The Other McCain

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Bubble Bursts? Wall Street Tumbles, as Silver Prices Slump on Margin Hike

Posted on | May 5, 2011 | 16 Comments

DJIA . . . . . . 12,584.17 -139.41 (-1.10%)
S&P . . . . . . 1,335.10   -12.22 (-0.91%)
NASDAQ . . . 2,814.72  -13.51 (-0.48%)

The headline this morning was another one of those “unexpected” bits of bad economic news:

Jobless Claims in U.S. Unexpectedly Jump Due to Anomalies

What’s up with that? The Lonely Conservative:

For the life of me I can’t figure out why the “really smart” people are always so surprised that people lose jobs in a rotten economy.

Yeah, but this is supposed to be a “recovery,” remember? As one of Instapundit’s readers snarks: “What? The MSM can’t say ‘jobless recovery’ anymore?”  The Wall Street Journal reports:

The energy sector led U.S. stocks lower Thursday as crude-oil prices plunged and jobs data disappointed, hurting expectations for the government’s upcoming employment report.
The Standard & Poor’s 500-stock index shed 12.22, or 0.91%, to 1335.10, marking the measure’s fourth consecutive drop. It represents the first time the S&P 500 has been down for the first four days of a month since October 2008.
The tumble in crude oil came as investors rushed to the safety of the dollar after data showed new claims for jobless benefits unexpectedly surged last week to the highest level since August. The report lowered expectations for the government’s report on April employment due Friday.
“There’s a lot of different things that are hitting all at the same time,” said Michael Shea, managing partner at Direct Access Partners. “The dollar is stronger versus the euro, and crude is just getting pounded.”

The phrase “investors rushed to the safety of the dollar” can best be translated: They decided to cash out.

It’s like when a gambler loses a hand of blackjack, looks at his remaining stack of chips and decides it’s time to head for the cashier’s window.

The price of silver, which reached an all-time high of $49.51 an ounce last week, has fallen by 23 percent– “a nearly unprecedented sell-off,” as Reuters calls it — after the CME Group sharply increased its margin requirements. In other words, credit is tightening and speculators now have to put up more cash to buy silver, and this has let the air out of the bubble. Gold has also fallen from its record highs, down to $1,488.50 an ounce, but the decline has been smaller than silver.

Another factor in the decline of precious metals is that the dollar is stronger, and most people will say, “Oh, the dollar’s stronger! That’s good news!” — except that a stronger dollar hurts U.S. exports.

Insofar as there is any really good news, it’s that the price of crude oil declined sharply – except that’s bad news, too: Investors anticipate declining demand for oil because they expect an economic downturn. Which brings us to my favorite bad-news headline of the day:

Double-dip recession is now undeniable

Bad news is good news, because the one thing that could fix the economy is for Obama to be defeated in 2012, and the more “undeniable” the evidence that Obamanomics has failed, the more likely it is he’ll be defeated.

UPDATE: ?Linked by The Rhetorican – thanks!

UPDATE II: Welcome, Instapundit readers!

The Atlantic says that the “double-dip” is now official, and Jeff Goldstein has further thoughts at Protein Wisdom.


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Category: Economics

Comments

  • Pingback: Unemployment Claims ‘Unexpectedly’ Jump Again! | The Lonely Conservative

  • http://twitter.com/lonelycon lonely conservative

    Thanks for the link. On the upside, if you invested in gold and silver two years ago, you’re still in pretty good shape.

  • JeffS

    …and the more “undeniable” the evidence that Obamanomics has failed, the more likely it is he’ll be defeated.

    “It’s the economy, stupid!”

  • Anonymous

    On the upside, if you invested in gold and silver two years ago, you’re still in pretty good shape.

    Gold is still a good investment, because the Fed’s policy is so inflationary. But, as I’ve been saying for two years now, Obamanomics looks like a surefire formula for “stagflation,” and now we’re seeing the “stag-” part of that formula. I’ve also been saying for nearly two years that the “bounce” in the stock market was essentially a reflection of inflation: i.e., stock prices weren’t going up because they were more valuable, but because the dollar was declining.

    This attempt to “re-inflate the bubble,” as an economist friend of mine described Obama’s policy to me in spring 2009, is ultimately doomed to end badly. Whether it is ending now, or if Geithner and Bernanke will be able to keep up the sham a while longer, is the big question.

  • Pingback: Did the Bubble Burst Today? « The Rhetorican

  • Anonymous

    Ruh-Roh.

    d(^_^)b
    http://libertyatstake.blogspot.com/
    “Because the Only Good Progressive is a Failed Progressive”

  • gorak

    The price was simply manipulated downwards by an outrageous and possibly criminal abuse of Exchange policy. Apprently the people who wax about “fairness” have no problem wiping out people’s investments by arbitrary decree. I hope they rot in prison.

  • Anonymous

    Apparently the recent financial reform legislation forgot to regulate anomalies.

  • Anonymous

    Apparently the recent financial reform legislation forgot to regulate anomalies.

  • Pingback: Instapundit » Blog Archive » IS A DOUBLE-DIP RECESSION now undeniable?…

  • David R. Graham

    ” … Bad news is good news, because the one thing that could fix the economy is for Obama to be defeated in 2012, and the more “undeniable” the evidence that Obamanomics has failed, the more likely it is he’ll be defeated.”

    Variant of the Advice of Gamaliel. Roger that.

  • http://profiles.yahoo.com/u/GZZABF4MGIRHSHQIPVEXM3RJQE Fatty_Bolger

    I’m not going to root for a bad economy, that’s the Democrat’s shtick. But I do want the true economy exposed, good or bad, which is something we can’t rely on the MSM to do with an election in the balance. Thankfully they are becoming increasingly irrelevant.

    Getting rid of Obama would be a good start, but it’s going to take more than that to fix the economy for the long term. Republicans are going to have to come through once they take power, and I’m far from confident that they will do so. Don’t be fooled into thinking that just getting rid of Obama and putting Republicans into control will do the trick. Pressure must be kept up on them to keep them from going back to business as usual.

  • Anonymous

    20th century tax-and-spend politicians who sold their souls to the IRS

    will not, _cannot_ , adapt to 21st century economic reality;

    Replace them all, now.

  • Pingback: Fox News Edits Criticism of McCain Out of Daily Show Clip? | Ace Campaign

  • http://qwertyaltofuori.blogspot.com Red

    I know it’s all ‘bad news’ but we’ve been buying silver American Eagles and I’m still glad we did/are. The drop in prices can only help us accumulate more. Eventually precious metals do go up so I’m not crying too much over buying low. More jobs would be nice though.

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