A new age of higher energy prices may very well be dawning, but the United States isn’t going to rush into the new world order without a fight. Although the options available to the world’s last superpower are dwindling when it comes to keeping energy costs low, whatever does remain of America’s choices won’t soon be surrendered.
Author Archives: James Picerno
THE GOLD RUSH OF ’05
When in doubt, buy gold. That seems to be the informed, or at least inspired decision of the moment. The precious metal today danced about $460 an ounce–the highest since 1988. Year to date, gold’s up 4.6%, making it one of the better performers among asset classes (assuming you think of gold as a separate asset class, which some clearly do).
SENSITIVITY TRAINING
Joe Sixpack’s sensitive to fuel prices after all. Or so one could argue given the latest batch of gasoline data from the Energy Information Administration. The most-recent weekly average for demand, through September 9, fell to 8.636 million barrels of gasoline a day. That’s down more than 4% from 9.027 million b/d in the previous week. The drop’s even steeper from the 9.406 million b/d of two weeks ago. Is this a sign that higher prices have triggered a new era of conservation-minded Americans when it comes to fuel? Or is the recent data an anomaly and/or a cyclical glitch tied to the end of the traditional driving season?
LOOKING FOR MR. DOOMSDAY
It wasn’t supposed to matter, thanks to Katrina. But today’s retail sales report for August may be relevant after all, despite the fact that the report is a snapshot of consumer habits for the weeks leading up to the hurricane’s attack on New Orleans and the surround region. Yes, it’s hard to ignore the 2.1% drop, the biggest monthly decline in retail sales in nearly four years. Or is it?
RESEARCH ROOM UPDATE
Can a central bank’s monetary policy serve two masters? That’s more than an academic question for the United States. The dollar is the world’s reserve currency as well as the domestic medium of exchange. As a result, the Federal Reserve is charged with making monetary decisions that, in a perfect world, serve both local and international objectives at once. Can both be done without compromise? Or is there an inherent conflict of interest in the two? Not to worry, writes William Gavin, vice president and economist at the St. Louis Fed, in a new essay that today becomes the latest addition to our Research Room. Fear not: a central bank can manage its currency for the benefit of its citizens and the global economy without doing injustice to either. The device that lets the Fed burn the monetary candle at both ends is inflation targeting, or so Gavin explains.
IT’S STILL ALL ABOUT OIL
At least Katrina’s dark legacy will eventually fade. Energy is another matter for the simple reason that the bull market in oil may still have legs. If more of the same is coming in the pricing of crude, the trend will eventually squeeze the economy to a degree that’s more noticeable, and for the worse.
FOLLOW THE MONEY
Gold touched a nine-month high this week. Is this a sign that inflationary fears are again moving to the fore? Perhaps, although news of gold’s improving allure from a fashion perspective may have something to do with the latest leg in the metal’s bull market.
SIGNS OF THE TIMES
You can see a lot just by looking, Yogi Berra once advised. True for baseball, true for the stock market, where the 10 sectors that comprise the S&P 500 are dispensing signals about investor sentiment.
ON A CLEAR DAY (YOU CAN SEE FOREVER)
Some say it’ll cost $50 billion. Others predict $100 billion. Senate Minority Leader Harry Reid (D-Nevada) goes as far as to predict it will be $150 billion. Whatever the final price tag for federal spending tied to Hurricane Katrina, the impact on the U.S. budget threatens to be more than trivial. The bond market seems to be preparing for no less. The benchmark 10-year Treasury Note’s yield continued rising today, closing the trading session at 4.14%, the highest since August 29.
AUTUMN’S GREAT DEBATE
The post-summer trading season began today with a bit of dissent over what will, or won’t happen as an economic consequence of Hurricane Katrina. The stock market cast its vote about the morrow in clear terms with the S&P 500 surging 1.3% from Friday’s close. The bond market, by contrast, retreated slightly, pushing the yield on the 10-year Treasury up a touch to around 4.08%.