The Dow Takes Us for a Ride

It was a roller coaster this week in the Dow, and most of the time was spent on the downhill run. After a decent Monday, the rest of the week was consistently in the red. The reason behind this decline is earnings, for the most part. This was a big week for earnings reports to be released, and the results were lackluster.

One of the major problems that we saw was consumer spending. It's still on the decline. People just aren't as sure about the economic recovery as some investors on The Street are. Which is why it was so surprising that Visa (V) posted such an excellent earnings report.
They even revised guidance upward for the coming quarter, which took a lot of analysts unaware.

Until consumers quit feeling the pain when it comes to their economic condition, it's going to be hard for these quarterly earnings seasons to be anything but lackluster. So much of our economy relies on the spending power of regular people, that when the spending stops, even unrelated sectors feel the pain.

And that's the fundamental reason why the Dow has taken us for such a ride this quarter. The business economy is going strong, but your everyday consumer's purchasing power has fallen further than ever before. Companies like Amazon (AMZN), Walmart (WMT), and Yum! Brands (YUM) can make a profit in these conditions, but car companies and other Consumer Durables are just going to keep struggling -- and keep pulling the Dow down with them.

PayPal's IPO Could Be Going Better

After opening at $26 and change, the PayPal (PYPL) IPO is really struggling to take off. Either the company's valuation was spot-on -- to within a percentage point -- or people just aren't biting. The surprising part is that PayPal is so popular, and still investors seem to be ignoring it. PayPal is touting an initial buy-in of 169 million investors, which isn't bad, but compared to its parent company's IPO, things aren't going so well.

PayPal (PYPL) was just spun off from eBay (EBAY), one of the kings of early internet IPOs. The eBay IPO is still talked about as one of the most successful of its era. ebay shot through the roof when it was released, but payPal is barely climbing the stairs. We'll see what next week brings, but this week the stock lost value on 4 of 5 days, in line with the NASDAQ where it's listed.

Gold Down 6.5% on the Month

The price of gold has slid even further this month, dropping another 6.5% as the markets fell with it. Gold has been especially volatile since 2008, first spiking in price at levels of more than $2,250 per troy ounce, then falling to essentially half of that today.

Unfortunately, during the boom times a lot of people opted in to gold-backed retirement vehicles. I typically shy away from giving people concrete investing advice about their retirements, but if you are stuck in a gold-backed IRA or other retirement vehicle now is the time to look for a way out. It's going to be quite awhile, if ever, before gold hits the highs that it was at during the panic of 2008. Hopefully you can afford to wait for it to get back to those levels.

If not, you can expect gold to keep falling. The conditions in the marketplace right now are just too favorable for the US Dollar for gold to stage a comeback. The only question on investors' minds at this point is just how far gold will fall before it finally hits a floor.
Published on Jul 25, 2015
By Aaron Phillips
Aaron Phillips is a financial researcher and journalist based out of Michigan. He regularly writes the IG Daily and IG Weekly columns.

Copyrighted 2020. Content published with author's permission.

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