SO WHAT NOW

So what now for the US dollar?

With the slow down in China, the EU mess and emerging markets touted to retrench, what now for the dollar becomes an interesting question. Higher interest rates could spike the dollar higher. Hot money looking for a stout place to hide could also push up the greenback.

And then there's oil, denominated in dollars. Could oil prices surprise nearly everyone and keep going up? Like most things in life, opinions are mixed. Here's one that thinks the almighty US dollar has seen its better days for this run and will soon, if it hasn't already, be topping out.

http://www.resourceinvestor.com/2013/07/15/is-the-inflationary-phase-finally-here?eNL=51e42973fc746fd1640000e9&utm_source=DailyENL&utm_medium=eNL&utm_campaign=RI_eNL&_LID=485386&t=precious-metals&page=
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LOOK FOR A ROUT.

Instead of a rainbow with a pot of gold at the end, look for a rout.

That might be one of the best pieces of investment advice one will ever hear. The most recent rout is taking place in emerging market country. You know the names and there are plenty to go around. The International Monetary Fund recently lowered it growth outlook for next year for EMs. 

Like most things in life, however, not everyone agrees. Some followers think there's still more downside out there. They say opportunity is one thing. Waiting for it to materialize once you're invested another.

So do your homework.
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WHAT'S UP

What's up with the recent price of oil?

There's a lot of talk in the media today about fracking, US energy independence, an energy glut and the like.

Sure, there's the trouble in Egypt. Some think it's tacked on a $5 or $10 a barrel risk premium. After pulling back on Thursday to $104.91, it recovered Friday to close at $106.25. Just a few weeks ago oil traded well below $100. 

Some analysts believe $100 a barrel oil is the new norm. At that price oil is still quite a bit above it's 52-week low last November of $84.44. We' ll spare you the spread talk about Brent versus West Texas Intermediate.

Brent crude, so the thinking goes, symbolizes world events while WTI more domestic happenings. At this point the market doesn't view Egypt's internal turmoil a major threat. Could the real message be that despite all the ballyhoo about new domestic supplies and the technological wonders of fracking the market smells something the cheerleaders don't want the rest of us to know?

With the EU economic mess not expected to be repaired anytime soon, a predicted drop off in emerging market growth and the well-publicized China slowdown, one would think it might impact demand.
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WEEKEND BRIEFS

An article in today's Barron's, "Trickle Down Economics," paints a fairly bleak picture for China and the EU.

Citing a just-released study from Stratefor, a geopolitical research firm, the article claims unemployment in periphery EU is now around 27%, even higher than that of the 1930s Depression era. In short, there's much trouble in what once was thought to be the brainchild of EU economic paradise.

Bad news: Serious defaults in EU just ahead and a more repressive dictatorship in China.

Good news: US may be beneficiary.
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                              THE SHILL FACTOR

Webster's defines shill as someone who poses as a customer to influence others to participate in an activity.

When Big Ben Bernanke mid-week rolled out his financial boomerang act, letting God and everyone else know QE's imminent demise has been greatly exaggerated, most major stock indices did a 180 and turned skyward.

And the US greenback, Treasury yields, emerging market equities and even gold turned upward. Some analyst say the move is for real, others aren't buying the turn around. So, to borrow an over-used line from one media popular blowhard: What say you? It's only your money.
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BRIEFS

Some came away bruised. In this case big bond fund gurus, many of whom were caught off  guard when Big Ben spoke a while back about easing off the QE party. But not all of these big boys got hammered.

http://online.wsj.com/article/SB10001424127887324694904578599900117934728.html
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                                                         SURPRISE?
In case you have not been paying attention, with the exception of yesterday, the price of crude is on a run, up 10 of the last 12 days. Global oil demand and higher interest rates should lead to higher future prices. Sure more supply is expected owing to increased discoveries and more fracking.

Both, however, remain subject to uncertainties, trouble in the middle-East and environmental nonsense. OPEC's clout appears on the wane. Global oil flows may soon switch directions,flowing West to East, hardly an insignificant change in more ways than just geopolitical.

Hot money is another. Oil is denominated in dollars. Speculators love it. Higher interest rate usually go with a stronger currency. That could make oil more expensive to many countries, something those EU politicians most likely don't want. Any expected recovery in the US and elsewhere will add to the demand. 

Biofuels as in diluting gasoline may be facing further political pressure as the fuel versus food debate continues to heat up and ethanol additive requirements and transportation costs in the US have led to higher food prices and dealers exporting more energy overseas.   

EU politicians recently voted to curtail the percentage of biofuel required in autos and trucks, a blow to the clean air freaks like Greenpeace and others. The point here is the market and many investors are gearing for one thing with all the excessive energy talk. 

What they get may just be another. Clean air versus economic recovery could prove to be a hard choice for professional bureaucrats and politicos around the world.
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                                  SICKENING 
Jobs are and have been front page MSM stuff for a long while.
Given the shortage of them one would think those who have one would be more grateful. Not so according to this report.

http://blogs.wsj.com/economics/2013/07/10/work-makes-people-miserable/?KEYWORDS=work+makes


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BACON BRIEF

The name of the nation is United States of America. But it's misleading to say the least.

America is about as divided as any country on the globe. Some might even postulate more divided now than ever, the Great Civil War period included.

The usual subjects get cited: abortion, gay marriages, taxes, education, big-versus-smaller government, gun control, to name just a few.

Well, here's another one considering a story in today's WSJ--bacon and the smell of it. Some like it, others don't. Surprised?

http://online.wsj.com/article/SB10001424127887324867904578596570016827626.html?mod=ITP_AHED
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DO ANYTHING YOU WANT BUT

You can drive my brand new car, drink my liquor from an old fruit jar, say whatever you want to say. Knock me down and step on my face, slander my name all over the place. Do anything you want. But please, please don't take the economic heroin away.

That's the message from this pundit and it should not surprise anyone. Easy money and if you're a big bank free money are addicting. Who doesn't like them? 

Half the globe tried a little mostly smoke-and-mirrors economic retrenchment for about a season but when the pain barometer started buzzing, as it will, the crying time started again. 

http://blogs.marketwatch.com/capitolreport/2013/07/10/fed-about-to-shoot-the-economy-in-the-foot-posen/

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EARNINGS SEASON

What happens when anemic earnings meet over-priced assets?

The answer remains to be seen. But a decent guesstimate: something not good.

According to one recent report, the trailing 12-month PE ratio for the S&P 500 jumped from over 15 to almost 18.5 in the last year. One reason: earnings growth has lagged price gains. Should earnings growth, as some pundits expect, increase, the PE ratio could fall toward the 15 level again.

But that's, some say, a big should. The point  here is valuations look expensive. Then there's the possibility the Bernanke Dog and Pony Easy-Money Show will hit the egress trail sooner rather than later. 

There's only so many fancy rabbits in any economic hat, notwithstanding the spate of stock buybacks and cost cuttings corporate USA has pulled off in recent years. These are old not new ploys. All the more reason perhaps to expect the unexpected.  

You might want to start your list today.

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CHINESE DEMAND FOR GOLD

Interesting chart. As pointed out previously demand for the yellow metal remains high in Asia.
http://moneymorning.com/2013/07/10/if-you-own-gold-you-must-see-this-chart/#.Ud2Zisu9KSM

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UPDATE ON EM

Recently we pointed out that investors were pulling capital out of emerging markets, those once hot places for them to make some money and pick up a little yield.

One explanation given is the threat of the Fed's turning down the easy-money spigot. Now adding to the problems these EM face is the recent report from the International Monetary Fund predicting slower global growth prospects, particularly for China and Russia. 

Many of these countries in 2012 rolled out higher taxes on foreign investments and lowered interest rates to decrease the torrent of hot money flowing there as a result of Big Ben's easy-come-easy-spread policies.

It just shows that what may happen in the US doesn't stay there.

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