THE PH'd COMMODITY

Following copper, as one Wall Street wag several years ago reported, was supposed to be the equivalent of a Ph'd in economics. It was a statement about the metal's economic sensitivity.

Now, however, the precious industrial metal seems to have joined the unpopular club after a decade of being in the commodity limelight, according to today's WSJ. Demand is waning on a global scale while more supply hits the market. For a while labor problems hit the industry crimping production.

No longer. According to some, supply between now and 2015 should easily outstrip demand. Copper is quoted in dollars and over the past several years tends to correlate to US dollar movement more so than other industrial metals. 

The housing market is inextricably connected to copper. So what  
happens there with rising interest rates is also a consideration, though higher interest rates could lend support to a stronger dollar.

MESSY, MESSY

What goes up comes down. And what runs smooth turns messy every now and then.

That's the current situation in China. But to be more accurate, the mess is pretty much global despite all attempts by those in power to cover it up. Damage control, cover up, semantical gymnastics aside, there's a four letter word to describe it--grim.

http://www.fool.com/investing/general/2013/06/25/the-most-important-number-china-needs-to-worry-abo.aspx

FINE LINE

Sometimes it's a fine line between winning and losing.

And the same holds true for credibility. Once blemished it's difficult to ever fully restore. Here's an article that touches on the subject we've been writing about for a while now.

http://www.minyanville.com/business-news/markets/articles/Bill-Gross253A-The-Fog-That2527s-Yet/6/25/2013/id/50524?camp=newsletter&medium=email&from=recapemai

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                                     The Drum Beat Increases

The drum beat against the euro intensifies.  Make little mistake the euro lives and breathes on borrowed time. It's problems are symptomatic of those in other developed nations, politicians and bureaucrats and social so-called do-gooders run amok.  It's just not the Germans who will sooner or later grow weary of paying.

http://www.spiegel.de/international/europe/new-anti-euro-figures-in-germany-offer-vague-ideas-and-fan-fears-a-906675-3.html
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COMMON SENSE

Common sense is one of those topics one hears much about but, truth be told, sees and hears little around. Gold prices are an example; they've been going down for a while now after a 12 year run-up.

The key part of that sentence is "after a 12 year run-up." Now we don't expect everyone to get it.  That they won't is a given. But here is a link to one of the more common sense discussions on today's global financial mess.  The US dollar has more hot air in it than the Goodyear blimp.

People want what they want.  Keep that in mind when you're doing your homework.  And Bernanke and others want a economic recovery without addressing any of the real causes that caused the mess in the first place.

It's human nature. Bet against it.

http://www.moneynews.com/InvestingAnalysis/Axel-Merk-dollar-gold-safe-haven/2013/06/24/id/511559

MORE DAMAGE CONTROL

If at first you don't suceed, switch to your damage control mode.

That appears to be the Federal Reserve's latest ploy after Big Ben stuck his economic shoe in his mouth and sent the stock market reeling recently. Calm those frayed investor nerves. Refill the punch bowl. Let them know we're still serving.  

If you're a big bank, don't fret. The drinks are still on the house.

For every seller there needs to be a buyer. And the bridge that connects the two in most cases is called credibility. So here's the multi-trillion buck question: How much if any does the Bernanke-led Fed have left?

http://www.reuters.com/article/2013/06/25/us-usa-fed-idUSBRE95O0B020130625

INTERESTING READS

Asia Down
http://www.zerohedge.com/news/2013-06-25/asia-crumbling-chinas-worst-2-days-almost-4-years-nikkei-450-pts-session-highs

Energy Pick
http://www.insidermonkey.com/blog/what-does-seth-klarman’s-baupost-see-in-bp-plc-adr-bp-179239/

Another Way To View Energy
http://ourfiniteworld.com/2013/06/24/energy-products-return-on-investment-is-already-too-low/#more-38254

UK Equities Face Turmoil
http://www.reuters.com/article/2013/06/25/markets-britain-factors-idUSL5N0F10A520130625

Save On the Benefits
http://jobs.aol.com/articles/2013/06/24/nation-temp-workers/

SOOTHING NERVES THE FED WAY

There's the old tale about the three monkeys: see no evil, hear no evil and fear no evil. 

And then there is this, the variance of opinions among current members of the Federal Reserve Board. It's sure to calm investor nerves. It just make one feel so much better to know that these watchers of the public trough have their economic acts so smoothly in place. 

In a previous life they could have all been weather forecasters.

http://money.cnn.com/2013/06/24/news/economy/federal-reserve-qe3/index.html?iid=HP_LN

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                       Higher Interest Rate Impact

One of the things you want to ask yourself  is what impact higher interest rates will have on energy prices. 

 We've been talking energy for a while now. It's been one of the forgotten commodities in the equity rally that started at the first of the year and all the palaver about future US energy independence.  This might well be a place you want to take a: "Not-so-fast approach."

It could turn out to be a unexpected opportunity to make some serious money.

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SHAKE, RATTLE AND DUMP

Below is a link to an article that will rattle some bond investors. It also emphasizes something we've been alluding to for some time and just mentioned in yesterday's post, Treating Lab Numbers.

It's called fiscal accountability or letting a financial fever run its course. Fevers spike to help fight off unwanted bugs. More often than not fevers spike owing to excesses. It's one of the most basic built-in protection mechanism the human body has. Most are self-limiting and will do just fine without human intervention. 

Too bad the same can't be said for recessions.

http://www.cnbc.com/id/100836919

TREATING LAB NUMBERS AND OTHER BRIEFS

In medicine one of the first things you're taught is never treat a lab number. Treat the patient.

The Bernanke-led Fed continues to treat a lab number, 6.5% unemployment. So Big Ben, beyond a feel-good factor, what's the magic in that number versus, say, 6.3 or 6.6 or 5.9? When you don't allow recessions to run their course, you're treating artificial economic numbers.

When Bernanke announced last week his proposed timeline for slowing down QE, he was playing the calendar game not the market game. They're different. The real market's based on the economy, the real economy.

Like all those New Year's resolutions people make every year, they're calendar events. And truth be told most fail. Bernanke's trying to slide one past you here. The lab number is artificial--6.5% unemployment--in an economy where job-force participation is at record lows.

What's really worrying Big Ben is the bubbles his QE-based plan are creating in paper assets and housing. There's really not much to toast here despite all the Wall Street celebrating up until last week.

As one Wall Street wag recently noted, "Housing is the bright spot. But even it is staring down the muzzle now of higher interest rates."

So here's the bottom line. We all know the danger associated with unintended consequences. But often overlooked by many are the dangers of intended ones.

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Spin and hype are four-letter words.

Politicians love to spin, MSM hype. These are givens. So how does one make sense of the market's reaction to what Big Ben Bernanke spewed forth this past week? The short answer is one doesn't.

The long answer is just look for disparities, opportunities. If everyone wants something usually it's either overpriced or over-hyped. Bargains are not often found sleeping on the new high list, notwithstanding what the technical or momentum crowd will tell you, though they have their point.

You find the bargains often on the new low list among the unwanted and discarded. There are about to be more of those coming on the market soon. As always do your homework. ________

What do you get when you open a mall in South China twice the size of the US's Minnesota Mall of America? A vacancy rate of 99% since opening in 2005.
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So where's the pain in all this?

Well, two places to look, and there are others like energy and gold mining, are both bonds--junk and municipals.

In the muni market, according to the WSJ weekend edition, quoting one fund manager: "Everybody wants a bid and nobody's looking to buy."

Other signs are several big public offerings in New York and California among others were postponed. Both of these once-over bought markets will correct and start coughing up higher yields that will entice some yield-starved investors start to hunting once the volatility dies down.
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A LOOK AT REAL ESTATE

As nearly everyone knows real estate is an important cog in the US economic recovery cycle.

Here's an interesting graphic. Consider it like an overlay. 

http://www.marctomarket.com/search/label/Great%20Graphic