Tuesday, June 17, 2008
Here is something that you don't hear every day. Kuwaiti Finance Minister Mustafa Al-Shimali stated today that oil prices are too high and that they should be around $100 per barrel. With this coming from the 4th largest oil producing member OPEC, oil has retreated below $134 again. Housing starts fell 3.3% in May, the lowest in 17 years. This is bad news for the construction industry, but good for the market as a whole as we all painfully know, we could use a reduction in inventory. The Producer Price Index came out today at 1.4%, or .2% core with energy and food removed. Normally most investors would only look at the .2% (which was expected) as the general consensus is that food and energy rise and fall. With most starting to figure that the price of oil isn't looking to retreat any time soon, including former St. Louis Fed President Poole, more and more are looking at the overall 1.4% as a better gauge of inflation. The biggest positive news out today was Goldman-Sachs better than expected earnings report. Normally a boost to the DOW, today's news coupled with the PPI and housing starts has given us a small rally in the bond. We are up 54 Bp for the day, but still sitting with the finger on the lock trigger as any change in stocks will defiantly come at the expense if the Bond Market. Look at rates in the 6.75% range on FHA and keep an eye on the market as it looks like it will only take a small nudge pass 7%.
Karl Menzer
435-849-0212
Very good analysis. You are straight to the point and accurate.