Bonds Reach for The Sky

GOLD UP, OIL DOWN AGAIN

Bonds rallied almost 20 bp last week on clear signs of slow growth. The 10-year yield is at 4.601%. A money-market account offers more. While portending if not a recession, at least a GDP dip, interestingly, this may help lift stocks. Oil dropped another 5.42% to close at $60.55. Gold was up $13.00 to close at $589.40. The dollar sank to $1.2788/€ and ¥116.52/$. The asset wealth-driven spending party for the U.S. economy is over. Foreign stock markets seem to be more rattled by the slowing U.S. demand than the U.S. indices. The Nikkei is down almost 1000 pts this month. On HedgeStreet, gold, oil and the euro held the most volume. The exchange listed two new hurricane contracts on Helene and Gordon. The 30-year mortgage binaries settle on Thursday; last week’s rate from Freddie Mac was 6.40%.

ECONOMIC RELEASES THIS WEEK

Monday: Existing homes 6.25m, 15% lower than June 05.
Tuesday:Consumer confidence expected at 103, up from 99.6 last month.
Thursday: Initial Claims expected flat at 315K.
Friday: Personal income expected at +0.3%, spending expected at +0.2%. Key in the report is PCE at 0.2%, core 0.2%, or high 2.4% year-on-year. Michigan sentiment 85.0, Chicago PMI 57.0.

BUSH THE DEVIL… THE USELESS NATIONS… AMARANTH LOSES $6BN… HARVARD’S $29 BN… CLINTON BLOWS

Hugo, boy, we knew he was the devil from Dan Rather. Next time get a shoe to bang like Nikita … Cuba is to lead the Non-aligned Movement, Sudan sits on the human rights panel, and Venezuela wants to be on the Security Council. We feed the UN. Why? … How do you lose $6bn? You let a 32-year old trader out of his house in Wyoming. Rich people can be so stupid … Harvard’s endowment grew to $29 bn on the back of solid investment returns. Bill Gates who dropped out of Harvard is worth $53 bn … Bill Clinton lost his cool when probed by Fox’s Chris Wallace if he had done enough to get bin Laden while he was in charge. He said after he had bin laden Monica, Hillary would not have it. Besides, he wasn’t going to go after a guy.

Will The Gov’t Miss The Oil Tax Revenue?

FED TO KEEP RATES UNCHANGED

Oil dropped another 4.41% last week to close at $63.33. Gold lost 5.45% to close at $576.40. Natural gas is down 56% this year. The free-spending Congress should start worrying. For every dollar of Exxon’s revenue, they collect 25¢ in taxes, while Exxon makes 10¢ in profit. Joking aside, the drop in oil prices from the peak of $78 to $63 is huge for the U.S. economy. Especially, if the gold decline signals tame inflation 3-4 quarters ahead. The Dow rose 168.66 to 11560.77 last week. The dollar rose slightly and bonds held steady. The 10-year yield is 4.798%. On HedgeStreet, oil and gold accounted for most of the volume. Tuesday is the last day of trading for the Fed Funds contracts. HedgeStreet traders are speculating on no action from the FOMC. The FF=5.25% traded last at 9.00, the FF=5.50% traded at 0.80.

ECONOMIC RELEASES THIS WEEK

Tuesday: Housing starts are predicted at 1.77m, a 15% decline year-on-year. PPI is forecast at 0.2-0.3%, core 0.2%, leaving core at 1.5% annual growth, down from 2.8% a year ago.
Wednesday: Crude inventories; hope they and the distillates don’t decline too much. The Fed decision at approx. 2:15 pm EDT.
Thursday: Initial Claims expected at 315K, leading indicators down 0.2% (definite downward trend), Philadelphia Fed 14.0 (0 is neutral and nobody understands the rest).

POPE OFFENDS MUSLIMS … ETHANOL IPO … LONG COMMERCIALS … HP SCANDAL

Pope Benedict XVI’s remarks that religion and violence shouldn’t mix sparked a violent reaction in Muslim countries … The last two ethanol IPOs have tanked. Another, Hawkeye Holdings, debuts on NYSE this week. If $billions in subsidies aren’t enough, add a lime twist, and sell as booze … This fall, P&G and Pfizer will test two-minute commercials in lieu of 30-second spots. TiVo is adding a button to the remote … Dunn stepped down following an eavesdropping scandal at HP. Investigators had posed under false identity and wiretapped directors’ phones. The FBI needs them badly … No strikes in France this week.

Oil Plummets, Hooray!

A SOMBER ANNIVERSARY

OIL PLUMMETS, HOORAY! DOLLAR, BONDS FIRM

On Monday, we observe the anniversary of 9/11. Let us remember that the war is not won yet and lots of bad guys still need to be eavesdropped on and jailed. Plummeting oil prices are helping. Crude closed at $66.25, down 4.2%, last week. Crude inventories stand at 330.6 million barrels, 12% above the 5-year average. Oil has fallen 15% off the July 14 high of $78.40. The dollar rallied to $1.2671 against the euro and to ¥116.90 against the yen. Bonds sold off a bit, but the 10-year Treasury yield stands at 4.78%, the 30-year at 4.92%, while the 6-month T-Bill is at 5.10%. Remember the economists who claim that the boom of the 1990s had nothing to do with technology or productivity, but with cheap oil? What if oil were to drop to $60? On HedgeStreet, oil contracts commanded the most volume with price drops surprising even experienced traders and few positions being taken on a rebound. Orders for Ernesto and Florence contracts drew to a trickle as hurricane threats waned. This week, trading in intra-day yen and sterling contracts starts on Wednesday, trading in CPI contracts stops on Thursday.

ECONOMIC RELEASES THIS WEEK

Tuesday: The U.S. trade imbalance for July is expected to rise slightly to $65.5bn.
Wednesday: The Treasury deficit is expected to rise to $66bn as unstoppable outlays swamp very healthy tax receipts, still below $300 bn for the year.
Thursday: Initial Claims expected at 315K. Retail Sales expected to decline by 0.1% as higher interest rates and energy costs weigh in.
Friday: CPI is expected at +0.3%, core at +0.2%. This would leave CPI at a 4-month year-on-year 4% low, but push the core close to the 2.9% year-on-year decade high. Industrial production is expected to grow by 0.2%, reaching a 4.9% year-on-year growth on strong business investment. Capacity utilization will be at a tight 82.5%, perhaps pointing to price pressure buildup for the remainder of 2007.

EBBERS TO REPORT TO JAIL … TOM-KAT’S BABY HAS ONE HEAD … IRWIN KILLED

Ex-WorldCom CEO Ebbers was ordered to report to jail by Sept. 26 to start serving his 25-year sentence. Don’t worry, Bubba will protect you, Bernie … Tom Cruise and Katie Holmes released pictures of baby Suri. The baby has one head. Also, she looks like Tom, and likes to play with weird globe-like devices that communicate with spirits … A U.S. bankruptcy judge in New York ruled that debtors filing Chapter 13 can’t tithe or donate to charities until after they have paid their credit card debt. Jimmy Swaggart lost 95% of his income … Brad Pitt said he won’t marry Angelina Jolie until “all people are allowed to marry”. Way to go, Brad! … Federer is a machine … Millions of people have enjoyed the croc hunter. Crikey! We’ll miss you, Steve.