Monday, November 7, 2011

Dow breaks 12,000 again

Dow remained near break even for most of the day, but late day buying brought it into the black.  Dow rose 85, advancers were only slightly ahead of decliners & NAZ was up a modest 9.  Banks stock which will feel the effects if the European debt crisis if it worsens, were only up marginally.  The Financial Index gained less than 1 (to the 179s).

The MLP index was even at 371 & the REIT index was up a fraction to 230.  Junk bond funds were mixed to higher & Treasuries rose, taking the yield on the benchmark 10 year Treasury below 2%.  Oil continued strong, up to a 3 month high.  Gold is getting more interest from safe have investors as it is pushing on $1800. 



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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLZ11.NYMCrude Oil Dec 1195.54 Up 1.28 (1.4%)

Live 24 hours gold chart [Kitco Inc.]

European finance ministers need more time to work out how to boost their rescue fund & are counting on budget cuts in Greece & Italy to allay doubts about the response to the debt crisis.  Finance leaders won’t decide tonight how to scale up the €440B ($606B) bailout fund or approve the next €8B installment of Greece’s aid package.  The talks on using financial engineering to bulk up the rescue fund were called “insanely complicated.”  Europe is battling to regain the upper hand in the debt crisis after political dramas in Greece & Italy provided unexpected distractions & soured intl confidence in a package of measures hammered out last month.  What a  surprise!!  Greece is heading toward a cross-party gov after last week’s call by Prime Papandreou for a referendum on the next bailout led European leaders to speak publicly about pushing the country out of the euro.  This debt crisis is a sorry mess.

EU Seeks Time on Rescue-Fund Boost, Demands Budget Cuts in Greece, Italy

U.S. Consumer Credit Rose $7.4 Billion in September

Photo:   Bloomberg

Americans borrowed more in Sep to buy cars & attend college, but they cut back on using credit cards for a 3rd straight month, suggesting consumers are being cautious about taking on high-interest debt in the weak economy.  The Federal Reserve says total consumer borrowing rose by $7.4B after it had fallen in Aug the most in 16 months.  The Sep increase reflected a 5.8% increase in borrowing in the category that includes car & student loans.  But the category that covers credit card purchases dropped 1% after declines of 3.4% in Aug & 5.1% in Jul.

Fed: U.S. Consumer Credit Rose $7.4B in Sept.

Buffett Broadens Portfolio by Spending $23.9 Billion

Photo:   Bloomberg

Berkshire Hathaway invested $23.9B in Q3, the most in at least 15 years, as it accelerated stock purchases & broadened the portfolio beyond consumer & financial-company holdings.  It bought almost $7B of stocks in Q3, compared with $3.6B in Q2 & $834M in Q1.  Stock holdings labeled “commercial, industrial and other” soared 62% to $17.4B on a cost basis, surpassing equity investments in financial & consumer-product firms.  Warren Buffett drew down cash as Europe’s debt crisis & S&P downgrade of the US pushed stocks to their worst quarterly performance since 2008.  The BRK.A portfolio includes stakes in Coca Cola (KO & a Dow stock) & Wells Fargo (WFC). 

Buffett Broadens Portfolio by Investing $23.9B

Berkshire Hathaway Inc. (BRK/A)

stock chart

Stock buyers are not being held back by the crazy goings on in Europe.  The Dow chart below shows it has been in a sideways trading zone until the Oct rally.  As the Greek situation worsened & other countries (especially Italy) are brought into the chaotic situation in Europe, even the bullish stock market has stuttered.  This is choppy trading & the breadth today was not good.  It's tough to figure out what is going on in the markets.  Dow just broke thru 12K, but that has not been significant this year.  What's important to remember about the European debt mess is that the financial leaders are making it up (solutions) as they go along.  Worse for Europe, it's entering a period of contraction, making economic solutions more difficult.

Dow Industrials (INDU)

stock chart

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