Recovery

The week got off to a peculiar start. We think that for every bullish article out there was a bearish counter-exchange. Nothing was as it seemed on the surface on Monday and the confusion left investors in the American equity markets scratching their heads as the earlier rally faded to naught.

The preliminary driving force was the concerted cohesion between global monetary-mavens following the widely anticipated Jackson Hole, Wyoming annual conference. At the time of the meeting last year a fully equipped emergency operation room was used during the market turmoil. While it was prepared this year, apparently it was not used.

The bankers' tone coming out of the meeting was one of guarded optimism, sharing that of equity and commodity investors discounting recovery. But bankers continue to warn against a rocky-road ahead and noted that it would be some time before they should discuss the infamous withdrawal of the punchbowl from proceedings.

While global equities warmed to the post-meeting speeches, metals prices started to rise too. December copper prices roared back to $2.9276 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the metal reached $2.933, the highest price for a most-active contract in a week.

Yet the stock market fell apart after words of warning from a southern banker speaking in Atlanta, GA during the early part of the afternoon. Expect more write-downs and expect commercial real estate to be a drag through 2010 was the message of SunTrust CEO. Just two weeks ago, 53,000 people crammed in to Atlanta's World Congress Center at a 'Save the Dream' fair. With 6,605 homes entering foreclosure in May and June alone throughout the state, the fair was meant to draw together struggling homeowners, lenders and industry leaders in an attempt to renegotiate mortgages wrecking many households.

The dollar failed to roll over and die throughout the morning. We say this because that's fast become the expectation these days. The thought process is that when the economy shows signs of life, it's safe to ditch an ailing dollar hampered by souring public finances. This week alone the government is set to auction over $100 billion of bonds to dealers.

Yet the stock market's turnaround sowed that tiny bit of doubt and saw investors favor the dollar in the face of growing risk aversion.

The price of gold then argued itself around losing the support of a rising euro. When the dollar falls, the price of gold improves, but not so today. Gold for December delivery dropped $11 to $943.70 an ounce as its safe haven status gave way to a better positioned greenback today.

The euro could have fared better following an improvement in industrial output for June delivered earlier in the day. The 3.1% gain was the biggest such gain since November 2007. However, investors chose to focus on the flip side of the coin today. According to newswires, a Luxembourg newspaper will source ECB member, Yves Mersch as forewarning against "succumbing to optimism" over the path for the economy. Once again it would appear that the central bankers choose that rocky path ahead of them.

One thing appears certain in this world of uncertainty in which we live;  Nothing is certain.

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