What a great turnaround!
We can thank our man Paulson and Fed Gov. Plosser, who both made good strong dollar comments early in the day. That puts at least 2 Fed voting members in the raising rate camp and I’m betting tomorrow’s Fed minutes will show a lot more discussion of tightening than the last set. "Monetary policy cannot control changes in the relative price of a key commodity, like oil or food,” Plosser said at a breakfast hosted by the Philadelphia Business Journal. “But it can help ensure that a relative price increase doesn’t turn into a rise in overall inflation.” The Nov. 4 presidential election won’t influence the Fed’s decision incoming meetings, Plosser told reporters after the speech.
That was enough to drive gold, oil and other commodities down sharply while the NYMEX crooks continued their "Tea Party" and dumped 38M barrels of oil that were scheduled for August delivery in just one day, once again leaving Cushing with just 23M barrels worth of contracts for the month and shorting the US another 4Mb a week of delivery. This is the same BS they pulled at the close of the July contract last month – AND IT DIDN’T HELP – despite a month of the lowest level of foreign crude deliveries in 3 years, oil is still finishing the August contract period $10 below where it began.
Last Tuesday I pointed out that we had 154,516,000 barrels scheduled for delivery in August and I warned that "by Monday, at least 110M of these barrels will be dumped, much like a perverse Boston Tea Party, denying US citizens the delivery of barrels we already paid for." Well, it turns out that 133M barrels were turned away from US shores by NYMEX traders even though our inventory levels are 30M barrels lower than last year so there is certainly room for it. What do we call people who purposely choke off our nation’s supply of oil to line their own pockets? Are they market manipulators, simply speculators or, perhaps, economic terrorists who hold the US consumer hostage through their control of the crude supply.
Don’t forget the contract you see on CNBC tomorrow morning will be the September contract, not August so there is an automatic .78 bump built into the price. We have inventories in the morning but if we get past that under $130, then we may get our next leg down in oil to the $110s! While this is great, this does not excuse the action of the NYMEX traders, who have cost this nation an unnecessary $500Bn+ this year in crude alone (and inflated world food prices) by running this scam on the US consumers.
Also as we expected, the housing package is winding it’s way through Congress with the government looking to insure up to $300Bn in refinanced mortgages, which will let many homeowners recast their ARM loans at more favorable terms. That is great for our HOV play, which is humming along nicely, as well as our bank plays as the XLF continues to provide leadership to the markets. The oil patch did not take a big hit yesterday but if the inventory report is bad (for them) tomorrow, we can expect a very big commodity sell-off (XLE/XME puts, DUG calls) that will be a bit of a drag on the markets.
We had a great day today as our faith in both Apple and Google was rewarded. We should have a very different tone than this morning as the market held up very well and we had a huge recovery from WB today that shows investors are turning to look ahead, not behind and misses from YHOO, DRH, CX, ILMN, TRMK, ZHNE and WM are being shaken off in after hours trading. NBR is an interesting miss at they are up 30% this year but the CEO is asking for a mulligan and may get one, at least until the inventory report.
This was just what we wanted this morning, a nice test of the market that we passed with flying colors – the kind of move that makes us feel it may be safe to buy stocks again. Like I said in the morning, we’ll be concentrating on people who already gave us good earnings reports as they have been slow out of the gate an we are a long, long way from recovery at 11,600!
