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Here’s a whopper! The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in February, before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The February level of 203.499 (1982-84=100) was 2.4 percent higher than in February 2006. It looks as if Mr. Bernanke has egg all over his face when he said, “inflation is well contained.” The report set off all kinds of alarms, including a spike in interest rates, which does not bode well for either the bond market or the stock market. What is interesting is that the press misreported the true rate of inflation. The quote above comes directly from the Department of Labor’s Bureau of Labor Statistics. Compare that to the hyperlink to the MarketWatch article. It’s hard to say whether the press is deliberately misreporting the numbers or whether they all took their information from the same source (not the BLS statistics).Are Consumers throwing in the towel? WASHINGTON
(MarketWatch) -- Pummeled by higher gasoline prices, a weaker Beware the Ides of March.
This is where things get interesting for the market. Wednesday’s drop to 11939 in the Dow has cemented the trend with concrete boots. In other words, the liquidity that kept the market afloat all this time is fast disappearing.
What’s the next target? Usually you can find levels of support where the market took a pause on its way up. Unfortunately, there were few pauses in last year’s rally. What that means is that this decline could go to 11,000 or possibly the July low.
The Nasdaq is ready for its plunge, too. The next level of support for he Nasdaq is 1550, a fairly steep double-digit decline. Like the Dow Jones industrials, the Nasdaq is also looking “edgy.” Market analysts are trying to deflect away from the fact that the markets have been seriously weakened. “U.S. growth is going to slow but its not going to crash. This is entirely a subprime issue," said Stephen Pope, Head of Equity Research at Cantor Fitzgerald in London.” The bond market is starting to look dicey. The whole reason for the bond rally was that the Feds would ease their interest rate policy soon. That thought is now history. See the next segment below. The housing index down nearly 10% on news of higher rates.
Yet another mortgage company feels the strain as creditors close their wallets. Analysts are poring over any new data to see whether the housing problems will ease. But the news isn’t getting any better as various homebuilders re-assess their prospects. Apparently home-buyers smell blood and appear to be waiting to see how badly the housing market falls before buying. This spring may offer an unpleasant surprise for people who are putting their homes on the market. The dollar is at a critical juncture.
Just as interest rates have quit going down at the end of February, so to did the Dollar. Although there appeared to be no progress in the dollar, it has also held its February 27th low until today (not shown). At this point, there is a need to reassess what the cycles are telling me. “Mind the gap, part 2.”
This week’s rally put some juice into the gold market, but it appears that the rally may have run dry before accomplishing a major feat…closing the gap left two weeks ago. That means that buyers aren’t interested in buying GLD above $65.00. In addition, the pattern appears more bearish than bullish. Next week will provide answers. Are we turning the corner on gasoline prices?
The good news is that there is a surplus of unrefined crude oil. The refiners just have to catch up with demand. Natural gas prices lower still.
Today natural gas prices slipped below $7.00 per million British Thermal Units (not shown). Spring officially starts next Wednesday and it appears that consumption of natural gas is already on the decline. The Energy Information Agency reports that natural gas in storage remains 12% above the five-year average for this time of year. From the sub-prime to the ridiculous. Peter Schiff gives a credible explanation of how the markets are linked together. It’s not just a sub-prime issue anymore. “Those who think that the sub-prime market is unrelated to the broader economy do not understand that the problem is not just the fiscal responsibility of marginal borrowers, but the inherent weakness of the entire U.S. economy. It's just that the sub-prime sector, being one of the most vulnerable spots, is where the problems are first surfacing. Think of the U.S. economy as an unstable dam. The first leaks will be seen in the dam's most vulnerable spot. But there will be many more leaks to follow. Before long the entire dam will collapse. It would be a fatal mistake for those living downstream to assume a leak is an isolated event, unrelated to the integrity of the dam itself. But that is exactly what those on Wall Street are doing with respect the horrific data emanating from the sub-prime market.” Asset Type: Trust Company CitiStreet Annuity Fidelity Stocks Sell Sell Sell Money Mkt. Bonds Sell Sell Sell Money Mkt. U.S. Dollars Neutral Neutral Neutral Money Mkt. Gold (Stocks) Sell Sell Money Mkt. Money Mkt. There will be no Weekly Market Update next week, as I will be in Washington D.C. attending a conference. I plan to be back for the last week of March with the next Update. As of March 2007, there will be new strategies added to the TPI menu of investments. Please make an appointment to discuss these strategies by calling me or Claire at (517) 324-8741, ext 19 or 20. Or e-mail us at tpi@thepracticalinvestor.com. Regards, Anthony
M. Cherniawski, Disclaimer: It is not possible to invest directly into any index. The use of web-linked articles is meant to be informational in nature. It is not intended as an endorsement of their content and does not necessarily reflect the opinion of Anthony M. Cherniawski or The Practical Investor, LLC.
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