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Are You Ready For Some Football?

09/24/2011

This was a miserable week for Wall Street, with the Dow down 6.4%.  That was the worst week in almost three years.  It was like investors collectively but suddenly realized the whole world has a leadership vacuum.  In addition, a lot of other things were happening beneath the headlines.

World markets got hammered worse than the U.S. stock market.  With funds from selling their stocks abroad, foreign investors were buying U.S. dollars, driving the dollar up enough to drive down the price of gold, which had the worst week in almost twenty-eight years.  One of the characteristics of gold is that it is a store of value that can always be sold to raise cash.  That was certainly true last week as investors in the emerging markets, which are much less liquid than the developed markets, sold gold to raise cash for margin calls, etc.

In other words, money moved out of stocks and commodities into currencies, primarily the dollar, Swiss franc and Japanese yen.  Raise your hand if you think this is sustainable.

If you want to worry while the markets are closed for the weekend, pay careful attention to the G-20 meeting of finance ministers and central bankers in Washington.  The reason Thursday’s slide didn’t continue on Friday was (1) selling fatigue and (2) the eternal hope that the G-20 bureaucrats will fix the European crisis.  If the Sunday night announcement at the conclusion of the G-20 meeting is platitudinous as I expect, Monday will probably be ugly.

Frankly, I think your time would be better spent this weekend watching the gridiron games!

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