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May 13, 2006
SouthAmerica: I feel sorry for Ben Bernanke â he inherited an economic mess from Alan Greenspan.
In my opinion, now that he reached the 5 percent Fed Funds rate he should take a break on Fed Funds rate increases for a few months (until November 2006) and give time for the dust to settle before he decides what to do next.
The only problem is if the US dollar starts heading south that will force him to continue increasing the Fed Funds rate before the decline of the US dollar becomes a major international monetary crisis.
It did not take long for Ben Bernanke to realize the mess that he has on his hands and I hate to be on his shoes in the coming months.
If the US dollar starts heading south in a big way and becomes a major international monetary crisis â Ben Bernanke will be alone on his efforts to stop the bleeding of the US currency since today we have a âBuffoonâ playing US Treasury Secretary.
In the meantime, today May 12, 2006, the dollar ended at $1.293 to the euro in New York trading.
My prediction for the US dollar is looking very good by the day - before the end of 2006 will might see the US dollar trading in the range of US$ 1.40 â US$ 1.50 to the euro.
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âWall Street unsettled by Fed languageâ
The Financial Times â UK
May 13, 2006
Wall Street was spooked this week by a combination of rising commodity prices and comments from the Federal Reserve that heightened fears about interest rates and inflation.
Stocks in focus included Wachovia and Dell, while Archer Daniels Midland and General Motors provided some relief from the gloom.
Markets were sluggish in the run-up to the meeting of the Federal Reserve's open markets committee on Wednesday.
The 25 basis point rise in the Fed funds rate to 5 per cent, the 16th in succession, was widely expected but the markets were unsettled by the language used by Ben Bernanke, the Fed chairman.
Traders initially did not know which way to turn after Mr Bernanke made no reference to a "pause" in monetary tightening, but instead said further rate increases "may yet be needed".
Having slept on it however, investors decided to take fright. This triggered a Thursday sell-off that was the largest loss on Wall Street since January.
"That's quite a typical reaction," said Arthur Hogan, chief market analyst at Jefferies & Co. "If you look back at all 16 meetings, the real reaction came the day after, and that's what we got on Thursday, and we're seeing some follow-through today [Friday]."
At the close on Friday, the S&P 500 was down 1.1 per cent or 14.68 points for the day, or 2.6 per cent for the week, at 1,291.24.
The Nasdaq Composite was also mauled, shedding 1.3 per cent or 28.92 points for the day at 2,243.78 â a loss of 4.2 per cent for the week. The Dow Jones Industrial Average dropped from a six-year high to lose 1 per cent, or 119.74 points, on Friday to 11,380.99, a fall of 1.7 per cent for the week.
The Russell 2000 Index of small companies fared even worse, losing 5 per cent for the week.
Wachovia disappointed investors after it announced it would buy Californian lender Golden West for $25.5bn, a price many investors felt was too high at a time when the lending industry was slowing. Wachovia fell 7.9 per cent to $54.67 for the week, and Golden West rose 5.2 per cent to an all-time high of $74.14.
It was a particularly grim week for technology stocks, as bad news hit two titans of the sector, Dell and Cisco, which both made gloomy predictions for future business. The S&P Technology Hardware and Equipment Index dropped back to its February level, down 4.7 per cent for the week.
On Tuesday, Dell said that its quarterly profits would fall short of its own forecasts, because of price cuts aimed at increasing market share and revenue. Dell, which had gained 2.7 per cent on Monday, finished the week down 6.5 per cent at $24.02, its lowest level since February 2003.
Cisco followed suit the next day, reporting a rise in quarterly profit above analyst expectations. However, the networking equipment manufacturer fell 6.5 per cent to $20.34 after its fourth- quarter revenue forecast disappointed investors. Google which had returned above the $400 level, was also caught in the melee and finished the week down 5.5 per cent at $373.75.
Chipmakers also suffered. The separation by Intel of its flash-memory unit â widely seen as a prelude to spinning off the business â allowed it to avoid the worst of the carnage on the Nasdaq. The stock fell just 1.2 per cent over the week. Other chip manufacturers and makers of flash memory were less lucky.Micron fell 7.3 per cent to $15.81, and Advanced Micro Devices slumped 8 per cent to $31.66.
"It's not a good market for tech," said Ken Tower, chief market strategist at Cybertrader. "For two years we've had a market dominated by energy. There are very few times when energy does well and tech does well."
With commodity prices pushing higher, one of the biggest gainers was Archer Daniels Midland, the largest US producer of ethanol. The stock jumped 8.4 per cent to $44.10, leaving it up 25 per cent since late April and 87 per cent since January.
Autos provided another bright spot. Delphi went to court with its unions to try to renegotiate labour contracts. As optimism grew that it would avoid a strike, shares rose 35.8 per cent to $1.31.
General Motors, Delphi's principal customer, also benefited, rising 12.6 per cent to $26.09, amid upgrades by Deutsche Bank and Keybanc Capital Partners.
.
May 13, 2006
SouthAmerica: I feel sorry for Ben Bernanke â he inherited an economic mess from Alan Greenspan.
In my opinion, now that he reached the 5 percent Fed Funds rate he should take a break on Fed Funds rate increases for a few months (until November 2006) and give time for the dust to settle before he decides what to do next.
The only problem is if the US dollar starts heading south that will force him to continue increasing the Fed Funds rate before the decline of the US dollar becomes a major international monetary crisis.
It did not take long for Ben Bernanke to realize the mess that he has on his hands and I hate to be on his shoes in the coming months.
If the US dollar starts heading south in a big way and becomes a major international monetary crisis â Ben Bernanke will be alone on his efforts to stop the bleeding of the US currency since today we have a âBuffoonâ playing US Treasury Secretary.
In the meantime, today May 12, 2006, the dollar ended at $1.293 to the euro in New York trading.
My prediction for the US dollar is looking very good by the day - before the end of 2006 will might see the US dollar trading in the range of US$ 1.40 â US$ 1.50 to the euro.
***********
âWall Street unsettled by Fed languageâ
The Financial Times â UK
May 13, 2006
Wall Street was spooked this week by a combination of rising commodity prices and comments from the Federal Reserve that heightened fears about interest rates and inflation.
Stocks in focus included Wachovia and Dell, while Archer Daniels Midland and General Motors provided some relief from the gloom.
Markets were sluggish in the run-up to the meeting of the Federal Reserve's open markets committee on Wednesday.
The 25 basis point rise in the Fed funds rate to 5 per cent, the 16th in succession, was widely expected but the markets were unsettled by the language used by Ben Bernanke, the Fed chairman.
Traders initially did not know which way to turn after Mr Bernanke made no reference to a "pause" in monetary tightening, but instead said further rate increases "may yet be needed".
Having slept on it however, investors decided to take fright. This triggered a Thursday sell-off that was the largest loss on Wall Street since January.
"That's quite a typical reaction," said Arthur Hogan, chief market analyst at Jefferies & Co. "If you look back at all 16 meetings, the real reaction came the day after, and that's what we got on Thursday, and we're seeing some follow-through today [Friday]."
At the close on Friday, the S&P 500 was down 1.1 per cent or 14.68 points for the day, or 2.6 per cent for the week, at 1,291.24.
The Nasdaq Composite was also mauled, shedding 1.3 per cent or 28.92 points for the day at 2,243.78 â a loss of 4.2 per cent for the week. The Dow Jones Industrial Average dropped from a six-year high to lose 1 per cent, or 119.74 points, on Friday to 11,380.99, a fall of 1.7 per cent for the week.
The Russell 2000 Index of small companies fared even worse, losing 5 per cent for the week.
Wachovia disappointed investors after it announced it would buy Californian lender Golden West for $25.5bn, a price many investors felt was too high at a time when the lending industry was slowing. Wachovia fell 7.9 per cent to $54.67 for the week, and Golden West rose 5.2 per cent to an all-time high of $74.14.
It was a particularly grim week for technology stocks, as bad news hit two titans of the sector, Dell and Cisco, which both made gloomy predictions for future business. The S&P Technology Hardware and Equipment Index dropped back to its February level, down 4.7 per cent for the week.
On Tuesday, Dell said that its quarterly profits would fall short of its own forecasts, because of price cuts aimed at increasing market share and revenue. Dell, which had gained 2.7 per cent on Monday, finished the week down 6.5 per cent at $24.02, its lowest level since February 2003.
Cisco followed suit the next day, reporting a rise in quarterly profit above analyst expectations. However, the networking equipment manufacturer fell 6.5 per cent to $20.34 after its fourth- quarter revenue forecast disappointed investors. Google which had returned above the $400 level, was also caught in the melee and finished the week down 5.5 per cent at $373.75.
Chipmakers also suffered. The separation by Intel of its flash-memory unit â widely seen as a prelude to spinning off the business â allowed it to avoid the worst of the carnage on the Nasdaq. The stock fell just 1.2 per cent over the week. Other chip manufacturers and makers of flash memory were less lucky.Micron fell 7.3 per cent to $15.81, and Advanced Micro Devices slumped 8 per cent to $31.66.
"It's not a good market for tech," said Ken Tower, chief market strategist at Cybertrader. "For two years we've had a market dominated by energy. There are very few times when energy does well and tech does well."
With commodity prices pushing higher, one of the biggest gainers was Archer Daniels Midland, the largest US producer of ethanol. The stock jumped 8.4 per cent to $44.10, leaving it up 25 per cent since late April and 87 per cent since January.
Autos provided another bright spot. Delphi went to court with its unions to try to renegotiate labour contracts. As optimism grew that it would avoid a strike, shares rose 35.8 per cent to $1.31.
General Motors, Delphi's principal customer, also benefited, rising 12.6 per cent to $26.09, amid upgrades by Deutsche Bank and Keybanc Capital Partners.
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