Dan Schmeidler

Today in Commodities: Dollar Sets the Tone

Shoot! The above should read: "It appears ...". Sorry.

Today in Commodities: Dollar Sets the Tone

Thank you, Matthew, for your postings. At appears that China (and other economies with massive amounts of U.S. denominated reserves) are currently (the logical) willing buyers of Oil (in exchange for the greenback) at these levels. But these nations have (at least until recently) been mostly dependent on foreign economic growth (a la the "foreign" consumer) in order to spur their own economic growth. And until we see definitive proof that these nations can economically expand on their own, I would not be betting on continued higher commodity prices all across the board.

P.S. Love the new spell-check feature in the comment section. Thank you Seeking Alpha.

"The future of the global reserve system looks a lot like the past of the global reserve system," economics professor Barry Eichengreen tells a conference of international monetary policy makers today. "The euro and the renminbi will match the dollar as an attractive form of reserves only when they possess equally deep and liquid markets."

BINGO! Excellent Quote!

Equities Update: Economy Trumps Earnings

My main concern here is how these improved earnings are going to effect the trade on the U.S. dollar. Up until now, rising equities have benefited from both improving economic indicators AND a sell-off in the U.S. dollar. The obvious effects of these counter-trends will sooner or later (have to) reveal themselves within equities and in resistance levels that will become harder and harder to break. That type of exhaustion could lend itself to a nice and smooth downward glide - fueled by the emergence of a strengthening U.S. dollar. In other words, I just don't see how these stocks can benefit from this type of an environment for that much longer.

Canary in the Gold Mine

The weaker dollar and the near-record high gold prices might be indicative of looming run-away inflation. However, we could very well be at the top/near-end of that cycle (even though Gold could very well shoot up another couple hundred points once it breaks resistance). But I still don't see how inflation can be rampant when banks (the main provider of capital and liquidity) are still facing massive write-downs on loan losses. That sort of asset destruction (on balance sheets) is offset by massive government intervention (a la printing press). But the propped-up banks are now largely government controlled, and if it's not their equity, than it's certainly the executives that are now forced to play largely to the tune of the Feds ( -now more than ever). In other words, they are not lending like they used to. In addition, continued mass-layoffs along with an expectation of prolonged high unemployment should also send the markets some clear signals with respect to wage increases.

So my concern is mainly where all the liquidity (monetary issues) and economic activity is going to come from to drive up inflation to the extent of run-away or hyper-inflation.

More Support for Gold's Bullish Outlook

Gold is largely a trade on the dollar. And if the dollar stays strong in the interim, the gold trade is off. There is just too much right now standing in the way of a sustainable rally in gold. I would wait until after this fall to build a gold position, unless you are considering to trade it. I would consider trading gold over $1000; who knows where it can go above resistance. But I would not hold Gold it until after this fall and until there are better and more reliable indicators that inflation and a weaker dollar are imminent. The argument for being long Gold are convincing, and they become even more convincing as we approach resistance levels. But I simply do not believe in a weak dollar or inflation at this time. Even with the news from China as descibed in this article.

Sure It’s Legal … But Is It Right?

Riots, no. Anger, no. That would certainly not be the right approach. Heck, who likes to listen to a rioting angry person. They are scary. Kind of like LA Raiders personnel. So, (and in reference to the title of this article), let's solve this the "right" way.

Sure It’s Legal … But Is It Right?

I stand corrected: There is no "easy way" out of this one.

Sure It’s Legal … But Is It Right?

Tough issues to deal with here. And it's not right. But our society has become so complacent to these changes that it is no longer a question of what is not right. Most people prefer to take the easy way out of this dilemma by withdrawing into their own world, trying to fix their own lives, and to look for blame only within their immediate surroundings. But taking that bigger leap and seeing the world for what it is: That is a heartbreaking choice to make.

While Citigroup Jumps on John Paulson's Investment, AIG Jumps on Anything

This is nothing more but a bubble formation in equities. And yes, (from a Fed's perspective) this sort of bubble in equities ain't so bad, considering all these other places where inflation could be creeping up. Since the government is backstopping/owning these equities (as opposed to NASDAQ2000) we are likely going to see this process (and this type of action in equities) prolonged. And (as (TraderMark points out) the rise in these equities is signaling that the Feds could potentially manage to keep their stranglehold on the markets for a very long time.

The Lunacy Surrounding AIG's Stock Price

Good article. Irrelevant of the fact that the government (more or less) owns these entities, the short covering (in FNE, FRE, AIG, C, etc.) is generating additional tax revenues (when received) for next year. And speaking of anniversary, for securities held for less than 1 year, the revenues, when received, will be even higher. So I don't really see why the Feds should regard this process as mockery, or stop the trading of these companies and/or delist them.

In addition (and aside from insignificant tax revenues), the price move of these equities is signaling (a perception) that equities owned by the Feds/Government can appreciate in capital. This is a notion that would have been unfathomable a few years ago. But these are different times, and for right now, ailing/defunct government entities are the stocks to own. This type of action in equities is a clear indication of a bubble formation (it's not the first, - nor will it be the last), and the Feds are unlikely to stop this process since they the direct beneficiary of this kind of appreciation. In addition, the Feds might regard this type of action (in equities) as inflationary side effects to their monetary policies. And they will likely tend to keep it contained to equities. I figure, we will have a lot more of this type of action coming in the next few weeks and months.

Bernanke Being Rewarded for Failure

Wow, and how lucky is Bernanke that his time for reappointment coincides with a huge market rally. The man must be really looking forward to another term. Guess it must be hard to say "no" when the president tells you what to do.

An 'X' Shaped Recovery

True. That's something the Feds will have to decide. They have ample control to take this "X" at any time of their choosing by eliminating a free market system and keeping their chokehold on the system. The next few months will be a great test as the economic environment improves and the apparent need for (monetary/economic) interventions diminishes. I wouldn't be surprised to see the markets come begging once again. Who knows, maybe even a smarter (and now certainly wiser), Jim Cramer will decide to keep his friggin' mouth shut the second time around.

Forget 'Cash for Clunkers': Try 'Dough for Dumps'

We are less than a year into this new administration and it is starting to dawn on many Americans as to which direction our policymakers are planning to take this country: Pathetic short term fixes and no definitive plans or visions for lasting economic growth and capital expansion. No question that we are all being put to test here. This article perfectly exemplifies to which extent government run economic programs can (and will) run their course: Bigger government and a choked off private sector. As a government employee myself, I can vouch for the kindness and the good intentions of public employees (and their policymakers), but I am vehemmently against government initiating these types of programs - risking to take the place of a free and (efficiently functioning) independent private sector. It is fatal to capitalism. Thank you Mr. Schiff for sharing your dismay about the unfortunate short-sightedness of this administration.

Lehman 2: The Collapsening. With the anniversary of the Lehman Brothers bankruptcy approaching, the BBC says it's producing a movie based on the firm's fateful September, with James Cromwell as Hank Paulson and Corey Johnson as Lehman chief Richard Fuld.

Great, now we can watch that debacle all over again. The BBC must feel that we all need this kind of reminder of the beauty of American Capitalism.