STOCK MARKET WATCH, Friday 14 May

[ozymandius]

Friday May 14, 2004

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 255
DAYS SINCE DEMOCRACY DIED (12/12/00) 3 YEARS, 154 DAYS
WHERE'S OSAMA BIN-LADEN? 2 YEARS, 207 DAYS
WHERE ARE SADDAM'S WMD? - DAY 421
DAYS SINCE ENRON COLLAPSE = 903
Number of Enron Execs in handcuffs = 18
Recent Acquisitions: Jeff Skilling
ENRON EXECS CONVICTED = 2
Other Arrests of Execs = 54

U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES-----------------------------S&P FUTURES




AT THE CLOSING BELL ON May 13, 2004

Dow... 10,010.74 -34.42 (-0.34%)
Nasdaq... 1,926.03 +0.44 (+0.02%)
S&P 500... 1,096.44 -0.84 (-0.08%)
10-Yr Bond... 4.85% +0.05 (+1.13%)
Gold future... 374.90 -2.80 (-0.74%)

DOW..........................NASDAQ.......................S&P

||


GOLD, EURO, YEN and Dollars


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PIEHOLE ALERT

Heads Up!
Preliminary info on appearances by Bush & Co. throughout the country. Details & links are added as they become available so check back. And if you know more, are organizing something, or would like to, contact [e-mail]

For information on protests and other actions Citizens For Legitimate Government

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[ozymandius]

1. WrapUp by Mike Hartman

Interest Rates, Inflation, Debt and Dollar

There was plenty of economic news for the markets to digest today. The Commerce Department said retail sales fell by 0.5% in April which was the first decline in seven months and the Labor Department reported initial jobless claims increased to 331,000 from 318,000 reported last week. The number is still considered relatively low when it comes in below 350,000. The economic report that had the biggest impact on the market today was the Labor Department’s release of the Producer Price Index with an increase of 0.7% after economists were forecasting an increase of only 0.3%. The surprise inflation number implies producer prices are rising by an annualized rate of 8.4% and caused bonds to fall, the dollar to rise, and stocks to flop around neutral for most of the session.

I’ve been watching the Dow Industrial Index just barely clinging on to the 10,000 as trading progressed throughout the day. This doesn’t really surprise me after the action we saw yesterday. Stocks were crumbling badly with 25/30 stocks in the Dow losing ground and the index down roughly 160 points. The last two hours we saw the DJIA make a miraculous recovery of nearly 200 points for the close with 24/30 stocks in positive territory. Nice reversal, but it was difficult to find a market driven cause for the rebound. I read and heard three separate analysts claim stocks bounced higher because they were “technically oversold.” If you take a look at the two charts of the S&P 500 you can see what the analysts were referring to as the reason for the two-hour rally.

-cut-

Debt and Interest Rates

These are difficult financial times we live in! The short version is simply that interest rates need to go higher to arrest the dollar’s decline and slow inflation, but they can’t raise rates significantly because there are too many debts at all levels. It would be a crushing blow to an already fragile system that is purely based on debt creation. If you have not read “Illusions” by Jim Puplava yet, I strongly urge you to have a look as it explains much of the big picture. There are many noteworthy points in the article, but this is one that stands out in particular. “Wall Street believes the Fed will embark on a rate renormalization program that will take the fed funds rate from its current 1% to a more neutral rate of 3%. This is an illusion. In an economy that has $35 trillion in debt, of which $15 trillion has been added in the last six years, a tripling of the federal funds rate would become disastrous. The financial sector has doubled its debt from $5,532 billion in 1997 to $11,402 billion in 2003.”

-cut-

My final quote to wrap it up on inflation comes from an article by Laurence Kotlikoff in the current issue of Fortune Magazine. “Hyperinflation is a real and present danger for the simple reason that the US government is effectively bankrupt. Its fiscal gap is $51 trillion, when measured as a present value. That’s 11.6 times official debt, 4.5 times GDP, and 1.2 times private net worth. Coming up with $51 trillion without a printing press would require, immediately and permanently, either hiking federal income taxes 78%, cutting Social Security and Medicare benefits 51%, or eliminating more than 100% of federal discretionary spending, which ain’t easy. And waiting only makes matters worse. This is America’s menu of pain. When investors around the world wake up to US insolvency, it will be extremely expensive for our government to borrow. The only option then will be printing huge sums of money – generating exactly the hyperinflation the bond market has decided to expect.” (This is why I make such a big deal about the government debt sales. They have to take precedent over all other market activities.)

http://www.financialsense.com/Market/wrapup.htm

[54anickel]

26. Great wrap up! That quote out of Fortune - YIKES!

[54anickel]

2. Morning Ozy and all. Anyone catch last night's Nightly Business Report?

Interesting interview with Frank Gretz. Here's the transcript if you missed it.

http://www.nbr.com/

05/13/04: Market Outlook-With Frank Gretz, Chief Technical Analyst at Shields & Company

SUSIE GHARIB: Our guest tonight says we`ve seen the top of the market and forecasts that between now and the November elections, stocks will go lower. Joining us now with some technical analysis on the markets, Frank Gretz, chief technical analyst at Shields & Company. Hi, Frank.

FRANK GRETZ, CHIEF TECHNICAL ANALYST, SHIELDS & CO.: Hi, Susie, how are you?

GHARIB: Let`s begin with your take on the markets from a technician`s point of view.

GRETZ: Well, from a technical standpoint, the market has a fundamental problem of sorts, and that would be rising rates. If you look at the S&P 500, maybe 20, 25 percent of the S&P 500 is financial by market weight. And if you look at financial stocks just by the sheer numbers, there are just many, many, many rate-sensitive stocks. So with these stocks no locker acting well, that has a big impact on the technical background in a negative way.

GHARIB: Some of the technicians who I have heard from said that the failure of the markets today to have -- specifically the Dow, to have a big rally back after yesterday`s turnaround and that reversal is a negative sign. What do you make of that, do you agree?

GRETZ: Well, you know it could have been better obviously. Yesterday`s reversal, as a matter of fact, right on the S&P 200-day moving average, often a support area, that was a good place for the market to rally yesterday and did yesterday. But it didn`t follow through today. It`s hard to read too much into that, but certainly it would have been nice thing. You know, I think if you look at tomorrow, the news hasn`t been so terribly bad, the market is just deeply, deeply oversold. So even if we don`t follow through right away, I think we`re in a spot where the market should begin to try to hold in here.

GHARIB: You were telling me earlier that only 44 percent of the stocks that are traded here at the New York Stock Exchange are trading above their 200- day moving average, what is the significance of that and what is that telling you about the health of the markets?

GRETZ: Well, a 200-day moving average from a technical standpoint is a pretty long-term moving average. So I use that to so say stocks are in uptrends or downtrends. So as little as -- at the beginning of April, for example, there were 89 percent of New York Stock Exchange stocks above their 200-day. We have since slipped to 44 percent. There is two problems here. First of all, you know, if you`re a buyer of stocks, it just means it`s much, much harder to find stocks in uptrends, that is much, much harder to find stocks that are going up. From a real technical standpoint, though, the problem is even more severe in the sense that when most stocks begin to go down, they don`t suddenly turn around and start going up. Usually they end up dragging down the rest of the strong stocks. So for example, when you drop below 60 percent in this measure, you usually go to 30 percent, or even 20 percent sometimes before you make a stand. And that`s one of the reasons why I think the market still has more to go on the downside.

GHARIB: So is this also underscored by the number of stocks advance/decline ratio, the number of stocks that are advancing versus the number that are declining?

GRETZ: Absolutely. We went through a year most days were most days there were 2000 stocks up. Now it`s very, very hard to find a day with -- since the beginning of April, that is, a day with 2000 stocks up. Most days they have 2000 stocks down. So again, if you look at it most stocks are going down, it makes it harder to make money. And also from a technical standpoint, the advance/decline index is really a measure of the average stock as opposed to stock averages. And again, the average stock tends to drag down the stock averages eventually.

GHARIB: So then just to wrap it up for us, your outlook, you said a few moments ago that the market is very oversold. So does that mean that we`re going to get some buyers in? I mean, what do you see the trends over the next couple of weeks and months?

GRETZ: Well, you know, a lot of this business is observing. And if the market are oversold, the market should rally. If the market rallies, you know, you look at a rally, you learn a lot from rallies in a downtrend. A good rally means either the market isn`t as bad as I think. But if the market can`t rally in here, that also tells you something. I think we should rally. I think this may be a topping process. We may be on our way lower for the rest of the year, but it is a process so we will have plenty of opportunities to see rallies even if on balance things are looking down.

[ozymandius]

3. That sounds like a healthy way of looking at the situation.

"A topping process", he says. That's fine. It looks like Gretz is promoting the long-term view and that is healthy. Overall it sounds like he is not bothered by the 10k ceiling and the recent downtrends.

I did not see the program unfortunately. Nightly Business Report is a great show - let the guests speak with little interruption.

[54anickel]

5. Yes, I try to catch it when I can. There have been less cheerleading

guests on lately. Possibly because there is less to cheer about when you take an overall perspective rather than the tunnel vision the talking heads tend to spout off about. NBR usually has some pretty decent guests.

[54anickel]

4. US rate futures point to June Fed rate hike

http://www.forbes.com/personalfinance/funds/newswire/2004/05/14/rtr1371690.html

snip>
July futures <FFN4> price in a 98-percent chance of the federal funds rate will be raised by 25 basis point following the June 29-30 Federal Open Market Committee meeting, up from the 90-percent chance at Thursday's close.

By year end, futures imply the Fed's key interest rate will be above 2.00 percent.

The consumer price index rose by a smaller than expected 0.2 percent in April. But the so-called core CPI, which excludes food and energy prices, rose 0.3 percent against forecasts for a 0.2 percent gain.

more...

[ozymandius]

6. I'll try to tune in later.

Right now though, I have to get my son to the doctor for a checkup.

Have a great day Marketeers!

Ozy :hi:

[54anickel]

8. Bye Ozy! Hope to see you back.

If not, have a great weekend!

[54anickel]

7. Futures looking a bit better than they were. Here's the blather

9:18AM: S&P futures vs fair value: -4.2. Nasdaq futures vs fair value: -4.5. Futures trade has little reaction to the better than expected April Industrial Production and Capacity Utilization reports, and continues to point to a moderately lower open for the cash market.
8:56AM: S&P futures vs fair value: -4.4. Nasdaq futures vs fair value: -6.0. Futures trade bounces off its lows of the morning as traders ease off their selling activity related to the April core CPI report... The 0.3% increase (consensus of 0.2%) was more the result of higher housing and medical costs than anything else... Two more economic reports are due out before the open: April Industrial Production and Capacity Utilization... Both will be released at 9:15 ET, and the consensus estimates are pegged at 0.5% and 76.7%, respectively.

8:32AM: S&P futures vs fair value: -8.6. Nasdaq futures vs fair value: -15.0. Futures indications slip off the larger than expected increase in the April core CPI... The figure checked in at 0.3% versus the consensus of 0.2%, even though the CPI (including food and energy) came in at 0.2% (consensus of 0.3%)... As a result, the cash market is poised for an even weaker start, pressured by concerns about rising inflation.

8:00AM: S&P futures vs fair value: -6.5. Nasdaq futures vs fair value: -11.0. A bearish bias prevails in the futures market as traders have not been encouraged by DELL's Q1 (Apr) report - citing a lack of upside surprise and a sequential decline in gross margins... Losses in the European and Asian indices have not helped matter either, and have paved the way for the lower open.

[54anickel]

9. Consumer prices up 0.2% in April

http://cbs.marketwatch.com/news/story.asp?guid=%7B1CBA0520-1C14-4AC6-A9DF-9DA6E8E2F1ED%7D&siteid=google&dist=google

WASHINGTON (CBS.MW) - With energy prices nearly flat, U.S. consumer prices rose a seasonally adjusted 0.2 percent in April, the Labor Department reported Friday.

The gain is the smallest of the year.

The core rate of the consumer price index, which strips out food and energy costs, rose 0.3 percent. Read the full release.

The figures were largely in line with expectations on Wall Street. Economists surveyed by CBS MarketWatch were forecasting that both the CPI and core CPI would rise 0.2 percent. See Economic Calendar.

Bonds gained some strength from the benign report. Stock futures remained under pressure. See full story.

In a separate report, the Commerce Department said business inventories rose 0.7 percent in March, but the key inventory-to-sales ratio dropped to a record low of 1.30 as sales increased a record 2.9 percent. See full story.

more...

[UpInArms]

10. daily dollar watch

http://quotes.ino.com/chart/?s=NYBOT_DXY0

Last trade 91.99 Change +0.03 (+0.03%)

http://www.fxstreet.com/nou/noticies/afx/noticia.asp?pv_noticia=1084539635-9e32d306-26973

Dollar reverses to trade lower vs. euro after CPI data

CHICAGO (AFX) -- The dollar forfeited a small gain against the euro and is now trading marginally weaker against Europe's shared currency. The reversal followed a consumer price index report that offered little surprises and raised some doubts for aggressive or immediate Federal Reserve rate hikes. With energy prices nearly flat, U.S. consumer prices rose a seasonally adjusted 0.2 percent in April, the Labor Department reported Friday. It's the smallest gain of the year. The core rate of the consumer price index, which strips out food and energy costs, rose 0.3 percent. The dollar was down 0.3 percent against the euro, with the shared currency valued at $1.1840 in early U.S. trading. The dollar maintained a slim gain on the yen after the data, up 0.1 percent at 114.64 yen

...more...

the dollar is recovering from its earlier losses - the UMich has come in "steady" - guess it's a wait and see what the day brings.

Have a great day Marketeers!

[54anickel]

11. Anatomy of a Liquidity Drought

http://www.forexnews.com/AI/default.asp
(Articles and Ideas section)

Yesterday’s sharp rally in the stock market from its 200-day MA and channel support was entirely technical in nature. While the ricochet should see some followthough this week, a lasting rally may not be forthcoming.

Widely overlooked in yesterday’s session was that prior to the spectacular stock market rebound nearly all the “easy money” trades put on last year were down together. To see stocks, bonds, precious metals and the Australian dollar falling in unison was a mirror reflection of last year’s harmonious rally, and perhaps an ominous sign for the remainder of 2004. The ebb and flow of these formerly unrelated markets indicate that their current association has more to do with the presence of liquidity than prevailing fundamentals.

Given the simultaneous rally in stocks, bonds, commodities and foreign currencies in 2003, a rising dollar and rising rate environment undermines a set of assumptions that were previously in place. This might mean the current downswing in the stock market is just a temporary adjustment to the global reflation trades of 2003. But with the bond carry trades quickly unraveling, the cheap market fuel of 2003 is in short supply.

snip>

Yet with the US economy expected to show strong economic growth over the remainder of 2004 is the stock market simply overreacting to rising interest rates? The answer to that question depends on just how dependent output growth is on a negative real interest a rate from the Fed. Our fear is that the rally of 2003 may prove to be uncomfortably reliant upon low interest rates.

snip>

Recall that in early March as interest rates were still falling we said the enourmous speculative interest in our bond markets forewarned of another precipitous meltup in rates this year. We wrote, “anecdotal evidence suggests that speculators in the US bond market know they are leveraged to a falling dollar and foreign demand for US debt. If this trend were to reverse, speculators should watch out for a rising dollar, rising yields and falling stocks in the months to come.”

more...

[Coventina]

12. The "I Ching" on today's market

Hi everyone!

Thought I should do a reading, since I haven't been able to in a while.

Today's reading is SYNERGY changing to TRAVELING. Interestingly, the changing line from SYNERGY fits with TRAVELING: "When you first begin on your new path, you are bombarded by impressions. Keep your goal in mind constantly and you can avoid confusion and error."

I'll just post a short quote from TRAVELING: "Long-range and significant aims cannot be accomplished. The traveler should hold to modest goals and behave with good grace and propriety."

Based on that, I am going to predict a day of ups and downs on the market today. I think it will finish slightly up.

Have a great weekend everyone!
:hi:

[UpInArms]

13. Market Numbers at 10:18 EST

Dow 9,945.23 -65.51 (-0.65%)
Nasdaq 1,897.83 -28.20 (-1.46%)
S&P 500 1,090.43 -6.01 (-0.55%)
10-Yr Bond 4.796% -0.055

10:00AM: Stocks dip lower following the worse than expected Michigan Consumer Sentiment figure... The preliminary May reading was unchanged with the April result and missed the consensus estimate of 96.0... The 2.2 point rise in the economic conditions component of the index offset the 1.2 point decline in the economic outlook, leaving the report flat at 94.2... The end result was actually somewhat surprising considering the rise in global tensions and the spike in energy prices... Investors have disregarded these reasons, however, and used the data as a reason to sell...

Technology has fallen the most, and taken the Nasdaq 1% lower...NYSE Adv/Dec 1378/1020, Nasdaq Adv/Dec 952/1344

[UpInArms]

14. Market doing better - Dollar dropping

10:35 EST

Dow 9,979.66 -31.08 (-0.31%)
Nasdaq 1,904.93 -21.10 (-1.10%)
S&P 500 1,092.51 -3.93 (-0.36%)
10-Yr Bond 4.814% -0.037

Last trade 91.60 Change -0.36 (-0.39%)

[WillyT]

15. Kickapoo !!!

Have a great weekend all!!!

:loveya:

[54anickel]

16. US deficit bigger worry than China slowdown

http://nationmultimedia.com/page.news.php3?clid=6&id=113649&usrsess=1

International Monetary Fund economists are warning that twin US deficits would weigh down East Asian economies in the medium term more than the slowdown in China.

snip>

The US current account deficit, in particular, is now equivalent to 5 per cent of gross domestic product, soaring to record of US$45.9 billion (Bt1.9 trillion) in March. Financial markets have been questioning the sustainability of this deficit, as evidenced by the broad weakening trend in the US dollar.

snip>

"Events in the past week illustrate how the global economy accommodates US fiscal and monetary policies. As the markets have expected the Federal Reserve to increase interest rates, the shift in investor sentiment has caused financial market turbulence," Adams said.

Asia's governments therefore should be prepared for the ripple effect of a US policy adjustment.

But will the move from low interest rates to normal rates be smooth? Some believe the transition is manageable in the short term, but the US current account deficit would linger as the global economy copes with it for several years to come.

[54anickel]

17. Dollar Declines Against Euro, Yen After U.S. Confidence Report

http://quote.bloomberg.com/apps/news?pid=10000103&sid=aXIbAJOOTGSc&refer=us

snip>

``The numbers didn't play out the way the market had thought, so a lot of people had to cover'' earlier bets that the euro would fall, said John Cholakis, a currency trader at Natexis Banques Populaires, a unit of France's fifth-biggest lender. ``Same thing with the yen -- people were caught long dollars.''

Against the euro, the dollar traded at $1.1863 at 10:27 a.m. New York from $1.1821 late yesterday, according to EBS, an electronic foreign-exchange dealing system. Compared with the yen, the dollar fell to 114.36 from 114.52.

``People have made some good money this week and they are shutting off now,'' said Paul Mackel, a currency strategist in London at ABN Amro Holding NV. ``The current rally in the euro can go a little bit higher -- maybe to $1.1940.''

snip>

``If the CPI had come out much higher, then it would have been fantastic and the dollar would be at $1.17 now against the euro,'' said Matthew Vandyckhoff, a currency strategist in London at Brown Brothers Harriman Ltd. ``We are stuck in a range between $1.1750 and $1.2125 for now.''

more...

[54anickel]

18. Treasuries Rise as Traders Buy Back Notes After Price Report

http://quote.bloomberg.com/apps/news?pid=10000103&sid=ahkji97x0wgo&refer=us

May 14 (Bloomberg) -- U.S. Treasury notes rose as traders bought back securities they had sold in anticipation a government report would show a faster rise in consumer prices.

Ten-year notes are still headed for their eighth straight weekly decline, the longest losing streak in a decade. The drop has pushed yields to their highest since mid-2002. Inflation erodes the value of fixed-income payments.

``The market was braced for more inflation,'' said Anthony Crescenzi, chief bond market strategist at Miller Tabak & Co. in New York. ``There is probably a good chance for a rally over the next week.''

snip>

``Everyone has already made their bets about higher rates and had been fearing an higher CPI,'' said Jeff Given, who manages $10 billion in fixed-income at John Hancock Funds in Boston. ``We are just getting a short-covering rally here since the numbers came fairly in line.''

Investors who are ``short'' sell borrowed securities in the hopes of profiting by buying them back at a lower price. The number of investors betting on a drop in Treasury prices reached a record high, according to a weekly poll of clients by J.P. Morgan Chase & Co., the third-biggest U.S. bank.

snip>

Today's rally follows the government's so-called quarterly refunding. The Treasury sold $54 billion of three-, five- and 10- year notes to finance a budget deficit that the Bush administration projects will reach a record $521 billion this fiscal year.

``Dealers finally found the level where investors were willing to buy the week's three refunding auctions,'' said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi Ltd. ``It took a 4.90 percent 10-yearr note yield to bring investors in off the sidelines.''


more...

[54anickel]

19. 12:08 update

Dow 9,996.27 -14.47 (-0.14%)
Nasdaq 1,904.57 -21.46 (-1.11%)
S&P 500 1,094.05 -2.39 (-0.22%)
10-yr Bond 4.818% -0.033
30-yr Bond 5.527% -0.031

NYSE Volume 582,096,000
Nasdaq Volume 730,064,000

12:00PM : With not much out there to snap it out of its funk, the stock market has resumed what has become its normal course of trading - down... Economic and earnings reports were not necessarily bad, but were also not strong enough to inspire buying interest in this downtrodden market... The April core CPI rose an unexpected 0.3% (consensus of 0.2%) and brought to mind thoughts of inflation, although much of the increase came from housing and medical costs...
The preliminary May Consumer Sentiment index was also somewhat disappointing - checking in at 94.2 (consensus of 96.0) - and suggested consumer sentiment was not rebounding... Other economic reports were more encouraging: March Business Inventories at +0.7% (consensus +0.4%), April Industrial Production at +0.8% (consensus +0.5%), and April Capacity Utilization at 76.9% (consensus 76.7%) - all signaling early inventory rebuilding that provides a boost to production... Nonetheless, these economic data were swept under the rug - partially because they pointed to a strengthening economy which might precipitate a rate hike - as investors remain focused on other developments, like Dell's (DELL 34.67 -1.13) Q1 (Apr) report...

The computer hardware name just met the consensus EPS estimate of $0.28 as gross margins declined sequentially... Tech has thus been the weakest group in trading, along with biotech and brokerage... Blue chip areas have done a bit better, with energy, restaurant, and casino putting up noticeable gains...SOX -2.1, NYSE Adv/Dec 1533/1606, Nasdaq Adv/Dec 861/1999

[ozymandius]

20. lunchtime update and blather

12:21
Dow 10,011.38 +0.64 (+0.01%)
Nasdaq 1,907.10 -18.93 (-0.98%)
S&P 500 1,095.75 -0.69 (-0.06%)
10-Yr Bond 4.793% -0.058

U.S. stocks stall on mixed data

NEW YORK (CBS.MW) -- U.S. stocks were lower Friday in choppy trading as investors steered their way through a mixed batch of data, including an unexpected dip in consumer sentiment, a benign inflation report and stronger-than-expected industrial production figures.

"It's a real mixed bag on the data front," said Art Hogan, chief market strategist at Jefferies & Co. "And with such confusion on the numbers, the market is certainly not going to trade up in the current environment. The path of least resistance is down."

High energy prices also remain a concern with the June crude oil futures contract touching a new record of $41.50 a barrel in morning trading, while June unleaded gasoline hit a fresh all-time high of $1.406 a gallon on the New York Mercantile Exchange.

more...

[ozymandius]

22. motion sickness setting in

12:47
Dow 10,021.95 +11.21 (+0.11%)
Nasdaq 1,911.88 -14.15 (-0.73%)
S&P 500 1,097.17 +0.73 (+0.07%)
10-Yr Bond 4.782% -0.069

[54anickel]

21. Alternative Energy - down, out and forgotten?

http://www.gold-eagle.com/editorials_04/chapmand051304.html

snip>

Rising oil prices act like a tax on the economy hitting every sector including transportation (trucking, airlines), tourism (airlines, autos), consumer (autos, home heating) and business (heating, oil based products). Cries are rampant of gouging by oil companies and price fixing. Demands are made to do something about it. North Americans are used to paying the world's lowest price for oil and gas and anything that prevents them from going anywhere, anytime in their SUV's is taken personally.

Numerous analysts keep saying that prices should come down because Saudi Arabia can pump more or that more production will come on stream to compensate for growing demand. Clearly while oil plays less of a role in the economy then it did back in the 1970's it still plays an extremely important role and rising prices slows economic growth, contributes to rising interest rates and inflationary pressures and is a significant contributor to the recently announced record monthly trade deficit in the US.

It is moot whether the price temporarily comes down because Saudi Arabia might pump more or oil or others come forward to take up some slack. The ability for oil producers to pump more oil is limited and much of the oil that can be added comes from the sensitive Mid-East, an area wracked in war, terrorism and uncertainty. That US troops currently sit in Iraq only a short hop away from Saudi Arabia is also moot as ongoing rebellions in Iraq demonstrate that it doesn't take a whole lot to disrupt supplies, pipelines and oil infrastructure.

In our article on "Energy Wars" (April 16, 2004) we noted from Paul Michael Wihbey, President of GWEST and writing for First Energy Capital that instability in Iraq, Venezuela and Saudi Arabia are key areas of political instability that are going to continue to drive up the prices of conventional oil. And considerable higher prices are required to tap fully into the huge potential unconventional reserves in the Canadian Oil Sands and the Venezuelan Shale Fields and other places.

So what happened to alternative energy led by hydrogen fuel cells in all this chaos and price increases? It seems to have fallen off the radar screen. Well it is still there with numerous companies including the major automobile companies, oil companies, power companies, other giants such as General Electric and numerous small independent companies building and even selling alternative energy solutions. Fuel cells are being used but so far use is limited although one sits right in Times Square New York in a shiny new building called the Conde Nest. Fuel cells are being applied not only to automobiles but cell phones, batteries, laptops and host of other products.

more...

[ozymandius]

23. Have a wonderful weekend folks!

My shift at home is over and now it's off to work I go. Have a great weekend and I'll look forward to seeing you back here on Monday.

Ozy :hi:

[54anickel]

24. Global: The Long Road

http://www.morganstanley.com/GEFdata/digests/20040514-fri.html#anchor0

I continue to believe that the rebalancing of a lopsided, US-centric global economy will be the big macro call over the next three to five years. There are two principal avenues by which such a realignment can occur — a shift in the world’s relative price structure (i.e., foreign exchange rates) and/or a change in the mix of real growth among the major countries of the world. The evidence suggests that the process has barely begun.

It’s worth reviewing the gravity of the problem. Based on revised IMF data, it now appears that the United States accounted for fully 98% of the cumulative growth in world GDP over the seven-year period, 1995 to 2002 (the prior data put that share at 96%). America’s growth contribution over that interval was more than three times its 30% share in the global economy. Conversely, this calculation also means that the remainder of the world economy — some 70% of global output — collectively accounted for only 2% of the cumulative increase in world GDP over the 1995 to 2002 time frame. This is a truly astonishing result. Never before has the modern-day world economy experienced such a protracted period of unbalanced growth.

These calculations are based on market exchange rates — adding up dollar-based measures of GDP for the world’s various economies. This is in contrast to the purchasing power parity (PPP) metric that we normally use to assess global growth. The PPP construct is designed to purge the transitory impacts of currency fluctuations, enabling us to get a cleaner read on the world’s underlying growth dynamic. By contrast, at market exchange rates, the global growth dynamic reflects the interplay between currency swings and country-specific growth disparities. As such, it captures the full array of forces that generate global imbalances. And in doing so, it also provides hints as to how any subsequent rebalancing could occur.

The global imbalances that emerged over the 1995 to 2002 period were a by-product of two major trends — a sharp widening of the growth gap between the US and the rest of the world and a sustained rise in the foreign exchange value of the dollar. Real GDP growth in the US averaged 3.3% per annum over this seven-year period; that’s fully one percentage faster than 2.3% average gains recorded in the remainder of the industrial world (i.e., the euro zone, Japan, Canada, Australia, the newly industrialized economies of Asia, and a broad array of smaller advanced economies in Europe). The growth disparities were most pronounced in the first five years of this seven-year interval, 1995 to 2000. Over that period, real GDP growth averaged 4.1% per annum in the US, more than 50% faster than average gains of 2.7% elsewhere in the industrial world.

snip>

All in all, the progress report on global rebalancing is far from encouraging. So far, any realignment in a US-centric world economy has been modest and accomplished mainly through a relatively limited decline in the US dollar. A shift in the mix of the underlying global growth dynamic has yet to occur. If rebalancing continues to be channeled mainly through currency adjustments, there would have to be a sharp further decline in the dollar. The only way to avoid that outcome, in my view, would be for a significant reversal to occur in the growth disparities between the US and the rest of the world. This would most likely entail a major shift in the mix of global growth — away from America and back toward Europe and Japan in the developed world and into China and India in the developing world. Until the adjustment process enters that more fundamental phase, I believe any recovery in the world economy can only be tenuous, at best. It’s likely to be a long and arduous journey on the road to global rebalancing.

more...

[54anickel]

25. A Crude Shock

http://www.nytimes.com/2004/05/14/opinion/14KRUG.html

So far, the current world oil crunch doesn't look at all like the crises of 1973 or 1979. That's why it's so scary.

The oil crises of the 1970's began with big supply disruptions: the Arab oil embargo after the 1973 Israeli-Arab war and the 1979 Iranian revolution. This time, despite the chaos in Iraq, nothing comparable has happened — yet. Nonetheless, because of rising demand that is led by soaring Chinese consumption, the world oil market is already stretched tight as a drum, and crude oil prices are $12 a barrel higher than they were a year ago. What if something really does go wrong?

Let me put it a bit differently: the last time oil prices were this high, on the eve of the 1991 gulf war, there was a lot of spare capacity in the world, so there was room to cope with a major supply disruption if it happened. This time there isn't.

The International Energy Agency estimates the world's spare oil production capacity at about 2.5 million barrels per day, almost all of it in the Persian Gulf region. It also predicts that global oil demand in 2004 will be, on average, 2 million barrels per day higher than in 2003. Now imagine what will happen if there are more successful insurgent attacks on Iraqi pipelines, or, perish the thought, instability in Saudi Arabia. In fact, even without a supply disruption, it's hard to see where the oil will come from to meet the growing demand.

But wait: basic economics says that markets deal handily with excesses of demand over supply. Prices rise, producers have an incentive to produce more while consumers have an incentive to consume less, and the market comes back into balance. Won't that happen with oil?

more...

[54anickel]

27. 3:26 update

Dow 10,012.16 +1.42 (+0.01%)
Nasdaq 1,908.10 -17.93 (-0.93%)
S&P 500 1,096.38 -0.06 (-0.01%)
10-yr Bond 4.788% -0.063
30-yr Bond 5.503% -0.055

NYSE Volume 1,130,575,000
Nasdaq Volume 1,283,230,000

2:55PM: Stocks edge off their best levels as this session continues to be more akin to something out of a country western song - two steps forward, one step back... Buyers have not exactly exhibited the kind of conviction needed to send this market shooting higher - with sector leadership spotty, market internals mixed, and the indices still trading below key technical levels like the 50-day moving average... As it stands now, the Dow, Nasdaq, and S&P 500 are poised to close lower for the week, but not by much...
Despite its weak performance today, the Nasdaq is just 2 points away from finishing higher...NYSE Adv/Dec 2133/1131, Nasdaq Adv/Dec 1347/1711

[gratuitous]

28. And at the finish, it's . . . !

Beetle Bomb.

Up two whole points, the Dow stays above 10,000, and the Bush economic miracle grinds slowly on.

[Coventina]

29. Whoo-hoo!

I finally got a prediction right!
It was bound to happen sooner or later!
;-)

[54anickel]

30. US Corp Bonds - Spreads widen; junk sees outflow

http://www.forbes.com/markets/newswire/2004/05/14/rtr1372450.html

NEW YORK, May 14 (Reuters) - U.S. corporate bond spreads ended wider on Friday, hurt by a lackluster performance in stocks and worries that rising consumer prices will prompt the Federal Reserve to raise interest rates soon.

Junk bonds ended mostly unchanged after opening about one point lower on the heels of a $2.1 billion outflow from junk bond funds, the second biggest outflow ever, according to AMG Data Services. The junk bond market firmed after investors decided the selling was overdone, but it could still face headwinds in the days ahead, traders said.

"Clearly we're in a higher interest rate environment or the market believes we are, so I really don't foresee the market rallying a lot," said Steve Hornstein, head trader for Pinewood Capital Partners in Greenwich, Connecticut.

In the high-grade arena, spreads, the extra yields corporate bonds pay over U.S. Treasuries, widened 0.01 to 0.02 percentage point overall. Automakers ended about 0.03 percentage point wider after opening about 0.10 percentage point wider, traders said.

[54anickel]

31. Closing numbers and blather

Dow 10,012.87 +2.13 (+0.02%)
Nasdaq 1,904.25 -21.78 (-1.13%)
S&P 500 1,095.70 -0.74 (-0.07%)
10-yr Bond 4.788% -0.063
30-yr Bond 5.503% -0.055

NYSE Volume 1,339,569,000
Nasdaq Volume 1,531,410,000

Close Dow +2.13 at 10012.87, S&P -0.78 at 1095.66, Nasdaq -21.78 at 1904.25: Stock market took a stab at a recovery effort in early afternoon trading, but ultimately, found its attempts sabotaged by the same thing that has plagued trading all this week - weak conviction on the part of buyers... With rising interest rates on everyone's minds, earnings and economic news need to be nearly perfect to prompt buying interest... This failed to materialize in today's session as earnings from Dell (DELL 34.72 -1.08) were so-so, and economic data were largely a mixed bag...
The April core CPI rose a larger than expected 0.3% (consensus of 0.2%) and served to reinforce fears about inflation... May Michigan Consumer Sentiment also missed the mark, coming in at 94.2 (consensus of 96.0), as geopolitical and energy worries continue to weigh on investors... Other economic reports were more encouraging - March Business Inventories at +0.7% (consensus +0.4%), April Industrial Production at +0.8% (consensus +0.5%), and April Capacity Utilization at 76.9% (consensus 76.7%) - all indicating improving end market demand and inventory rebuilding...

The market - susceptible to interpret most reports in a negative light with interest rates on the way up - chose to focus on the earlier data, and Dell's Q1 results... The computer maker just met the Reuter Research EPS estimate of $0.28 as gross margins contracted (on a sequential basis)... As a result, technology was one of the weakest groups, weighed down by losses in computer hardware and chip stocks... The blue chip averages managed a basically flat finish, however, on account of solid gains in transportation, energy, homebuilding, and gold...NYSE Adv/Dec 1859/1451, Nasdaq Adv/Dec 1085/2029



Advances & Declines
NYSE Nasdaq
Advances 1874 (54%) 1085 (33%)
Declines 1440 (41%) 2029 (62%)
Unchanged 140 (4%) 138 (4%)

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Up Vol* 624 (46%) 286 (18%)
Down Vol* 694 (51%) 1223 (79%)
Unch. Vol* 22 (1%) 21 (1%)