Last weekend it was announced that China has suspended exports of diesel fuel indefinitely to help meet domestic energy demand ahead of the peak summer season. The measure could create energy shortages and spread higher prices – and possibly panic about the availability of energy supplies - across Asia.
The stock market continues to be strenuously overvalued here, with a variety of historically reliable methods indicating probable total returns for the S&P 500 of only about 3.5% over the coming decade. This does not necessarily imply much about near-term market returns, though the continuing syndrome of overvalued, overbought, overbullish, rising-yield conditions does contribute to near-term risk.
There is no question that desperate waves of government spending and central bank liquidity have created a dramatic rebound in commodity and stock prices over the past 2 years. But just as government rescues failed to change the long term revision back to mean in housing prices, history tells us that the recent top down efforts to sustain inflation in stock and commodity prices will also fail.
The prices of rare earth oxides are blasting through the stratosphere. Manufacturers are driving prices in their haste to involve them in production of hybrid vehicles, wind turbines and the most high tech applications of which many sophisticated investors are unaware. These producers need the rare earth ore and are willing to pay for them on the world markets.
The price of gold rallied against all major currencies on Wednesday morning, hitting $1491 per ounce and rising 1.2% from yesterday's eight-day low as stock and commodity markets also gained.
Higher prices are supposed to encourage more world supply. It’s standard textbook economics. But what happens when instead of export-oriented global firms, it’s governments that control supply. They may not respond to price signals the same way as profit maximizing companies. n fact, they may respond in the exact opposite way.
Joseph Kile from the CBO testified before congress today. This was a discussion of the Federal role in maintaining/building the nation’s highway system. Central to the presentation was the status of the Highway Trust Fund. Like all the other government Trust Funds (Social Security, Medicare) The Highway Fund (“HF”) is, well, running out of gas.
Today, I bring our discussion of peak oil and the coming breakdown of the petrodollar system to a close. The threat posed by peak oil to the United States is real and will be devastating without immediate intervention.
We've talked before about the new war that is waging - a war that is not fought with guns, missiles, or human soldiers, but with code in cyberspace, using computers and the Internet. This war is being waged on all fronts - by governments against governments, governments against corporations, organized crime and insiders against both, and even individuals against other individuals (which is more often dubbed cybercrime but that's not a necessary distinction for our purposes).
Potentially serious inflation shock for the American consumer down the road as wholesale food inflation feeds through to consumer prices. It should be noted too that these are the rates of increase AFTER the highly publicized corrections during the first two weeks of May.