Sunday, November 15, 2009

Sunday Night Market Update: Trends Continue reports tonight that:

Asian stocks fluctuated as mining companies gained on higher gold and copper prices, while financial and technology shares slumped on concern share sales will dilute the value of existing holdings. . .

Mitsubishi UFJ, Japan’s largest bank by market value, may announce the nation’s biggest secondary share sale this week as it prepares for stricter global capital rules, eight of nine analyst surveyed by Bloomberg said. Reuters reported that Hitachi may raise as much as 400 billion yen ($4.5 billion) through the sale of new stock and convertible bonds.

Japan Government bonds are rallying in prce while stocks are mixed while the rest of Asia looks strong.

Gold is up 1/2% and silver is up over 1% in Asian trading.

Weakness in the sectors that led the markets up in March, tech and finance, is notable. Finance is relatively weak lately in the U. S. as well, without central bank tightening.

Looser money was good for gold prices in the 1980s, but only in the setting of a correction from the gold bull market of the 1970s. This decade, the Fed never tightened enough in 2006-7 to seriously restrain the gold price, and precious metals buyers may be playing a game of chicken and short covering this cycle as price records fall almost daily. One wonders: Big Pharma stocks at 10X earnings and yields around 5%, trading at 1997 prices, or a metal that costs money to own that has surged year after year? Value investors say the former; probably one day they will be correct. For now, the market hasn't lost its tendency to look at stimulus, deficits, government guarantees, and conclude: There will be growth, and it will be inflationary; and if not, fiat currencies are in deep doo-doo.

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