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In Europe, we are paying $3.50 a gallon for unleaded gas...
Gwenn
Ira Tunik wrote:
> Gee I wonder if $2 per galllon gasoline in California is inflationary? we
> are there right now. The rest of the country can't be far behind. It is
> time for the gov. to drop fuel from their inflation index. Maybe a
> comparison to Evian at $23 per gallon is a good comparison to show that they
> are producing gas for less then you are paying for water. Ira
>
> Earl Adamy wrote:
>
> > I'm expecting to see an uptick in inflation in the next couple of months
> > which scares heck out of the markets. High energy costs will percolate
> > through the economy more rapidly than the historical norm because JIT
> > and internet based distribution systems trade reduce inventories for
> > increased shipping frequency. As these costs rise, demand for production
> > intended to increase inventory levels will increase, placing pressure on
> > delivery times, product pricing, and demand for shipping capacity (which
> > is already stretched to the limit). Most of the "stuff" which has been
> > falling has either stabilized or is increasing in price - consider
> > commodities, housing, many service costs (especially medical), and even
> > computers. Not to mention labor costs which I believe will begin showing
> > acceleration as demand increases for cash compensation in the many
> > sectors of the economy which are not benefiting from stock options and
> > are being hit with increased benefit co-payments. Once the inflation
> > genie surfaces for real, it will take a lot more than 1 or 2 rate
> > increases to stamp inflation worries out of the credit markets.
> >
> > BTW, my upside target for oil is just north of $38. I will also note
> > that it is possible for equities to rise in the face of both inflation
> > and rising rates (as they did in the late 70's), although I don't think
> > this will happen before a major correction occurs.
> >
> > Earl
> >
> > ----- Original Message -----
> > From: "JW" <JW@xxxxxxxxxxxx>
> > To: <realtraders@xxxxxxxxxxxxxxx>
> > Sent: Wednesday, March 01, 2000 11:05 PM
> > Subject: [RT] FW: OIL has almost reached our upside target of
> > 32.35--35.85
> >
> > > FYI...
> > >
> > > JW
> > >
> > >
> > > -----Original Message-----
> > > From: James Smith [mailto:JSmith@xxxxxxxxxxxxxxxxx]
> > > Sent: Wednesday, March 01, 2000 7:13 PM
> > > Subject: OIL has almost reached our upside target of 32.35--35.85
> > >
> > >
> > > Technicians know that ascending triangles often
> > > set up nasty corrections. What I find intriguing is
> > > that both Nymex Crude and the Nasdaq show this
> > > formation...& both violated the upper line, which
> > > often occurs just before a fall. Crude hit a High of
> > > 31.77 today (Nymex March) & it may possibly test
> > > 32.35 tormorrow, but it looks as though its nearly
> > > ready to fall off a cliff. This makes intuitive sense
> > > because even though Richardson (DOE) says he
> > > would "like to maintain the SPR for a crisis situation,"
> > > what could be more important to the Administration
> > > than winning the election???
> > >
> > > The Nasdaq (mar) might possibly continue to
> > > 4500 or so, but also looks as though its
> > > ready to fall off a cliff. Maybe there's a connection.
> > > Will a surge in oil prices cause investors to
> > > worry that 50bps is coming March 21st instead
> > > of 25 bps, and therefore reconsider the idea
> > > of holding onto their stocks?
> > >
> > > At some level soon the Administration will be very
> > > tempted to release the SPR and perhaps there is
> > > some truth to the rumors that more oil is already on
> > > the way. Again we cannot rule out a move to 35.85
> > > basis Nymex March contract, but a sharp Wave II
> > > correction for OIL would fit nicely with one last move
> > > down for GOLD and quite possibly a FreeFall for the
> > > Nasdaq.
> > >
> > > Where do I admit I'm wrong:
> > >
> > > Nasdaq (mar) breaks above 4800; DOW and S&P
> > > make New Highs. This would set up a mega-blowoff high
> > > into April followed by a May Crash, but a strong correction
> > > in the Nasdaq in March still seems much more likely.
> > >
> > > Panic Cycle indicated on Nasdaq for month of March:
> > >
> > > The problem with Panic Cycles is that they don't
> > > tell you which way the market will move. All they tell
> > > you is that you are going to experience wild vol in
> > > the market indicated. Still, given the overbought
> > > nature of the Nasdaq, the risk is that this month's
> > > Panic Cycle for the Nasdaq will turn out to be Panic
> > > selling rather than panic buying. Keep an open
> > > mind. Let the mkt tell you what its going to do.
> > > Watch for a break below 4000 (March contract) or
> > > a break above 4800 (March).
> > >
> > >
> > > Is the Yield Curve getting ready to steepen sharply?
> > >
> > > The mkt is discounting 2 more rate hikes and many
> > > analysts believe 3 or 4 are coming. These analysts
> > > may be proven wrong if stocks sell off too sharply
> > > in to short a period of time.
> > >
> > > Is this a setup for a "curve steepening" trade?
> > > If the Nasdaq sells off sharply here in March, a rate hike on
> > > March 21st of 25bps may be the last hike for a while.
> > > It all depends on how precipitous the slide is for the
> > > Nasdaq. Greenspan would no doubt appreciate a 20-30%
> > > correction in stocks, but may grow alarmed if it goes much
> > > beyond that. Arbs that have put on curve flattening trades
> > > would be thrown for a loop.
> > >
> > > Event risk is growing.
> > >
> > > Arbs do not care whether the trigger is a JGB slide,
> > > invasion of Taiwan, an oil spike, or just a a plain-vanilla
> > > stock mkt selloff from overbought levels. What matters
> > > more to arbs than the event itself, is the effect it has on
> > > the yield curve.
> > >
> > > If Greenspan chooses NOT to raise rates or it becomes
> > > apparent that he may only raise them once for 25bps
> > > rather than 2 or 3 more times, it turns the world upside
> > > down for Arbs. 2yrs would rally as traders take
> > > back some already discounted rate hikes...and bonds
> > > might sell off if traders believe this is going to be
> > > a 1987 style correction--that is, one in which the stock
> > > mkt tumbles but the economy plows ahead unfettered.
> > > A stk mkt selloff not accompanied by a slowdown in the
> > > economy would make life very awkward at the FED.
> > >
> > > If the Nasdaq is off 30% or more, but the economy
> > > continues to show signs of unsustainable growth,
> > > what would the FED do?
> > >
> > > Since many people are in stocks for the longterm, they
> > > may not care that their stocks have sold off. 401K
> > > programs are automatic.
> > >
> > > The FED: "Damned if you do, damned if you don't."
> > >
> > > Some market commentators will no doubt worry
> > > that the FED will continue to raise rates regardless
> > > of severity of the selloff in stocks. This perception
> > > could add to the stock mkt's decline.
> > >
> > > Other analysts may worry that the FED will not
> > > raise rates enough (in an election year) to
> > > be able to slow down the economy given the
> > > amount of cash that keeps flowing into stocks
> > > from 401 K programs and overseas buyers
> > > (Many Europeans missed the boat and would
> > > only be too eager to buy a major dip in US
> > > stocks).
> > >
> > > The perception that the FED is incapable of
> > > slowing down the economy may have
> > > devastating consequences for the 30 year
> > > bond.
> > >
> > > In this context I believe Friday's Unemployment
> > > figures may actually trigger an event. If
> > > unemployement comes in at less than 4%,
> > > look out! A tight labor market is going to
> > > be a major concern to the FED and traders
> > > won't wait til March 21st to see what the
> > > FED decides to do.
> > >
> > >
> > > "Chaos and Mayhem"
> > >
> > > A lot of people are likely to grow very very
> > > confused. When confusion reigns people
> > > are more apt to buy the 2yr than the 30 yr.
> > >
> > > A precipitous steepening of the Yield Curve
> > > is coming.
> > >
> > >
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