kelm

As Oil Goes, So Goes the Euro / Dollar

I think we will see substantial dollar weakness going forward and indeed, quite possibly a currency crisis. I'd look for the Fed to announce a substantial increase in their QE strategy followed by the bind market and dollar selling off hard on the news. I agree that the Euro, due to liquidity only, will benefit as will commodities.

High Oil Prices Could Constrain Monetary Policy

This article seems to miss the global supply and demand picture and focus solely on America as the center of the universe. Supply has been reduced in virtually all commodities as rigs have been idled, oil production ratcheted back, mines closed, smelters closed, operating and production improvements delayed by lack of demand and credit. Demand has dropped dramatically but is picking up decidedly in some parts of the world notably China due to domestic demand and their stimulus.

The net result is that supply and demand dropped precipitously due to the crisis and suppliers reaction to it, then vast sums of money were thrown in to increase demand while the slower moving supply equation continued to degrade. The result is a supply demand imbalance that leads to higher prices.

Warnings from the President: This Is a Bear Market Rally

A very good article. Jim Rogers stated during the Asian currency crisis that when you have a currency crisis it is always the locals who are selling because they are the ones with sufficient funds to cause the massive move that is a crisis. During the recent rouble crisis it was Russian banks selling and they were using money borrow from the Russian Central Bank to do so! The shadows behind the curtains are us.

This equity rally is failing. Look at the charts and look at the internals, especially Russell and Nasdaq and you can see the weakness. China and Brazil will correct at the same time as they are both poised for it. This is a time to raise cash and prepare a shopping list because some parts of the world are growing and you will soon have a solid buying opportunity.

As for the dollar, it is fading but we are not at crisis point yet. Look for the Fed to increase their QE levels and the market to react negatively. I've been writing about this a lot on my site.

The Dollar Continues to Get Pounded

Jim Rogers said recently he expected a currency crisis as soon as this fall. My bet is the Fed will up the stakes in the QE strategy and that will start the sell-off in earnest.

Inflexion in the Markets

Good article. Yes, people are going to get fed up with buying US debt. While rates are now lower than they were when the bubble was created they are not down to where the housing market needs them to be which is what the Fed and administration want. Rates are headed up due to massive oversupply and the market beginning to get gun shy of our fiscal profligacy. Look for the Fed to greatly increase the quantitative easing and the market to react negatively as money flows out of Treasuries and the dollar. Treasuries are the final bubble and they are starting to crack.

Baltic Dry Index Signals Commodity Inflation

Interesting. It makes sense that as the demand for bulk commodities and their price increases that shipping costs should increase (which then feed back into the commodity price). China's domestic economy is growing solidly and I expect will surprise us in just how resilient it is. True they are stockpiling raw materials at low prices but that should not be interpreted as indicating low usage.

The Myth of Deleveraging

Well this was a good laugh. True but a good laugh nonetheless. We will not see a next bubble as the Feds attempts to lower interest rates are failing. Their next step will be to ratchet up the degree of their QE and that I expect will drive more investors out of binds and out of the dollar. The market will eventually force the pain on us one way or another. Markets, like life, find a way.

Was That the End of the Rally?

What amazes me about the comment stream is the majorities inability to simply ignore the village idiot. It used to be we had Rolex and he would say something that didn't warrant a response every time. Everyone just gave him a thumbs down and that was that. Eventually he drifted away. This guy however has really gotten under all of your skins. Stop playing his game - ignore him if he bothers you, you'll feel better.

Oh...and the post! I quite liked it. This has been a traders rally, at least in the US. It will be interesting to see how China and Brazil respond to this correction.

How Green Shoots Flower, Or Turn into Depressions

The difficulty is that we have not solved the fundamental problems we have simply thrown money at the problem and for awhile it makes everything seem better. Our leaders need to be worried - very true. They need to be worried about the Fed's inability to drive interest rates down despite running the printing presses full bore. Rates are headed up and that coupled with a massive and increasing deficit spells big trouble for the US governments ability to continue in its attempts to get the economy moving.

As for optimism during the Great Depression - we were a much younger and economically better positioned country then than we are today so I would hope they had been more optimistic. We had massive export industries and a growing population, expanding infrastructure etc. Today we manufacture little, have an aging population and have a total debt burden around 400% of GDP. A very different situation. Are the worst declines over? Maybe, maybe not. It has been said that the bottom comes with "the death of equities" everyone is disgusted and wants no part of the market. That could come at any level but we certainly have not seen it yet.

Many Hedge Funds Are Still Loving Gold

What has been odd is that physical buying by India, the Middle East, and Turkey - which account for a huge amount of the gold trade, has dried up and been replaced by huge scrap inflows and yet the price has not corrected nearly as much as could be expected. Fund buying is certainly supporting it but that is support in expectation of future fundamentals and at odds with current fundamentals - all of which makes for a risky trade. That said, I believe we are on an inflationary path and a dollar depreciating path both of which should lead to much higher prices at some point.

The Government Continues to Mess with Monetary Policy

Good article. It should be noted that the IMF (whether you like the institution or not) has the charter to review the fiscal position of each of its member states...and would have done so for the US many times had the US government not blocked the IMF from conducting such an audit. So an independent systemic risk auditor already existed and was told to pound sand. That is why the Asian nations announced a couple of weeks ago the establishment of a $120 billion fund buy year end to support members currencies if needed AND the establishment of a systemic risk auditor for members. They are done with letting an institution so marginalized by the US be responsible for flagging potential issues.

Another Sign of Recovery: Retail Sales End Free-Fall

Are metal prices up because the US is consuming more metal or because supply has been restricted due to mine and smelter closures and China is importing at a strong rate both for use and stockpiling? I agree that there is evidence that there are pockets of strong recovery globally, China being the main one, and I agree that our own economy is no longer in free fall. Whether we will see actual growth anytime soon, especially in jobs, remains to be seen.

Psychology of the Rally Changes

I would argue as well that taking a look at the Shanghai index and the Bovespa provide complementary indicators as well. As noted above this is a global crisis that displayed no decoupling on the way down. Interestingly, global markets are all in corrections at about the same time again (look at the charts and you'll see that Shanghai and Brazil were both poised to correct technically this week). How those markets react to this correction could be telling. Especially if we see decoupling.

China's Economic Prowess Predicts Geopolitical Change

An excellent article! You have hit all of the major points I have been talking about on my blog for some months now. I also like the comment above regarding only 7.3% growth - that is 1.3 BILLION people growing at 7.3%. Size matters.

As for the currency situation, Jim Rogers stated that he could see the crisis as early as this fall. (Odd for him as he almost never makes any statement regarding timing.) I believe we will see the Fed announce a substantial increase in the QE strategy in the next few weeks in order to make a further attempt to drive down borrowing costs, especially for mortgages. How the market reacts when that comes may tell the tale. Last time rates dropped as everyone bailed out of bond shorts. This time we may well see a massive exodus from bonds and the dollar.

Are We at the Beginning of a Bull Market?

You are describing a bull market like those we have seen in fairly recent history. If we have a prolonged recession you may see a very different set of indicators at the start. This is a global economic crisis so I would look to confirming signals from major overseas markets and commodities as well. I agree that there is likely more work to do before a new bull. There are two many fundamental fiscal issues that this nation is dealing with that have to be resolved in order for their impairments to be removed from economic growth.