The Dow Jones Industrial Average closed down 520 points or 4.6% in wild late trading on fears Europe's sovereign debt crisis is spreading to France and would engulf its banking sector before spilling over to America's banks.
See more here at Bloomberg on the market's fresh slump.
Credit rating agencies were forced to deny rumours that France's sovereign credit rating would be downgraded from AAA.
French bank stocks fell sharply on worries they were exposed to European sovereign debt and that European inter-bank credit markets were beginning to freeze. Soceite Generale shares fell 15%, forcing it to deny rumours about its financial health. See more here at Reuters.
This sparked a sharp selloff in American bank stocks on fears they too would be hurt by slumps in European credit markets and in French banks. See more here at Reuters.
Bank of America was forced to deny talk that it needed to sell new shares to raise capital. Its shares fell as much as 11.3%. See more here at Reuters.
However, it emerged late in the day that Bank of America was in urgent discussions to sell some of its US$17 billion stake in China Construction Bank to Middle Eastern sovereign wealth funds to raise cash. See more here at Reuters.
The New Zealand dollar slumped from 83.7 USc around midnight to 80.7 USc by 8.10 am. It tends to rise and fall with appetites for risk on global stock markets.
Gold rose over US$1,800/oz as panicked investors sought safe havens wherever they could find them.
See more here at Bloomberg on gold's rise.
(Updated with more detail, market moves, links)
No chart with that title exists.
68 Comments
Ben Bernanke has moved the goal posts yet again.
Headline CPI inflation in the US is 3.4pc. There is no deflationary threat at this stage that can justify holding rates near zero until the moon turns into blue cheese, let alone embarking on emergency money printing.
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100011419/t…
BazzaMcKenzie What you refer to as lifting asset prices is actually transferring wealth from savers and lenders to borrowers.
It is simply theft which has zero moral or economic justification.
It is the process the Fed, the BOE and ECB have been engaged in for the past few years. They have no democratic approval for this. They have just done it because the public does not understand the consequences of their flagrant money printing. And they have done it to aid their mates in the banks.
So far as economic benefit there is none, as we have seen. By transferring money from savers to borrowers (who made what in hindsight are bad investments) they prevent that wealth actually going into new capital investment, which is actually needed for growth. Of course, in the process, a whole lot of it is siphoned off in the form of lavish salaries and bonuses for the hired gamblers in the finance sector. ReportRecommend
Same policies as Bollard AJ....keep the cost of credit near zirp to pork the numbers and bugger the savers who get screwed by the debasement and the taxes to pay on the low interest as well.
I have yet to witness one journalist having the guts to demand Key or English or Bollard explain why they are running a deliberate policy to debase the currency...not bloody one.
Has to happen Wolly, either that or they have to face up to joe public and tell them they have lost all the money, its a battle between their mates in the banks, the beloved system or the voters, so far banks and those who foolishly indebted themselves expecting more capital gains are winning, for now. Lets see the next dairy auction. Lets see if exports collapse like in 1930 when export dependent nations came off worst. If those riots dont encourage thift then what does?
Lets take a moment towind back to 2007, and the Doom and Gloomsters who where suggesting this could very well be a 'W' economic down turn rather than the usual 'V' or longer 'U'
Are we seeing a repeat of trends of the last great up heavel? the ressecion after the '29 crash, then America screwing up and full on depression 4 or 5 yrs later.
I can figure how a political system can last so long when the elected Government dont have control of the treasury benches.
Actually the real "doomsters" talked about an L, ie a jobless recovery where the only ppl who made money were the banks gambling with very cheap credit.....and guess what they have been right. Also this looked and looks like a classic dead cat bounce...
All the while the "elites" were focusing/worrying about the wrong thing and probably on purpose knowing that they would get no where with creating jobs as long as we had neo-classical economics/pollies in preponderence....
".....trends of the last great up heavel? the recession after the '29 crash, then America screwing up and full on depression 4 or 5 yrs later."
Yes indeed,
"here’s the thing: it wasn’t just the WSJ. Pundits, Very Serious Politicians, and more have spent the past two years plus doing everything they can to make the deficit the center of public discourse, to focus all our fears on the attack by bond vigilantes that was supposedly just over the horizon.
And now it turns out that what really terrifies the markets, let alone the suffering unemployed, is the prospect of a second Great Depression — a prospect that has become much more likely thanks to the utter wrongness of elite policy priorities.
Great work, guys."
As he says.....
http://krugman.blogs.nytimes.com/2011/08/10/utter-wrongness/
regards
We are in the end stages of this Ponzi Scheme and are teetering on the edge of full-on collapse. If immediate action is not taken to stop the accumulation of yet more debt and piling up of more leverage upon that which cannot be paid we will go down the toilet.
It may be too late even now, but this much is certain: The path we are on leads to CERTAIN disaster.
http://market-ticker.org/
I warn you not to go read this and the cartoon link will give you a shock....full exposure of the naked govts, voters and other fools holding the euro...anyone for another piece of toast?
And the worrying thing is: SocGen has the perma-bear team of Albert Edwards and Dyland Grice, of their Cross Asset allocation department, calling all of this, years in advance, ( it gets much, much worse accodring to them) and even their bank employer still couldn't get out of the way of the train-wreck in time.
Ah the old inedible barbarous relic. Every traditionally trained economist must be scratching their collective heads by now, it was a bubble at $800, and then $1200, then every hundred dollars after that wasn't it?. Well since they don't teach that gold is money at university, then it must be a commodity right?
Anyway, if you have absolute faith in the competency and ability of our government, our bankers, and our politicians, and you have absolute trust in them to do the right thing for you and not themselves before you, then just ignore the next sentence and carry on with your lives.
Buy gold. Buy at least some amount 5-10% of your investment portfolio and take physical delivery.
Silver will continue to lag in my view because its part industrial commodity - and demand from that source will no doubt shrink. It is in a 'pushme-pullme' situation, being one part commodity, one part pseudo-currency.
Gold is not so constrained.
I am surprised the silver-bugs are not prepared to recognise this. I am not saying silver will be a dog, I am saying that gold has more going for it (plus buying physical silver is bulky in terms of bangs for your bucks and the spread on buying is a pain).
I wonder whether GBH will be 'filling his boots' again on the share market this morning. Never. Catch. Falling. Knife.
Thx, andyH. As I mentioned, when gold was $850 and you were out a-buying, I don't profess to have a handle on gold - well done - ( except that history taught me that it hurts, when it reverses! This time, when the street's on fire, I prefer to remain on the footpath, than rush into the only non burning house :)
Shhhh NA your not expected to remember my investment calls, chuckle.
A couple of other general observations on gold (following on from Andrewj comment below).
a) Yes, rising interest rates might be problematic for gold - and certainly may have played some role in the 1980''s fall in gold's price. So what did the Fed do yesterday? Effectively gave gold the green light for the next 2 years by pegging rates. However parallels with 1980 can only be taken so far - the rolling crises of the next decade are of a scale unimagineable from what faced the world in the 1980s. Economist's will tell you waht we face is a debt issue - it is, in so much that debt is a proxy for energy. Five years down the line folk might have realised that.
b) There is still the very real possibility that as the crisis deepens (and moves back towards a credit crunch situation) that gold will suffer as it did (briefly) in 2009 as investors are forced to liquidate even their winning positions in gold to stem their losses elsewhere.
c) In the past 10 days gold is up nearly NZ$350 - it has benefited as much from the nearly 10% fall in the $NZ as from the rise in the POG. There is an arguement to be made that the POG in NZ$ terms is still very cheap - personally I think the NZ$ is going to surprise many people with its strength in the next 10 years (in aggregate). Because of our relative strengths (low population, good resources, we can feed ourselves) NZ will actually be something of a stand out compared to the disasters happening elsewhere - but then thats why I chose to live here ;).
I think its more that silver is lagging the gold move right now. Whereas back in 2009 the flight to safety was to the USD$, now its clearly to Gold. That is a very significant signal that the world has lost faith in the dollar and the governments ability to fix their economy.
The thing you have to keep in mind is how gold will perform in NZD dollar terms. I think the long term trend is clearly upwards, it has been in a very strong linear upwards channel for many years and there is no reason to believe right now that that is about to change. But gold in USD dollar terms, it looks like it may be entering an exponential phase.
Personally the only sane portfolio choice right now is mostly cash or cash equivs that can be quickly sold, ie highly liquid.
If you believe in gold, (and yes I think its a bubble myself), then I think you should add, pay cash and pick it up yourself as well and store it yourself.....and make sure there is no soft/hard record of your address.....because if gold is ever really needed "our" Govn will come calling and take it.
regards
WellI made it public that I took the jump into metals on Monday.
Part of my motivation is that someone said to me that those who held gold in the 30's did alright.
There is also the prinicple that is growing on me of withdrawing your support for the banking system by not participating in it.
Agree for the most part there Wolly...about the cronies I mean....as to the repackage yes but under a new administration with built in austerity n tax measures.....
The tactic currently is a huge gamble (I believe)...but if they go down they will inflict maximum damage with predjudice. ....perhaphs in some vain attempt to create a ...New ..level playing field.
Wonder away Steven....you yourself agree it's futile...but would still expect it as the only response...just maybe they think........ your not the only one thinking that.
Look through this...they get hurt...but their already critically wounded....who else gets hurt if you see down the road...
Human response and it's curiosities...safety in numbers ...comfort in numbers.
What is the story about government and gold ?
Bernard couldn’t or wouldn’t answer my question a number of days ago. So, I ask again. Does our government (RB) trade in gold in order to balance it’s finances - rebuilding our economy – when not - why not ?
http://en.wikipedia.org/wiki/Gold_reserve New Zealand - well place at number 105 – HA !
How much gold is the Reserve Bank holding ? Gold certainly rising over US$ 2000.- soon, why is there not more public interest/ debate on gold ? Does the government wait until gold is up to US$ 8'000.-oz and then buys - a ton 180 days interests free ??
Gold price above US$ 1'800.- oz rising more than $US60 in less than a day's trading. Read the comments too.
http://www.nbr.co.nz/article/gold-price-soars-above-us1800oz-nk-98685
There is currently ,above ground, only enough actual tangible gold available to fill 2 ,yep, TWO olympic sized swimming pools according to the CEO of Kinross Gold..one of the worlds biggest producers.
So the equation is rapid demand versus lack of commodity...which spells?..you got it !
Gold doesn't pay interest or dividends, has limited practical uses, and increasing supply. It would only make sense if your currency is depreciating against all the others.
Once ads appear on TV extorting investment opportunities (remember CDOs?) it's a pretty good indicator that the bubble will someday burst.
you're missing the point, simon...gold is not about bubbles etc...it's about a flight to safety and it's the only tangible option.
JP Morgan bank in america are already accepting gold instead of cash for trades, large pension funds like the Texas Education have sold over a billion dollars in assets and replaced it with similar value in gold...and they did this when it was around 1400 an oz so they will up big time as we type.
if money collapses then what will you use to exchange for goods?....when those ferals like we're seeing in london come calling they won't just be wanting your water, flashlight and baked beans supplies,mate !
That is a very common misconception about money in general. The reason you receive interest on your deposits is to compensate you for the loss of 'value' to inflation. Putting cash in the bank is a slow way to loose all your wealth. Nominally the number keeps growing but after the government has taken its share through tax and then stolen the rest through inflation then your purchasing power over time diminishes.
But yeah, agree Gold has virtually no practical use.. in fact you could say that it has no utility .. which if you think about it, makes it perfect for use as money.
HELP PLEASE, can anyone give me polite sudgestions on where i might find my capstone turbine shareholding, many moons ago i was a client of access brokerage, when they went belly up in 2005, at the time i was sent a letter stating that access brokerage was no longer the holding company for this stock, i was given the name of the new holder but have lost this letter.
the share's were left to me when flecther energy was sold 2005 ish and the new owners of the company did not want the capstone turbine share's(good decision for them)
any help or idea's much apprecaited.
Go Here SNAPITI it will send you in the right direction...http://www.sharechat.co.nz/article/d2822c61/most-kiwis-now-rid-of-capstone-turbine-shares.html
Here are some interesting charts, NFP's is telling.
http://www.businessinsider.com/jeff-gundlach-investment-cubism-2011-7#-1
France goes to austerity......oops....lemmings...too little too late.......
http://www.telegraph.co.uk/finance/financialcrisis/8694238/Nicolas-Sark…
Now this is one country where protests can be quite common, french voters are very quick to show their displeasure. Even riots seem possible.
gold to $1800....wow....
oil to
regards
"Even riots seem possible"
Agreed, the French people will see this for what it is. They are to take the tough medicine while the Financial Elite are, literrally, laughing all the way to the Bank. Same right through the Western world - Wall St, The City have screwed up big time and compromised entire economies with their bailouts yet they're making more than ever and hardly a one has seen the inside of a prison cell.
If the PTB seriously think that the people will see that as OK they're completely out of touch. What we're seeing in Greece & UK is just the warm up.
In case you all mised it..here it is again... http://www.marketoracle.co.uk/Article29799.html
Well I am off to do some work, I have money to make so that the Govt can steal some of it from me, so I'll leave you all with couple of my favourite quotes from Atlas Shrugged.. enjoy.
Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion — when you see that in order to produce, you need to obtain permission from men who produce nothing — when you see that money is flowing to those who deal, not in goods, but in favors — when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you — when you see corruption being rewarded and honesty becoming a self-sacrifice — you may know that your society is doomed. Money is so noble a medium that it does not compete with guns and it does not make terms with brutality.
It will not permit a country to survive as half-property, half-loot.
"Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to "produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked: 'Account overdrawn.'
Have a look at this table giving the net foreign position of countries as a % of GDP. (Data mostly from 2009). Here are the bottom 5 entries: http://en.wikipedia.org/wiki/Net_international_investment_position Greece -83.1 New Zealand -90.1 Spain -93.6 Ireland -97.8 Portugal -108.5 While the US's position has deteriorated, becoming a net debtor in 1985 and deteriorating further since 2000, they are still only at -18%. They have a lot of foreign assets as least some of which could be repatriated if necessary. Even Italy is a mere -24%. NZ is at the bottom of a ginormous hole. John Key is saying don't worry, the walls of the hole are strong. However, wouldn't he rather climb out of the hole into the broad, sunlit uplands?
Foreigners see NZ as a safe haven currency & country , largely due to their ignorance . They lump us in with Australia , as if we're a " mini-me " version of them . Hence the rise of the $Kiwi , as it flew towards US 87 cents ...... and now it's ... remembered it's got no wings .... SPLAT !
... I recall watching CNBC one morning around 4 a.m. , as one does , and a US fund manager tipped Telelcom NZ as a stock for private American investors , because it was seen as a well managed telco , with a 7 % dividend yield , and excellent growth prospects .....
When I regained consciousness from convulsing on the floor in spasms of laughter , I realised a couple of valuable truths ; one being that even reputable experts can make utter tits out of themselves , when they venture of of their own sphere of expertise , and blunder into someone elses .......
.. and the other truth was that I'd pissed my Gummy nappies .
This is laughable...its sounding like the Spanish Iquisition.....except its mad italians....for now....
"The ratings agencies are under intense pressure in Europe and may no longer be able to carry out their work effectively. Italian prosecutors have raided the offices of S&P and Moody's in Milan, accusing them of issuing "false and unfounded judgements" on the Italian financial system. S&P said the accusations are "without any merit"..."
regards
I seriously worry about how far the coercive powers of the state will be misused to protect those who least deserve it.
For those who don't know, our Police lost their independence under the Clark government when Police National Headquarters was overhauled and replaced with the Office of the Commissioner. Robert Peel would have turned in his grave.
I just their website and the interesting thing is the name has changed back toPNH. I wonder if the structural changes affecting independence have been changed back also.
All i am seeing is the classic Elliot wave theory playing out.If their are any idots still in the sharemarket by the middle of Sept or October, They may as well find a high building.
The fed gives out free money, then forces the investors into the share market.Or forces another bubble ,this time in Gold.This isnt the medicine for a well balanced economy.When it all does the inevitable, at least we can do a great leap backwards, the NZ economy is small enough to adjust quickly.I'm just wondering if we too are living on borrowed money,what happens when their is no one left to pay it back to?..Thats what a collapse could be all about.
Looks like the Wil E Coyote moment has actually arrived. Maybe...
And in other news, the Clueless Christchurch City Council has just announced its new 5 Year Plan: which includes that spiffingly up to the minute innervashun: Light Rail!
Time fer another set a naps, prhaps, Gummy?
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