Courtesy of Phil’s Stock World

What a difference a week makes!

Just a week ago, I was apologetic for being so bearish on the markets.  People were complaining that the writers at PSW were “too negative” and that we were out of step with the MSM, who saw nothing but “green shoots” under every economic rock.  On June 28th, I wrote an article comparing the US consumer to the NY Yankees as a way of explaining how the analysts can be so wrong in their expectations for a recovery.  I pointed out that, although they are the winningest team in baseball history, I can still remember a 10-year dry spell from 1965-1975, saying: “Like the US consumer, you come to EXPECT the Yankees to be in contention and you may make your bets that way out of habit, but that storied history of performance is NOT going to stop you from hitting a 10-year losing streak is it?”

Like the Yankees, the media EXPECTS the US consumer to win.  After so many consecutive years of stuffing our faces and shopping until we drop, the global media simply refuses to believe that the US consumer can do anything more than stumble slightly before getting right back on the horse and refinancing or whatever it takes to get out there and start charging once again.  As the US consumer makes up 70% of our economy, it’s no wonder all the sentiment polls think prosperity is just around the corner because everyone believes the US consumer is simply resting.  The homebuilders telll us things will rebound, the manufacturers tell us things will rebound and the companies reporting earnings, who are “beating” expectations by only doing 35% worse than last year, are all giving us sunny outlooks as well because the US consumer is coming to save us all.

Isn’t it amazing how, just 7 days later, the media has suddenly gotten on a totally different bandwagon?  Just as a crowd turns on a star ballplayer who strikes out in a clutch situation, the MSM has turned sour on the US economy and has changed their outlook on the US consumer from “resilient” to “dead” overnight.  While extremism grabs a lot of headlines, sometimes the truth can be found in the very dull places between the labels.  I have long pointed out (some may say ranted) that commodity prices were unjustifiably high and were jeopardizing the recovery by pulling money out of the pockets of already-nervous consumers and pulling disposable income away from job-creating industries in favor of imported necessities like food and fuel.

This is no way to grow an economy and hopefully this little stumble will gain a few converts who will join us in cracking down on the theivery practiced by Goldman Sachs and their ICE partners as well as other commodity pushers who are willing to squeeze the industrialized addicts to death in order to extract the last dimes from a dying global economy.  Thanks to Matt Taibbi’s article in Rolling Stone, some very uncomfortable light is being shined on Goldman Sachs and the rest of what Matt calls “The Wall Street Bubble Mafia” that has been systematically dimantling the American middle class ever since they accidentally made wealth gains during the Kennedy/Johnson era.

Way back in September of 2006, I noted the way Goldman was stirring the commodity pot, saying: “This is the kind of out-of-control commodity spending that took down Amaranth, only it’s happening in slow motion at the investment houses.”  That bubble took an additional 12 months to pop, but the rapid rise in commodities in the first half of the year is now leading to an accelerated deflation on the other side.  Oil plunged all the way to $63.50 in pre-market trading, down $10 in 7 days and erasing 25% of the year’s run-up.  Don’t blame the dollar – it’s barely moved and will cause the commodity bulls a world of hurt if it does begin to recover but there was a tremendous amount of posturing this weekend from the BRIC countries aimed at holding the dollar in check along with a Bloomberg featured article calling the dollar “the world’s biggest Ponzi scheme.”

According to Bloomberg: “The dollar isn’t crashing because those invested in it are propping it up and adding to their holdings. After all, the magnitude of Asia’s foreign-exchange holdings means it can’t dump the dollar without shooting its economies in the foot.”  Again, it’s nice to see the MSM catch up with me over 2 years later as, in my Dec 2006 article “Burn Dollars to Fight Gravity,” I said:

That’s where the old Roach Motel Theory kicks in – not as it applies to oil, but as it applies to dollars. The Chinese have a Trillion US dollars! While they may threaten to diversify them into something more stable Mr. Paulson is going to point out to them that they are not the only roach in the motel.

Japan also has a Trillion of our dollars, we send them more every time we buy a Toyota but the biggest joke of them all is that we’ve been shipping these ever devaluing dollars to OPEC and every other oil producing country at the rate of $165Bn a month (what, did you think Jihads just fund themselves?). Oil is traded in dollars, people who want to sell oil must accept dollars, people who want to buy oil need dollars to buy it…

Ha ha! So the devaluing US dollar will hurt China, Europe (the least), OPEC AND every one of that top 10% of the world’s richest people who have 85% of the dollars that are floating around. I challenge you to find a government, no matter how communist, that can afford to ignore them!  So, we will keep printing dollars and China will keep buying them, as will everyone else.

So kudos to Bloomberg for catching up and let’s keep in mind that the dollar has been pronounced dead over and over again in the 30 months since I wrote that article but, here we are, holding the line at 80 once again – with oil at the same $62 it was then and gold clearly the 2-year outperformer, up 45% from $650 at the time.  Is oil too low or is gold too high?  That’s going to be a key indicator for us to watch this summer and the movement of oil, gold and the dollar will be a lot more important over the next 30 days than all the earnings reports we are likely to hear.

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