Friday Lite

This has been a wild and nasty week in just about every market around the world except for currencies which were tame by comparison - the mainstream news media now seems obsessed with rising inflation and declining share values across the major stock indices.

Last week a Kitco chart was shown where three days of gold trading laid on top of each other failed to show any crossing in the price level from one day to the next - a very unusual occurrence, only possible during periods of large, steady gains.

This week has been much different and there's more excitement in early trading today.

The chart below includes Monday, Tuesday, and most of Wednesday, where Monday's precipitous drop in blue was something to behold - more than $30 in just over two hours after the London open. On Wednesday it came back up over $700 again only to be smacked down in New York trading.
If you look at these charts enough, the pattern of "up in Asia" and then "down in London or New York" seems to be a fairly regular occurrence - it doesn't always work that way but it sure seems to be the case more often than not.

Looking at the unhedged gold miners index (HUI) versus the major stock indices it's clear where the real whacking in equities occurred in recent days. It's not clear what all those QQQQ owners were complaining about though - they got off easy.
Not having looked at this week's results for equities owned here, the mood may turn more somber this afternoon when the damage is assessed. But, knowing that over a period of five years this takes the gold bugs index from a cumulative gain of over 400 percent to back under that level, while the other indices were flat, provides some solace.

By far, the most favorable aspect about what has happened this week with the mining shares is that there are lots of great buying opportunities developing out there right now, with perhaps more to come in the weeks ahead.

A Perverse Methodology

Could things be going any worse for Fed Chairman Ben Bernanke?

The government's price index, which, ironically is 40 percent housing but contains no housing prices, is being driven up by increasing rental costs:

Beneath the surface of rising core consumer prices over the past two months lies a disturbing trend: The slowing housing market is actually making inflation look worse, economists said.
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In the heady days of the booming housing market, more people were buying homes, and fewer were renting, economists said. Supply and demand kept rents comparatively low, and inflation appeared to be contained -- despite the run-up in home prices. But this virtuous circle is now reversing.

Meanwhile foreclosures are rising in Houston, Chicago, Denver, and elsewhere, which in the near-term will likely create even more demand for rental housing.

In spite of rising late mortgage payments, falling stock prices, rising jobless claims, falling consumer confidence, rising anxiety, and falling housing prices in some areas, Mr. Bernanke is keeping a cool head regarding the lynch-pin of the American economy - housing.

"It looks to be a very orderly and moderate kind of cooling at this point," Bernanke said, adding that the U.S. labor market is strong and incomes are rising.

Financial markets view a slowdown in housing demand as a key to Fed policy for the next few months.
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Bernanke said the central bank does not have the ability to fine-tune asset prices or stock prices with monetary policy, but instead is watching the trajectory of the housing slowdown within the context of the overall economy.

If he thought things were getting lousy would he say so? No. And why is this guy smiling about the U.S. housing market?

Former Federal Reserve Chairman Alan Greenspan said on Thursday that the "extraordinary" boom in the U.S. housing market in recent years is over.

"This has been quite an extraordinary boom," Greenspan told a Bond Market Association dinner in New York. "The boom is over. I think we can safely say that with a strong degree of confidence."

Or, as Barron's($) put it, in reacting to the standing ovation he received as he was introduced before Bond Market Association dinner.

Greenspan returned the compliment, noting that without the ever-inventive financial system and the innovations it has wrought over the past two decades, there's no way America could cover a banana-republic-like current-account gap equal to 7% of U.S. GDP. A debt binge of such proportion would never have been possible in past times, when domestic savings had to fund domestic investment. But with the boom in emerging markets, where the thrifty folks save a bigger chunk of their rising incomes, spendthrift Yanks can tap those savings and borrow to their hearts' content.

Does Ben Bernanke yet realize what he has signed up for? Has he received any standing ovations lately?

Jimmy Hoffa - Still Some Unturned Stones

The latest tip as to the whereabouts of former Teamster leader Jimmy Hoffa is that he's been doing underground stud service on a horse farm in Michigan.

In one of the most intensive searches for Jimmy Hoffa in decades, the FBI summoned archaeologists and anthropologists and brought in heavy equipment to scour a horse farm Thursday for the body of the former Teamsters boss who vanished in 1975.
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Over the years, Hoffa's disappearance spawned endless theories — that he was entombed in concrete at Giants Stadium in the New Jersey Meadowlands; that he was ground up and thrown to the fishes in a Florida swamp; that he was obliterated in a mob-owned fat-rendering plant that has since burned down.

In 2003, authorities searched beneath a backyard pool a few hours north of Detroit but turned up nothing. The following year, they pulled up the floorboards on a Detroit home and found bloodstains, but the blood was not Hoffa's.

Thirty-one years and counting - they just might get away with this.

Commodities Bubble or No Commodities Bubble?

According to Caroline Baum at Bloomberg, copper is quacking:

Another sign of the degree to which commodities have separated themselves from reality is the disconnect between home building and copper. Housing data "used to move the price of copper,'' which makes sense since the homebuilding industry is the marginal buyer of copper, Shaoul says.

Year to date, the Standard & Poor's 500 Homebuilding Index, which includes large builders such as Pulte Home Inc. and D.R. Horton, is down 20 percent while copper prices are up 86 percent. Is China really buying all that copper?

While Bob Greer who oversees a $12 billion commodities fund at Pimco disagrees:

"To have a speculative bubble, you need one or both of two things -- one, a restricted supply of whatever it is that's going to bubble up, and two, you need to lose all concept of an objective measure of value."

"The former was true in real estate." he said. "Real estate is in limited supply and you can certainly bid up the price of that limited supply. In the case of dotcoms, there was a classic case of losing all concept of what a measure of value was. Neither of that holds for commodities."

The debate rages on and Caroline Baum's smug and ingratiating style just gets more smug and more ingratiating.

Now Here's Something to Brighten Up Your Day

Thoughts about the rising gold price from The Onion.
The first and last factors make a lot of sense - they probably need to hire some commodity writers.

The Weird Impact of Rising Energy Costs

More signs of stress resulting from high energy prices are being seen worldwide. In this story from Germany, high gas prices are now straining friendships.

A German woman left her friend as a deposit at a gas station because she did not have enough cash to pay for her petrol, police said Wednesday.

"She didn't have enough money to pay the bill, so her friend stayed behind as a human deposit while she went to withdraw cash," said a spokesman for police in the southern town of Muenchberg. "Unfortunately, the woman did not return."

While reasons for the fight were not provided in this report, internet rumors indicate that the fight erupted after five passengers reneged on promises to "chip in" for gas.

A man intentionally ran over five people in North Bellmore, with an S.U.V. after a fight last night, the Nassau County police said. The driver fled the scene of the accident, at 2800 Pacific Ave. But the police later located the vehicle they believed was involved in the accident in Garden City and took the driver in for questioning. The victims were taken to Nassau University Medical Center, the police said. One was in critical condition, a hospital spokeswoman said.

And those poor, poor oil executives and their plight to be heard.

More than 1,000 majority shareholders and executive officers from the nation's largest oil companies gathered in the National Mall and marched to Capitol Hill Monday in a mass demonstration for petrochemical corporations' rights and, according to several of those who attended, "to let our voices be heard at last."

Dozens of the executives, sheikhs, and oil barons who marched to demand an end to their oppression

"We're American citizens, and we demand to be part of the national dialogue," said John S. Watson, vice president of international exploration and production for Chevron Corporation, the world's second-largest oil company. "Many people in our industry think nobody in Washington cares about us, and that our opinions don't matter. We're here today to change that."

They will likely get little sympathy.