Market indications


Look Out Below   Dec 8 2008 10:34AM  Howard Ruff at

While we were enjoying the Thanksgiving holiday, the stock market has continued to fall, only with a short-term rally for a few days, but not enough to encourage me.

The P/E ratios are still way above the levels that are found near the bottom of bear markets. The market probably has another 20 to 25 percent to go on the downside.

In the meantime, the precious metals have continued to be sick, giving us an unprecedented opportunity to buy low so we can eventually sell high.

Gold and silver is giving us contradictory signals. The nominal price is way down from its peaks, and investors are still looking for a non-existent bottom in the stock market.

The irony is that there is such demand for bullion and coins at the mints and bullion dealers that they can’t manufacture the popular items, such as 100-ounce bars and bullion coins, fast enough to meet demand. So when you order silver or gold from a dealer, you could wait several weeks for actual delivery. Don’t allow this to discourage you. Eventually they will catch up with demand.

The metals, as defined by futures prices, are still down. The investment buyers will catch up so that their decisions will dominate the marketplace; also, the markets are giving us the answer to the question of whether or not deflation is good for gold and silver. We are suffering from deflation, and prices are falling.

Oil is the best example of that; it has dropped from over $140/barrel to below $50. I would bet that it will drop below $40. It should be an indicator so you can measure deflation.

Other deflationary factors are the collapse of the big brokerage houses, the collapse of the banking system, the bankers’ refusal to lend, rising unemployment, and sick Christmas shopping, as evidenced by the worst early Christmas shopping in our lifetimes.

Don’t Despair

Gold and silver will bounce back when inflation reasserts itself. It is axiomatic that deflation is the spawning ground for inflation, as the government doesn’t know how to fix deflation, depression or recession other than to throw money at it. The creation of all the money floating through the economy will eventually meet all the conditions for inflation.

You need to be patient, which is hard. One day you will brag about your smart buying decisions as you bought low to sell high.


Page updated: July 13, 2012

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Drop in consumer prices is most since 1932

Core CPI flat in the month as energy prices plunge

By Robert Schroeder, MarketWatch

Last update: 12:04 p.m. EST Dec. 16, 2008

WASHINGTON (MarketWatch) -- U.S. consumer prices fell in November at the fastest rate since 1932, the darkest days of the Great Depression, the Labor Department reported Tuesday, as prices for energy, commodities and airline fares plunged across the country.

The U.S. consumer price index fell by a seasonally adjusted 1.7%, the department reported, the biggest drop since the government began adjusting the CPI for seasonal factors in 1947.

But on a non-seasonally adjusted basis, the CPI fell by 1.9%, the biggest decline since January 1932, at the nadir of the Great Depression.

"This is scary stuff," said Mike Schenk, an economist for Credit Union National Association. "We are teetering on the brink of a massive downward spiral. Deflation is a threat."


Aluminum Alert: China Stalls, Market Falls

By Christopher Barker
October 21, 2008 |
Comments (3)

This is not the same world you lived in just a few short months ago.

Over the summer, involuntary disruptions to aluminum production around the globe yielded reasonable assumptions of higher prices, as companies struggled to meet demand from China's industrial machine. But now that the financial crisis has devolved into a multitrillion-dollar fiasco, all those prior assumptions have gone out the window.

Unfortunately, recent revelations about weakening steel demand in China and elsewhere are taking their toll on aluminum's outlook. This week, Chinese aluminum giant Aluminum Corporation of China (NYSE: ACH), aka Chalco, announced further production cuts that will shutter 10% of the company's capacity and reduce China's production by about 5%. Let's take a comprehensive look at the fundamental picture.

Did he say "fundamentals?"
That word may appear meaningless in a spastic market gripped by fear and woe, but seasoned Fools know that once indiscriminate selling ceases, fundamentals will again rule the day. Now that the depth of this crisis has apparently knocked the wind out of even China's industrial revolution, the fundamentals for aluminum look pretty terrible in the near term.

Let's review the information emerging from around the world:

•Aluminum prices on the COMEX are off 33% from their July peak.

•In addition to Chalco's production cuts, China's second-largest smelter, Weiqiao Aluminum, has cut half of its production. Weiqiao's production costs were 25% above the alumina spot price in China.

•Chalco last week guided for a 50% reduction in earnings for the third quarter, while lowering spot alumina prices for the third time in five months.

•Mining conglomerate Rio Tinto (NYSE: RTP) issued a warning this week that China's demand for commodities is slowing.

•Aluminum stocks on the London Metal Exchange have risen to 1.46 million tons, equivalent to one month of pre-closure production in China.

•Russia's UC Rusal, the world's largest aluminum producer, estimates that 75% of producers in China, Europe, and the U.S. are operating at a loss in today's price environment.

•From the steel sector, we're hearing much the same story. ArcelorMittal (NYSE: MT), China's Baosteel, and Russia's Severstal have joined a growing list of companies cutting production thus far.

•Korean steelmaker POSCO (NYSE: PKX) warned of difficult times ahead, while Australian miner BHP Billiton (NYSE: BHP) downplayed concerns raised by smaller miners that China's iron ore stockpiles were quickly growing.