Interesting report from Factset titled: "An Oil Bubble to Rival the Internet Boom."
It's got lots of stats and charts, very nice and the author concludes: "Technically speaking, the energy sector could outperform further in the months ahead, but the correction could be brutal, as is the case with cyclicals. We recommend neutrality on the sector, and sales in line with bad news on the economy." These are guys who provide top-level reports for hedge funds but it came out last weekend and it seems everyone ignored it…
I was saying in comments on Friday that the price of oil is much like the Terminator robot in the first movie – no matter what bearish fundamentals turn up to stop it, it just keeps coming and coming and it grinds and crawls and claws ever higher… Here's the clip.
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I was looking at copper (because of my BHP puts) last week and it went down hard on Friday, touching 370 again and it looks primed for a nice fall. Far be it for me to bring up fundamentals but there was a 10% increase in stockpiles this month, the most since Aug 2005. Apparently the Chinese have reached their limit as to what they will pay and have just stopped ordering and a strike that was supporting prices at record levels in Chile just ended (from 4/16). Here's an interesting comparison of Copper, Gold and Oil. Note oil has decoupled from everything – If oil is trading up on international tensions, why not gold?
Again, my premise is that Food, Metals and Oil are currently using ALL of the spare money in the world and for any of them to go up, other things must come down or WAGE inflation must start to really kick in to help us pay for this stuff. China's PPI jumped 8.1% and their currency is UP 10% over the past year, which should have kept it down a bit. They release CPI on May 12th, possibly close to the record 8.7% increase. “The falling U.S. dollar exchange rate and interest rates and excessive global liquidity'' require China to take extra steps to safeguard financial stability, Vice Premier Wang said. “If we don't handle financial risks well, this could cause turbulence in the overall economy and undermine social and political stability.'' The PBOC's lending rate is currently 7.47% yet their economy grows at 10.4% and the government runs a surplus. Is our country run by idiots or what?
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Now, to get off the doom and gloom wagon, Forbes (Capitalist Tools, I think is their motto) says the economy is in better shape than we think and that companies are starting to spend again, something tech needs to make a big score this year. Forbes is blaming macro funds for being too bearish on the current market troubles. I'm sorry but I'm still staying 70% cash! I do think the economy is in good shape but you could be in fantastic shape and a bullet will still kill you – $120 oil is that bullet!
If you're shopping for a house, think castle! And, if you're just shopping – think Baghdad's fabulous Green Zone district where the Pentagon has a $5Bn plan to build a shopping center with luxury hotels around a brand new $700M US Embassy "whose total price tag will reach about $1 billion after all the workers and offices are relocated over the next year." “When you have $1 billion hanging out there and 1,000 employees lying around, you kind of want to know who your neighbors are. You want to influence what happens in your neighborhood over time,” said Navy Capt. Thomas Karnowski, who led the team that created the development plan. This is one of those times I really wish I were joking!
"For the moment, however, it’s mortars and rockets — not investment money — pouring into the Green Zone, which includes the U.S. and British embassies, key Iraqi government offices and other international compounds. Militants have escalated their shelling of the enclave since Iraqi forces began a crackdown on Shiite militias in late March."
Yet another economic accomplishment of the Bush Administration – Welfare rolls are on the rise in 27 states, reversing decades of progress! Bush has cut the welfare budget considerably with just $37Bn in food stamps (a whopping $1,870 per person for the 20M people living in abject poverty). This is just over the amount of the welfare check handed to JPM/BSC last month to keep those poor people in Cristal and there is a $300Bn welfare bill caled the farm bill moving through Congress that will pay farmers record money at the same time they are charging record money for their food – nice way to buy an election…
Who needs tasers? Certainly not the Philly police, who get caught beating the hell out of a guy the old fashioned way…
Speaking of guys who need to be tasered – Ron Paul may be out but he's not down and his supporters are wrecking havok at the Republican primaries (yes, they are still having them).
Someone else who needs to be tasered: 5 ways Hillary can still win the election video. Slate magazine has a Hillary deathwatch, now down to 2.5% chance of winning while Bush is stacking the FEC to make sure no one gives McCain any troubles.
