| 3/12/2008 6:20:38 PM | The Fed, Interest Rate Cuts, Inflation, & The Price of Oil | | 
starlightnight
Lebanon, KY
age: 30
| Will the US Oil bill lead to a commodities bubble?
http://www.commodityonline.com/news/topstory/newsdetails.php?id=6233&cont=1
"Too much money chasing too few commodities" might be the best way to explain the historic rally now underway in the global commodity markets.
Who's been blowing such bubbles in the commodity markets? Central bankers in eighteen of the top 20 economies in the world have been expanding their money supplies at double-digit rates for the past several years, trying to prevent their currencies from rising too quickly against the sickly US Dollar.
Nowadays, fund managers are pouring billions of dollars into commodities such as crude oil, wheat, base metals, Gold Bullion and silver as a hedge against the explosive growth of the world's money supply, competitive currency devaluations, and the negative interest rates engineered by central banks. To the chagrin of central bankers, however, much of the new money pumped into the global markets is going into commodities instead of the stock market.
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The Bernanke Fed's aggressive rate cuts are doing more harm than good for the US economy, by leaving the US consumer with slumping home prices on the one hand, and soaring food and energy prices on the other hand, otherwise known as the "Stagflation" trap. According to Bill Gross, chief investment officer at Pimco, the Fed's rate cuts of 2.25% since September have not brought mortgage rates lower, with the Fannie Mae 30-year mortgage rate stuck at 5.75% percent.
"Here is the startling point – the markets that the Fed is trying to affect haven't changed," says Gross. He thinks the housing downturn is still in its early stages, and expects a 20% decline in total.
"A 20% decline in housing prices is confidence destabilizing, it's credit imploding."
And how long can US Treasury yields stay under the exploding rate of inflation, or negative rates of interest?
"The Fed is printing money and are trying to prevent the recession, they are putting on Band Aids," commodities investment guru Jim Rogers said on Feb 25th to an investor conference in Dublin, Ireland
Rogers added that "as long as the US central bank and the federal government keep making mistakes, you will have a longer period of slowdown, and it will be perhaps, one of the worst recessions we have had in a long time in America."
Buoying the commodity markets across the board is the chronically weak US Dollar, which has been stripped of its life support, by the Bernanke Fed. After a double barreled rate cut of 1.25% in January – the largest monthly reduction in 25 years – Fed chief Ben "B-52" Bernanke signaled yet another rate cut in March as an "insurance policy" against an economic recession.
Playing down the soaring costs of food and energy, Bernanke told Congress on Feb 15th that "inflation expectations appear to have remained reasonably well anchored."
Yet even government apparatchniks said US inflation at the wholesale level soared 1% in January, led by rising food, energy and medicine costs. With the January jump, wholesale prices rose 7.5% over the past 12 months, the fastest increase since 1981, when the country was trapped in "Stagflation".
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Platinum is up 90% to $2,145 per oz amid supply disruptions from South Africa; cocoa futures are up 65% at a 24-year high; coffee is up 60% to a 10-year high; sugar is up 35%; Gold and silver are up 50%, and crude oil is banging against $100 per barrel, up 80% from a year ago. Crude oil or "black gold" is not just an industrial commodity, but is utilized as an inflation-hedge and alternative to stocks.
Thus super-easy central bank money policies – plus rate cuts in Canada, Hong Kong, Saudi Arabia, the UK and the United States, combined with strong demand for industrial and agricultural commodities from emerging China, India, and the Arab oil kingdoms – are laying the groundwork for a new era of hyper-inflation worldwide.
The Fed's double barreled rate cuts in January ricocheted into the foreign exchange market, weakening an already wobbly US Dollar – which in turn put a floor under the crude oil market at $87 per barrel.
Nymex traders figured another half-point Fed rate cut would lift crude oil above $100 per barrel, and boosted their net long oil positions to 60,873 contracts at the end of Feb., compared with 39,933 in the previous week.
And now crude oil futures have stayed above $100 per barrel for almost three weeks ahead of the widely expected March rate cut.
The United States imported a record $331 billion worth of crude oil last year, at an average price of $64.25 per barrel. Ironically, if the US is forced to import crude oil at $95 per barrel or higher on average this year, due to the Fed's aggressive rate cuts, the import bill for 2008 could jump by roughly $150 billion, and completely negate Washington's upcoming $152 billion economic stimulus package.
In other words, Washington is going deeper into debt, to help American motorists pay for the higher cost of imported oil, which in turn, will flow into the hands of Iran's Mahmoud Ahmadinejad, Saudi king Abdullah, Venezuela's strongman Hugo Chavez, and the Kremlin's foreign exchange reserves, already at $480 billion.
On Jan 15th, Saudi's oil minister Ali al-Nami pointed out that, "Financial speculators are adding $20 to $30 to the price of oil. If you look at who is in the market, you'll find a lot of financial institutions, players who are speculating, using the market as a hedge against a weak Dollar."
OPEC oil producers can hardly believe their good fortune. The Bernanke Fed has driven US dollar deposit rates into negative territory, adjusted for inflation, and inflated the price of crude oil to $100 per barrel. For OPEC, the windfall could reach $1 trillion in oil revenues this year. Iran and Saudi Arabia are expected to lower their oil output by 200,000 bpd next month, to prevent a sizeable slide in the oil market, when global demand normally recedes in the second quarter.
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| | 3/13/2008 9:53:39 PM | The Fed, Interest Rate Cuts, Inflation, & The Price of Oil | | 
explorer3
Warminster, PA
age: 33
| Heres a link to an interesting article i just saw the other day.
http://www.msnbc.msn.com/id/23601813/
The feds cut the interest rates and still theres been a 60% increase in forclosures in feburary over last year.
| | 3/14/2008 8:31:58 AM | The Fed, Interest Rate Cuts, Inflation, & The Price of Oil | | 
knightnyte2
Spring, TX
age: 55
| if you have money in the stock market, it might be time to cash in your chips and run. like a few years ago, the hype doesn't last forever. saudi will continue to cut back on oil production to keep the pricing soaring in the stock markets to keep their 'double dipping' sound.
Sadly, the international commodities market controls the pricing for so many things. Normally, I'm pessimistic about most things, but those 'snake oil' salesmen in the stock market are going to cost a lot of people, a lot of money soon. Just an opinion thats based on history, nothing more. Normally the market soars every few years, then settles back down for a few before starting again.
The housing market is another of those that jumps through the roof every few years, then we go through the foreclosures, prices drop, then it settles again. Of course the developers/builders want more, the real estate folks want a higher price, so they work on 'funny money' ways to get people financed for those higher prices. Your average young starting couple have no idea when they finance their homes. The couple are sold on the prices will keep rising, the interest rates will remain close to where they are, but we all know, those fluctuating mortgages never drop. Within a year or two, that P&I payment goes from $700/mth to $1200 or more. The excited new home buyer was convinced their salaries would keep up with inflation when they bought the house. Now reality faces them with the, in most cases, doubled mortgage payments, new cars in the drive and most often an additional mouth to feed in the household.
The mortgage company has all this money to loan and with the help of the real estate and builder people, create the 'funny money' financing that will satisfy their investors. Some of these home owners can refinance and get their payments back in line, but many cannot. They are faced with losing everything.
At this point, the builder has his/her money, the real estate person has made their commissions, the mortgage people have made their 'points' money, and everyone is happy but the home owner, soon followed, by the investors on the loans. The investors at least get some of their money back by foreclosing on the real estate, and offering it for sale. They are not in the real estate business by any means. They have money to loan and wish to remain in the shadows, not become owners of real estate. The housing market falls a bit, the investors lose a bit, yet they can file the losses on taxes so they really do not lose. The only loser is the home owner. Credit screwed to the wall, all they could beg, borrow and steal were spent on trying to save their home. Now faced with moving expenses, deposits on apartments, or rentals, they struggle years to recover.
For those of you in the real estate market, you know, you tell most appraisers that you need X price on this house, and in most cases the appraiser justifies it by using comparable sales to make it happen. These comparables might not be within 10 miles of the proposed property, but it passes all the requirements by the mortgage company. They 'sneak' the appraisal through. Oh, sure, you have the wise older mortgage agents who catch some of these, but then you have the inexperienced mortgage people who simply do not know. These agents work on commission and they just want the loans to go through.
So, who is really responsible?
The question is, is it our governments responsibility to bail them out with taxpayer's money? Sadly, I personally think not.
peace... don't be hatin'
| | 3/14/2008 10:41:36 AM | The Fed, Interest Rate Cuts, Inflation, & The Price of Oil | | 
im_geminigirl
Willard, MO
age: 44
| I've never posted here before...kid gloves please...ty
Interesting subject though...The stock market crash after 9-11 caused by terrorist and those who support them (???Iran's Mahmoud Ahmadinejad, Saudi king Abdullah???) started towards a resession. Was it their intent to destroy our economy? I think yes. Are they benefiting from that? I think yes.
I talked to a financial advisor. Asked him why the interest rate on my credit card stays the same or gets higher when the fed's cut interest rates. I pay on time and never go over. He said I'm paying higher interest to cover everyone who is NOT paying. Are those the same ppl that are losing their homes? I think yes. Could I afford to own my own home if I didn't have to make their cc pmts? I think yes.
When I go the the grocery, I very rarely purchase something unless it's 'ON SALE', I stock up on it to last til the next time it will be on sale. I know what the sale prices used to be and what they are. Prices on groceries have jumped at least 30%, don't let anyone mislead you with the 5% here and there adjusted for COL blahblah. The ppl who crunch those #'s are so rich they don't even know what a doller is, they probably toss them out in the convenience store parking lots like the rednecks throw pennies around here.
Our income helps bring the average income down to $72,000 (last I heard) our salaries aren't really every gonna be $250,000+ a year. Lets face it, if the Dems hold the WH, S, and R majorities next 4 years and do what they do, will I have more money in my pocket? I think yes. Would I be better off after a recession? I think yes. Level the playing field so I can make something to retire on in the next 25-30 years.
Can we survive a depression? I think yes. My grandparents and great grandparents both did fine. They scrimped and saved then invested it in rental property. WOW, something just made sense to me. My great-grandad bought homes that other people couldn't afford to buy because they spent their money on new cars, fine clothes and expensive jewelery all bought on a signature. I remember him telling me once that your name was very important and that is all he had in the 30's, but it meant something in his little town. He had parkinsons and after he passed grandma found desk drawers full of slips of paper with his signature, all of varing degrees of degradation from his disease.
I think it's a travesty what the cc co's and the morgage lenders are doing to ppl today, I really do. Our government is allowing this to continue. Does that make it their fault? idk. I wanted to purchase a house 10 years ago, but after reading the fine print I saw that I was just about to get ripped off. So, I decided to wait and did not put my good name on that piece of paper. My name is still good. My credit is still good, so I am left paying off other ppls debt. I'll take my $600 check, thank you very much. It's NOT a windfall and certainly does not cover all the extra interest I've had to pay since ppl started losing thier homes and not making their cc pmts.
Just thinking out loud in the forest where noone hears.
Disclaimer...I've never posted here before...so if you think that my thinking is 'off' please point out any faulty reasoning (nicely plz)...I don't claim to know anything about how the economy does what it does...and I'm not a dem.
| | 3/14/2008 10:45:46 AM | The Fed, Interest Rate Cuts, Inflation, & The Price of Oil | | 
bucktail
Poynette, WI
age: 46
| ok,,,,,whats your take on the grain markets,,,,,,we can deal with oil prices,,,,,,but we have to eat,,,,,,where is the grain market going???
| | 3/14/2008 11:28:44 AM | The Fed, Interest Rate Cuts, Inflation, & The Price of Oil | |
im_geminigirl
Willard, MO
age: 44
| The grain mkt is going up because were refining it and putting it in our cars...go figure.
| | 3/14/2008 11:35:41 AM | The Fed, Interest Rate Cuts, Inflation, & The Price of Oil | | 
garravesh
New Harmony, UT
age: 36
| The money we get as a return from the GOVT..the 450 dollars if given to us will most likely hurt us more then save us....The money will be used to help pay for gasoline...with prices in oil going up...we will still be buying this oil and where do that money go? to the oil producers..not back into the US economy.
Also the Fed dumped 200 billion dollars recently which caused the stock market to boom that one day. There is a slight problem..there was no gold backing it up.....inflation.
gas will easily reach 5 bucks a gallon coming up soon theres little to do to stop it...and as the american dollar will crash and burn it is going to be a very rough road for us...From what I have read and understood they are trying to make the dollar crash...So that they might institute the Amero...and the NAU more easily.
90% of americans on the road right now do not OWN the vehicle they drive in and the average debt in the USA was over 40k ...When they come to collect who can pay..
I ,for one, own my own car and have no Credit cards...but even worse is the associated costs in moving food and supplies across the USA.. I have a friend who runs a truckiing business...He owns 7 trucks..his gas costs have gone up 66% in one year...He has paid off 3 of his trucks...after this year he had to put 2 back on a mortgage just to pay for gas...and his gas surcharge is being passed onto his contracts as well...but he says he is loosing his shirt.
[Edited 3/14/2008 11:39:49 AM]
| | 3/14/2008 12:37:26 PM | The Fed, Interest Rate Cuts, Inflation, & The Price of Oil | |
im_geminigirl
Willard, MO
age: 44
| Got my letter today, gar ravesh. All you have to do is file a 2007 tax return and your entitled to a payment up to $600. For taxpayers with AGI of more than $75,000 the payment will be reduced or phased out completely.
No, I'm not putting it in the gas tank...lol
[Edited 3/14/2008 12:38:10 PM]
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