A Melman Minute — July 26, 2007

Watching the markets during the first 90 minutes of trading today is like riding a roller coaster. In America, the Dow opened down 150 points, rallied by almost 100 points, then fell with remarkable speed and is down more than 200 points. In Canada, the TSX opened sharply lower, rallied modestly and is once again falling, down nearly 170 points. Those numbers are changing swiftly.

While the long term rallies remain intact in both markets, the heavy waves of selling over the past few days have succeeded in dulling the rampant optimism of just a week ago when the Dow Industrials (see chart) broke through the 14,000 level and the TSX soared to record highs, approaching 15,000. The great question remains whether the growing waves emanating from the real estate debt problems in America threaten to become overwhelming.

Today’s news was hardly reassuring with the U.S. Commerce Department reporting additional weakness in their real estate markets. The rate of New Home Sales for June declined by an enormous 22.1% from year-earlier levels and the media price of a new home sold was below year-earlier levels by 2.2 percent - a stunning reversal from just one year ago when price increases were taken for granted by buyers, sellers and lenders.

These negative numbers came on top of yesterday’s release of Existing Home Sales data which showed existing home sales dropped to their lowest levels in five years and prices were declining for those homes as well. Foreclosure rates were rising and the circle of homeowners trapped inside mortgages they cannot afford and which exceed underlying property values continues to widen.

But it is not only securities markets that are declining of late. The gold market put in another of its sudden and unexpected declines over the past three trading sessions. Based on rumors of foreign gold sales, the yellow metal declined sharply from its recent highs near $685 to today’s levels near $665 - a drop of $20 or three percent. But it was the suddenness of the decline that caught market observers by surprise.

So, with turmoil existing simultaneously in many markets - and the petroleum market surely must be included with prices rising to $77 per barrel, falling to $73 and rising once again back to $77 - all in just a few trading days - it might be an opportune moment to simply stand aside, let the market turmoil subside and then, in a calmer period, take whatever actions appear necessary.

On a personal note, I will be leaving tomorrow early AM for a visit to a promising mining prospect in Peru. That nation is truly one of the most geologically exciting areas on this planet and it will be of great interest to get a first-hand view of mining activities, the political background and observe the general manner of life in that all-important nations.

Since I will be unable to follow the minute-by-minute fluctuations of the market for the next three trading days (thank goodness!), the next three “Melman Minutes” (Friday, July 27; Monday, July 30; and Tuesday, July 31) will deal with subjects of significant long-term importance.

DISCLAIMER

The information presented above is based on data which we believe to be from reliable sources, but the accuracy of which cannot be guaranteed. Any opinions or predictions contained herein are those of the editor and are likewise offered also for information purposes only.

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