Top Line: Commodities were in the volatility ride on Tuesday with Oil and Gold both opening up and dropping into the close. Oil was up about $3 early but dropped such that it was down $3 by the end of the day. Gold really didn't open up much at all but ended down over $25 and is poised to drop more.
What was the News? That would be the news that the Fed Chairman thinks the economy is just fine and the Fed is now concerned about inflation and we should be expecting a rate hike, maybe a small one, at the next meeting in a few weeks. Meanwhile, the Democratic presidential candidate is telling Congress the economy is slowing and the government shouldn't wait for his presidency to do something now. Obama thinks the right amount would be $50 billion. Apparently, he thinks we should send this amount at about the same time the $160 billion is being sent out.
We are not really interested in the rhetoric, we just want to focus on how the market perceives the news. At this point, Obama does not carry the weight that Bernanke does. And, well, the bond market was not happy what with the threat of higher inflation and lower rates. What other item might be having trouble??? Well, that would be precious metals. Since they don't have children (as in, no interest) or other way to collect interest, they get sold in times of the threat of higher interest rates. What goes up with the threat of higher rates? Yes, you are correct, the Dollar.
We are sharing the email from last night here:
Okay, I'm just really freaking out about this economy...This is totally and utterly insane. The oil price increase on Friday was just so unbelievable. And of course, you know that will cause another huge increase in gas prices for us all (It's already taking affect). Talk is it'll be $4.25 easily by the end of the month. Wouldn't surprise me. ... It's frustrating for sure and everyone is being hit financially with the raised costs of EVERYTHING!!!! It's definitely not going to get any better anytime soon. Just don't know what to really expect for the future. It just looks so dismal!!!!!
This pretty much sums up the economy as a whole. People, who had very little to do with running up their debt or buying homes way out of their comfort zone, are the very same ones that are going to get hurt by this real estate downturn.
We wish we could give you more info this evening but we need to close down a little early. We'll try to put up a better post tomorrow.
FSI: 92.68 (small rally in the speculative issues)