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Mark's Market Blog

11-27-09: Black Friday: Dubai Sinking???

By Mark Lawrence

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The market dropped this week in light holiday trading on news that Dubai is close to bankruptcy. European and Arab banks hold much of their debt; US banks never got heavily involved in this particular stupidity. Notice in the chart below that lately the market is running in little hills that last about a month. We're perhaps nearing the end of one more of these - or perhaps not. I continue to believe that the market will trend upwards for at least the rest of the year.

S&P 500 August 27 2009 to November 27 2009

The hot rumor for the week is that Geithner is on the way out - his "bailout" policies, sending an extra $13 billion to his Goldman Sachs friends, have proven quite unpopular. The current front runner for his replacement is JP Morgan Chase chairman Jamie Dimon. This, in my humble opinion, would be replacing incompetence with evil. But then they say "it takes a thief." Perhaps he'll use the post to seek redemption, now that he's scammed his billion or so.

I went shopping on Black Friday, the day after Thanksgiving. To my eyes there was about 1/3 the crowd compared to last year, and the cheap stuff like movies was moving a lot faster, the expensive stuff like TVs was moving a lot slower. In fact I said just that to a Walmart clerk, and he said, "Absolutely." The hot seller this year: GPS for under $100. Sam's club had free coffee, orange juice and Danish, which vaulted them to the top of my list. I missed out on a deal at BestBuy, but I got the same product at Walmart, who matches prices. I didn't buy much - my kids have had rather superlative birthdays this year, and I'm afraid this Santa's helper is feeling a little tapped out. It looks to me like most of the Santa's helpers in this country are feeling less enthusiastic than normal.

There's a popular trade on Wall Street that's been ongoing for a couple months. You short the dollar and long gold. This trade has been working because India's and Russia's central banks have been buying hundreds of tons (billions of dollars) worth of gold. The countries who run a trade surplus have to put their money somewhere, and they are getting quite unenthusiastic about dollars, as the federal deficit is likely to cause inflation in the long run. Jim Rogers, the commodity trader who predicts a huge food shortage in the next couple of years, says he believes gold will surpass $2000 per ounce (currently $1180 per ounce) by 2020.

Debt-burdened Dubai dragged down global markets for a second day Friday. Dubai's Supreme Fiscal Committee called to defer payments for at least six months on the $60 billion owed by Dubai World. We read about Dubai World in the Jan. 17 blog, "60% of Arab construction projects have been canceled or put on hold, including Dubai's miracle future cities. Dubai, famous for their ecological disasters, has been building artificial islands and a new university / research institute / carbon neutral city, Masdar. They hope in the future when the oil runs out people will still flock there for the beautiful sunny 116 degree summer days and the open, lively intellectual atmosphere."

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