Risk Avoidance Pushes Bond Yields Lower

Risk avoidance is the name of the game. Capital is flowing back to the US and invested in T-Bills. Pretty soon, the yield on T-Bills, which was down to the annual rate of +0.315% yesterday, could go to zero, which means that effectively nobody is willing to take a risk.

Brother, can you lend me a dime? How sad it is that this refrain from the Great Depression is now, Brother can you lend me two or three dollars?

The DJIA (-443.48 -4.85% to 8695.79), S&P 500 (-47.89 -5.03% to 904.88), and NASDAQ Composite (-72.94 -4.34% to 1608.70) were hammered again.

The biggest losers in NY yesterday were Financials (XLF -6.9%), Energy (XLE -6.0%), and Basic Materials (XLB) and Tech (XLK), both down -5.5%. That is a broad decline. The best performing sector was Staples (XLP -1.1%).

The Toronto Composite (-331.79 -3.36% to 9555.41), and the Venture Board (-31.29 -3.29% to 920.13) followed NY down from the opening bell.

In Europe yesterday, the Bank of England (BoE) and European Central Bank (ECB) dropped their rates by -150 basis points to 3.0% and -50 bp from 3.75% to 3.25%, respectively. Markets there this morning a bit stronger.

The $USD rallied yesterday, as expected, closing up +1.30% to 85.96. The Yen was up +0.29% to 102.53) as traders pulled out of global equities.

The Pound (-1.75% to 156.15), Euro (-1.64% to 127.10) and Cdn Loonie (-2.37% to 83.49) were the losers.

Crude Oil ($WTIC -$0.15/bbl to 65.15) and $GOLD (-$8.72/oz to 733.68) were soft, but not much.

The long bond ($USB) rallied again (+0.15% to 116.80), but not by much.

The T-Bill yield crashed to 0.310%, which usually is the case when Financials sell off like they did yesterday.

For the Cara 100, there were just four winners: (ABB), (WFMI), (GOL) and (KSS), but all very marginally so. The biggest losers were KB -16.7%, TM -16.5%, ABB -13.5%, CHA -13.5% and SU -13.2%.

I noted WFMI volume was +226% average daily volume, but across the board, volume is not pushing prices lower; it’s just a lack of bids.

Earlier today, the Asia-Pacific markets were mixed: Japan’s Nikkei 225 (-3.55% to 8853.0); India’s Sensex BSE 30 (+2.36% to 9964.3); Australia (-2.43% to 4006.6); Shanghai (+1.75% to 1747.7); and Hong Kong (+3.29% to 114243.4).

At about 7:20am ET, the French CAC (+0.37%), German DAX (+0.59%), and UK FTSE (+1.58%) were a bit stronger.

In futures trading at 7:35am ET this morning, the $USD is at 86.23. The Euro is at 127.57.

Crude Oil is trading up +$1.55/bbl to 62.32, following a drop yesterday.

$GOLD is stronger by about $7.

Spot gold, palladium, platinum and silver at 7:35am ET (vs yesterday at 7:40am ET) were: 740.84 (741.86), 227 (222), 856 (857), and 10.15 (10.41), respectively. Those prices, except for silver, are side-tracking.

The DJIA futures were at 8779 (+79) at about 7:30am ET.

Yahoo (YHOO) management is indicating that the time is possibly right for Microsoft (MSFT) to buy it.

The October Jobs Report was issued with employment down -240,000 and unemployment up to 6.5%.

Comments & Outlook

We’re very busy, so I’ll check in when possible. I suspect that prices will recover a bit today, looking forward to the new Obama team and the stimulus package to come out of Congress.

There is some talk in the media that the President-elect would choose Corzine or Bair to head up Treasury. If that happens to come to be, then I’ll take a sabbatical from blogging, returning in the New Year. If you think I was tough on Paulson, and deservedly so, I do respect the man for his abilities and previous accomplishments. The others are not acceptable, just like Gov. Palin was not ready and hence was a weakness in the Republican strategy. I hope to see Palin return, but I will never say that for Corzine or Bair.

If Pres-elect Obama doesn’t intend to bring change to Washington then he should never have campaigned on that platform. Corzine and Bair would totally destroy his credibility. He’s already starting from deep in the hole. He needs every possible leg up.

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