Fadel Gheit, Oil Analyst, Oppenheimer & Co. speaks to BNN today on oil price speculation.

Great quotes in this piece: “where are the adults?” “its like we are allowing under age drinking.” “Pension funds are down 40% because they have been making bets and speculating in commodities. They were playing a game without rules. They were not investing.” “Investing starts with preservation of capital; where is the preservation of capital when assets are down 40%?”

Good stuff.   more »

Good post from the Ramsey Report ala "The Big Picture" blog this afternoon:

"We’re all technicians now!’ Stocks again are so divorced from reality and economic fundamentals that investors must be technicians in order to capture upside and avoid the inevitable recoupling with economic and financial reality…Remember the last recoupling of a few quarters ago?

Please recall the Goldman CFO, David Viniar, warned in early February 2008 that there is a “total disconnect between the equities market and the credit market.” [King Report 2/7/2008] We are now witnessing a historic disparity between stocks and GDP as well as employment. The autumn is going to be very, very interesting.

Globe & Mail: Stocks surged Thursday morning when the Bank of Canada said it has seen signs that the US economic recession has reached its bottom. We don’t recall the Bank forecasting the economic collapse last year."

I too had to chuckle on the Bank of Canada forecast of recovery this week. Not only did they not forecast our recession in Canada, 6 months ago they were still assuring us Canada would decouple and enjoy solid growth for 2009. Oops! Read the whole article here.   more »

This week world markets have broken through some key upside resistance: 9000 on the Dow, 950 on the S&P, 1900 on the NASDAQ. It’s been quite a week, adding to an already record run in equity prices from the March 9 lows. The issue for thinking investors (as always) is what does reasonable risk management suggest one do.

The bullish argument is that in March world markets hit a 12-year low after a historically large 63% decline on the S&P and that the extent of this decline was overdone. Those bullish of the stock market here believe that it has started into its next cyclical expansion forecasting an economic recovery that is now underway. This may be true. I, for one, hope that it is.

The bearish argument is that we are in a period of deflation similar to the 1920 and '30's and that the world economy will continue to contract for the next few years leading the stock market lower over the next many months. This may be true. Sprott (and many others) sell gold and commodity funds as the answer. See Sprott's July 2009 comment for a good summary of this argument.

It is actually impossible to predict which of these arguments (or any other) will win in the end. Admission of this fact is the first step to enlightenment. But what then is a realist to do with investment capital?

In practice we have developed some key rules to help us navigate through uncertainty, and it can be useful to review them...   more »

TV clips can be so fast that its a miracle you get any complete thoughts out sometimes. My point that was not finished on Fast Money tonight was that western world over-consumption and then retrenchment, has triggered the global recession. And this new reduced level of consumption is likely to continue for several years.

To think that emerging markets can somehow pick up the slack in world demand because they have a few billion people walking about is to miss the point about consumption. It is not just about population; it is about marginal propensity to consume per unit (human)...   more »

The UK entered into the global downturn later than America and they are likely to be still in recession for another year. After that they are likely to have a period of still falling house prices and sub-trend growth for several years to come.



As domestic demand plunges around the world, each country is hoping that renewed demand can come from somewhere else, anywhere. So far, evidence to support this hope is scant...   more »

Ms. Park was a guest on BNN Wednesday July 22 at 8:15 am and CNBC Fast Money Wednesday July 22 at 5pm. Clips of the interviews are available on the web here:
BNN and CNBC   more »

I admit that I have a deep revulsion to banker/brokers. I can't help it. I worked on the sell side for 6 years and I know the beast intimately. Call me a reformed smoker I suppose. Sure many of the people who work at broker/dealers are "nice" people, but they are either don't care about the outcome to their customers or they are wilfully blind; either way, not much to respect. A drug dealer is a drug dealer even if they wear a nice suit. Remember Martin Sheen’s character in "Wall street" and how he warned his son that fine wine and art collections don't mean you aren't hanging with moral reprobates.

Until one of them gets arrested or sued of course; notice the way star-traders for financial institutions become "rogue" traders when things go the wrong way or an immoral practice is finally revealed to the public...   more »

Gary Shilling has decades of hands-on experience in financial markets. This doesn't mean he gets a crystal ball into the future any more than anyone else; but wisdom and experience can help us to see the main trends through the noise of day to day movements. The KISS principle really does apply in this area. While most of the world is distracted by day to day "plays" that are basically completely random and unpredictable, those that know what to look for in the larger picture can be like the focused kids in a class of ADHD’s.

This clip Shilling did with Henry Blodget yesterday connects the main dots better than most. The headline is dramatic here, no one can say with certainty that there will be a “market crash” before year end, but another downside test is in the realm of probable. And yes, market movements in our highly connected world are “all one big trade."

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Risk appetite hit another rough patch the past 4 weeks. Disappointment over the so far illusive economic recovery was pulling “growth” assets down again with a mood as damp and dreary as this summer’s weather. Then yesterday morning in a spark of light, respected banking analyst Meredith Whitney pointed out that Goldman Sachs was likely to report a surprising profit surge for the second quarter. This glimmer of profit, no matter how fleeting, was enough to spur some into a round of buying. I can’t blame people for seizing an excuse for a party. Things have been pretty grim the past year. Levity is scarce as unemployment rates move through 10%, and chunks fly off World Trade like a worn tire unravelling on the freeway.

But for anyone that cared to digest the detail in Whitney’s comments, it must be noted that she was talking about a short term trade potential for Goldman. She was not declaring an end to the world recession; she was not saying banks were all good again; she wasn’t even saying Goldman Sachs was all good again. Whitney was talking about the opportunity for a trade if this bank was able to surprise to the upside for this quarter. Today they did, reporting net income of $2.7 billion on record net revenue of $13.8 billion and the bank stocks sold off again. Great; now what? See Shining Results Aren't Solid Gold.

Unfortunately we are still too early in this summer to declare doldrums gone...   more »

I know that for many it seems like our troubles today are unique and worse than recent memory, and for those who are out of work, today is bad, no doubt. But for perspective it can be helpful today to read books and articles from other tough periods in human history. The 60's and 70's for example, were similar to today in many ways: deleveraging economy, over-indebted people and economies, OPEC Oil Crisis, Watergate, Viet Nam, social dis-ease.

Before the 60’s, the late 40's and 1950's were a period of remarkable growth and prosperity in North America. Not having to dig itself out of post-war rubble was an advantage that North America had over Europe and Japan. America was the industrial power best equipped to help the world rebuild after the war. It brought in the GI Bill to offer affordable housing and post-secondary education programs to its war vets. Everyone was buying houses, raising families and spending money. And then after this remarkable period of rejuvenation, came the usual suspects of over-capacity, inflation, over-indebtedness and the down side of up. Peter Bernstein was one of the big picture economic commentators writing about it in real time:

"It may be said that the pride of prosperity is resurgence of our sense of social indignation – social urgency – that poverty, filth, disease, or discrimination should exist anywhere in America or elsewhere. If we can recapture this passion for social justice that carried the nation to greatness in the past, we shall find that the price we must pay is but a small one indeed for the rewards it can bring to us and to our children."
PETER L. BERNSTEIN, The Price of Prosperity, 1962

People generally get a whole lot humbler after the boom. The world gets scaled back down to a more practical model and we work away at the recovery. This is the normal course; the way our problems have always been solved over time.   more »