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FINANCIAL MARKETS UPDATE for WEEK ENDING JULY 11,2008
What a week it was in the financial markets!
The main news story was the fate of the quasi-governmental mortagage agencies-
Fannie Mae & Freddie Mac. These agencies are responsible for about 1/2 of the mortagages in the US, approximately $5 trillion!! The stocks of these companies collapsed as people were beginning to realize that these agencies were insolvent. Finally,on Friday,the Congress and the President seemed to realize that there was a major problem!
It looks like some sort of bail-out is in the works. For the short term,it looks like the Federal Reserve may allow these agencies to borrow from them. This will keep them solvent for now, but a long-term fix needs to be put in place.
Other major news included the US car company (GM & F)stock prices continuing down toward zero as they also seem to have solvency problems.
All of this bad news pushed the DOW INDU below 11,000 intraday for the first time in 2 years.
Overseas stocks fell also this week but not nearly as badly.
Treasury bonds fell as some overseas investors began losing faith in the US. This loss of faith also pushed the US dollar down steeply this week.
The renewed fall in the US dollar along with tensions in the Mid-East along with the continuing near civil war in Nigeria sent oil up sharply this week.
Precious metals,such as gold,benefitted from all the turmoil and rose sharply.
I hope to hear from you sometime soon,either in the forum or in response to this email message. If there any questions regarding the turmoil in the financial markets,please feel free to contact me at any time with any questions you may have.
Tony Daltorio, Investing Editor
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