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

To: Knighty Tin who wrote (14054)	10/26/2004 10:58:49 AM
From: mishedlo	Respond to of 116555

EU FORECASTS Euro zone 2005 growth forecast cut to 2.0 pct; 2004 raised to 2.1 Tuesday, October 26, 2004 2:15:31 PM afxpress.com BRUSSELS (AFX) - The European Commission raised its estimate for euro zone growth this year to 2.1 pct from the 1.7 pct given in its April forecasts, but cut its 2005 estimate to 2.0 pct from 2.3 pct due to soaring oil prices In its autumn forecasts, the commission said 2006 growth in the euro zone is expected to reach 2.2 pct "Economic activity in the euro area and the EU gathered speed in 2004, supported by the continued buoyancy of global growth and trade," the commission said But compared to previous economic upturns, external demand has continued to be the main support for longer, while domestic demand has been slower to recover Euro zone growth will slow slightly next year "as the sharp rise in oil prices takes its toll", it said "As the price of oil subsides, growth is set to pick up once again in 2006." The commission said it expects the average price of oil will rise to 50 usd per barrel in the fourth quarter from 40.6 usd in the third quarter, before easing to an average of 45.1 usd next year and 40.1 usd in 2006 While the rise is less in real terms than during previous shocks and most major economies have reduced their dependence on oil, this year's price surge has already dented world growth for 2004 "The persistence of higher oil prices and their increased volatility have adverse implications for the growth outlook over the forecast horizon," it said By country, the commission raised its 2004 forecast for German growth to 1.9 pct from 1.5 pct, but cut its 2005 prediction to 1.5 pct from 1.8. It forecast 2006 growth of 1.7 pct For France, it increased its 2004 forecast to 2.4 pct from 1.7 pct, but lowered its 2005 figure to 2.2 pct from 2.4 pct. It forecast growth of 2.2 pct for 2006 Outside the euro zone, the commission raised its forecast for UK growth in 2004 to 3.3 pct from 3.0 pct. It left its 2005 estimate unchanged at 2.8 pct and forecast 2006 growth of 2.8 pct On euro zone inflation, the commission raised its headline forecast for harmonised consumer prices in 2004 to 2.1 pct from 1.8 pct and to 1.9 pct from 1.6 pct for 2005. It forecast inflation of 1.7 pct for 2006

To: Knighty Tin who wrote (14054)	10/26/2004 12:20:31 PM
From: patron_anejo_por_favor	Read Replies (1) \| Respond to of 116555

<<"I humped her leg and they arrested me for beastiality.">> Ann Coulter had him on? ROTFL, she's a better sport than I thought she was....<G>

To: Knighty Tin who wrote (14054)	10/26/2004 12:30:07 PM
From: mishedlo	Respond to of 116555

NZ Commodities Report www1.asbbank.co.nz The higher NZD/USD is again largely the result of a lower USD dollar. The US requires a large capital inflow to fund current expenditure and this inflow becomes less likely when US growth prospects diminish and/or the rising interest rate trend is checked. Now is such a time, in part due to high oil prices. At this stage the USD move is within the trading range already set for 2004. Another USD rebound is expected in the weeks ahead but that still leaves scope for the NZD/USD to reach levels around 72-73 cents in the meantime. ======================================================== Wonder what their thinking is on that US$ rebound Mish

To: Knighty Tin who wrote (14054)	10/26/2004 12:34:46 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Fed´s Ferguson sees solid gains in U.S. capital spendin - Tuesday, October 26, 2004 4:15:01 PM afxpress.com Fed's Ferguson sees solid gains in U.S. capital spendin - UPDATE 1 WASHINGTON (AFX) -- U.S. businesses are discarding their earlier caution and investing more in capital goods and structures, Federal Reserve Vice Chairman Roger Ferguson said Tuesday in a speech in South Carolina. "The fundamental features of the current U.S. economy argue for solid increases in capital expenditures needed to produce and facilitate sales," he said in prepared remarks made available in Washington. While he remained optimistic about U.S. economic growth, Ferguson did not directly address whether the Federal Open Market Committee would raise rates again at its Nov. 10 meeting. Most analysts believe the FOMC will raise the federal funds target rate to 2 percent at the meeting, the fourth increase this year, but perhaps pause in December "The prospects for business investment over the next few quarters are, on balance, relatively positive," he said "With steady contributions from business investment, [gross domestic product] growth is likely to continue expanding at a good pace, leading to further job gains and increases in family incomes," he said Business investment makes up only about 10 percent of U.S. final demand for goods and services, but plays an important part in the business cycle of booms and busts. The 2001 recession was primarily felt in the capital spending sector Businesses remain somewhat cautious even now, he said. Corporations have accumulated $1.3 trillion in cash, which means their balance sheets are in good shape. "But the news is also troubling," he said. "Given the current low interest rates, the preference for holding financial assets over expanding operations suggests that businesses lack confidence in the future profitability of their potential ventures." Still, capital spending has been increasing, perhaps in part because of a special tax provision that allows companies to immediately expense capital items rather than writing them down over time. How much impact the tax provision has had on capital spending is unclear, he said, but he does believe the expiration of the provision at the end of the year could damp spending in early next year. Spending on structures remains weak, he said, but he thinks "the nascent upturn in this sector is likely to continue." Ferguson said he does not believe the recent increase in inventories bodes ill for the sector. Inventory accumulation can be tricky to forecast and just as tricky to analyze after the fact, because much depends on whether the increase in inventories is desired or not. "Inventory investment does not seem to be pointing toward another problematic inventory cycle," he said, but, on the other hand, "inventories are not likely to be a major spur to GDP growth in the near future." ============================================================== In terms of contradiction and wishy-washyness I think this has to be high on the list. Mish

To: Knighty Tin who wrote (14054)	10/26/2004 12:44:26 PM
From: mishedlo	Respond to of 116555

Dollar recovers as US data confounds gloomiest predictions Tuesday, October 26, 2004 3:52:46 PM afxpress.com LONDON (AFX) - The dollar recovered slightly against the euro as US consumer confidence data outpaced the market's gloomiest predictions, providing speculative players the opportunity to square up positions. Though a closely-watched survey into US consumer confidence skidded for the third straight month in October, the market had positioned itself for a poor survey in the wake of the collapse in the corresponding measure from the University of Michigan The Conference Board's main consumer confidence index, compiled from a survey of 5,000 households, dropped 3.9 points from the previous month to 92.8 in October, the lowest reading since March Tony Norfield, global head of forex research, said the market needed even worse data to justify its positions, which were heavily against the dollar "It's relatively easy to get this sort of retracement," said Norfield, who can see the euro slipping down towards the 1.26 usd mark over the coming days The euro's cause was not helped this afternoon after the European Commission cut its growth forecast for 2005 and warned that nearly half of the 12-nation eurozone is set to breach their own budget rules, as surging oil prices hit a fragile recovery But the EU executive, in its regular autumn forecasts, said growth this year is stronger than expected and predicted that the economy should pick up again in 2006 [Gee a new variation of "wait till next year" and "second half pickup". Now it's "the economy should pick up again in 2006" - Invest now. Beat the rush. mish] Overall though, analysts said dollar sentiment remains weak on continuing concerns about the US economy and the associated trade deficit In addition, uncertainty surrounding next week's US presidential election has kept the dollar on the backfoot With the polls showing Senator John Kerry and President George Bush locked in a very tight battle for control of the White House, concerns are mounting that the US will suffer a prolonged period of post-election uncertainty, much like what occurred in 2000 "The momentum is towards a weaker dollar as sentiment is still bearish," said Neil Mackinnon, chief economist at ECU Group Today's US consumer confidence data, he added, were a reminder to dollar bears that the economic data flow is somewhat mixed and patchy Given the widespread concerns affecting the dollar, the euro climbed to an eight-month high of 1.2841 usd earlier, just shy of February's all-time high of 1.2925 usd. Meanwhile, the yen held firm against the dollar despite warnings of possible central bank intervention by Japanese officials. Hiroshi Watanabe, the vice finance minister for international affairs, said last night that the pace of the yen's appreciation has been too strong and that the Japanese authorities are watching the currency market very closely In the UK, the pound dropped slightly against the euro and the dollar after a relatively downbeat quarterly industrial trends survey from the Confederation of British Industry this morning The CBI said the UK's manufacturing recovery is stalling under the weight of slowing demand and higher costs, particularly of raw materials, with evidence of sluggish orders and output growth over the last three months

To: Knighty Tin who wrote (14054)	10/26/2004 1:12:31 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Crackspreads explained by BI on the FOOL ====================================================== Crackspreads are a fundamental part of the oil business, and someplace where I think TA CAN be a productive activity. First thing I would say is that you need to wrap your head around one fact. No one wants or needs crude oil, they want the products it can be turned into. Refineries "boil" crude oil within specialized equipment, the difference between the value of a barrel of crude oil and the products it produces is called the crack spread. The crackspread times volume less refinery operating costs will be a refineries gross profit. Crack spread is used in two ways, first is a product crack spread the "fuel oil crack spread" is the diffrence between the price of a barrel of crude and a barrel of fuel oil. Any product spread is the value of the product less that of the crude. Yesterday for example now with crude at $54.33/BBL and fuel oil at $1.56/gallon. The fuel oil crack spread was equal to: (42$1.56) - $54.33 = $11.19 With gasoline at $1.3935 the "gasoline crack spread" was equal to: (42$1.3935)- $54.33 = $4.19 Normal crackspreads or reference crackspreads are the ones traded on NYMEX. The 3-2-1 crackspread is based on a "normal" refinery, and what is commonly refered to as just the "crackspread". Twice the gasoline crackspread plus the fuel oil spread divided by 3 is the value of this crackspread. A refiner would buy 3 barrels of crude oil and sell two barrels of gasoline and one barrel of fuel oil to lock in the "crackspread"

To: Knighty Tin who wrote (14054)	10/26/2004 2:10:01 PM
From: mishedlo	Respond to of 116555

Contrarian Chronicles - Fleck moneycentral.msn.com Insurance mess may ignite bigger problems The insurance scandal is another strong signal that our financial system is vulnerable to serious disruptions. The next 18 months could be dangerous ones. By Bill Fleckenstein When future historians look back on this period, with all its attendant dangers and warning lights flashing in neon, they will scratch their heads as to why everyone was so complacent and so supremely confident right before the financial hurricane hit. Last July, I talked about the potential for a market dislocation in my column "Odds of a crash are higher than you think.” Once again, I want to reiterate that it's a low-probability event. But whatever the probabilities were when I laid them out a few months ago, they can only be higher now. A watchdog smells a rat Marsh & McLennan (MMC, news, msgs), the subject of a continuing investigation by New York Attorney General Eliot Spitzer, demonstrates the problem that could happen in many other arenas. As Gretchen Morgenson of The New York Times pointed out last Wednesday in "Investors Are Losing Ground As Insurance Inquiries Expand:" "The pain of losing almost 50% in share value is perhaps most excruciating to the thousands of Marsh & McLennan employees who have bought Marsh stock. . . . There is a pension plan, a stock purchase plan, 401(k) accounts, stock option grants and a cash bonus deferral plan to name a few. And in all cases, Marsh stock or Putnam funds dominate the offerings. . . . According to Marsh filings, at the end of last year, a defined-contribution plan for Marsh & McLennan employees had assets of $2.24 billion. Almost 60% of the plan's assets were in Marsh stock -- $1.3 billion worth." The eggs-in-one-basket aftermath However, it won't be just MarshMac employees who will be affected. If any employees had thought they were wealthy because they held a lot of MarshMac stock, and if they used that wealth to buy expensive homes during the housing bubble, they'll be in trouble when the housing bubble starts to reverse along with their net worth. The banking industry could wind up with a lot of bad paper. I'm not saying that events surrounding MarshMac will play out exactly this way. Down the road, though, I expect that we'll see dominoes fall in this manner on a large scale when the bear market really gets rolling in stocks (again) and housing. These two asset-class declines are going to feed on each other, and a whole lot of credit is going to be impaired. Playing debt dominoes . . . Though the financial industry has managed to remain unscathed (thanks, in no small part, to its absurd accounting), it too will get mauled if shenanigans are turned up and that impacts credit rates. Most of these financial companies have a good deal of debt, and it's held by other companies, both within and beyond the financial arena. So, the potential for this investigation to snowball is not trivial. Of course, if you add a problem in the financial industry to problems in real estate and the stock market generically, you can see how we would be headed for a world of hurt. It's what happens when you pursue irresponsible, reckless policies for so long. . . . and derivatives dominoes The probability of a dislocation may also have increased due to the location of the ticking time bomb known as derivatives. American International Group (AIG, news, msgs), another target of Eliot Spitzer's investigation, is very active in the derivatives market. If the company -- one of the few AAA credits left in America -- has a problem of any magnitude that impacts their perceived credit quality or credibility, it would in all likelihood wreak havoc in the derivatives market. (As Warren Buffett said last July, "We have trillions of dollars of derivatives, of which we have no knowledge of how they might work in a market meltdown.") Think about this from the perspective of foreigners. They now look at Fannie Mae (FNM, news, msgs), MarshMac, AIG and Merck (MRK, news, msgs) and observe a black cloud hanging over what have been deemed to be some of the best corporations in America. It's just another psychological negative for the dollar, in my opinion, and a reason for foreigners not to want to own our stocks. (Editor’s note: the euro is up 4% against the dollar in the last month.) Trouble is so close you can taste it Meanwhile, for the "professionals" who play with other people's money, the rally cry is: Buy stocks first and ask questions about fundamentals later. With a huge chunk of third-quarter earnings behind us, we're at the point in the quarter when the bulls typically like to throw a party. They figure there's no more bad news in the offing, and in the absence of bad news, stocks should always go up. Over the next couple weeks, I'm sure that the bulls will attempt to rally the market whenever they can. They may be able to party a bit longer, but big trouble seems so close, you can almost taste it. Once we get past the election and its attendant noise, attention will be turned to the fourth quarter and, more importantly, 2005. By my reckoning, the next 18 months look to be one of the most dangerous periods for financial markets in the last 50 years. The destruction of capital measured in the trillions lies ahead in the not-too-distant future.

To: Knighty Tin who wrote (14054)	10/26/2004 2:12:26 PM
From: mishedlo	Read Replies (3) \| Respond to of 116555

Check this out: Snow stated today that consumer confidence is on a pretty good course. Mish

To: Knighty Tin who wrote (14054)	10/26/2004 2:47:26 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

World oil prices set for significant fall over next two years - IEA Tuesday, October 26, 2004 6:06:01 PM afxpress.com LONDON (AFX) - World oil prices will be driven down over the next two years due to there being enough crude to meet soaring demand, said Claude Mandil, executive director of the International Energy Agency. Supply and demand "fundamentals do not justify current oil prices", Mandil told reporters gathered at the Oil and Money conference in London. "Current prices are not sustainable and market fundamentals will drive them down in the next two years," he added. Mandil spoke as the IEA said global oil reserves would remain abundant for several decades despite a surge in energy demand

To: Knighty Tin who wrote (14054)	10/26/2004 2:51:17 PM
From: mishedlo	Respond to of 116555

Heinz on oil COTs Date: Tue Oct 26 2004 11:54 trotsky (Apollo,@oil prices per the trade data) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved note that there are several factors at work here: 1. both heavy and sour crudes trade at a VAST discount to WTI light sweet which trades on the NYMEX. 2. many importers will probably have hedged their exposure somewhat, via fixed price contracts for near term delivery months, or other means. 3. it takes 6 weeks or so for a tanker to arrive from the Persian Gulf. in those 6 weeks, the price can move a lot, but the cargo will already have been paid for. 4. the government lies as much as it can get away with in its economic statistics. Date: Tue Oct 26 2004 11:47 trotsky (mooney, 8:13) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved "With THREE closes just below $55 in last 5 trading days in November Crude and ONE close just above $55 in same five days in December Crude, the oily one is again looking toppy." you might get a short term correction, but my usual caveat is coming here: top picking small speculators continue to hold a huge net short position ( for this category of traders ) in WTI crude - in fact, for the first time in months, the commercial hedgers are actually NET LONG crude oil, if only by 1,000 contracts. therefore there continues to be a lot of upside potential for the contract, since a technically strong market exhibiting so much negative sentiment usually tends to rise much further than anyone thinks possible. in fact, it is the strongest 'expectational analysis' ( a term copyrighted by Schaeffer Research ) position a market can find itself in. the risks assumed by the speculative shorts are imo enormous - the physical oil market is so drum tight that any significant disruption could send the contract into a parabolic blow-off rally. note that in terms of the positioning data, the speculative position could easily swing from 1,000 contracts net short to 80,000 contracts net long per the contract's history - thus i conclude that there continues to be a plethora of OTHER markets where considering short positions makes more sense and involves far less risk. top picking in crude just doesn't seem worth it at this stage - imo it's better to wait for the speculator positioning to significantly swing toward a large net long exposure before actually committing funds to such a trade. trotsky (Heavy Metal, 8:41) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved it is important to remember that Bush is NOT a 'conservative' in any heretofore known sense of the word. if i didn't know anything about him and someone described to me the set of policies implemented under his watch, i would guess he was a socialist, or more precisely, a national socialist. i'd really be surprised if it were then submitted to me that he is actually a Republican. the upcoming election seems to be a contest between a national socialist and a more traditional socialist ( known in Europe as a 'democratic socialist', a label that serves to differentiate mainstream socialism from the inherently non-democratic communism ) . there is in fact no 'conservative' candidate. the libertarian Badnarik seems intellectually closest to conservatism, and the same goes for the Constitution party candidate.

To: Knighty Tin who wrote (14054)	10/26/2004 3:01:34 PM
From: mishedlo	Respond to of 116555

Date: Tue Oct 26 2004 12:48 trotsky (mini-miner, 9:17) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved this lack of demand for US minted eagles is actually a bullish contrarian indicator. the 'little' guy has never driven the gold price, and never will, except in the final, 'mania' phase of a bull market. by the time Joe 6-pack 'gets it' as you have put it, you should be thinking of selling, since it means that the end is near. note btw. that i view India a little bit differently in this context, since gold buying is such an ingrained feature of India's investing scene - i.e. we're dealing with a far more educated and sophisticated gold buying public there. Date: Tue Oct 26 2004 12:14 trotsky (Apollo, 8:49) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved " There is the issue of quality of oil, but the discrepency between Light Sweet & others is obviously not that dramatic." not true - the price difference IS in fact dramatic. the discount of heavy and sour crudes to light sweet is the biggest ever recorded, fluctuating between $12 and $20 per bbl.

To: Knighty Tin who wrote (14054)	10/26/2004 3:04:09 PM
From: mishedlo	Respond to of 116555

UK's RICS Sep House Price Balance -30 Vs -12 In Aug -2- -By Saadia Hashmy and Paul Hannon, Dow Jones Newswires On a non-seasonally adjusted basis, the balance of surveyors reporting a rise in prices in the three months to September also fell by a large margin to -36 from -13 in August. September's decline in house prices has been the largest fall in prices recorded since June 1995, according to surveyors at RICS. The institute attributes the huge slump in house prices to the Bank of England's five repo rate increases since November 2003. "Despite interest rates being left unchanged in September, the previous three increases in the space of only four months have weighed on buyer activity," said surveyors at RICS. Completed property sales fell 11% in the three months to September, while surveyors noted that the number of new prospective buyers has also fallen every month since May 2004. Consequently the number of sellers on the market rose moderately in both August and September, according to RICS. As a result stocks of unsold properties have risen to the highest level in almost a year, the survey said. The housing market slowed across the majority of regions in the U.K., with only Scotland reporting price rises in September. Regions in the North of England and Wales recorded minimal declines in house prices, while other regions remained unchanged, contrasting starkly with house price booms witnessed in the first-half of 2004. Looking ahead, surveyors predicted the short-term outlook for house price growth is negative, primarily due to the rise in mortgage repayments by over a third in the past year, alongside a slowdown in economic growth, RICS said. "Interest rates are close to reaching a peak and the economy is likely to stay out of recession, we forecast the housing market is set to see a period of stagnation over the next six to 12 months," said surveyors at RICS.