|Dow||-331.34 to 17,501.65|
|S&P 500||-37.62 to 2,020.58|
|Nasdaq||-74.24 to 4,652.57|
|10-YR Yield||-.084 to 2.039%|
|Gold||+$19.30 to $1,205.50|
|Crude Oil||-$2.82 to $49.87|
The calendar may have flipped. But it looks like investors didn’t notice … because they’re selling the same darn things in 2015 that they dumped like mad in 2014!
Crude oil? It plunged another 5 percent or so to a fresh 5+ year low, breaching the $50 level to the downside for the first time since the Great Recession.
The euro? It tanked by more than a full cent to 1.1895 against the dollar. That put it at a fresh, nine-year low!
Other commodities like copper lost more ground, while longer-term interest rates continued their recent declines.
So why are investors saying: “Out with the old, in with the old”? Because the Saudis haven’t flinched yet despite increasing desperation elsewhere in the oil-producing world … while the European markets and European policymakers are as dysfunctional as ever!
|Venezuela’s president Maduro is seeking help from China before his country goes broke.|
Start with OPEC and oil. Cartel members like Iran, Algeria, and Venezuela are getting crushed by collapsing crude.
Venezuela’s president and ambassadors are literally knocking on doors around the world, trying to get other countries to cut production before the country goes broke amid a deepening recession. Algeria depends on oil revenue to generate a whopping 97 percent of its hard currency reserves, so its energy minister is urging cuts at the same time the country is forced to eliminate public sector and freeze major government projects. And non-OPEC countries like Russia are now openly speculating about a joint U.S.-Saudi “conspiracy” to bring them to their knees with cheap prices.
But so far the Saudis haven’t flinched on official OPEC production quotas, for all the reasons the Wall Street Journal provided in this late-December story. Experts polled by Bloomberg also say that OPEC countries produced more oil than they agreed to for the seventh month in a row in December.
Result: Oil prices keep sinking day in and day out, regardless of what year it is!
Meanwhile, Europe’s long-festering debt crisis is flaring up again. Greece’s Syriza party (which I talked about a few days ago) is making increasing noises about repudiating or restructuring the country’s debts. Officials are also saying they’re fed up with German-prescribed austerity, and ready to take the country in a different direction.
That, in turn, means a “Grexit” from the euro currency is getting more and more likely. A report in Der Spiegel magazine over the weekend suggested the German government is growing more comfortable with such a move, increasing the chances it will happen.
|“We’re also getting wildly extended here, so jumping on the bandwagon now could burn you.”|
Bottom line: Unless and until concrete action is taken by someone, somewhere to arrest the ongoing collapses of crude oil and the euro currency, those moves could continue. But we’re also getting wildly extended here, so jumping on the bandwagon now could burn you. That’s why I’m more likely to recommend taking profits on the phenomenal “short euro” call I made back in the spring of last year than I am to recommend new positions.
What about you? Did you rake in a bundle of profits going short the euro like I recommended? Do you think we’re near the end of this move … or is it just getting started? What about oil? With crude closing in on a “$4-handle,” are you ready to go bottom fishing? Or are the Saudis going to keep the pressure on?
You know the best outlet in my book is the Money and Markets website. So add your thoughts there when you get a minute!
|Our Readers Speak|
The New Year may not be resulting in any new trends for the markets I mentioned earlier. But it is certainly prompting a lot of comments on a variety of topics from readers like you!
Reader Myron R. warned that festering crises overseas could soon lead to problems for stocks here in the U.S. His observation: “You failed to mention the slow down and possible real estate crisis in China. Seems like the storm clouds are getting heavier, the thunder is getting louder, and the lightning strikes are getting closer … With all of these concerns, we just may be close to a market top.”
On the topic of housing here in the U.S., and the relative attraction of renting versus owning property, Reader Tommr said: “I have always contended that renting is always cheaper than buying a house. However, it appears that this is now not the case anymore. With home prices quite reasonable in most areas and mortgage rates at extreme lows and rents up a lot, it seems that it is finally cheaper to buy.”
Reader Orville H. added that buying is the better alternative — as long as the price is right! His take:
“I bought my house in 1990. I considered renting, but I was able to find a bank repo which was much less expensive than a rental house would have been. The big difference is that my house was paid off a long time ago, and my only housing expenses are utilities, insurance and property taxes.
“If I had rented, I would have paid off the landlord’s mortgage by now, he would own a house debt-free, and I would still be making monthly payments. As my own landlord, I invest my monthly ‘rent’ payments so I get richer rather than working to make someone else wealthy.”
Finally, Reader Chuck B. said he doubts the Federal Reserve can raise rates anytime soon without crushing the economy. His comments:
“I just read that the ISM manufacturing index hit a six-month low in November. Can the Fed afford to raise rates with stresses like that and declining commodity prices in the economy? It would not seem to be wise. Could be the tipping point to a Super-Depression.”
|Other Developments of the Day|
What states will get hit the hardest by an energy sector downturn? Texas is at the top of the list, according to this Wall Street Journal story. Check it out for some interesting perspectives on how sensitive the state is to energy prices.
What investment benefited from oodles of cheap, easy money last year? Initial Public Offerings (IPOs)! Thomson Reuters says 1,205 companies around the world raised $249 billion via IPOs in 2014. That was up 40 percent by volume, and 36 percent by dollars raised, from 2013.
The trial of Boston Marathon bombing suspect Dzhokhar Tsarnaev is nearing, with jury selection taking place today and the formal start set for Jan. 26. He faces the death penalty if convicted on federal charges.
The mercury topped 80 degrees again here in South Florida today. My mother-in-law is one happy camper as a result, considering she’s still in town from Chicago for the holidays. Unfortunately, it’s frigid back home — and throughout much of the Midwest and Northeast. Bundle up!
Until next time,