A.L. Waters Capital, LLC

Morning Call

0 CommentsMonday • July 6, 2009 • by alwaters

“It is the mark of an educated mind to be able to entertain a thought without accepting it.”

Aristotle

Beware of Bears. After giving up over 2.5% on Thursday, US futures point to another 1% selloff at the opening bell today. Afterhours trading has been brutally negative with selling in all sectors. Oil and other commodities are all lower this morning as investors grow more pessimistic about economic prospects in the near future. In Asia, stocks traded lower by an average of well over 1% with the banks and many technology stocks suffering the worst. European equities fell sharply at the opening and have since leveled off at a downside of about 1.5%. In Europe, as in Asia, the financial sector has seen the highest volume of selling. Comments from Vice President Biden that the administration may have “misread” the severity of economic conditions have also contributed to the negative sentiment among investors. Known for his straight shooting style, Biden also didn’t rule out the possibility of a second round of stimulus.

Commodities are down significantly this morning. Oil, after holding the line for a while near the $70 mark, has fallen by more than $3 this morning to just over $63. Gold has also fallen by more than $8 to $922. The move is more significant for oil because economic concerns could quickly drive oil down into the low $50 range from its present level. Gold, on the other hand, is still at a comfortable level where the outlook remains positive. We could see prices fall close to $900 before recovering. Any further would be concerning for the Gold Bugs among us. The Dollar, for its part, is lower against the Yen, but has moved higher on the Pound and Euro.

The only economic news planned for today is the Non-Manufacturing Survey. The earnings calendar is also void of any listed stocks reporting.

The Dollar’s relative strength this morning is interesting because it is occurring despite renewed calls from China to replace the Dollar as the international reserve currency. You have to wonder whether this morning’s strength can hold up for very long. All the more reason to stay optimistic on Gold as well. As we headed into this past holiday weekend, US regulators closed another 7 banks, bringing the year total to 52. The closures will cost the FDIC another $314 Million. Clearly, the recent rally in stocks is over. How severe this leg down will be remains to be seen. We do believe that we will soon revisit past lows on the indexes, but there may be some positive days along the way, as well.

Posted in: Morning Call

Tagged with: bonds, economy, gold, money management, oil, stocks, wall street