Crude oil did not make too much progress this morning; it appeared stalled near the $95 per barrel level as doubts about the global economy’s ability to sustain growth remain manifest in the wake of one feeble economic statistic after another. Standard Bank (SA) notes that “the health of the global economy remains the overarching factor in dictating the directions for the oil market. Behind all the sovereign debt concerns in the Eurozone and the US, there are plenty of signs of a slowdown in economic activity in many major economies. It is likely that the oil market again might have to lean on hopes of further stimulus from monetary policies, which leaves the oil market much more vulnerable for a big fall.”
Speaking of potentially BIG falls (and, hopefully, not in your wallet), Marketwatch’s Paul B. Farrell minces no words when he warns that the “commodities casino” is not a place for the faint of heart and/or the weak of wallet. Mr. Farrell sees China as being headed for trouble and cites the source we recently cited as well in these columns; Gary Shilling.
The case is made by Mr. Farrell that one might as well dismiss the Chin-dia ‘insatiable’ commodity demand myth, recognize a bubble for what it is, and-most importantly- that, for “naïve amateurs with portfolios under $100K betting their retirement money” on commodities, the game is “a total crapshoot” – one in which the ‘house’ always wins. Always. Something to take into account the next time you get a thrill and the urge to invest after reading “to da moon!” predictions for commodity X.
The US dollar advanced a tad, remaining above 74.30 on the trade-weighted index. However, the greenback lost sufficient ground to the Japanese yen to once again give rise to overt talk of intervention by the Bank of Japan. The euro was trading near 1.417- not quite benefiting from the shine it enjoyed last week, to be sure.
At fault, say traders, were the record yields that Spanish and Italian bonds hit amid regional investors’ worries about the EU’s economy. Similar apprehensions sent the Dow tumbling (90 points at last count) once again this morning as investors digested bad consumer spending news in the US and the still-present specter of a credit rating downgrade of US debt by one or another vigilant(e) agency (which was not vigilant when one wished they had been).
And now, all that’s left on the green felt tables are a stack of professional chips and the roll of the dice that the Friday jobs report and the Fed meeting one week from today will turn out to be. Let the guessing game being anew. In this casino, the last bets have already been made about August 2. Seems everyone lost; even the winners.
Jon Nadler is a Senior Metals Analyst at Kitco Metals Inc. North America