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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Perspective who wrote (9376)	7/16/2004 1:54:50 PM
From: mishedlo	Respond to of 116555

Bill Bonner on consumers and the war economy Daily Reckoning Bill Bonner, back in Baltimore... *** Consumers are tapped out. Businesses are paying down debt. What happens next? Almost every president wants to be a war president, except for one who has actually been a war president. War gives politicians an excuse to spend as much as they want... while vastly increasing their power. And now... with corporations and consumers cutting back (they have too much debt)... government spending seems critical. Richard Russell explains: "[That] leaves it up to the U.S. government to keep the economy rolling. And if the government is the savior, that means that the U.S. government, in order to stave off dangerous deflation and recession, will have to run deficits, big deficits, huge deficits, maybe deficits of up to a trillion dollars a year. Impossible, you say? Hey, we're running budget deficits of half a trillion dollars now - and as recently as the year 2000 we were running budget surpluses. "So what's the government going to spend the money on? My thoughts immediately turn to the "Big D" - defense. After all, who can object to our defending our nation from the new enemy? Whatever it takes, baby, whatever it takes. "The US is now fighting two wars, and daily we're hearing that the nation is under siege with the implication that maybe World War III is about to start. Believe me, from now to election time we're going to hear endless talk from this administration about terrorism, danger, the need for a bigger military, more ships, more planes, more bodies in the military. Get ready for code yellow, code red, danger signals, and increasingly, the need for a major build-up of the defense system. After the election, if the Bush team is still in, it would not surprise me to hear more about a draft. And to be honest, I don't know if it will be any different if the Kerry team is triumphant. "This then, is the way the government plans to hold off deflation and recession. It can all be expressed in four words - MORE SPENDING and BIGGER DEFICITS."

To: Perspective who wrote (9376)	7/16/2004 2:10:36 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Oil swells to new six-week high as funds flow in. Panic in heating oil looming? Friday, July 16, 2004 4:44:05 PM reuters.com LONDON, July 16 (Reuters) - U.S. oil prices climbed to a new six-week high on Friday as a falling dollar and the vulnerability of stretched global supplies spurred a new wave of speculative buying, traders said. News of OPEC pumping at its highest rate in a quarter of a century made only a minor dent in gains, as big-money funds were seen moving back into long positions that had been liquidated over the last month and a half. U.S. light crude <CLc1> jumped 46 cents to $41.23 a barrel, off the day's $41.80 high but still near June's $42.45 peak, a record for the contract's 21-year history. European benchmark Brent <LCOc1> was up 45 cents at $37.93 a barrel, having climbed more than $1 at one point, buoyed also by an exceptionally strong cash crude market in the North Sea. Speculators had pared back their net length in the NYMEX crude contract to around 25,000 lots last week, nearly the lowest level this year and only one-third of the length they held in late May. "Today you're getting some rebuilding of that length after a build-up of cumulative factors this week," said Kevin Norrish, energy analyst at Barclays Capital. A drop in weekly U.S. crude and gasoline inventories and an upward revision to this year's 24-year-high demand growth forecast helped foster a more supportive fundamental view, he added. U.S. economic data on Friday also appeared to tempt funds, after news of a muted rise in U.S. inflation and a below-forecast report on consumer inflation that sent the dollar down to four-month lows versus the euro. That drop seemed to trigger a rush of fund buying onto the energy complex, as investors looked to oil to provide high returns in a time of weakness for fixed-income and foreign exchange markets, analysts say. OPEC, PUMPING HARD, DROPS MEETING Oil prices have surged 16 percent in the last three weeks, kept on edge by disruptions to oil supply in Iraq, Norway and Nigeria at a time when the world's spare capacity is at its lowest in more than 10 years. Capacity has ebbed as OPEC pumps faster to meet rising Chinese and U.S. demand, with the cartel set to boost production by 440,000 bpd to 29.91 million bpd this month due mostly to a recovery in Iraq, consultants Petrologistics said in a report on Friday. Iraqi exports in the first half of this month came to only 1.4 million barrels per day (bpd), about 400,000 bpd below capacity, as sporadic pipeline sabotage and technical problems hit flows, shipping sources told Reuters. But this was up from June's average 1.2 million bpd exports. The new data puts OPEC output at its highest since December 1979, according to Geoff Pyne, an independent energy analyst and veteran OPEC watcher. With only Saudi Arabia holding any significant additional capacity, analysts expect little new oil to emerge when the cartel's ceiling rises another 500,000 bpd from August 1. The group, which controls around half the world's oil exports, is now pumping more than two million bpd over its new 26 million bpd August quota, according to Petrologistics' data. It estimated OPEC-10 output in July at 27.81 million bpd, up 76,000 bpd over June. With high oil prices seemingly out of the group's control, ministers cancelled next week's planned meeting. It will next meet September 15. HEATING OIL WORRIES Distillate supplies in the United States, where the Northeast region is a major winter-time consumer of heating oil, have emerged as an early driver for the energy complex as dealers fretted over the pace of pre-winter inventory building. Heating oil futures <HOc1> reached a year-and-a-half high of $1.1250 a gallon on Friday, the strongest on record for July, when gasoline is typically the market's strongest product. By the afternoon, it was trading up 1.64 cents at $1.1150. Seeking to avoid panic buying, the U.S. government Energy Information Administration (EIA) said on Thursday there was plenty of time to boost heating oil inventories before the winter heating season arrives, so traders should not bid up fuel prices. This week's EIA data reported a significant build up of 2.7 million barrels in middle distillate inventories for the week ended July 9, putting them three percent above this time last year. fxstreet.com