After the “Flash Crash”, the Market Continues to Soar
May 12, 2010
Posted by Jody Eisenman | Filed under Uncategorized
It’s been quite a week! After Thursday’s 1000 point inter-day slide where the DJIA dropped briefly below 10,000, we have now rebounded to almost 10,900 in just four trading days. Of course, the European Unions’ bailout of Greece had a lot to do with this. Investors and many economists now believe that we are coming out of a recession and moving quickly towards a recovery. Although the unemployment rate is still high, low interest rates and a good first quarter of earnings has helped the equity markets continue to move higher.
I would be remiss if I did not discuss the gold situation. The price of gold is generally thought to be tied to economic crisis situation. The way the theory goes, if the world situation is unstable politically or economically, people will flock to gold. However, it seems strange that the price is rising in the face of a supposed economic recovery. Gold closed today around $1240 per ounce. A year ago it was around $900. Five years ago it was just over $400. There is clearly a strong sentiment toward this precious metal as either a hedge or potential safeguard against economic disaster.
I am currently at a conference in Palm Beach. Here is how one conversation went with a woman I will call Sandy:
Sandy: The dollar could go to zero, so people like to hold physical gold (as opposed to a gold fund or ETF).
Me: Do you really think the dollar could go to zero?
Sandy: I don’t know. Maybe.
Me: If the dollar went to zero, don’t you think there would be riots in the streets, and the most valuable commodity would be a gun?
Sandy: I guess you’re right.
I don’t have a strong opinion on gold.
