Market briefing --- Lori
Silver - Bob (fast)
copper prices rose to an all-time high, up 1.5%. $3.55, on the comex floor trading. traders speculating there’s not enough copper supply to meet demand globally. speaking of metals, silver today rose to prices not seen since ronald reagan’s first presidential term. that drove up shares of silver stocks, as well. bob bowden joins us with more on the silver story today. bob?
>> thank you, lori. good afternoon. there’s only one way to start this story, which is showing you silver prices beginning with a five-year chart showing you silver was flat in the first half of the five-year period, where the red line is drawn, generally between $4 and $5 an ounce back then. then after a runup to $8 in early 2004, silver prices bounced above and below $7 until about september, when this runnigen gan. we have basically about a nine-month run. take a look, in fact, from just over $7 an ounce to over $10.80 today, a six-month chart shows a gain in just that half-year period and the percentage of 49% higher for silver futures. silver hasn’t been above $10 an ounce in 22 years. 2006 is on track as the best year for silver since the billionaire hunt brothers caused prices to skyrocket in 1979 by conspiring to manipulate silver prices and barclays global investors has applied for u.s. approval for an exchange-traded fund linked to the price of silver, making it easier for investors to own the metal. frank mcgee says the barclays e.t.f. could help push prices higher still.
>> right now, certainly $11.50 to $12 is doable. the question is as the market reacts and pricing unfolds, if we continue to be bid and things like the e.t.f.’s come on board, you have an underpinning that could take us significantly higher.
>> this is pan american silver hitting an all-time high today, up 74% in 12 months. silver standard resources up 78% in the last year, hitting a record price today. mark barnett of morgan keegan says all the -- >> the more fanfare these stocks get, they’ll be a bigger part of the portfolios, especially the hedge funds.
>> amid the enthusiasm, there are bears. precious metals manager for standard bank asia in hong kong says the total demand for silver is diminishing because of lower sales of photographic film which contain silver as we have more digital cameras proliferating.
>> thanks for that. from silver to gold. a big day in gold prices, rising to three-week high today. some of the gold stocks have been rallying on that news. here’s our stocks editor, connell mcshane, joining us.
>> the interesting thing about gold that differs from silver is it’s lagged the move that bob was talking about for silver, at least for the last couple of weeks, gold has not been moving as much. it was up today and along with it, many of the gold stocks also rising. if we look at some of those stocks, the big gainers for today, one was meridian gold, almost 9% rise there for meridian, operating mines in the u.s. and chile. el dorado, 7% gainer and royal gold also up. a big part of the story for the gold stocks is jumping on board the overall rally in metals we’ve seen the last couple of weeks. the price of gold is still up 30%-plus in the past year but when we say about lagging the rally, this is just near term. that stock up a moment ago, royal gold, in the past 12 months, it’s returned nearly 90% but just over the first few months of this year, hasn’t done much at all. it’s up today and the rest of the stocks catching up in the rally a little bit. the gold bugs index at the american stock exchange higher today, encompassing a lot of these stocks. the usual suspects that usually drive gold stocks higher at play today. the metal often moves higher because of a weaker dollar. we did see that against the yen today. the other thing to remember for many of these stocks is the fed ithe interest rate decision tomorrow afternoon. depending on how the dollar trades on that, these gold stocks might move one way or the other but more than anything else, traders are telling us we’re seeing gold and gold stocks riding the backs of the broader stock market rally so the gold stocks hopping on board to that rally today.
>> everything works its way back down to the fed.
>> that’s right. tomorrow the big day.
>> thank you very much. crude oil futures continuing to trade towards their highest price in more than a month. nymex crude oil futures ended the session at $64.16 a barrel, a decline, a dime below friday’s close. other commodities today, gasoline futures, the only gainer as confusion over coming change in pollution control additives continues to cause volatility. earlier today, the release of three kidnapped oil workers in nigeria sent crude prices lower, yet there’s debate over whether this signals an end to the violence that’s cut almost a quarter of that country’s oil output.
>> you would think we would get a bigger pullback given that they’ve released all of the hostages but that situation, even though the hostages have been released, is not resolved and doesn’t look like it will be any time soon. we have the nigerian president in washington this week so i’m sure they’ll be talking about the instability plaguing nigeria.
>> looking ahead to this week’s government report on fuel supplies, a bloomberg survey shows gasoline stockpiles probably fell last week. what will happen on day two of the fomc meeting on interest rate policy and what impact will it have on the u.s. economy? we’ll ask our next guest, chris low, chief economist at f.t.n. financial, next.
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Listen Interview: Chief Economist at F.T.N. Financial
>> welcome back. the federal reserve meets as we speak. tomorrow, day two of the fomc meeting, the first with ben bernanke as fed chairman. while most economists expect a rate increase at this meeting, there is a little more uncertainty about what we’ll hear in the statement. joining us for his take is chris low, chief economist at f.t.n. financial, joining us from the trading floor in new york. chris, welcome.
>> hi, nice to be here.
>> let’s talk about that statement. a lot of economists have opinions on what will be added, removed. what do you think?
>> well, they’ve been leaning towards warning about inflation, playing down any economic risks and that’s been the stance really for the last 18 months, since they began to move higher in yield. so i think what you’re going to see tomorrow is a step towards balance, if not outright balance. something that we saw a little bit of in the january minutes, backing away from some of the inflation risks and pointing out that there are corresponding economic risks, particularly in housing on the other side.
>> what should we look for? give me more specifics, if you can, on how to read the statement? how do you expect the wording to sound?
>> right off the bat you’re going to look for an indication in the beginning of the statement about whether they’re talking about the need or possible need for more restrictive policy. that’s something that showed up in the last two statements and that is really something that should disappear once the fed thinks the funds rate is high enough. so that’s the first step. second, going down into the section on the balance of risks, they’ve played up high energy prices and possible tight resource utilization as inflation risks. what we haven’t seen is anything corresponding on the other side, possible economic risks. there’s always some inflation risk out there. the fed has to stop tightening once they think those risks are offset and i think you are going to see something, perhaps a mention of recent weakness in housing, for example, to offset that inflation risk talk.
>> how much more clarity do you think we’ll get after tomorrow’s rate decision and statement? do you think we’ll have an idea if we’ll go to 5% or perhaps higher?
>> that’s a tough question. there are some at the fed who would rather say nothing at all. poole, for example, has been urging the fed to stop giving any kind of forward-looking commentary. i think, given bernanke’s stance on this, he likes transparency, he thinks it’s a good thing. i think we will see that forward-looking language. but i think the fed’s got to tread very carefully here, as well. even if they’re planning to go to 5%, they have to back down at least a little bit from the need to tighten that’s been perceived in the last couple of statements, because otherwise the market ‘s going to start pricing in 5.25% at the next meeting and they don’t want that.
>> we’ve been following the fed funds rate as it compares to the 10-year treasury yield and have seen this in the fed funds futures but now we could see this in reality with the fed funds target going above the yield on the 10-year. what’s the ramification of that?
>> that’s really important because the fed essentially determines short-term interest rates and what you’re going to see with 4.75 on fed funds, you’ll see something very close to that in the three-month t-bill and according to fed research done by the federal reserve bank of new york, the spread between that three-month bill and the 10-year note, when it’s inverted, is probably the best indicator we have of recession risk. typically, if that spread stays inverted for 90 days, you have a recession within a year. of course, bernanke and greenspan before him have played down that risk, but it is something people are going to talk about if we see that inversion.
>> and we’ve had a flat yield curve at least for a couple of months already. is that of concern to you from what you just described?
>> absolutely it is. you’re already seeing a change in behavior. if you look at lending since the beginning of this year, it has slowed dramatically compared to last year. personal loans are down, home equity loans are slowing. mortgage loans in general are slowing down and business loans are slowing, as well, so you’re starting to see an impact from tight credit that is a reflection of a tight curve. if the curve inverts, you’ll see credit slow further.
>> how big of a risk is the housing slowdown? we know the economy will probably slow throughout the duration of the year. what’s your take? >> it depends who you listen to. some members are very concerned. minehan in boston says the risk of sharper slowdown in housing and bernanke, for that matter, himself, has said the same thing. this is the biggest risk to the economy that the fed has to worry about. others, poole in st. louis said he doesn’t think housing will have any economic impact at all this year. i suspect, on balance, the fed’s going to come down on the side of playing it careful, particularly since housing has slowed quite a bit in the last two or three months.
>> chris, we’ll leave it there. thank you for joining us tonight.
>> thank you.
>> our thanks to chris low, chief economist at f.t.n. financial. much more coming up on the fed meeting tomorrow. what will happen after tomorrow’s decision? we’ll examine this more. as you heard, economists saying housing prices could hold clues about the rate decision in may. our editor-at-large, tom keene, will explain in today’s “chart of the day” next.
