4um: Market Wrap Up (7-3-2008)

Title: Market Wrap Up (7-3-2008)
Source: FSO
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Published: Jul 3, 2008
Author: MICHAEL PANZNER
Post Date: 2008-07-03 17:49:15 by orangedog
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Views: 357
Comments: 38

Today's Market WrapUp 07.03.2008 Mon Tue Wed Thu Fri Panzner Archive

NOT QUITE SLOW AND STEADY
BY MICHAEL PANZNER

Despite plenty of evidence that domestic demand continues to weaken, some analysts have remained upbeat on the economy (and the stock market). One reason for their optimism is their belief that dollar weakness will (continue) to power export sales (especially at the large multinational companies whose shares comprise the S&P 500 index), more than making up for the difference. However, a graph of U.S. factory orders (yesterday, the Commerce Department announced better-than-expected data for May) vs. the U.S. Dollar Index suggests the relationship may not be what it was.

Today, the Bureau of Labor Statistics released its monthly employment report for June. Although the change in nonfarm payrolls came in at -62,000, in line with expectations, the figures were once again bolstered by a striking “birth/death” adjustment. According to the BLS, new businesses created a net 177,000 new jobs last month, with leisure/hospitality accounting for 86,000 and construction chipping in 29,000 (sounds like their statistical methods need some serious adjustments of their own). Regardless, one reading of the data suggests the U.S. is not only in recession, but that the downturn will continue for at least two more months.

Yesterday, the media made a big deal out of the fact that the Dow Jones Industrials Average, down more than 20% from its October 2007 peak, is officially in bear market territory. Of course, if you owned the wrong sectors, you blew through that particular milestone a while ago. Below is the return (through yesterday) for the 10 S&P 500 economic sectors since the bellwether index hit its closing peak on October 9, 2007.

Name	Return Since 10/9/07 Peak
	3/10/2008
Energy	8.72
Utilities	-1.63
Consumer Staples	-5.27
Materials	-9.26
Health Care	-15.78
Information Technology	-17.20

S&P 500	-19.40

Industrials	-22.92
Telecom Services	-25.34
Consumer Discretion	-26.65
Financials	-44.02

Finally, the cyclical sector, including mining, chemical and steel stocks, has been a heavy speculative favorite in recent months. However, technically at least, it looks like the tide may be turning in favor of shares that are more defensive. Below is a chart of the ratio of the benchmark cyclical index relative to the consumer index.

Stocks ended mixed-to-higher, aided by investor relief that today’s jobs report was not as bad as some had feared and pre-holiday-weekend short-covering/bargain-hunting following the sharp declines of recent weeks.

At the 1:00 p.m. early close, the Dow Jones Industrial Average was up 73.03, or 0.7%, to 11,288.54. The S&P 500 Index rose 1.37, or 0.1%, to 1,262.89. The Nasdaq Composite Index slid 6.08, or 0.3%, to 2,245.38.

August gold last traded at $936.00, down $10.50, while the Dollar Index rose 1%. The U.S. currency was aided by dovish comments from European Central Bank President Jean-Claude Trichet about the future outlook for European interest rates following today’s widely expected quarter-point hike (to 4.25%) in the ECB’s benchmark lending rate. Ten-year Treasury bond yields rose two basis points to 3.98%.

Michael Panzner

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"I'd like to live just long enough to be there when they cut off your head and stick it on a pike as a warning to the next ten generations that some favors come with too high a price." Vir Cotto, Babylon 5

Yeah. I was also doing a little more mental searching. I thought I was living on a sane Planet in a sane World but ..... Then I came to the conclusion, it must all boil down to the fact we're the insane and that's brought on by too much book reading and not enough TV watching.

darn, where's my beer and pizza? Gotta also find a real 'Reality Show' to set my night straight.

And they think this ..... 'The strike has been called by the umbrella COSATU labour federation to protest job losses linked to the country's power crisis, the soaring prices of food, fuel and interest rates', will be solved by their strike.

I tell ya, I gotta stop going to the Forum. Maybe that's where the problem lies. My problem of finding what reality is and what delusion is just got tossed a new curve ball.

I'm back for the next week. Spent the last few days in the local hosptial being scanned and probed. Chest pain and trouble breathing. All they could turn up is a large thyroid nodule which was probably restricting my air way. Seemed like an eary call to me - take it out, but the docs have to be sure that it actually is a problem, so they keep scanning and probing and having meetings. I actually didn't hear until this morning when the surgeon called me that they decided to remove the nodule.

But anyway, looks like I'll be at home for a week and then have to check back in to the hospital for the surgery. Should be in one day and out the next. One good thing out of all of this is that I found out that me heart is in great shape. Passed the stress test and angiogram with flying colors.

The 100 oz of silver that I ordered on April 1 was finally delivered yesterday. On the day that I ordered it, the spot price was $16.80. Just checked Kitco and it says the spot now is $18.05. At least it went up while I was waiting.

sounds like you had a little scare, but glad to hear that it's something relatively minor. wish you the best with the procedure and a speedy recovery.

I am extremely lucky, no doubt. It could have been a lot worse. My care at the hostital was top notch and the staff was very professional. I definitely can understand why health insurance is such a big political issue. One visit like I just had could wipe out anyone without insurance and it was just for a throid problem.

Jeeze, hope everything's OK. I figured you were hob-nobbing with your e-lite buddies in Davos again manipulating the world markets or sumpthin'. ;)

Everything seems to be okay at least for the time being. I started having some health problems way back in the middle of Feb. Some sort of mystery illness - loss of appetite, weakness, generalized pain and dysphoria. It is like having an extreme case of mono without the fever. Been seeing various specialists and undergoing all sorts of tests without finding the cause. The first episode went away after about 6 weeks after I stated taking some pangestyme, a pancreatic enzyme. Thought the pangestyme was the magic bullet and all was going to be well but about two weeks ago, all the symptoms came back again. So I'm back to square one. Funny cause it is putting my docs on the spot and causing them a degree of stress since they don't like being stumped. Of couse, it is causing me a lot of stress because I don't like being sick and not knowing what to do about it. During the Feb episode, I could barely get off the sofa and thought I was getting ready to check out permanently. Can't remember ever being that sick before. Hopefully, this time won't get that bad.

July 4 (Bloomberg) -- Crude oil fell from near a record after Iran said it gave a ``constructive'' response to incentives intended to persuade the country to stop uranium enrichment.

A compromise may allay concern that Israel is ready to attack Iran's nuclear installations, starting a conflict likely to cut supply from OPEC's second- largest oil producer. Futures climbed to a record $145.85 a barrel yesterday on speculation tension in the Middle East may worsen.

The Haynesville Play is predicated on shale as the subsurface source of natural gas, according to information from M.B. Kumar, Office of Conservation geologist administrator.

The shale is a rock formation mainly composed of consolidated clay-sized particles deposited and buried in the north Louisiana geological basin more than 170 million years ago during the geologic Jurassic time. It's characterized by ultra-low permeability in contrast with the conventional sandstone/limestone reservoir rocks that have high permeability.

The U.S. currently produces roughly 30 trillion cubic feet of gas a year, and these numbers are dropping. According to Engelder, the technology exists to recover 50 trillion cubic feet of gas from the Marcellus, thus keeping the U.S. production up. If this recovery is realized, the Marcellus reservoir would be considered a Super Giant gas field.

Engelder, who has studied this area of the U.S. for most of his career and began looking into fractures under a National Science Foundation grant 25 years ago, has identified and mapped natural fractures in the Marcellus shale. He and Lash will present some of their recent work at the 2008 American Association of Petroleum Geologists Annual Convention and Exhibition this spring.

“This is one of the biggest booms New York has ever seen,” said Arthur Van Tyne, an oil and natural gas consultant from Wellsville in Allegany County. “It’s amazing the amount of money being spent here, and the amount of acreage being taken.”

Landowners in these parts have yet to hit it big. But they’re watching closely, hoping they’ll be the next Jed Clampett, now that gas companies are sniffing around parts of Erie, Cattaraugus and Allegany counties looking to make a deal.

“It’s going on, on a daily basis,” said Robert Christman, the Allegany County clerk. At least a half dozen land men, from places such as Texas and Oklahoma, file into the clerk’s office in Belmont each day to pore over county maps, land deeds and old lease agreements.

BISMARCK, N.D. - North Dakota's mineral resources director says it will probably be a decade before the promising Bakken shale formation has a significant effect on the nation's oil and gas supplies and prices.

Lynn Helms testified Wednesday in Bismarck at a hearing led by Sen. Kent Conrad, D-N.D., to discuss fuel prices.

The Bakken encompasses 25,000 square miles in North Dakota, Montana, Saskatchewan and Manitoba, with about two-thirds of the area in western North Dakota. The U.S. Geological Survey has estimated that up to 4.3 billion barrels of oil can be recovered from the formation using current technology.

Oil may be headed for $200 a barrel and the price of everything from wheat to gold set to cause yet more ructions in world commodities markets, but for European businesses, households and governments, natural gas may be the next big headache. Like oil, the price of this fossil fuel is rising dramatically. Now EU officials and others in the industry are warning that Europe is facing a supply crunch as well, whatever the price.

Europe is “sleepwalking” its way to a “staggering dependence on imports,” Paulo Scaroni, chief executive of Italy’s national energy company, Eni, told the World Energy Congress in Rome late last year. By 2020 gas demand could be 40% higher than in 2007, at a time when production in the 27-nation EU was “expected to halve.” The result, he stated, will mean doubling Europe’s annual imports from 300 billion cubic metres to 600 billion cubic metres. “We clearly run the risk of a gas shortage in the future,” he added.

I heard the other day that the crack spread is so thin now that some refineries are going to slow down because they're actually losing money producing gasoline.

No sense being in business if you can't price to make a profit. I just don't understand why the refiners aren't passing on the increased costs. People can't just stop using gasoline although they may cut back. I keep hearing about demand destruction but the reality is that if you have to drive to work and the grocery store, then you are going to drive regardless of what the pump price is. The real problem is that the PTB doesn't want to see wage inflation so they are trying to squeeze every dime out of the serfs without having to pay them more to survive. Bastards.

Luxembourg's Yves Mersch said the ECB could do little to influence soaring international commodity prices but it could take steps to head off euro zone wage pressures. "We are sending a signal today which shows that we are determined to act against home-made inflation," he told the Luxemburger Wort newspaper.

"Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall "below zero".

"We're in a nasty environment," said Tim Bond, the bank's chief equity strategist. "There is an inflation shock underway. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth."

"Barclays Capital said in its closely-watched Global Outlook that US headline inflation would hit 5.5pc by August and the Fed will have to raise interest rates six times by the end of next year to prevent a wage-spiral. If it hesitates, the bond markets will take matters into their own hands. "This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that's possible. It has lost all credibility," said Mr Bond."

Did you catch any of my posts about the NIPSCO NatGas rates here? The residential rate has gone from $.70/therm in Jan rising every month to $1.72/therm now, a 150% increase in 6 months.

Yes, I did. Folks are going to have to adjust their spending habits by eliminating everything they don't need to only spending for what is necessary. Read the Shedlock article I just posted. He makes a good case for deflation although I think that the government is about to start handing out money on street corners once it looks like deflation is here. No doubt, they will also welcome wage inflation about the same time. Anything but a deflation. More stimulus checks are coming. Either that or we're in for an awful lot of financial pain.

Nick Barisheff said POG to go 10-20x from where the price is now on the Puplava show.

Great having you back. It's a little tough getting the guys here to laugh without a straight-man. Best Wishes.

I really enjoy listening to Puplava's show. Lots of good information. I generally have to listen to it 2 or 3 times to get it all. I'm way behind in my reading after being off most of the week. Going to be doing some catching up. Just found Willie's last article and about to start reading it now.

Good to have you back again Arete. With peak oil has come peak credit. We basically burned the credit bridges with the mortgage security fiasco. I was reading some MSM piece wondering whether the problem is unwilling borrowers or unwilling banks. It is neither, it is the drying up of the credit resale market as only the Fed and other PTB are buying asset backed crap these days. That translates directly to inflation as they print up dollars to but that junk.

But rather than loan us back our dollars, the oil producers are using them to buy oil futures. That is ultimately self-defeating. A proper hedge strategy would have them buying puts against their inventory, not calls. So when the oil price crashes they will have to pump more and accelerate the price crash. The Fed and other CBs will be inflating hard in the other direction. They will win in the long run, but they welcome the deflation roller coaster since it helps their cause.

Money problems do not come from a lack of money, but from living an excessive, unrealistic lifestyle

Another forecast of a potential price of $10,000 for POG from Jay Taylor looking at Ms. Yamada's financials ...

If Ms. Yamada’s target of a 10,000 Dow makes the bottom of the bear market in stocks, we would need to see the price of gold rise by more than tenfold to hit our 1:1 ratio.

OK. Here is the miner's handicap for last week. Things didn't get too bad. As a group these miners did -1.6% which is not as bad as they usually perform. They did go in the opposite direction to gold and silver. They still seem to have a push button panic attack. After all, gold did +0.7% and silver did +2.85% for the week. They musta spotted something that I didn't. I didn't budge at all and haven't for several months now and actually layered in several times over the last few months.

Here's the yearly chart and GSPG is still at the top. KBX has not mounted an atack for weeks now.

Now for the weekly. Not too many miners hit 9% or above. Only 16 out of the 55 didn't go negative. Good for them. Those guys for the most part didn't panic and head for the exits. Guess they were tooo far down for the year anyway.

Or is it Sunday morning for you. OK, now I'm going to look at the HUI. It didn't do bad at all. It went down to the fuchsia line and bounced off of it. For da Boyz to be right-on, they needed to close right on top of the fuchsia line.

That fuchsia line also coincides with the 50dma almost but most notably the FIBO line at 431.59. That is a pretty strong sign and I wouldn't expect to see the HUI go below it but it could. Wednesday's close was right on the FIBO line of 443.08 and dead nutts on da Boyz line too.

You might think that the US is now exporting oil. The Dollar did a moon shot when the ECB raised their federal rate which is hawkish and gives support to the Euro vs. the Dollar. So what happened?

Well it was one of those instances where a low bid was tossed in on the Euro and probably a high ask on the Dollar. This paniced the longs on the Euro and the shorts on the Dollar. A pure manipulative scenario. Probably orchestrated by the US to slap the ECB in the face for raising their rate when they weren't supposed to in order to support the Dollar. Especially after BB and the FED declined to raise the FED rate last week.

So now we have a strong Dollar with/from a weak Dollar policy. How long will that last? It'll probably correct tomorrow, Monday. After all if one is an investor who likes to earn income and save wealth, you have to go with the higher interest rate not the lower one. This was a one-time market play provided by the structure of the market. That structure no longer exists after Thursday's play-out. Look for normalcy and intelligence on Monday.

There is no doubt about that. Whole sale gas was around $3.59 and gas was selling retail for $4.08-$4.20. That is with the summer blend price increase. Most summer spreads around my neck of travel is near $1.00.

If America is destroyed, it may be by Americans who salute the flag, sing the national anthem, march in patriotic parades, cheer Fourth of July speakers - normally good Americans who fail to comprehend what is required to keep our country strong and free - Americans who have been lulled into a false security (April 1968).---Ezra Taft Benson, US Secretary of Agriculture 1953-1961 under Eisenhower

I noticed they were only serious to a 1/4 point extent and indicated "no bias" towards further increases. It was also interesting that some country finance ministers criticized the decision while the Euro finance minister supported it. Apparently the populist politicians like Sarkozy are supporting inflation, so perhaps the French want to inflate the Euro in the theory that the Eastern Europeans or the Spanish will take the price hit.

Saw relatively few holiday travelers through PA today. The way up (last Thurs) was busier, including a 7 mile backup with lots of trucks in it on 81. There's a few more for lease signs but busier billboards. Gas was 3.97 in NJ, 4.49 in NY near the CT line (or CT near the NY line) and 420's most other places. Saw one billboard for 4.34 diesel, perhaps it was out of date, most pumps were 4.75. Saw a birthday card in the humor section complaining about ridiculously high gas prices: $3.37 ("at least your age is increasing at a slower rate" or something like that).

Money problems do not come from a lack of money, but from living an excessive, unrealistic lifestyle