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Courtesy of Scott Martindale, Senior Managing Director, Sabrient
Stocks rallied again today (Wednesday) while Treasuries and gold got hit hard. It is likely that gold is encountering profit-taking in advance of the Fed meeting in Jackson Hole, WY on Friday, in which new stimulus might be introduced. We all know from recent stock market volatility how quickly stop losses and short-selling can propel an otherwise normal “overbought” correction to any asset class – often followed by bargain-hunting and short-covering sending it back up.
Another key item on the will be President Obama’s on September 5, when he plans to unveil his jobs plan. After all is said and done, I expect gold will return to its preferred status. Gold has been on a tear as a traditional safe haven on fears of global financial distress, illiquidity, and stagflation. The underlying problem seems to be public mistrust of their governments and financial institutions.
Volume has moderated a bit as the VIX “fear index” has come back down to the mid-30s. Even with further market upside, VIX is likely going to have trouble getting back below 30 in the near term. The perma-bears and fear-mongers are out in full force, and the recent extreme weather events we’ve seen recently like drought, inordinate heat, tornados, East Coast earthquakes, and hurricanes have only emboldened some of them in a “Mayan Prophecy” sort of way.
Furthermore, Apple’s (AAPL) announcement tonight that Steve Jobs will be stepping down as CEO came at an inopportune time, and AAPL was down about 5% afterhours, dragging the major averages a bit with it.
David Trainer of New Constructs wrote a compelling argument imploring the Fed and Chairman Bernanke to make haste in breaking up all the big banks that are supposedly “too big to fail” – essentially reinstating Glass-Steagall by separating the deposit-taking and lending from trading and investment banking. This would jump-start lending by freeing up capital that is otherwise put at undue risk while restoring confidence in our banking system and government leadership. David believes that time is of the essence as the lack of a truly free market in the financial system and capital markets is responsible for the stalling economy. He may be right – but it will take real fortitude to overcome the powerful Wall Street…
