Dow Slides As Oil Reaches Record High

Goldman Sachs [[gs]] the investment bank that forecast a surge in oil prices back in 2005, has once again said oil will rise, this time to over $141/barrel in the second half of this year. And since oil traders are rallying on any possible good news, this forecast pushed oil up to over $127/barrel. Like most of the market, oil is pretty volatile these days, just yesterday it fell below $125 on a huge surge in US natural gas stocks, and today it’s broken a new record.

Stock investors obviously didn’t like this, as the already high oil prices are pushing up inflation and squeezing companies’ margins, and the markets were down slightly. Not even Fannie Mae’s [[fnm]] scrapping of the larger downpayment requirements they introduced last December could lift the mood. Fannie Mae said they scrapped the policy - which some claim worsened the housing market - because of new computer models which it uses to assess who to lend money to. The problem with such small downpayment requirements of 3%-5%, is that it can encourage people to buy homes which are far more expensive than what they can afford, and in a housing crisis like the one today, people can just walk away without having lost much since the price depreciation of the home is so much more than their downpayment.

Many realtors are saying that there are buyers in this market but that they just can’t get loans. Does that mean that the buyers aren’t qualified for the loans, or that they’re trying to buy houses way out of their means? Or are housing prices still so much higher than what they should be in relation to people’s salaries? Maybe that’s why builders have broken ground on the fewest number of single family homes since 1991. At the same time, construction of apartments and condos rose significantly.

But if you’re not into the brick and mortar or the black gold, you can always follow billionaire investor Carl Icahn in his bid to control Yahoo [[yhoo]] and arbitrage a Microsoft [[msft]] takeover. Unless you have as many billions as he does, you’ll just have to buy shares and hope he can succeed in his hostile takeover. So far, the Yahoo board seemed unimpressed in a letter they sent him which included: “Unfortunately, your letter reflects a significant misunderstanding of the facts about the Microsoft proposal and the diligence with which our board evaluated and responded to that proposal.” But ended on a completely different tone with the line: “We look forward to a productive dialogue.”

Posted in Categories: Commodities, Stocks, USA.

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