Money and Metals

Reuters has some price action. "Gold futures in New York tumbled from a 25-year high on Friday morning, pressured by speculator and trade selling as the dollar climbed after a closely watched U.S. jobs report and as oil prices eased. Silver moved lower, after stretching up to a new 22-year peak above $12 an ounce, on further speculative buying. Platinum and palladium also pulled back."

A Market Watch report looks at the chances for a global post-housing bubble recession. "The U.S. economy has in recent years been a key driver of global growth, and a sharp downturn would certainly have an impact around the world. The Federal Reserve could fail in its effort to slow the economy just enough to relieve inflationary pressures without triggering a recession."

"In fact, most of the Fed's major credit tightening moves in the last sixty years have ended in recession, often because an energy crunch, war or terrorist attack occurred just as the Fed was at a delicate stage in the interest raising process."

"Possible triggers for a recession next year, besides a miscalculation by the Fed, include an oil supply interruption, a precipitous drop in inflated home prices, or a crisis in foreign confidence that slowed the inflow of investment dollars the U.S. has come to depend on, driving long-term interest rates sharply higher."

"Chinese manufacturers accustomed to rapidly rising exports to the U.S. would be hit hard if exports to the U.S. suddenly leveled off or declined. It's impossible to predict how many Chinese workers would lose jobs. However, Chinese companies probably have built huge inventories of materials because of worry about shortages. They could be clobbered the way U.S. manufacturers were in the recession of the early 1970s, which followed a period of materials shortages and soaring materials prices."

"Metals and other materials prices could drop sharply, depressing stocks of producers in developing countries. Also, if oil demand dropped simultaneously in the U.S. and China, two leading importers, oil prices could collapse. That probably would trigger a painful drop in energy stocks. However, 'we'd regard that as a tremendous buying opportunity," said Arvind K. Sachdeva. He's bullish about the long-term outlook for energy and assumes oil prices would rebound as the recession ended."

"The whole U.S. housing sector, from homebuilders and related building materials and service industries to recent home buyers, is cited by many observers as the most vulnerable U.S. economic sector. Home prices in much of Florida, parts of California and other states along the East Coast and Southwest could drop fairly sharply."

"Some economists think the blow would be tolerable because most people could stay in their homes and wait for price recovery. Others think as much as 40% of U.S housing is extremely over valued and vulnerable to major price decline. Inventories of unsold homes are at near record highs, and a recession often quickly turns a modest surplus into a huge overburden that drives down prices."

"A home price decline could further slow the rest of the economy, said Raj Aggarwal, 'because people are spending their houses these days' by re-mortgaging or taking out second mortgages to pay off credit cards or make major purchases.'"