MARKET COMMENT
November 27, 2006
For the past few weeks we’ve been suggesting that a
correction should come, but what would be the cause and when? WMT’s poor same
store sales figures were fingered as “a” culprit, but other retailers reported
healthy sales. I’d pin the reason for
today’s sell-off on the rise in currencies [falling dollar], precious metals
and commodities.
As readers of this column know we’ve been highlighting what
we chose to call the “usual suspects”: energy, bonds, the dollar and precious
metals, homebuilder’s and consumer sectors to name a few as the potential source
of trouble. Many times corrections come
from left field or unusual events particularly when equity markets are
overbought. What’s interpreted as poor WMT
sales data isn’t one of them frankly.
No, the dollar’s condition stands out today. Why?
Because precious metals markets soared, bonds were flat and no other
sector was spared from selling.
Most retail investors would find CEF [Central Fund of
Canada] despite dealing with the premium a more convenient way to invest in
precious metals since it holds a 50/50 position in gold and silver bullion.
DBC has a percentage of assets in corn and wheat. Rapidly rising corn prices are crimping profitability
and costs for ethanol. Nothing like
government subsidies is there? The old
joke is: “How does a farmer double his
income? Put up another mailbox.”
A severe drought in Australia pushes wheat prices
higher as well.
Okay, enough of this currency, precious metals and commodity
diversion; let’s get back to some of the other usual suspects.
Other than currency, metals, bonds and cash was there
anywhere to hide today? No.
We just don’t have time to cover any more today as much as
we’d like to as we need to go to work.
What’s the big issue? Will Bernanke & Co. [including Treasury with Paulson] be
able to stem the dollar’s decline? Expect
a lot of chatter this week in this regard.
The “tell” that they’ll be able to will be in the behavior of US bonds
in my opinion.
Have a pleasant evening for tomorrow is another day. Brilliant!
Disclaimer: Among
other holdings, The ETF Digest maintains positions in: FXE, FXA, FXB, FXM, FXF,
GLD, SLV, GDX, CEF, SPY, QQQQ, IEF, IEV, EEM, ILF, IFN and TRF.