B4 The Bell, Thursday May 13

[Guest]

There will not, repeat not be any Fed rate increases when oil is above 40 and the economy starts falling fron no refi and high energy and food prices. The Greenspan Fed is probably thinking about how to EASE policy - given they are out of bullets on rates. When the market sees this the dollar will plunge and gold soar. All just speculation!

BTW - bartonsan Bigosky was right - for all of 2 hours ! Ha ha ha

Totally agree.

 

Load up on gold.

 

They are using high oil price in place of higher interest rates to hold back the economy.

 

Hard to believe that policy would come out of this white house, considering they are ALL IN THE OIL BUSINESS. As long as we own the oil in Iraq, the price of it will not come down.

[Hiding Bear]

There will not, repeat not be any Fed rate increases when oil is above 40 and the economy starts falling fron no refi and high energy and food prices. The Greenspan Fed is probably thinking about how to EASE policy - given they are out of bullets on rates. When the market sees this the dollar will plunge and gold soar. All just speculation!

BTW - bartonsan Bigosky was right - for all of 2 hours ! Ha ha ha

While the Fed funds rate under the control of the Fed is very important, what the Fed is actually doing to supply liquidity is also important. After being relatively tight in March - early April they have loosened up a bit lately. They will loosen up more when clear signs of economic slowdown appear.

 

The Fed funds rate will likely just stay where it is while the Fed figures out its next move. Because of dollar concerns it will be hard to actually cut rates if needed, so they will resort to liquidity expansion instead.

[Henny Penny]

The Fed does not control interest rates. They only control the Fed Funds rate. The 1 year T-bill is already up nearly 100 basis points. The rate has more than doubled since last summer and is up 75 basis points in the last 6 weeks.

 

The Fed is irrelevant.

Seems to me that is only because the market has convinced itself that the Fed will raise by 100 bp over the next 12 months. So the Fed is quite relevant - as are expectations of what the Fed will do.

I agree that rates on 10 year bonds and longer maturities may continue to rise - because the next Fed sometime in 2005 will have to slam the brakes real hard - no irrelevant 25 bp stuff but real manly action - say 300 to 500 bp to stop runaway inflation and a collapsing dollar.

[Guest]

Whipsaw Theory:

 

As I've been saying for the past couple months, the whipsaws will increase in size and frequency the closer we get to the breaking point. Stops are there to be raped.

[flockofsheeples]

tbones liked those numbers.

[Guest yobob1]

Welcome to B4 The Bell!

 

The ongoing rise in energy prices will exert an enormous ripple effect throughout the US and world economy. As discussed yesterday, wage earners and savers will have difficulty keeping their standard of living up. What will be the ultimate solution put forth in Washington to counter that? Greater deficit spending and monetary inflation. Count on it. But first we will see some weakness develop in the economy, both from higher energy prices and higher interest rates - mostly doing their work in the real estate sector.

Difficulty keeping their living standards up? Well, IMO it will be nigh on impossible. Zero savings and maxxed in debt + higher essential costs=spending cuts in non-essentials, aka discretionary income.

 

They can deficit spend and monetary pump all they like, but the likely higher IR will easily absorb all they can fling at it and in the mean time take a nasty swath through the real economy as construction grinds down and the residential retail market slows rasing the unemployment level of the millions who reside there. In reality a quick look at Japan and the extremes they've gone to says it will fail (as well as the experience of the 1930s) and there is the distinct possibility that the planet may not take too well to the world's reserve currency being "printed" with such abandon. We are not at the beginning of the debt inflation curve we are at the parabolic blow-off peak after nearly 100 years of stupidity.

 

The recent price hikes in lumber and other assorted building materials is casuing a ripple effect in new construction. Combined with higher IR, taxes and insurance, the number of people priced out of the housing market is surging, even with interest only ARMs. This is going to end very badly and soon. Local papers and TV are touting the strength of the housing market in spite of the headwinds - Kind of like a picture of a raging bull on the cover of Barrons.

 

Through out your college economic books because there was never a chapter covering the current situation.

 

Everything I read from the EIA to the various OPEC ministers statements leads me to conclude we have hit peak oil or certainly close enough for the effect to be the same. EIA was pounding on the table for more new drilling. OOPS - too late. And the oil companies might well ask, drill where? Oddly they pegged current annual consumption at 80+ mbpd and production at 81+ mbpd. They offered no explanation as to where the excess oil might be seeping or why the discrepancy.

[wndysrf]

PNRA now down $4 or so......

 

Anti-Pasta

[Hiding Bear]

There will not, repeat not be any Fed rate increases when oil is above 40 and the economy starts falling fron no refi and high energy and food prices.  The  Greenspan Fed is probably thinking about how to EASE policy - given they are out of bullets on rates. When the market sees this the dollar will plunge and gold soar. All just speculation!

BTW - bartonsan Bigosky was right - for all of 2 hours ! Ha ha ha

Totally agree.

 

Load up on gold.

 

They are using high oil price in place of higher interest rates to hold back the economy.

 

Hard to believe that policy would come out of this white house, considering they are ALL IN THE OIL BUSINESS. As long as we own the oil in Iraq, the price of it will not come down.

Various taxes on energy companies have been very helpful to the Treasury, and are offsetting drops in personal income taxes. Net personal tax receipts are down 3% year over year but total tax income is up 1%.

 

While this is never discussed in the news, the government benefits from high oil.

Excluding oil from the S & P - where would PEs be? Maybe 50.

[Guest yobob1]

You dare question herr Doktor??!!

 

Doc's is right. The fed has never led, only followed. Given their recent tack of endless jawboning (nearly 3 times the normal rate of speeches, etc,) they too apparently have realized that they have no ammo left. There is no virtuous circle of supplying endless liquidity either.

[Hiding Bear]

Welcome to B4 The Bell!

 

The ongoing rise in energy prices will exert an enormous ripple effect throughout the US and world economy.  As discussed yesterday, wage earners and savers will have difficulty keeping their standard of living up.  What will be the ultimate solution put forth in Washington to counter that?  Greater deficit spending and monetary inflation.  Count on it.  But first we will see some weakness develop in the economy, both from higher energy prices and higher interest rates - mostly doing their work in the real estate sector.

Difficulty keeping their living standards up? Well, IMO it will be nigh on impossible. Zero savings and maxxed in debt + higher essential costs=spending cuts in non-essentials, aka discretionary income.

 

They can deficit spend and monetary pump all they like, but the likely higher IR will easily absorb all they can fling at it and in the mean time take a nasty swath through the real economy as construction grinds down and the residential retail market slows rasing the unemployment level of the millions who reside there. In reality a quick look at Japan and the extremes they've gone to says it will fail (as well as the experience of the 1930s) and there is the distinct possibility that the planet may not take too well to the world's reserve currency being "printed" with such abandon. We are not at the beginning of the debt inflation curve we are at the parabolic blow-off peak after nearly 100 years of stupidity.

 

Well done.

 

Could it be that the lack of drilling is that because the marginal cost of new production is even higher than $40 - maybe even $50 - or higher? The same applies to securing new sources of natural gas.

 

It appears most of the troops in Iraq are not in the war zone but in the oil zone.

The marginal cost of securing oil from Iraq, when adding security costs, may well be $100.

[Lock Limit Down]

Stunning election defeat for India's BJP party. Oh - why should you care? Because this , to me, is at the leading edge of the political change that is going to sweep the globe. This is a vote against the yuppie, computer geek, dot com billionaire , wall street scammer culture. 380 million people said - screw that - give us the basics food, water, energy, infrastructure.

380 million people basically , as I see it, voted against the globalization wave that lasted the past couple of decades.

And the likely candidate for prime minister is Italian born Sonia Gandhi.

This is big news - and I think will spread - as more people express their disgust with a global elite run amok.

"This is big news - and I think will spread - as more people express their disgust with a global elite run amok"

 

The CFR must be panicking as best laid plans have run amok.

Maybe there is hope that the elitists can be contained and eventually defeated.

However I wont hold my breath. Lets see if this latest political turn is for real before giving one to the good guys...

 

Yesterday was another gift to the shorts brought to you by the matrix.

The bounce off the 200 day was well coordinated and manipulation at its finest.

40.00 dollar oil continues to be ignored as is all the other evidence ...especially the bond... suggesting we are headed for an accident.

 

Whats even more encouraging to me is it seems stoolies are the first ones jumping ship here. We have become so programmed over the years.

 

I have been doing a study of conditions leading up to the 87 crash. The parallels are amazing.

 

Yesterday I got stopped. I reshorted to early and got beat up a bit.

That's OK. Lots of ammo. Respecting stops as usual.

[Guest]

The Fed does not control interest rates. They only control the Fed Funds rate. The 1 year T-bill is already up nearly 100 basis points. The rate has more than doubled since last summer and is up 75 basis points in the last 6 weeks.

 

The Fed is irrelevant.

Seems to me that is only because the market has convinced itself that the Fed will raise by 100 bp over the next 12 months. So the Fed is quite relevant - as are expectations of what the Fed will do.

I agree that rates on 10 year bonds and longer maturities may continue to rise - because the next Fed sometime in 2005 will have to slam the brakes real hard - no irrelevant 25 bp stuff but real manly action - say 300 to 500 bp to stop runaway inflation and a collapsing dollar.

The BIG BAD UGLY is here already. Now it goes exponential.

 

[Henny Penny]

You dare question herr Doktor??!!

 

Doc's is right. The fed has never led, only followed. Given their recent tack of endless jawboning (nearly 3 times the normal rate of speeches, etc,) they too apparently have realized that they have no ammo left. There is no virtuous circle of supplying endless liquidity either.

I question everybody, - including myself. ! After all we are not talking about the fundamental laws of the universe or something - right?

[PeakOil]

Hmm, smells like Uncle Fuk-u-i got his mitts in the currency markets this morning. Gold, of the Black variety, seems to be ignoring $ manipulation lately.

 

June Crude, $40.88.

 

I don't mean to bore the short term traders and scalpers, but what will the price of Oil be in say 4-5 years??

 

Hint: more than 'Weimar Ben' can print.

 

By definition, energy "sources" must produce more energy than they consume, otherwise they are called "sinks".

 

The market economy burns energy to make money -- there is no substitute for energy.  Although the economy treats energy just like any other resource, it?s not like any other resource.  Available energy is the precondition for all resources -- including energy resources.

 

The key to understanding energy issues is to look at the "energy price" of energy.  Energy "sources" that consume more energy than they produce are called "sinks" and are worthless as sources of energy.  This thermodynamic law applies no matter how high the "money price" of energy goes.

 

The market economy receives almost 80 percent of its energy subsidies from nonrenewable fossil sources: oil, gas, and coal.  They are called "nonrenewable" because, for all practical purposes, they're not being made any more.  The reason they are called "fossil" is because they were "produced" by nature from dead plants and animals over several hundred million years.

 

In the 1950s, oil producers discovered about fifty barrels of oil for every barrel invested in drilling and pumping.  Today, the figure is only about five for one. (1999) Sometime around 2005, that figure will become one for one.  In other words, even if the price of oil reaches $500 a barrel, it wouldn't make energy sense to look for new oil in the United States after 2005 because it would consume more energy than it would recover.

 

The increasing energy cost of oil sets up a positive feedback loop: since oil is used directly or indirectly in everything, as the energy costs of oil increase, the energy costs of everything else increase too -- including other forms of energy.  For example, oil provides about 50% of the fuel used in coal extraction.[7]

 

Immutable energy laws tell us that a growing economy must eventually consume more energy than it can buy.  When America spends more-than-one unit of energy to produce enough goods and services to buy one unit of energy, it will be physically impossible to cover the overhead (money is irrelevant). At that point, America's economic machine is "out of gas".  Forever!

 

http://dieoff.com/page173.htm

[brian4]

Morning Crew-I posted last night that I wasn't sold on the "we rally now scenario" and I placed an order at the close to buy 1095 June puts on any break of 1095- Japan night before last had a huge rally and last night crapped out giving IT and more back. I think we follow the same scenario today and if we get that whipsaw to the downside that is the same pattern as 87. Lock N Load, helmets on , buckle up, window at the Bell for 40 minutes!