Itza all about nat gas and oil prices. The hedge funds got greedy.
Now all that has to be unwound. Funny how the affairs of man
are still at the whim of nature. No hurricanes and looks like
El Nino this winter. Money coming out of RE and commodities
and going into tech.

DollaBill,

Give it until after the elections in a couple months. When Iran and Venezuela start to assault the U.S by cutting their supply of oil the curtains will be pulled off with ferocity.

The Venezuela President just addressed the U.N. All I can say is wow! War with Iran and their allies seems unavoidable.

"Chavez Says U.S. Empire Will Soon Fall, Calls Bush 'Devil'

http://www.foxnews.com/printer_friendly_story/0,3566,214709,00.html

Note: Venezuela president "Calls Bush 'Devil'" news has different quotes (framed within the same sentences no less), depending which country you look at and how its being spun. Unfortunately you can't get to the truth, at least just yet. By blinding coincidence of all the morning session speech transcripts "THE BOLIVARIAN REPUBLIC OF VENEZUELA" is missing:
http://www.un.org/webcast/ga/61/index.shtml

Re: Baffling

Even the bond kings are baffled.

If the bond market is not behaving as seasoned traders think it should - does this mean the US markets are now being managed "Japan" style?

Or for that matter the equity markets?

One begins to wonder?

tradesman

The major concern here is oil. if iran and vz agree to cut off supply to U.S, there is your $100 oil.

Here is a possible reason for the Markets irrationality!

http://bigpicture.typepad.com/comments/images/fed_minutes.gif

Re: "By blinding coincidence of all the morning session speech transcripts "THE BOLIVARIAN REPUBLIC OF VENEZUELA" is missing:"

Visit:
http://www.cspan.org/homepage.asp

RealPlayer and Microsoft Internet Explorer required to view video with accompanying English translation; however, broadcast may be downloadable.

Don't claim that I have a crystal ball. But my guess is that the answers should be in the eyes of Fed. What Fed sees is the need for lower mortgage rates. So they can print money to buy up some treasury bonds. By doing this, no immediate inflation will be caused. Inflation will manifest itself very very slowly through government spending most likely on healthcare and defense industries. More money for mortgage market can support the housing market too. All these operations will not affect $US exchange rate in the short term because there are no additional sell orders for $US in forex. In the long term, it's bad for $US, but that's probably the goal for US Fed anyway (to reduce the real debt burden).

In the meantime, Fed can try to redirect these extra money freed up from bond market to go into the stocks, and away from commodity markets. In the end, everything will be all well, unless/until there is a big blow-up.

Hiding their trails in the non-transparency of M3, they will be perfectly safe.

Jim Rogers keeps saying that if a tradable is below its all time high, then how can it be a bubble.

With thinking like that , Silver wont be in bubble territory till what, $50 an ounce.

At this rate all that will be left of Mr Rogers is his bow tie. He's too much a one note johnny.

Thats not trading.

A modest proposal.

Perhaps we have low inflation AND robust growth. I concur that the economy is slowing, but I'd call slowing from 6% to 3-3.5% a blessing, not a cause for alarm.

As for the money supply, I don't see the growing. Have a look at MZM. I see world economies growing, which is sucking up the excess liquidity. My eyes strain trying to find the problem.

Some are concerned about housing. If you bought five homes hoping to flip them, I think you have a problem. Beyond that, this seems as overhyped a worry as I can remember since Y2K. Ryding at Bear Stears recently noted that the drop in oil prices to $65 (let alone that we may soon see $45) saves the consumer 3-4 times the total cost of the looming options ARMs resets.

As for commodities, perhaps producers are simply catching up with a commodity demand shock that made supplies tight and drove oil and metals prices to about double the price they will have in the new equilibrium? Does this mean the China boom thesis is wrong? No. Of course it's correct. But recall that the 1999 Internet boom thesis was also correct and the traffic growth has continued unabated, actually accelerating to this day. Still, it did get repriced.

Here's another odd thing I've noticed in the last year. Whenever there is some hint of real fear, e.g. the London terror plot day, the Iran Aug 22 day or yesterday's Thai coup, people seem to sell gold and run for the US$. Could it be that US$ is now thought to have more intrinsic value?

Of course, this thesis could be all wrong. However, its seems as consistent with the observable evidence as the ones you are wrestling with and at least ought be considered. Indeed, I'd be happy to have you rip it apart, because if I'm all wrong I want to unwind a lot of my positions.

Best,
JH

JH, I do not know how you can slow economy to exactly 3-3.5% to see a blessing. Economy is not a Yaris car, but the tanker. You apply brakes and it will take 20 miles to stop it and 30 miles to get it really running. Human beings are not good at judging this. That is at the hard of problem and persistence of business cycles. Can anybody figure this out well? Rocket science is easy, physics models work well. Society and weather is much harder to predict. You cannot manage it on "incoming data", tanker response is slow. Soft landing crowd is saying that this is not a problem, just trust the government and banks. I am not sure about this. Economy slowdown that we see now is from rate hikes in December 2005. We will see more slowing from rate hikes of spring 2006. Can you expect economy to stay at 3% for years? One thing I am certain. There will be bear market, followed by a bull market.

It is simple. Why would stock rally from here? Are earnings going to increase more than inflation? Businesses are valued on cash that they generate.

Housing problems are not overhyped. Numbers changed a lot. Just in my town, developers resurfaced a corn field 7 months ago for new housing development. Well, wild grass is growing there now, nobody wants to build anything.