Thursday, May 24, 2007

Cheerleaders and the Delusional

EUR/USD 1.3431 Hi 1.3465 Low 1.3415
USD/JPY 121.49 Hi 121.70 Low 121.23
AUD/USD 0.8208 Hi 0.8242 Low 0.8198
EUR/JPY 163.15 Hi 162.94 Low 163.74

There must be some peculiar alignment of the stars set for June 30th 2007. June 27th is the day on which Tony Blair will FINALLY step down. To jeering crowds. The head of the World Bank, Paul Wolfowitz, has resigned. Effective 30th of June. Why wait? Didn't want to disappoint his fans? There are none. But in the land inhabited by Grandiose Delusionals reality rarely gets a look in.

And in Europe we have politicians rushing, yes rushing, to cobble together some kind of compromise to resuscitate the European Constitution. The deadline is June 30th, when Germany hands over the Presidency of the EEC. The Germans, or at least their politicians, are pro this type of thing apparently. No-one on the street in Europe really cares. And those who do care don't want to breathe life back into this monster. The French people and the Dutch actually voted AGAINST it. Most everyone else didn't even get to vote on the issue. Now the politicians are making sure that no-one else will be able to vote. Because our Dear Leaders know it would not pass. Anywhere.

The European Juggernaut just keeps getting bigger and LESS accountable to the people. The people are not happy but it doesn't matter. We have DEMOCRACY in Europe which means "the people" only get to vote once in a while. And only on national issues. On questions regarding Europe they almost never get to vote. More Europe means less voting. Which is great news for the politicians. But the June 30th deadline is looming and so the politicians are at work. Rushing in fact.

June 30th 2007. Write it in your diary it could turn out to be an important date. We just don't know what for exactly. And the people that know are not telling. What can they have planned?

Well GEOPOLITICS is suddenly back. All sorts of new and exciting developments are taking place in the Middle East. The Israelis are bombing Gaza, arresting Ministers (haven't we done this already?), there is some kind of Civil War re-erupting in Lebanon and the U.S. is staging military GAMES (is that the word?) off the coast of Iran. Not that anyone is noticing. No, there is so much excitement about the U.S. Presidential Campaign (yawn) and the French Election (yawn) and Blair doing his little star-studded tax payer funded round the world trip, that there just doesn't seem to be much room in the press to report on the next Anglo-American attack. Which is, of course, focused on Iran. And this time France will be shoulder to shoulder.

Last year was just a rehearsal. The plans for World War III appear to have been taken off the shelf and dusted down. Israeli politicians have been making all sorts of ugly noises about how they can fire their 200 (undeclared) nuclear war heads in any direction they choose. Yeah guys we know. Thanks for reminding us. Iraq is still a mess. Iran is being blamed for that. But of course. And the U.N. is making noises about the Iranian nuclear programme. AGAIN.

So it's all going to plan. Sort of. The USD has recovered some ground. This is good news because it means that the USD is still a reserve currency. We think. We hope. Maybe it simply means that positions have been closed. It's not like the U.S. is seeing this flood of new foreign money. Only no-one is really talking about that inconvenient fact. The yield on the 30 year bond just broke through 5.00% and the it doesn't look like there is any new money ready and willing to soak up new paper. So yields keep rising. But hey this is good news because it means that the economy must be getting stronger. Not that the YIELD CURVE is positive yet. But it's getting there.

What happens when a nation which bases its entire economy on SPENDING (OK Consumption) and relies on foreigners to supply the CASH for that spending when the foreigners get antsy about handing over more of their hard earned dough? Well we may be about to find out.

Not that the cheerleaders in the States are likely to take any notice. Right now the cheerleaders are beyond shrill. Stocks can only go up from here. Indeed, records have been broken. But the whole rally thing is starting to look a little suspect.

Rupert Murdoch handily helped the Dow Jones Index push higher into record territory with his well timed bid for Dow Jones. Some insider traders reportedly also did very well. Surprisingly, the Rupert Murdoch owned New York Post published an article on how News Corp is run right in the middle of the bid. It painted an ugly picture, just in case the Bancroft family felt inclined to accept Rupert's very generous offer. (Well how about that?) I wonder if there are any insiders going short now. Particularly given the whispers that the kindly Mr. Murdoch, war monger extraordinaire, may in fact withdraw his offer? Well I guess we will never find out.

What we will find out right about now is just how much money which has been hitting the U.S. Stock Market is, in fact, purely speculative. Call it hot money. You buy because everyone else is buying and this will make you rich. The grandest delusion of them all.

OIL 65.11
GOLD 656.40

While the cheerleaders are going for ongoing global economic growth and the 'containment' of the U.S. economic slowdown, commodity markets appear less cheerful. Despite all the bullish calls out there, and we had near unanimity on this one, commodity prices are under pressure. So I guess in addition to inventing new ways to make money out of thin air (they call it liquidity) it seems someone has also found a new way to make commodities out of thin air TOO. In the face of really strong GLOBAL DEMAND the price of commodities is FALLING. There is a new paradigm in there somewhere. Just wait.

And the price of GOLD remains under pressure. This is good news because it means that everyone will have to stock up on USDs again and that will keep the U.S. economy afloat till the end of time. Which is planned, supposedly, for December 21 2012. So not that long. In the land of the permanently delusional this is a plausible scenario.

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