I believe that more investors are beginning to bet on future inflation by returning to the commodity markets. This is one reason why the price of gold has continued bouyant despite soft prices for other commodities. Soybeans are benefiting handsomely today. Other grains have also moved higher, but to a lesser degree.
Friday, January 9, 2009
"Forcing money into risky assets is perhaps the most dangerous experiment ever done, and is so large in scale and so unprecedented that we have no idea how it will end. I expect it to end poorly and with hyper-inflation. The funneling of assets into risk is masking the deteriorating fundamentals and giving the appearance of a market that has bottomed. But this is sleight of hand, an illusion.
"The Fed has declared a war on savers, a war on prudence and provided the ultimate Moral Hazard Card-and with our money no less. They are also setting up the ULTIMATE BULL TRAP-a trap so large that when it is sprung, perhaps as early as the end of the first quarter/beginning of second quarter that there will only be sellers left.
- Unemployment on every front is rising. market that has bottomed.
- Tax receipts are down and State Governments are suffering.
- The debt market, except that artificially supported by the Government is closed.
- Earnings estimates for the S&P 500 are down 60% year-over-year.
- Stocks (using the Dow as a proxy) are at the same level they were 10 years ago.
- Industrial Production around the globe is imploding.
"Here is the magical question: "why is there is so much bad news, and is it fully discounted in prices?" If so, "why are the Fed, FDIC and Treasury Department so desperate to drive down interest rates to zero, buy troubled assets, ruin what used to be an efficient debt market in Mortgage Backed Securities, Corporate Bonds and Preferred Stock?"
Read the entire newsletter here.
From my experience, the initial reaction of the financial markets is usually short-lived. As economists begin to study the underlying internal numbers and react to those over the weekend, we may see a different reaction on Sunday evening or Monday morning.
From the U.S. Bureau of Labor Statistics website (pay particular attention to the household survey -- it is usually the most telling):
Nonfarm payroll employment declined sharply in December, and the unemployment rate rose from 6.8 to 7.2 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Payroll employment fell by 524,000 over the month and by 1.9 million over the last 4 months of 2008. In December, job losses were large and widespread across most major industry sectors.
Unemployment (Household Survey Data)
In December, the number of unemployed persons increased by 632,000 to 11.1 million and the unemployment rate rose to 7.2 percent. Since the start of the recession in December 2007, the number of unemployed persons has grown by 3.6 million, and the unemployment rate has risen by 2.3 percentage points.
Thursday, January 8, 2009
- Costco Sales Fall 4%
- Sears Drops 7.3%
- Williams-Sonoma Comparable Sales Drop
- Macy's to Close 10 Stores
- Abercrombie Posts 20% Decline
- Limited Sales Down 10%
- Wal-Mart Expected to Outperform
- Weaker Holiday Gift Card Sales
- Supervalue Sales Decline
- Wal-Mart Steers Profit Forecasts Lower
- Saks and Nordstrom Remain Laggards
Note: Despite the above headline, even Wal-Mart's December sales were up only 1.7%, disappointing analysts, who expected a 2.8% increase. Sam's Club sales, like its competitor Costco, were down!
Here is his article.
"...You can make no rational bet about the market's direction in 2009 based on how the stock market performs in the first five days of January."
The Dow is down another 50 points at this writing, and both Eurozone and Asian stock markets are down almost across the board. (So are my beloved grain futures.)
David Calloway wrote this prescient editorial on Marketwatch:
Read his entire commentary here. He says now, "the great dying begins".
"Everybody should have known the holidays would only delay it. The freight train of job cuts, plunging earnings and massive spending cutbacks set to hit the economy was, thankfully, pushed back a few weeks while stunned investors and workers across the globe caught their breath after the worst fourth quarter in decades.
"...Earnings season, the time for companies to 'fess up just how bad it's been for them in the last three months, is here."
Here is the entire story.
Stocks in Europe and Asia dropped, sending the MSCI World Index lower for a second day, on concern the deepening economic slump is wiping out earnings growth and demand for commodities. U.S. index futures declined.
Wednesday, January 7, 2009
Note: Grain prices moved lower across the board during evening trading, confirming the sell signal. The grain bull is dead!
From Marketwatch tonight:
Here is the full story.
On Thursday, the Bank of England is widely expected to make a landmark statement of its own.
Facing what many economists expect to be the deepest recession since World War II, the nine-member Monetary Policy Committee is seen as virtually certain to drop the central bank's key lending rate to the lowest level since its founding in 1694.
Great editorial from the Wall Street Journal tonight:
Read the entire article here. Be prepared to be afraid. Very afraid!
Whether or not you think new spending will stimulate the economy, the one undeniable truth is that this money has to come from somewhere, which means that it is borrowed or taxed from the private economy. This spending blowout is all but guaranteeing huge future tax increases, and anyone who thinks only the rich will pay is living an illusion. Taxpayers need some new champions in Washington -- and fast.
From Marketwatch today:
The U.S. government will run a $1.2 trillion budget deficit in fiscal 2009, the Congressional budget Office estimated Wednesday, offering a stark assessment of the red ink facing the country and the incoming administration of President-elect Barack Obama...Here is the rest of the story.
"The overall deficit number is a challenge to President-elect Obama, who is seeking to enact a major stimulus plan of close to $800 billion...
"Enactment of an economic stimulus plan would add to that deficit," the CBO warned Wednesday..."
Do you get that? This article is suggesting that the total 2009 U.S. Government deficit is likely to reach $2 trillion this year, if the Obama economic stimulus package is enacted as expected! And that doesn't even include the debts and balance sheet obligations incurred by the Treasury and Federal Reserve!
Perhaps this is why treasuries are selling off today (see above chart).
Tuesday, January 6, 2009
From Bloomberg today:
Here is the complete story.
Chairman Ben S. Bernanke sees the thawing of frozen credit markets as critical to a recovery, and is determined to try to prevent a second wave of credit distress as the U.S. weathers bad economic news over the next two quarters. The Fed is now looking at ways to revive lending by using its balance sheet to hold loans and bonds that investors don’t want.
Soybeans (other grains have similar charts) - up 30% over the past month
Crude Oil - up 40% in 7 trading sessions. Crude has touched $50/barrel today.