Tuesday October 24, 2006 - 10:20:14 GMT
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Black Swan Capital - www.blackswantrading.com
Does goldilocks live?
â€˘ Key US Reports (WSJ):
7:45a.m. ICSC-UBS Store Sales Index. For Oct 21. Previous: +0.6%.
8:55a.m. Redbook Retail Sales Index. For Oct 21 Wk. Previous: +1.4%.
10:00a.m Oct Richmond Fed Mfg Business Index. Previous: 9.
5:00p.m. ABC/Wash Post Consumer Conf. For Oct 22. Previous: -7.
Two-day FOMC mtg begins.
â€śGood pitching will always stop good hitting and vice-versa.â€ť
Crude oil and the Dow Jones Industrial Average are mirror image-like of late. We would suspect that lower energy and materials prices help corporate profit expectations (for users of materials) and allows for greater discretionary spending on the part of Mr. Consumer (what isnâ€™t required to propel the car, stays in the wallet). Does goldilocks live?
The Fed has to be pleased the way this is playing out. The wealth boost from stocks is helping to counter some of the wealth hit from housing. Lower metals and energy are likely lowering inflationary expectations, while acting as a tax cut for business and consumers alike. The question is: Why would the Fed rock this boat? Answer: Itâ€™s in their nature.
Reader Comment on crude prices
On Friday we wondered why crude oil didnâ€™t get much of a bounce on the OPEC production cut news. Here is comment from one of our readers we thought you might find interesting:
â€śThe bounce was small because it was large factored in already and because of doubts that OPEC will really walk its talk. Oil is poised on the non-linear cusp between two price structures. One is when there is enough supply and normal supply-demand balance sets prices. The other is when supply is so tight that fear of shortages is realistic and an insurance premium is tacked on to the price of oil. That insurance premium is harder for the markets to price and allows oil prices to skyrocket. This dual structure is the key,â€ť wrote Kevin Rooney.
Jack Crooks, Black Swan Capital Black Swan Subscription-based Service
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