Tuesday Sept 23 2014
Iron ore futures continue to fall in price. It appears to me that this is par of a world wide deflationary trend.
As I keep saying in class, accounting is much more than debits and credits today. A professional accountant must have a global outlook. While we hear that a lot, what it means is understanding prices and trends around the world in various markets.
Recall that the FED lowered interest rates in an attempt to get people to borrow and buy. But now prices are falling again. How do you force someone to buy?
CRB Index - INvestors, Watch for Falling Prices
Why is this a problem? If money is borrowed against a commodity and the commodityprice falls, there is less collateral to secure the loan. But the loan balance is still on the books. Notice that the stock market is also starting to wobble up here. Small cap sock performance is trailing big caps.
I suspect all of this is the beginning of the end of the stock market rally.
Dow versus Russell
Large caps are 92% of total market capitalization. So small caps are 8%. Here small caps are following commodity prices to the downside. The performance of the large caps is holding the large indexes up.
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