Someone once said: “hell is a place where there is no reason.” Well, this, my little internet friends, is hell—for nothing reasonable is transpiring.
For example: [[UBS]] writes down 19 billion big ones, and reports a 12 billion dollar loss, sending the stock significantly to the upside.
Or, [[LEH]] raises 3 billion dollars, under unfavorable/dilutive terms, sending the stock through the roof.
Or, the ISM and construction data, which was released this morning, was bad—but could have been worse. As a result, the market runs 300 points in your face.
Basically, we have a bunch of bottom bitches out and about buying stocks, who have no regard for the laws of reason. What’s reasonable to me is seeing [[MON]] lower. Also, it makes sense seeing gold get the “hammer of certain death.” And, I understand why commodities are weak.
The bulls are running on the notion that we are out of the mess. There is no longer a “credit crisis,” and the recession will be very shallow. Before you know it, the low rate environment will spur a new round of economic growth and we all live happily ever after.
However, the problem with that story is that it does not include potential inflationary effects of such a rapid turn around in the economy. The only reason why commodities are “somewhat tame” is due to forecasted economic weakness in the States.
If you think copper, steel, coal, natty, oil and concrete are expensive now, imagine what they will be if the U.S. was growing at a 4% clip.
My point is this: in order to pop the commodity bubble, the Fed should be raising rates, not lowering them to zero. All this jibber-jabber of a bottom is ridiculous, as long as the consumer is saddled with high finished food, gasoline, natural gas and electricity expenses.
With my money, I will buy [[FXP]] under $90, [[SRS]] under $95 and [[SKF]] under $105. Also, with commodities under pressure, I will buy more [[SMN]], [[DCR]], [[DUG]] and sell short [[POT]] and MON.Comments »