Will she or won’t she? That’s the question. The answer will be forthcoming. Meantime, there’s the debate, speculation and outright guessing about whether Hurricane Katrina is the straw that pushes the economy into recession.
Author Archives: James Picerno
THE NEW NEW ENERGY BULL MARKET
There were no surprises in today’s update on second-quarter GDP, but the aftermath of Hurricane Katrina has kept everyone guessing on the energy front.
A PAUSE THAT REFRESHES, OR BITES?
The news was something less than a surprise. In fact, factory orders for July dropped less than the consensus predicted, according to TheStreet.com. No matter, the stock market wasn’t much in the mood to celebrate. The S&P 500 closed down modestly today. The bond market, meanwhile, took the other side of the sentiment trade by bidding up the price of the 10-year Treasury. The yield on the benchmark bond fell sharply by the end of Tuesday’s session, settling at 4.1%, the lowest since July 11.
EYE OF THE STORM
Seventy-dollar-a-barrel oil briefly gave the bond market fresh hope. Hope here is defined as a rationale for buying debt securities on the expectation that soaring energy costs will cripple the economy and create new momentum for a decline in the price of money. Will this twisted version of fixed-income hope prevail?
THE TROUBLE WITH CAPS
Let’s get one thing straight (again): price caps won’t help, and almost surely will make things worse. Sure, we understand the motivation behind putting a government-sanctioned ceiling on what someone can charge for widgets, apples, or (to pick a commodity at random) gasoline.
WHO’LL BLINK FIRST?
Oil prices continue reaching into record-high territory, but the consumer, so far, isn’t blinking. The sight of sharply rising energy costs and continued trips to Wal-Mart has surprised more than a few dismal scientists, and caused a few ripples here and there in terms of expectations for corporate earnings. But by and large, given the magnitude of oil’s rise, the American economy has remained largely unaffected by any notable degree. Can this strange dance of ascending consumer spending and energy prices continue? Perhaps, but not without ramifications.
HOME ON THE RANGE
Watching the bond market these days is a bit like watching Rover chase his tail. There’s a lot of spinning and swirling, and a vase or two gets knocked over, but Rover never finds resolution. The fixed-income set too seems to be spinning its wheels a lot lately but just can’t decide if the economy will grow or contract. Depending on the week, one or the other sentiment prevails until some bit of news emerges to reverse the trend.
VARIATION ON A THEME
Judging by the rise of U.S. inventories of crude oil, all’s well at the moment in the land of energy. Commercial stocks of crude (excluding the Strategic Petroleum Reserve) are far above where they were 12 months previous. So why is the price of crude dispatching a decidedly different, if not ominous message?
SUMMER DAZE
Pity the goldbugs. Inflation, depending on your point of view, is climbing higher, or topping out. The price of gold of late arguably reflects a little of each. After a four-year rally that carried the precious metal to over $450 an ounce last December, gold has moved sideways in 2005, reflecting the back and forth that has become the inflation debate.
KEEP ON TRUCKIN’?
Did the price of crude oil peak last Friday, when futures traders in New York pushed up the near-term contract to an intraday high of $67.10, which stands as an all-time high?