gabe borenstein

Today in Commodities: Inflation or Deflation?

Inflation is the least of the threats to the economies . The spike in some commodity prices especially gold ,is predicated on the past cyclical economic/commodity prices behavior. Until the current cycle ,every recovery was accompanied by excessive demand pull "forces" which had led to a cost push inflation.
The global implosion of 2008 has decimated global and consumer liquidity . Global focus at every level will and should be to restore this catalytic component of stability(liquidity).
In the U.S carefully applied "jolts" both monetary and fiscal will contribute to impressive and non inflationary economic expansion.
Gold?- is reflective of a global leveraged speculation based on the old notions.Other commodity prices will not go very far.
Inflation is not in the cards in the current cycle.

When Central Bankers Clash, Stock Markets Can Crash

The ECB and the FED as well as other Central Banks have a different mission.Let's accept the notion that the higher rates will lower the inflation rate (and expectations of)by declerating economic growth .If the Central Bank underestimates the impact of the higher rates on the economy ,a major economic debacle may follow,ie Great Depression.
Oil.untill now has been priced in dollars.By raising the rates and implying more hikes in the future,the ECB had managed to weaken the dollar by about 50% vs the Euro. As the oil priced had spiked ,the shift in the currency relationship in favor of Euro ,had lowered inflationary pressures in Europe.At the same time this policy will create a European Armageddon in the period ahead.The U.S American economic deceleration will decelerate European growth.Simultaneously,... higher rates imposed on Europe will only intensify severe slowdown.If the ECB decides to ease they will face stagflation.Anyhow ,because of the monetary lag ,any attempt to deflect potential European implosion to follow ,will not be effective.
The FED had chosen the right monetary course .Most of the post subprime debacles have been addressed .The record open short interest in the equity markets reflect a massive speculation (including hedge funds),not a investors liquidation(although some of it transpires as well).
Objectively speaking ,the risks that the U.S had faced ,will be the risks that the global economies are about to face.We have addressed most of our issues ,the others have not.The sequential economic implosion outside the U.S will cause an unprecedented fight to U.S assets.
Unprecedented stock market rally will follow and the yield curve underdog (10 yr treasuries)will rally even if for the wrong reasons.

Oil Jumps, Stocks Slide, Dollar Succumbs

In fact today's data was quite positive .The recession gurus who have proclaimed U.S economy to be in recession(two consecutive quarterly declines in the GDP) have some explaining to do.The negative market psychology is not necessarily economic reality.With the key global economies decelerating ,we will see a price adjustment in the crude oil. More monetary accomodation is needed and will be forthcoming .Economic upheaval in the Emerging Markets will strengthen the dollar in the period ahead.In the short run the volatility will continue ,but the major uptrend in the stock market is on the way.
Geenspan?his policies of several years ago had driven the FF to 1% ,allowing for "structured "mortgages leading to subprime debacle -for the record 20% of all the homes sold in 2006 were financed by the subprime mortgages.Thank you Mr.Greenspan.Stock market?for all of the wrong reasons will reach new highs in the period ahead

Currency Markets Taking Cue from Sliding U.S. Stocks

Actually ,dollar is under mega speculative pressure(hedge fund selling).One can actually argue that the weaker dollar is beneficial for the stock market.
a) it allows foreigners to acquire dollar (U.S) denominated assets at close to historical lows.
b)cheaper dollar ,allowing for the lag(J_curve ),will continue to enhance the competitivness of the U.S economy contributing to the major rebound in the period ahead-an event quite bullish for the stock market.
It is the weak dollar (and the leverage utilized outside U.S) that will contribute to the economic implosion outside U.S in the period ahead- causing massive inflows into dollar denominated assets -contributing to unprecedented rally in the U.S equity market and contrubuting to a record dollar rally; in that order .Let's not confuse
speculative/emotional dollar pressure with the fundamental reality ahead.