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contributors posted today and how they played those ideas.
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1. Gold Turning The Corner?
By Alan Farley
9:14 a.m. EDT
The gold futures are trading near $940 this morning after breaking out of a three-week bull flag pattern. The contract had dropped as low as $914 yesterday, shaking out traders after violating 50-day exponential moving average support at $934. That level will probably be "in play" for the next few days, in response to this afternoon's
This positive price action could mark the initial phase of a recovery that triggers the next assault on resistance at $1,000. That level has held back gold since March 2008, but a major breakout is becoming more likely. In turn, we could see gold prices between $1,500 and $1,800 in the next year.
2. Raises at Citigroup?!
By Tim Melvin
10:05 a.m. EDT
The news out of
this morning is mind-blowing. They are raising employee salaries by as much as 50% in some cases. The reason for the raises? Because they cannot pay bonuses similar to last year as a result of government funding restrictions, and the raises are needed to keep most employee compensation in line with 2008. According to executives, the bank needs to stay competitive in compensating people to retain employees. Really? Where are they going?
Bank of America
If there are people at Citi who deserve a raise or a bonus, they should get it in relationship to the profits they produced. But are you telling me that at an institution that is using taxpayer funds to survive,
deserves a raise? Why not give them all stock instead and tell employees, "If we all pull together and correct this mess, we all make a lot of money?"
3. Boeing Credibility Issues
By Charles Norton
10:08 a.m. EDT
"What we got here is ... a failure to communicate."
-- Captain, Cool Hand Luke
That line from the 1960s classic film kept going through my head as I thought about the issues at
. Just last week at the Paris Air Show, Scott Carson, CEO of Boeing Commercial Airplanes, vowed that the 787 would fly by the end of the month. He said publicly that "the plane could fly today" and reiterated this confident stance in private meetings during the week as well.
How could he be kept so in the dark about a known structural issue that only a few days later would lead to yet another delay? Beyond the actual issue (which in and of itself seems relatively minor), I believe there's a failure to communicate at Boeing, to upstream information from the troops to management, that causes me concern. All credibility lost. Plus, who knows what other issues will arise; I don't think it's safe to assume this will be the last glitch.
I said here a couple of weeks ago that the second half of 2009
, but I thought the weakness would start after a successful first flight. While 787 development risk is obviously very high and uncertainties loom, I expect we'll see further deferrals and a 737 production cut later in the year.
4. The Perils of Debt
By Tim Melvin
11:59 a.m. EDT
This morning's report from
shows the danger of debt. Rite Aid is a basic-services retailer that is actually showing growth in same-store sales. It has closed unprofitable stores, cut SG&A expenses and made all the right moves. In spite of this, the company lost money in the first quarter. The chief culprit is the $109 million the company paid in interest expense in the quarter. In total, the company has better than $9 billion in debt on the books.
That expense will grow by $55 million this year. The company is facing large repayments in 2010 that it will have to refinance. Without the crushing debt expenses, this company would be wildly profitable and trade in double digits instead of the dollar-bill level the shares fetch today.
5. Fed Does Nothing, Dollar Rallies
By Marc Chandler
2:42 p.m. EDT
They did not change their assessment of the economy, the committment to keep rates low for a prolonged period of time, or the amount of Treasuries or other long-term assets to be purchased. Nor did the
say anything about an exit strategy.
The pace of economic contraction is slowing, the Fed says, essentially the same assessment as in April, the last FOMC meeting. Spending is also showing furhter signs of stabilizing but remain hampered by rising unemployment. It recognizes that commodity prices have risen, but that the slack in the economy will prevent inflation from taking root.
The knee-jerk dollar gains probably reflect the fact that the Fed is not stepping up its purchases of Treasuries. The Treasury market did not like it, with 10-year yields rising 8-10 basis points on the announcement. The risk is that the dollar gains are short-lived as the market looks past the FOMC decision.
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This article was written by a staff member of RealMoney.com.