equity markets lower amid the deteriorating economic outlook and further fears of demand destruction,” said analysts at Sucden Financial Research. For example, the sharp deterioration in the world economy has led to a steep decline in energy demand and resulted in the recent slide in oil prices, which have tumbled just over 51 percent over the past 12 months.
Foreign companies now equally feeling the pain, too
A growing number of foreign public companies are feeling, and experiencing, the same type of financial woes that American companies are. They just aren’t getting the public “play” as U. S. stocks do since they may be in Japan, Australia, Italy, Germany, or the UK. As a matter of fact, a large and leading German memory-chip manufacturer announced last Friday that it was filing for bankruptcy protection, even though it had just received barely a month ago a package of emergency loans totaling 325 million Euros ($422 million dollars). It was just last October that the company unveiled its plan to lay off 3,000 workers, or about a quarter of its global workforce, in the U. S. and Germany.
Gold prices bounce back
The price of gold usually measures the levels of fear or inflation (some are even now talking about deflation) in the world. Right now, inflation is not even an issue on the horizon, but fear certainly is with most of the world’s investors now concerning themselves with both the credit and overall global financial fears helping them to make the decision to buy gold now a rather easy one. Right now, with the price of gold coming in at just over $850 an ounce (on its way to $900 an ounce), many of the so-called “gold bugs,” who have long considered the price of gold to be influenced more by irresponsible money supply increases than anything else, may have it right, after all. For now, we’ll have to wait and see.
Paul Rendine is Owner of the Rendine Financial Group, LLC in Salisbury, MD, offering securities through First Allied Securities, Inc., member FINRA/SIPC. You can contact him at 410-860-1137 or at his e-mail address at prendine@1stallied.com with any comments or questions.