Msrpaul

Thursday Outlook: Commodities, Emerging Markets

David,

I always love your posts. I got out of commodities before the last final and rewarding run, and keep waiting to get back in. I am aghast at the markets' willingness to digest bad news, but then again, with the coffers of the Fed in their minds as a backstop, risk is the only way to go. The consumer lending market has ground to a halt, and lots of people are on the brink. I know, as I work in the financial industry and see them. There is huge overcapacity in the financial system, which is yet to be dealt with. And today, the Ambac's got downgraded, and the market RALLIED!!!! What's missing from this picture? In the end, we are experimenting with a great game, using assetts instead of income to try to maintain"wealth" i.e. borrowing to keep the debt spiral running. The housing market is deflating. Moreover, today, the market rallies on high oil. I just can't figure the twisted logic. And gold falls on a weaker dollar.

Wednesday Outlook: Commodities, Emerging Markets

As I say, they can only "gig" the news so long (sucking in the small investor). What everyone seems to so severely miss is that without real income growth- which we haven't had for years as we've been fueling our demand for things with credit growth-there can be no real GDB growth. Greasing the financial wheels prevents meltdown, but the underlying fundamentals of weakening American skills creating a more service based economy (especially on the low end) are not a driver for wealth.

In our incredible desire over the years to avoid normal and healthy corrections, we have built an artificial economy based on assetts, not income. Housing will regress to the mean, as supply and demand will ultimately trump any tricks the Fed can attempt.

Now commodities inflation will enter, and will exist for years.

Great charts David, I look for them every day.