Blue Monday

Friends

Another Monday, another difficult day for stocks (though, by the close it was a lot better than it was at midday). The bulls really never had a chance today as sellers were waiting at the starting gate to sell stocks, and after a triple digit Dow loss at the open, stocks continued to fall into the afternoon. Thankfully, a few bargain hunters showed up to lessen the pain, but there were still a few scars left by the close. Interestingly, there were some stocks that bucked the trend all day long, including a few of the major oils and a couple of the consumer staple companies namely J&J and P&G.

By the close, the Dow Jones Industrial Average was down 177 points to finish the day at 16,027. The S&P 500 was down 26 points to close at 1853. Gold continued to shine as the precious metal was up $34 to trade at $1,191 per ounce, while oil was down $.80 to trade at $30.09 per barrel WTI.

One thing you might be hearing lately is that Sovereign Wealth Funds are major sellers helping to cause the recent declines in stocks. Sovereign Wealth Funds are investment vehicles created by countries with budget and trade surpluses. Who had these surpluses, thus huge Sovereign Wealth Funds? Well, oil producing nations of course. These oil producing countries are now feeling the pain from plummeting oil prices and thus surpluses have dissipated. Remember, these monies were invested for the citizens of these countries, and when shortfalls begin to occur, cash must be raised. These funds are invested in stocks, bonds, private equity and real estate. When money is needed quickly, what do you think they sell? Stocks, of course because they are liquid (sound familiar-remember when the mortgage crises hit in 2008 and the only liquid assets were stocks then too?) So, once again, stocks are liquid so they get sold. But remember what happens each and every time after these periods of illiquidity /forced selling and panic.

Have a nice evening everyone.

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