Prague Twin

Friday, May 12, 2006

Nigeria Pipeline Explosion

Despite today's Nigerian pipeline explsion which vanquished at least 200 people in less than a second, oil is only $72 a barrel right now, now about a buck for the day. Remember just a while back when our eyes popped out at $50, and now we may never see $60 again.

Wow, the price of oil is dropping, just an hour and one half after this explosion. They didn't even mention it on Closing Bell.

UPDATE: They finally mentioned it in passing ten minutes after the closing bell.

So the dow takes the biggest two day drop since last October. This is a sharp turn, but it had to happen. Six strait months of gains leading into it. Poor consumer sentiment and interest rate hike/inflation fears pulled it down.

Even the Bulls are saying sell. Last week I hear an analyst saying he was sticking with his prediction of an 8% gain in the dow for the year and they asked, "but it has already gone up 8% this year. So?" And he shrugged meaning, yea, there is going to be a correction. And here it comes. Monday could be ugly.

I saw a market bear who has been investing in European Markets and gold for the last 6 years (wow, he is stoked). For all the hoopla about the American economy, those who have been investing in Europe have been cleaning up. Why? Take the Czech Republic for instance. Those who invested here 5 years ago have seen good returns in crown terms. But the crown has nearly doubled its value against the dollar. So an American who invested dollars here five years ago can sell out now with no profit, and almost "double his money." What does that tell you about the dollar, and the real strength of th US economy. When people start to say the emperor has no clothes...look out.

The bull that he was arguing with had no chance, not right now. He wasn't the brightest guy anyway, sacrificial lamb. Probably the only bull they could get today. Here is a partial quote, "If you look at a country like London...."

One last thing... Gold is closing today down, DOWN to $712 an ounce. Import prices up 2.1% for the month. Inflation anyone?

Sorry about the all the financials. I'm going to keep it to Fridays. Sort of a weekly wrapup thing.



4 Comments:

  • When you consider that the Chinese and Japanese are who we are borrowing from just to keep the economy afloat..to say.."they own us"..is pretty much the truth.

    By Blogger dusty, at 11:32 PM  

  • You are right, but everyone owns each other. What is alarming is how much the of the current public debt is being bought by the chinese, and that trade with China accounts for 21% of our trade deficit.

    Financially, they are starting to gain a marked advantage, but they need us as well.

    Them "owning us" isn't so much the problem as us being dependent on them to buy our debt in the future. That is where they hold the advantage.

    By Blogger Praguetwin, at 2:59 PM  

  • praguetwin, I love the financials. I learn a lot from you.

    I was saying to my girlfriend last night that I just don't understand market sentiment. We were talking about the Dow tanking to the tune of 260 points in two days and we both were saying, "You'd think Monday would be another bad day, but the way the market has been acting the last few years, it could pick up 80 points no problem."

    And that's what I don't get. You're saying inflation seems to be on the immediate horizon and traders are worried about more rate hikes. Consumer sentiment seems to be shaken from energy costs, which must also scare the market. The WSJ reported the housing slowdown has spread to the country as a whole and not just recent RE hotspots. There are definitely signs bad times are coming. But I still wouldn't bet a dollar that the market doesn't make gains next week anyway. I guess I just have to learn more about the market because what seems like irrational behavior to me from the outside apparently has some rationale from the trader's perspective inside.

    Anyway, keep up the financial posts. You're helping me figure some of this out.

    By Blogger reality-based educator, at 5:03 PM  

  • Thanks RBE,

    Sometimes I wonder if anyone can even comprehend what I am saying.

    You make an excellent point about the resilliance of the US market. One thing I consisitently do is underestimate it. Yes, we could have an unexplained 80 gain on Monday. You and me both would be left scratching out heads, but that wouldn't change anything.

    It is all about investor sentiment. And as crazy as it sounds, a week dollar actully attracts investmetn because foreigners can buy US stocks at a "discount."

    There are so many things pulling in different directions, it is always hard to tell what is going to happen next.

    Having said that, I think Monday is going to be bad. I think this down turn is just getting started.

    But as I said before... underestimating the strength of the US market is our biggest pitfall.

    I will keep the financials coming on a weekly basis.

    By Blogger Praguetwin, at 2:41 AM  

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