George Chamberlin's Money in the Morning

July 27, 2015

Geez, I take a week off and the stock market tanks! I pretty much ignored financial news last week and was a bit surprised to see a 3 percent drop in the Dow industrials and other market indexes. Seems the tension has shifted away from Greece -- tourism there is booming -- and the attention has shifted to the worsening situation in China. The problems there continued this morning with the major Chinese stock market indexes dropping an additional 8.5 percent.

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One of the few stocks moving higher on Friday was Amazon.com. The shares were up 10 percent after the company disclosed sales in Q2 were up 20 percent. Of note, Amazon.com market value jumped to $252 billion, becoming the 11th largest company in the S&P 500. Most impressive, it surpassed for the first time ever Walmart on the S&P list, which has seen its market value -- and share price -- drop in recent months to $230 billion.

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While stocks have been taking a hit so have commodity prices. I was a bit surprised to see gold had dropped below $1,100 an ounce, down 20 percent from a recent peak two months ago and well off its all-time high above $1,900 in 2011. Yet people still keep calling it the safe place to invest these days. Oil also has moved into a steep decline, falling below $48 a barrel. Crude has been hit by concerns over the economic slowdown in Asia.

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It will be hard for investors to ignore domestic conditions this week with a heavy schedule of economic news. Of course, any week anchored by a meeting of the Fed's open market committee is going to attract attention. This could be the meeting when the Fed identifies when it will begin the gradual process of raising short-term interest rates to battle phantom inflation. If the Fed does not specifically say the first hike will be in September that means it will be December at the earliest -- and more likely some time in 2016, at the earliest.

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Also on the schedule this week will be the closely watched Case/Shiller survey on home prices in the 20 largest metropolitan areas -- including San Diego -- to be released tomorrow, which also will bring the July report on consumer confidence from the Conference Board. Thursday bring the first report on the gross domestic product in Q2. It should likely show a big jump from the weather-inhibited Q1 numbers. Friday includes the closely watched employment cost index for the second quarter. Attention will be focused on the growth in wages and benefits.

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Shares of Fiat Chrysler are down about 5 percent this morning after it was announced the National Highway Traffic Safety Administration has levied a $105 million fine, the biggest in history, against the car company for failing to disclose defects that later turned into recalls. In other words, the company allowed people to drive cars with serious defects and not warning them of potentially dangerous problems. Chrysler will also be required to buy back about 500,000 Ram pickups and other vehicles that potentially could be still at risk.

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Just a few thoughts from my vacation last week. Like Disneyland, cruise ships are a pretty good indication of how consumers feel about the economy. If the trip I was on was any indication, consumers are firing on all cylinders. The ship Royal Caribbean ship was full to capacity, mostly with multigenerational families. People were spending like crazy.

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Our trip to the so-called Mexican Riviera -- down to coast to Cozumel and over to Belize and Honduras -- left out of Galveston, not exactly a garden spot. It is a town tied very closely to the oil industry and you could see evidence in the harbor of the impact of plunging oil prices and the slowdown in Gulf exploration and development.

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And I am not much of a fan of air travel these days. I could run off a whole bunch of things that are irksome but I will limit it to one item. I wonder if the pilots on commercial flights know that when they make announcements to the passengers during a flight it is almost impossible to understand what they are saying. In this world of technology you would think there has to be a better communication system than what is used now, which makes them sound like they are taking through an old set of walkie-talkies. I'd sure like to know whether the reason he wants us to fasten our seatbelts is because we are preparing to land or if an engine is on fire.

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Finally, it is always great to get back to San Diego.

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George Chamberlin's Money in the Morning

Geez, I take a week off and the stock market tanks! I pretty much ignored financial news last week and was a bit surprised to see a 3 percent drop in the Dow industrials and other market indexes. Seems the tension has shifted away from Greece -- tourism there is booming -- and the attention has shifted to the worsening situation in China. The problems there continued this morning with the major Chinese stock market indexes dropping an additional 8.5 percent.

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