The S&P in July rose over 7%. Leaving many a hedge fund dumbfounded. As Gary Kaminsky suggested, they will be hard pressed to cover the reminder of the year and beat the indices. Expect a few stock names to go stratospheric but most bets will be on commodity speculation.
We are of the view that Oil prices are being propped up by a concerted effort of producers to keep the futures prices up. Anyways, we have lost all faith in getting a real sense of prices and their value. After reading Patel's book "Value of nothing" you soon realize that prices are set nowhere near the costs of owning anything let alone the cost to society and the planet as a whole. Prices for goods are set by a totally archaic and nonsensical basis of supply and demand. Through advertising, People are made to BUY BUY BUY while not really thinking about their actions and consequences.. In India a new car can cost less than $5K where you are hard pressed to find the same in Canada for less than $10K. Why?
Economic theory followed today was written when less than 1 Billion people lived on earth. With more than 6 billion it is totally inadequate to deal with the world's mounting problems.
Too bad the animals in the Gulf of Mexico don't get to vote on the price to charge for gasoline after the latest catastrophe.
According to some studies, some other 300 deep sea SHUT-IN or DISCONTINUED wells may also erupt due to corrosion... If it takes more than 100 days to fix a new well, we wonder how long it takes to fix an old one!
Well enough scary talk for a day! Let's get back to supply and demand!
DEFLATION AND MASSIVE GVMT DEBT SCENARIO is INTACT IN US
Next week the Fed meets. To prepare the terrain, US Treasury secretary Timothy F. Geithner (what does the F stand for? )wrote an Op ed yesterday in the New York Times vaunting his and Fed Chairman Bernanke calls in the past two years saying, the Administration's policies saved 8.5MM jobs vs. doing nothing. Interesting assumption... Bernanke is hinting that things in the near future will be done "à la Japonaise" i.e nothing. So if 2008, the FED was the BUYER of last resort, today the FED has delivered as they ARE, on our behalf, the HOLDER of last resort. This is for many years to come or until some sweet deal is negotiated in the backrooms. Good luck with that boys! Freddie, Fannie and the other in-breds' portfolios will continue to be held close to taxpayers balance sheets. This is a typical case of Prozac induced deflation courtesy of inane government policy. We are also curious to see how the FED plans to go after all those MBS issuers claiming fraud.
So deflation will continue unabated in the US and for good measure the Fed will continue to hold Treasuries as it has no choice but to maintain appearances in an INCEPTION type state of disbelief while using QE as the drug of choice. Expect 10yr Treasuries to trend towards an idiotic 2%. The pressure on that cauldron will be unimaginable when it blows, and blow it will, but we are not standing brave enough to face off both the stealthy Fed and the US Treasury. Best leave that to the young wolves and the old foxes!
According to Realty Trac , the top five US cities for foreclosures were:
Top Foreclosure Cities
That CHICAGO is third is both a surprise and a worry to us!
Gold has proven a poor insurance policy as of late and we still think its prospects are limited.
In conclusion, the US government, as a dying republic, funds a $1.3Tb deficit with very little hope of getting out of the tomb dug by the voting public. Nice Job people!
So how is it out there in the rest of the world? EURO / USD CHART (last 120 days)
BOOM for those who WANT TO WORK... EURO has RECOVERED SOMEWHAT
Freight rates in Asia are up 50% over last October and the ships that comprise the Baltic Index are steaming ahead now showing a 2% idle time vs. 12% last year.
Liner board prices have gone up and the UPSes of the world show nice numbers.
It has been our contention that Germany is enjoying a huge export boom and flooding the markets with its goods and machinery. Teutonic power at work. Our local dealer announces, with glee, further price decreases for 2011 Mercedes. BRING them on boys! We all need more gas guzzling toys!
WHEAT
With The Ukraine and Russia disparaging each other over wheat crops estimates, fall prices have seen huge speculation to the upside. I would hate to be an industrial baker right now and having to decide the future of those prices. It's a bit like airlines locking jet fuels at $67 or $140. There are going to winners and whiners.
Best for the bakers to recite the Lord's prayer. It can't hurt!
In the Meantime, we continue to hold a firm amount of US bonds, a healthy portion of Euros and expect Spain to be center stage this fall with its very precarious economy.
CHEAP OLIVE OIL COMING!
Good trading to you
DCW
