The Day that Was - September 6th 2007

The Daily Telegraph reports that a sharp drop in foreign holdings of US Treasury
bonds over the last five weeks has raised concerns that China is quietly
withdrawing its funds from the US, leaving the dollar increasingly vulnerable.
Data released by the New York Federal Reserve shows that foreign central banks
have cut their stash of US Treasuries by $48 bln since late July, with falls of $32 bln in the last two weeks
alone. "This comes as a big surprise and it is definitely worrying," said Hans Redeker, currency
chief at BNP Paribas. "We won't know if
China is behind this until the Treasury releases its TIC data in November, but
what it does show is that world central banks are in a hurry to get out of the
US. They don't seem to be switching into other currencies, so it is possible
they are moving into gold instead..." courtesy: Briefing.com

Wow.. that is a lot of money and something which should raise more than just an eyebrow in the market. And could also be one reason we are seeing Gold prices running lately. There is a genuine fear and a lack of confidence worldwide in the health of the US economy. This is something which will need to be monitored. But take it as a sign of perhaps more weakening of the dollar.

After the market closed today Thornburg Mortgage (TMA) filed an 8-K discussing recent developments of their business. I would suggest you read the entire filing here. But in summary Thornburg discusses that they have not been able to fund $231.6 Million worth of loans and may be forced to sell more assets to meet other obligations. Not looking good for Thornburg. Also of note is the continuing decline in Countrywide Financial (CFC) share price.

Today's trading was almost a non event whereas a market direction is concerned. The markets did end the day up but the trading range was rather confined and the volume was weak (again). None of the movements in the markets today was with any confidence at all. And trying to take on swing trades would have been nothing more than a 50/50 bet on which way the market will go tomorrow.

Tomorrow the markets will get the Government issued unemployment data and that may provide a catalyst but one must be cautious in that it may be just one more piece of information which provides nothing but more questions. Today there was a plethora of Fed speakers and each of them had different takes on how the economy is and what the future may hold. If anyone was trying to read into their statements the outcome of the FOMC meeting on the 18th then they were left with nothing but a headache trying to figure them out. One could take away the opinion that even they don't know what they are going to do!

A chart worth its weight in Gold: