My Comment: From my previous posts on this blog, it’s clear I’m critical of the stimulus program. This article and many others articles on the subject point out the obvious, the expectations for job creation due to stimulus aren’t being met. This is a nice article from the AP.
By BRETT J. BLACKLEDGE and MATT APUZZO – 2 hours ago
WASHINGTON — An early progress report on President Barack Obama’s economic recovery plan overstates by thousands the number of jobs created or saved through the stimulus program, a mistake that White House officials promise will be corrected in future reports. Continue reading
Anyone who has read my blog for some time, knows that I am bullish on oil over the next 12-24 months. I recommended purchasing oil in the 50s and low 60s . I still like it over that period, but think it ran up a bit too fast. Rex Tillerson, CEO of Exxon said on 6/16/09 The recent rise in oil prices is mainly caused by the weak dollar and not supported by market fundamentals. “When you look at just fundamentals, there’s not a lot to support this kind of price movement we have seen…in the last six weeks…Concerns about a weakening dollar and coming inflation have led some investors to bet on an economic recovery and try to get ahead of a rally.”
Source: Rex Tillerson, Exxon CEO statements made at a gas conference the Dutch city of Groningen.
My Comments: Merkel has been critical of central bank actions for some time. The independence of the Federal Reserve specifically is very suspect to me. Merkel was on the record saying “I view with great skepticism what authority the Fed has and the leeway the Bank of England has created for itself,” Merkel said in a speech in Berlin. “We have to return jointly to more independent central bank policies.” Stricter monetary policy isn’t politically acceptable, even when it’s the right thing to do. Merkel has called for tighter monetary policy (from foreign and the German central bank). Merkel apparently was awake on the day they taught about German’s inflation problems of the past.
Take a look at these two pretty good articles by Bloomberg and old faithful the Wall Street Journal.
My Comments: Interesting quick read. MSFT isn’t the only company analyzing their tax status. I know it sounds good to “close tax loops” and many should, but sometimes it just doesn’t make sense. Honestly, at times I don’t no where the line is either.
“Microsoft Corp. Chief Executive Officer Steven Ballmer said the world’s largest software company would move some employees offshore if Congress enacts President Barack Obama’s plans to impose higher taxes on U.S. companies’ foreign profits.
My Comments: In Germany you can now buy gold out of vending machines in the subway. Gold is a funny asset that many people believe is the only real hedge against inflation. The problem is you will always need willing buyers and sellers and during panics it usually goes up and during periods of normalcy everyone forgets about it. It is the wrong asset to buy and hold for decades, but can provide some diversification benefits during periods of uncertainty.
An article by the AP on newsmax.com stated “Oil consumption will this year fall at the sharpest pace since 1981 due to the crisis afflicting world economies, the International Energy Agency said Thursday as it made new cuts to its forecast for crude demand.”
My Comment: Thank You So Much Captain Obvious! Global GDP is rapidily contracting, for exmaple, GDP (Annualized Q1 GDP from Q4 2008) US -6.3, Germany -14.4, Japan -15.2, Mexico -21.5. With the major economies around the world contracting, demand for crude should be falling. Will it continue to fall? In my opinion no. The global economy will recover over the next 12-18 months and demand for crude should rise again. OPEC and other oil producers have been cutting supply and taking drilling units offline to stabilize the price of crude. This will result in reduced supply (for a while) and at some point increased demand when the global economy rebounds. The price should rise with less supply and more demand! I recommended on this blog to buy oil in the mid 50s and I continue to think that is the right trade.
My Comment: As market observers we have to wonder how much of the jobless losses is factored into the economic data that is coming out. I saw a statistic that for every 6-10 jobs lost adds up to one more foreclosure. Also, the recently announced car dealership closings will have a serious negative impact on the jobs numbers. It feels like the “crisis” may be over, but the economic pain may have a ways to go. We may be in for a long recovery, if measured by jobs, home prices or wages.
Nobel laureate economist Paul Krugman says financial markets have overestimated economic strength in their recent rallies. Continue reading