Italy’s 10-Year Bond Auction Disappoints!
Thursday, December 29, 2011. 9.25 a.m.
Markets are watching Italy’s final bond auctions of the year this week for signs of whether the eurozone debt crisis is easing going into the new year.
The initial indication from Italy’s auction of short-term 6-month bills yesterday was very encouraging, investors willing to buy the offering at an average yield of 3.25%, almost half the euro-era record of 6.5% they demanded a month ago.
However, the big test was to be today’s auction of benchmark 10-year bonds, and it did not go quite as well.
Although Italy sold 7 billion euros ($9 billion) of bonds at the auction, more than the maximum planned amount, in very thin holiday markets, which was seen as positive, cautious investors demanded an average yield of 6.98%.
That was lower than the record 7.56% of a month ago, but was still in such high-yield territory as to be worrisome.
The sales will help toward funding the 91 billion euros of Italian bonds maturing and coming due for payment between January and April, but the high yield at today’s auction will keep Italy’s debt costs as a main focus for markets in the early going next year.
What If Gold’s Secular Bull Market Is Ending?
If the recent decline in gold should be the beginning of the end of gold’s secular bull market, would it possibly mean the stock market’s secular bear market is over?
The stock market topped out into the 2000-2002 cyclical bear market in 2000, which was the beginning of its current secular bear market.
And while the stock market has been in a secular bear market since 2000, gold has been in an impressive secular bull market.
During that period gold experienced a couple of declines in which it dropped beneath the support at its 30-week moving average, but recovered and its secular bull market continued.
Is the current decline beneath the 30-week m.a. just another temporary pause in the secular bull market, or will this one be the beginning of the end?
The answer might have important implications for the stock market.
In the stock market’s last secular bear market from 1965-82, as is typical, cyclical bull markets repeatedly carried the market up to its previous peaks only to have cyclical bear markets immediately carry it back down.
And while the stock market was in that secular bear market, gold was again in an impressive secular bull market, steadily rising from $35 an ounce in 1971 when President Nixon took the U.S. off the fixed price gold standard to $850 an ounce in 1982.
Then, in 1982 the stock market ended its 1965-82 secular bear and launched into its next secular bull market of 1982-2000.
And gold headed the other way, into a secular bear market.
So, if the recent decline in gold is the end of its secular bull market, as some are saying, would that mean the stock market’s secular bear market will end, and its next secular bull market begin?
One problem with that thought is that the previous secular bear markets for stocks over the last 100 years have lasted 20 years, 20 years, and 18 years, and this one has only been underway since 2000.
And if the secular bear market in stocks has a few more years to run, then gold’s secular bull market also probably has a few more years to run.
Thank-you!
To Timer Digest for our ranking as #4 Long-Term Stock Market Timer this year.
And to Mark Hulbert for having us on his Best Ten Newsletters of the Year list again this year. (We were on the list in 2008, but then had two bad years in 2009 and 2010 when we didn’t anticipate QE1 and QE2 would have such an effect on the market). We will be working hard in 2012 to keep ourselves on that list.
Money-managers should be forced to study market history?
Given all the letters, and in recent years e-mails, I’ve received over the last 25 years questioning why I bother to put so much effort into the history of the economy, markets (and the self-serving activities of banks, Wall Street firms, and politicians), I was gratified to see a report on the subject yesterday.
The Chartered Financial Analyst Society of the United Kingdom issued a report condemning “financial amnesia’ among institutional investors, blaming failure to pay attention to the lessons of the past as a main reason financial problems, crises, bubbles and crashes repeat on a fairly regular basis.
The study argues that investment advisors and money managers should be forced to study financial history as a major part of the educational requirements for registration and licensing. The chief executive of the CFASUK added that at the present time “education requirements for investment professionals in the U.K. do not require any understanding of financial history”. He also advocated an annual “amnesia check”, saying “It would be reassuring to know that once a year the boards of financial service firms make an effort to remind themselves that this time is not different.”
Might similar in-depth knowledge of market and economic history be just as important for individual investors who manage their own assets?
To read my weekend newspaper column ‘Why 2012 Should Be Better Than 2011! Click here.
Subscribers to Street Smart Report: There is an in-depth U.S. Markets and Signals update, including the stock market, gold, and bonds, and a hotline, in the subscribers’ area of the Street Smart Report website from last evening, and an in-depth Global Markets and Signals update from Tuesday.
Yesterday in the U.S. Market.
The Dow hit a new rally high on Tuesday, but ran into profit-taking along with the rest of the market yesterday.
It was on extremely low volume, in this low volume holiday-shortened week, with fewer than 0.6 billion shares traded on the NYSE.
The Dow closed down 140 points, or 1.1%. The S&P 500 closed down 1.2%. The NYSE Composite closed down 1.5%. The Nasdaq closed down 1.3%. The Nasdaq 100 closed down 1.1%. The Russell 2000 closed down 2.1%. The DJ Transportation Avg. closed down 1.6%. The DJ Utilities Avg closed down 0.7%.
Gold plunged $38 an ounce to $1,553 an ounce.
Oil plunged $1.71 to $99.63 a barrel.
The U.S. dollar etf UUP closed up 0.9%.
The U.S. Treasury bond etf TLT closed up 1.8% on safe haven appeal.
Yesterday in European Markets.
Markets in Europe also closed down yesterday in their holiday-shortened, low volume week. The London FTSE closed down 0.1%. The German DAX closed down 2.0%. France closed down 1.0%.
Asian Markets Closed Mixed & Flat Last Night.
The DJ Asia-Pacific Index closed down 0.1%.
Among individual markets last night:
Australia closed down 0.4%. China closed up 0.2%. Hong Kong closed down 0.6%. India closed down 1.2%. Indonesia closed up 1.0%. Japan closed down 0.3%. Malaysia closed up 0.3%. New Zealand closed up 0.3%. South Korea closed up 0.1%. Singapore closed up 0.2%. Taiwan closed up 0.2%. Thailand closed down 0.4%.
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Markets This Morning.
European markets are up some this morning. The London FTSE is up 0.2%. Germany’s DAX is up 0.3%. France’s CAC is up 0.3%
Oil is up $0.11 a barrel at $99.47.
Gold is plunging another $30 an ounce at $1,533 an ounce.
This morning in the U.S. Market:
This holiday-shortened week is a light week for potential market-moving economic reports, but they include Consumer Confidence, the Chicago PMI, Pending Home Sales, etc. To see the full list click here, and look at the left side of the page it takes you to.
Tuesday’s reports were the Case-Shiller Home Price Index, which showed home prices in the U.S. fell 1.2% in October, making the decline over the previous 12 months 3.4%, and down 32% from the peak of the real estate bubble in 2006. It would be good to know the trend in November and December with the pick-up in home sales in those months. And the Conference Board reported its Consumer Confidence Index rose to 64.5 in December, better than economists’ forecasts of 60.0, and at its highest level in 8 months.
Yesterday it was reported that weekly chain-store sales were 4.5% higher last week than the same period last year. And that e-commerce (internet) sales in the November-December holiday spending period were a sizable 15% above the same period a year ago.
This morning it was reported that new weekly unemployment claims jumped by 15,000 last week, to 381,000.
Still to come this morning are Pending Home Sales.
Our Pre-Open Indicators:
Our pre-open indicators are pointing to the Dow being up 25 points or so in the early going, meaningless as to direction by the close.
To read my weekend newspaper column ‘Why 2012 Should Be Better Than 2011! Click here.
Subscribers to Street Smart Report: There is an in-depth U.S. Markets and Signals update, including the stock market, gold, and bonds, and a hotline, in the subscribers’ area of the Street Smart Report website from last evening, and an in-depth Global Markets and Signals update from Tuesday.
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I’ll be back Saturday morning with the regular Saturday morning post, as usual later than the week-day posts, probably around 11 a.m. (This blog appears every Tuesday, Thursday, and Saturday morning!).
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