While today was an interesting day in “the farce” on a lot of levels, I want to focus on gasoline. In the morning it traded down to a new recent low, but it reversed hard to close with a more than 1% gain. See chart below.
Well so what right? Gasoline has pulled back recently and had a small bounce today you say. Perhaps. The reason why I think it is important is because equities were generally very weak and on days like that you wouldn’t expect to see such a divergence. In addition, I think Obama’s latest very public political witch-hunt for oil speculators scared off longs in the energy market and that was part of the recent weakness. Here is my take on the speculator meme. If that is correct, then the market may be trying to adjust itself back higher where it actually belongs in order to price out unproductive consumption in a world where a larger and larger percentage of global GDP represents an unproductive misallocation of capital due to the welfare state and money printing. If this is the case, it will also be a huge thorn in the side of the Central Planners who are obviously attempting to smash commodity prices as much as possible before announcing QE3.
Precious metals and the FOMC
Also of note to me today was gold. It was slammed hard but came back in very impressive fashion. Silver not so much…In any event, the key day this week will be Wednesday when The Bernank and his cadre of clowns will announce their latest rate decision. In the last couple of months the Central Planners have used any comment out of the Bernank to raid the precious metals. Will Wednesday be the same? No one knows but I suspect physical buyers are waiting in the wings to pounce this time if they try it again.
China is Headed for a Revolution of Some Sort
As China’s economy continues to weaken we are seeing increased signs of tension. This quote from a Bloomberg article today really demonstrates how much of a tinder box this place really is.
Chinese legislators have amassed outsized assets, with the wealth of the richest 70 members of the National People’s Congress amounting to $90 billion last year, 12 times the combined wealth of the 660 top officials in the U.S. government, Bloomberg News reported Feb. 27.
My guess is that some savvy political mind will start to tap into domestic frustrations and blame those Chinese leaders in bed with the Western elites. This will create further riffs between the U.S. and China going forward. Read the Bloomberg article here.