The cyclical nature of Natural Gas is showing no signs of changing over time. Sure, we see the trend of higher lows in terms of weekly storage – meaning that there is a long-term build in inventories occurring. But almost right on schedule, inventories, while high, are starting to come down into the winter.

Wednesday’s report on oil and gas inventories corroborated the API numbers from the prior day. We are continuing to see a build over the past few months. This is USUALLY a sign that oil prices will begin to move lower as supply is outstripping demand. Unless of course it is 2008 or 2009. During this time of altered reality, supply and demand do not matter. The price of oil is a inexplicably linked to the decline/advance of the U.S. dollar’s.

Now that there are several countries devaluing or debasing their currencies (North Korea, Vietnam, Japan, China) among others that will surely follow. Playing the game of lowering the value of a currency to make exports more competitively priced is not going away anytime soon. So, we will have to suffer with higher oil prices, even if inventories continue to grow as long as the U.S. continues its quantitative easing policy.

At 2:00pm, the Fed Beige Book was released. It was, as usual, mixed.

The highlights are color coded – (Red (Negative), Green (Positive), Black (Neutral)…

Disappointment was high when the ISM manufacturing number was released. Economists called for a slight drop from the previous month to 55, but the actual was down to 53.6. Again, comparatives should be easy these days.

Tuesday had a pretty well filled plate of economic news for investors to chew on. In focus were housing related reports that actually were the strongest we have seen. It is nice to see that housing is starting to come out of its death spiral, even though the industry is still heavily reliant on government stimulus.

Construction spending was up from last month. Note that one month is not enough to make a trend.

Interesting that after a day that the financials took the news of the $26 billion of Dubai restructuring as good news, they are selling off into a strong market. Does it say anything? Probably not…

Either way, it is interesting to note that only a few days after a 97% down day for the S&P 500 on higher volume, we are seeing such a quick snap back.

The Chicago and Milwaukee PMI was released yesterday and beat estimates by a margin. Again, we are seeing conflicting data as many coal companies have been talking about shutting down plants since their stockpiles are growing. That corroborates with the readings on growing Natural Gas inventories.

We believe this is part of the inventory restocking cycle that may come to abrupt end.

Over the past few months, personal spending, on a year-over-year basis, has been improving. Perhaps this is the stabilization that we have been hearing about. But, behind the headline numbers is the reality that we are looking at no change during the past year. Comparisons are getting easier and we need to see growth in order to waive the victory flags.

We are seeing a few numbers that are “headlining” well. For example, the Case-Schiller reported a 9.36% year-over-year decline. But, the declines are on top of declines we have already seen. Of course we all knew there would be a time that would show a slow-down of rapid declines that were occurring - or houses would be worth zero in no time. So, we are glad to see the drop slowing. But…

The fact is that all of the housing numbers will look better for the foreseeable future since last year’s fall was off the charts. Digging deeper into the report also shows that many of the existing home sales are still from distressed properties.

Yesterday’s economic reports brought a mixed bag of results. Personal consumption was better, but the core PCE continued to slide. GDP was revised downward for last quarter and reports are showing that most of the increase that we saw was due to government stimulus. Then there was the Richmond Fed index that sank down to 1 when it was estimated to be near 8.

Today the Federal Reserve released its minutes that sent some mixed messages about the economy and the U.S. dollar. As we are all aware, the “official” policy is for a strong-dollar as per Treasury Secretary Geithner. Of course we also hear how important it is to keep America’s exports competitive from Paul Volker. So, which is it boys?

The Fed is clearly keeping the pressure on the dollar and in the recent minutes has said that the dollars fall has been “orderly”.

St. Jude Medical (STJ) took a nasty beating last month as their earnings outlook and several analyst downgrades. Yesterday we saw the first upgrade – all the way to a buy. This is creating a short-squeeze as it passes above resistance and creates a fill-the-gap scenario.

October downgrades:

We own Atwood Oceanics (ATW) as we found the fundamentals to be gaining momentum and the technicals continuation to hold the uptrend. What we like is their execution and portability as well as their ability to adjust to market conditions.

Key Fundamentals:

TIC Data and the U.S. Current Account Deficit: Foreign Investors Still Buying Treasuries

That is what it looks like. With all of the huffing and hooting by Brazil, Russia, India and China, we are still seeing inflows. That’s important because someone has to foot the bill for all of the money that is being spent on bailing out the sinking ship know as the U.S. Economy.

There are signs that the dollar is starting to base. To be sure, the quantitative easing along with a spend-all-we-have-to-fix-the-problem mentality has been weighing heavily on the U.S. currency.

Last week, Mr. Bernanke made mention that he was “keeping an eye” on the dollar and that sent short-sellers scurrying to cover. Not enough to create a significant short squeeze, but enough to taper off any weakness for the rest of the week. Now Fed’s Bullard is talking with dovish tones which crushed the dollar overnight.

Discovery Networks (DISCA) has been on our radar screen for some time. We have missed several opportunities to grab the stock and it kept on moving higher. This time we are looking at the news of Oprah’s move as providing significant upside for the network. It is really a big confirmation for the cable operators (We also own Comcast (CMCSA) for client portfolios)

Here are some of the info that we are looking at:

We like Brazil for a whole host of reasons. Some being the population growth, some being the vast commodities that actually back their economy. Then there is the great deep-well oil through PetroBras (PBR). Of course we have liked the juicy returns that we received as investors in the sector this year and the outlook for the next 12 months.

But, the latest moves to cool the appreciation of the Real (Brazil’s dollar) has us wondering the lengths that they will go to scare of foreign capital. Just a couple of weeks a go they slapped on a 2% tax for foreign inflows and yesterday we hear that Brazilian ADRs will have a 1.5% tax added that they hope will slow speculation.

The economic numbers for the day (Thursday) were not very encouraging. Leading indicators are continuing to fall. That is an indicator that that many bulls were hanging their hats on since March. Now is is continuing to show weakness and may be pointing directly to the Double Dip we have been discussing. (Less Good)

Comcast (CMCSA) had news that both helped and hurt the stock in that last few days. First, the NBC deal that would help to expand their content and distribution was seem as a positive for the company. There were a few flies in the ointment, but overall it was an exciting opportunity, as long as no one overpaid.

Then we saw the news that they were going “help” with the Ticketmaster (TKTM) and Live Nation (LYV) deal in order to move it away from anti-trust concerns. (See news story above.) Fundamentally, the company looks to be healthy but at the time that we added the position, it had a inviting slope up as it was bouncing off support. That has changed since Monday of this week.

Wal-Mart (WMT) has become more aggressive than ever, looking to take market share (assuming there is viable competition after this move) during this holiday shopping season. Dropping prices on key goods and expanding their product offerings were just the start. Now they have started to slash prices on selected items in an effort to lure customers.

There is great opportunity for both the shopper and for Wal-Mart here, but will have some lasting deflationary effects. Yes, deflation is alive and well – or is it?