The Other McCain

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Wall Street Panic: European Woes, Inflation, Weak Data Tank Market

Posted on | August 18, 2011 | 1 Comment

L.A. Times:

Global stock markets plunged anew Thursday amid intensifying concerns about Europe’s debt crisis and a batch of disheartening economic reports in the United States.
The Dow Jones industrial average tumbled more than 470 points, and other indexes followed suit. . . .
In addition to the European sell-off, U.S. traders were hit by a variety of bad economic news as they arrived at their desks this morning.
First-time jobless claims rose a more-than-expected 408,000 last week. Consumer prices jumped 0.5% in June from May, more than double the 0.2% increase economists had estimated. Core inflation, which excludes volatile food and energy prices, rose 0.2%.
Traders also were spooked by Morgan Stanley’s lowering of its forecast for global growth.

When the market hits a sharp drop like that, automatic “breakers” kick in to prevent a wholesale panic. As of 11:30 ET, the DJIA was off about 450. But the signs of economic trouble ahead are everywhere. Housing data also point toward a double-dip recession:

The number of people who bought previously occupied homes dropped in July. The third decline in four months suggests the depressed housing market won’t help the U.S. economy recover this year.
Home sales fell 3.5 percent last month to a seasonally adjusted annual rate of 4.67 million homes, the National Association of Realtors said Thursday. That’s far below the 6 million that economists say must be sold to sustain a healthy housing market.
And this year’s pace is lagging behind last year’s total sales. The 4.91 million last year were the weakest sales figures in 13 years.

Amid all this woe, what’s the safe investment?

Gold rallied to its second record high in a week. Spot gold hit a record $1,825.99, although it is still off its inflation-adjusted peak above $2,000 struck in 1980.

Gold was at $1,607.90 July 18, so prices increased more than $200 an ounce (13.6%) in one monthYou should have listened to Glenn Beck!

UPDATE 12:20 p.m. ET: One of the “breakers” explained:

The New York Stock Exchange early Thursday put into effect its “Rule 48,” aiming to smooth the opening of trading in a session that is expected to get volatile. Rule 48 allows designated market makers on the NYSE to refrain from disseminating price indications ahead of the opening bell. The procedure makes it easier and faster to open stocks on days when trading could be rough.

The DJIA has now bounced off the bottom, and is down about 350 points at this hour.


One Response to “Wall Street Panic: European Woes, Inflation, Weak Data Tank Market”

  1. Adjoran
    August 18th, 2011 @ 6:22 pm

    No one who listens to Glen Beck is safe, ever.

    Especially those who buy gold on TV after touting by him or Ron Paul or Gordon Liddy or some other guy who makes big money from suckers.  Because when you buy gold from his advertisers, they will nail you for a hefty premium when you buy – some of them as much as 30%.

    Then when you sell, you get to pay the premium again.  Don’t worry, you can always take your gold to a local coin or pawn shop – and pay the premium there.  Those guys aren’t operating some public service, Sparky.

    But let’s say you found a “discount” television gold hawker who only charges you a 15% premium on each end.  So you bought in July after Beck and Paul and McCain urged you to, @ $1607.90, and paid the premium of $241.19.  And you take your profit now @ $1825.99 ’cause Stacy pointed out the sharp increase, but they deduct the premium which is now $273,90.

    For the purposes of illustration, I am assuming you didn’t have to pay shipping and insurance costs coming and going, too, because you mentioned Beck’s new book or something when you called.

    So you bought gold and sold it at a 13.6% profit, and the transaction only lost you $297.00.  Then you can explain your financial genius to your wife.