Stocks pulled back from yesterday’s advance with the Dow falling 174 points to 17,541 on lighter volume. The NASDAQ also fell but trading volume for that index was higher so it was a mixed bag. The cause of the selloff was fears of a weakening global economy.
The drop in oil prices since 2015 has effected oil dependent countries like Russia and Venezuela in a most negative way as the former faces huge deficits and later faces default. This economic pain has also found its way to the state gubment of Alaska which, according to Gunnar Knapp (economics professor at the University of Alaska) is now spending $4 dollars to every $1 dollar it receives in revenues. The difference is being made up by dipping into savings. Gunnar gave a presentation at the 2016 ComFish convention in Kodiak and he predicted huge service cuts and tax increases by local municipalities as they scramble for dollars. The Alaska salmon industry is keeping a fishy eye on this situation since they could well be the target of local tax collectors.
Pre orders for Tesla’s Model 3 are now up to 325,000 in the first week since the reservation window was opened. This represents about $14 billion in potential revenue for a company that last quarter had just $1.2 billion in revenue. Elon Musk has a problem and it’s a good one! This will be fun to see unfold and to watch how the company handles its success.
Gold was up big today as fears over a global economic slowdown persist throwing the Fed into “do nutin” mode as far as rate hikes go. Of alarm to me is the recent selloff in Deutsche Bank, the largest bank in Germany which is now down over 50% this year on fear of possible bad loans it holds to other EU nations and companies. The fear of weakness and a pause in US rate hikes is causing the US dollar to drop after its record run-up. A falling dollar can be good for gold which finished the day up $18.80 an ounce to $1,242.