Monday, November 21, 2011

Markets sell off on recession and sovereign debt worries

Dow lost 248, decliners over avancers almost 6-1 & NAZ was down 49,  Stocks finished off the lows, but all considered, that was little consolation.  The Financial Index fell 4 to the 163s, approaching its Sep lows,

The MLP index ended down 3+ to the 365s & the REIT index was down 6 to the 214s.  Junk bond funds were mixed to lower & Treasuries rose.  Oil fell on debt woes.  Gold took a nasty tumble, going below 1700, near its Oct lows. 

AMZ  Alerian MLP Index

DJR  Dow Jones Equity REIT Index

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CLF12.NYM...Crude Oil Jan 12...96.81 ...Down 0.86  (0.9%)

Live 24 hours gold chart [Kitco Inc.]

Berkshire Hathaway Chairman Warren Buffett

Photo:   Bloomberg

On a down day for stocks, it's always good to her about Warren buying more stock.  His Berkshire Hathaway invested $24B in Q3 & could spend as much as $10B on its next acquisition.  Buffett has $8-$10B to spend on the right investment, though he has no specific merger-and-acquisition plans currently, he said.  “We like the A part better,” Buffett,said, referring to a preference for acquisitions over mergers. “On the Lubrizol transaction I think we spent about $8.7 billion.  We’d love another one like that -- we can handle that.  We can manage somewhat larger. We can handle a $10 billion deal very comfortably.”   He has turned to stocks & takeovers this year after interest-rate declines limited returns in the bond market.  BRK.A investable funds were boosted in Oct by a $3.3B payment from General Electric (GE), a Dow stock, that ended Buffett’s 2008 financing deal.  Many BRK.A units are producing better results than last year, when the company posted a $13B of profit.  

Buffett Could Spend $10B on Next Investment

BRK.A    Berkshire Hathaway Inc.

A trend to postpone or forgo having babies may delay the recovery from the 5-year housing slump & restrain future spending on goods & services from child care to diapers, soaps & toothpaste.  The number of births fell to under 4M last year, the fewest since 1999, according to National Center for Health Statistics data & US births may not recover until 2013.  A weak economic recovery is encouraging famlies to choose renting over buying a home & this trend is likely to persist.  These changes bring a muted recovery, especially for building new homes.  The number of births is similar to 2001, when the US was in “the early phase of expansion” after an 8-month recession.  Consumer surveys & sales of infant products reinforce this concern.  A Nielsen analysis for Kimberly-Clark (KMB) forecasts US births will drop 0.4% this year to 3.99M, the first time under 4M since 1999, & will be “flat to slightly negative” at about 3.989M in 2012.  Limited population growth is a factor not well appreciated when making forecasts about an economic recovery.

The collapse of talks by the supercommittee was a coming event.  Now the politicos are trying to tape together a last minute agreement involving more than $1T.  It's difficult to imagine anything will come at the last minute & if there is an agreement, who knows where that will lead!  The US economy is still in an iffy stage of recovery & is threatened with a reduction in gov spending (AFTER NEXT YEAR'S ELECTIONS!).  This will not stimulate greater investment in new factories & businesses.  Dow is just above 11½K, a very sensitive level.  The semi-holiday week can bring significant changes for the markets & indications are for more selling given the rise in uncertainty about US & European debt problems..

Dow Jones Industrial Average

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