October 01, 2010

Market Wrap: for the week ending 1-Oct-2010

• Gold price at yet another record, reaching $1320 on Friday (Reuters)
• SEC/CFTC report says: Trading software sparked flash crash on May 6, 2010 (CNN Money)
• S&P 500 posted 8.8% gain in Sep-2010, best September performance since 1939 (FT)
• Euro area seasonally-adjusted unemployment rate was 10.1% in August 2010 (Eurostat)
• US real disposable personal income (DPI) increased 0.2% in August (ESA)
• US personal savings rate as a percentage of DPI was 5.8% in August (ESA)
• Euro area annual inflation is expected to be 1.8% in September 2010 (Eurostat)
• Cost of bailing out Irish banks could rise to as much as €50 billion (Economist)
• US GDP grew at an annual rate of 1.7% in the second quarter of 2010 (ESA)
• US House passes tariff bill to stop China's yuan imbalance with US (Washington Times)
• European Economic Sentiment Index rose again in September, to 103.2 from 102.3 in August (EC)
• US consumer confidence Index dropped to 48.5 (1985=100), down from 53.2 in August (AP)
• Eurozone banks (plus Sweden and Switzerland) have all but stopped selling gold (FT)

Weekly Market Barometers    
stock-2010-10-01   fx-2010-10-01

• FINRA agrees to more disclosure on pay, rejects Madoff probe
• Deflation is it, but some prices are sure to rise: FedEx to raise rates
• "Great Recession" Pushes Gap Between Rich and Poor to Record Levels
• Europe’s central banks halt gold sales
• CFTC's and SEC's report on the causes of the "flash crash"

Chart Of The Week
US housing prices have been creeping up ever so slightly in the past 12 months.  Some regions and some specific cities however, have been hit  a lot harder than others and prices have seen some additional pressure on the down-side.  Worst hit, Las Vegas with a 57% price decline since the peak.  After all, the three most important factors for property prices are still location, location, location. 

source: www.calculatedriskblog.com

Recommended Video 
Please consider this excellent interview with John Lekas. As he remarks, the critical factor for the US economy going forward is employment. He considers the unemployment number U-6 which is at 16% as the “real” unemployment rate. The potential of 900,000 job losses in the municipal sector would equate to a decrease of about 1% in GDP.  The prospect of some States and Municipalities filing for bankruptcy smells a lot like more bailouts knocking on the doors of taxpayers...


Highly Recommended Read
When some gurus speak, the markets listen. Bill Gross, Managing Director of PIMCO, is one such person.  Please consider his Investment Outlook October 2010.  Mr. Gross sums up his outlook as follows:

Investors will likely not know whether the mouse has grabbed for the cheese for several years forward. In the meantime, they are faced with 2.5% yielding bonds and stocks staring straight into new normal real growth rates of 2% or less. There is no 8% there for pension funds. There are no stocks for the long run at 12% returns. And the most likely consequence of stimulative government policies that strain to get us there will be a declining dollar and a lower standard of living.

Good luck and good investing!

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