The market roller coaster ride continued this week
with the yellow metal rebounding sharply from oversold
conditions. Stocks continued the sharp sell-off this
week on renewed credit crisis fears. Panic stricken
investors sold assets across the board in the wake of the credit crisis.
But by market close, most indexes benefited from a surprise Fed
discount rate cut. Gold ended the week off, near $15 at $556 and
silver gave back a dollar closing at $11.73.
Looking at the energy sector, black gold ended a volatile week near
71 dollars per barrel, close to break even. Traders applauded the
Fed's decision to cut its discount rate, choosing to bid up the Nymex
contract on the news. The contract gained further support on reports
of the arrival of a new storm in the Gulf of Mexico, Hurricane Dean.
Its feared the cyclone might shift its course towards the gulf's oil
platforms next week. The storm has grown to category 3 strength
with winds above 120 mph, according to the National Hurricane
Center. Looking at the chart, black gold remains near the 50%
retracement point of the prior move. A close below this weeks lows
would likely end the uptrend, conversely a higher close next week
should lead to a dash to new highs.
Elsewhere, last weeks Fed bailout continued this week leaving
many scratching their heads over the 70 BILLION dollar hypodermic
needle injection of liquidity. Last week, the Fed broke its own written
rules, not to purchase any security other than government bonds.
Historically, the Fed's open market operations have been limited to
US Treasuries accept for a brief period in preparation for the Y2k bug.
But the self fulfilling prophecy of, they're too big to fail is once again
haunting Wall Street as bystanders watch the latest LTCM disaster
unfold before their eyes. The Credit Crunch part two is the result of
the unspoken Moral hazard of instant Fed bailouts. Like clockwork, the
Fed suspended its own rule, the first time since the feared Millennium
scare to buying up over 60 billion dollars of MBS. Unlike the stated
rules of play, the Fed actually entered the biggest MBS Repo. of all
time, 400% larger than any other operation. Please view the web
page for a startling graph. The fed is attempting to create a market
for now worth less bonds which made the sub-prime and alt-a
mortgages possible. Not to be outdone, the ECB and related banks
added an additional 250 billion in the past week, totaling one third of
a trillion global liquidity injection.
Essentially, the fed used worthless digital money to buy worthless
MBS which has many questioning if the credit crash tidal wave will be
contained or merely diverted into the rest of the economy. The
surprise move by central banks is leading to startling predictions that
up to half of hedge funds may be facing closure in the next five years.
The bailout continued this week as the Fed once again came to the
rescue adding an additional 7 billion dollars in reserves to the US
money market in overnight repurchase agreements. The move
dissolved an additional 5 billion in mortgage-backed securities and the
remainder in treasuries. The combined affect is the largest number of
temporary repurchase agreements entered into by the Fed since
September 11, 2001.
But the added credit infusion wasn't enough to halt the slide. In a
surprise move, The Federal Reserve, cut its symbolic discount rate
half a percentage point, to 5.75 percent. Not to be confused with the
Fed Funds rate which affects everything from credit cards to home
loans, the discount rate cut is offered only temporarily to major
banks. The Federal Reserve said Friday that it cut the discount rate
to 5.75%. The Federal Reserve Board noted the move was intended
to: "promote the restoration of orderly conditions in financial
markets."
Recently, the Federal Open Market Committee indicated it was aware
of the situation, noting:"Financial market conditions have
deteriorated, and tighter credit conditions and increased uncertainty
have the potential to restrain economic growth," The rate cut is an
attempt to build lender confidence without budging the key Fed Funds
rate, which remains at 5.25 percent. The fears a sudden change in
its benchmark rate would have the opposite of the intended affect,
sending markets into a tailspin. News of the discount rate cut sent
stocks soaring, the selling deluge reversed course with a 300 point
turnaround in the Dow Jones Industrial average...
Market Weatherman forecast is provided to contributors:
*ALERT TO SUBSCRIBERS:
Market volatility remains high with the credit crunch and subprime
mess. Please use protective sell stops. Only enter new positions with
tight money management in mind:
Pick #1
HIGH YIELD INCM FUND (NYSE:HYI)
Div & Yield: 0.48 (11.30%)
HIGH YIELD INCM FUND (NYSE:HYI)
Last Trade: 4.80
Trade Time: 3:59PM ET
Change: 0.29 (6.38%)
Prev Close: 4.51
Open: 4.55
Bid: N/A
Ask: N/A
1y Target Est: N/A
Day's Range: 4.55 - 4.80
52wk Range: 4.01 - 5.60
Volume: 47,200
Avg Vol (3m): 32,866.2
Market Cap: 55.68M
P/E (ttm): 7.73
EPS (ttm): 0.62
Div & Yield: 0.48 (11.30%)
DETAILS
Index Membership: N/A
Sector: Financial
Industry: Closed-End Fund - Debt
Full Time Employees: NaN
BUSINESS SUMMARY
The High Yield Income Fund, Inc. operates as a diversified, closed-end
management investment company. The company primarily invests in
a portfolio of corporate bonds, sovereign bonds, common stocks,
preferred stocks, warrants, short term investments, and long term
investments. Its investment portfolio comprises aerospace/defense,
airlines, automotive, banking, building materials, cable, capital goods,
chemicals, consumer, electric, energy, foods, gaming, health care and
pharmaceutical, lodging, media and entertainment, metals,
packaging, paper, pipelines, retailing, technology,
telecommunications, and tobacco industries. Prudential Investments
LLC serves as the investment manager of the company. The High
Yield Income Fund was organized in 1987 and is based in Newark,
New Jersey.
Pick #2:
ENERPLUS RES FD (NYSE:ERF)
Div & Yield: 4.81 (11.90%)
Last Trade: 41.80
Trade Time: 4:04PM ET
Change: 0.48 (1.16%)
Prev Close: 41.32
Open: 41.55
Bid: N/A
Ask: N/A
1y Target Est: 50.61
Day's Range: 40.91 - 41.87
52wk Range: 38.10 - 59.38
Volume: 346,300
Avg Vol (3m): 507,060
Market Cap: 5.40B
P/E (ttm): 13.19
EPS (ttm): 3.17
Div & Yield: 4.81 (11.90%)
DETAILS
Index Membership: N/A
Sector: Basic Materials
Industry: Oil & Gas Drilling & Exploration
Full Time Employees: NaN
BUSINESS SUMMARY
Enerplus Resources Fund, together with its subsidiaries, operates as
an open-end investment trust. It owns a diversified portfolio of crude
oil and natural gas producing properties in western Canada and the
United States. The company's property portfolio includes Sleeping
Giant, Bantry, Joarcam, Deep Basin, AB, Chinchaga, Hanna Garden,
Pine Creek, Verger, Giltedge, Medicine Hat, and Pembina 5-Way. It
also holds working interest in Joslyn project. As of December 31,
2006, Enerplus had proved plus probable reserves of approximately
119,404 thousand barrels of light and medium oil; 40,065 thousand
barrels of heavy oil; and 56,728 thousand barrels of bitumen, as well
as 16,467 thousand barrels of natural gas liquids and 1,264,086
million cubic feet of natural gas. The company was founded in 1986
and is based in Calgary, Canada.
Pick #3:
FORDING CDN COAL (NYSE:FDG)
Div & Yield: 2.43 (8.40%)
After Hours: 28.69 0.02 (0.06%) as of 4:26PM ET on 08/20/07
Last Trade: 28.71
Trade Time: 4:02PM ET
Change: 0.09 (0.31%)
Prev Close: 28.62
Open: 28.75
Bid: N/A
Ask: N/A
1y Target Est: 27.48
Day's Range: 28.34 - 29.13
52wk Range: 18.90 - 35.39
Volume: 865,800
Avg Vol (3m): 1,023,930
Market Cap: 4.25B
P/E (ttm): 11.63
EPS (ttm): 2.47
Div & Yield: 2.43 (8.40%)
DETAILS
Index Membership: N/A
Sector: Basic Materials
Industry: Industrial Metals & Minerals
Full Time Employees: 2,642
BUSINESS SUMMARY
Fording Canadian Coal Trust operates as an open-ended mutual fund
in Canada. It owns a 60% interest in Elk Valley Coal Partnership,
which produces and sells hard coking coal, a type of metallurgical coal
used for making steel in the integrated steel mill process. Elk Valley
Coal owns interests in six operating coal mines, which include the
Fording River, Coal Mountain, Line Creek, Elkview, and Greenhills
mines located in the Elk Valley region of southeast British Columbia;
and Cardinal River mine located in west central Alberta. The trust also
owns a 100% interest in NYCO, which engages in wollastonite mining
in New York State and Mexico, and Tripoli mining in Missouri. Its
product wollastonite is an industrial mineral that is primarily used in
the manufacture of automotive composites, adhesives and sealants,
metallurgical fluxes, friction material, paints and corrosion-resistant
coatings, fire-resistant construction wallboard, cement-based
products, and ceramics; and Tripoli is also an industrial mineral used
primarily in buffing and polishing applications. The trust was founded
in 1991 and is headquartered in Calgary, Canada.
Remember, wise investors place protective sell stops and never risk
more than 2% of portfolio value on any investment. The stock picks
become active only on a break above the previous weeks high point.
This message should not be viewed as a buy recommendation and we
cannot accept liability for losses related to any featured stock. Please
always do your own due diligence.
Thanks for listening to Gold$eek Radio.
Chris Waltzek