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Thursday, Dec. 25, 2014

Bloodbath on Wall Street

Posted Friday, August 5, 2011, at 3:35 PM

This week's broad sell-off left very few markets unscathed. The heaviest selling came on Thursday, when the Dow Jones Industrial Average had its biggest one-day selloff since late 2008. By midday Friday, the Dow had declined over 1000 points (-8.5 percent).

Concern over the lack of a concrete long-term plan from Washington, increasing focus on Europe's debt crises, and increasing fears that the United States could be re-entering recession all weighed on the markets this week.

Fear spread into the other markets as well, with traders dumping crude oil, grains and foreign currencies. This week, crude oil collapsed to $82.87 per barrel (-13.4 percent), soybeans stumbled to $13.13 (-3.0 percent), and the Australian dollar avalanched to $1.03 (-5.6 percent).

Gold and bonds keep climbing

As investors flee from "risky" assets like crude oil and stocks, they must either keep their money in cash or re-invest in another asset. For now, gold and U.S. Treasury bonds have been the "safe haven" of choice. Both markets pushed to new highs, with gold gaining $30 per ounce (+1.8 percent) and bonds ballooning 5 percent in value during the week.

U.S. Treasuries have been increasingly popular among investors despite the fact that the U.S. 30-year Treasury bond is paying only 3.6 percent interest rate, while the shorter term two-year Treasury note bill yields only a paltry 0.25, a record low rate. One prominent New York bank announced this week that it will charge some clients to hold their cash, effectively lowering the interest rate paid below zero!

Hogs avoid the slaughter

Hog prices continued to work higher, rising above the general market selloff. August lean hogs rose to a record $1.06 on Friday morning, up another 3 percent this week. Pork prices have shot 20 percent higher, up 18 cents per pound, over the last two months as hot weather has lowered hog weights, limiting supply. Further supporting hog prices, China has increased pork imports from the U.S. by 18 percent this year, as that nation attempts to stem a 50 percent rise in pork prices.



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Commodity Futures File
Alex Breitinger
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Alex Breitinger, a 2009 graduate of DePauw University, is a commodity futures broker with Breitinger & Sons, LLC in Valparaiso. He can be reached at 800-411-FUTURES (3888) or online at www.indianafutures.com.
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