Friday, July 31, 2009

Oil "Well Overpriced" and Will Keep Falling; Gasoline to Follow

fter rallying nearly 50% this year, crude prices hit a major speed bump this week as the dollar has firmed up and inventories have risen.

Oil prices were "well overpriced" in the $70s and will continue to weaken in the weeks and months ahead, says James Cordier, President of Liberty Trading Group and co-author of The Complete Guide to Option Selling.

Rather than increased demand, the recent rally was based mainly on speculative demand driven by government stimulus packages, Cordier says. Most notably, a flood of liquidity in China found its way into commodities and China's economy now "looks like a bubble," he says, joining a growing chorus. (video)

U.S. States Face Ongoing Deficits

U.S. states have identified more than $51 billion in revenue deficits for the next fiscal year less than a month after wrapping up their annual budgets, the Nelson A. Rockefeller Institute of Government reported.

Among the worst projections for fiscal 2011 are California at $15 billion, New Jersey at $6 billion and Florida at $5 billion. In the current fiscal year, U.S. states totaled $160 billion in budget gaps, the report said.

“States push large parts of fiscal problems into later years,” Donald J. Boyd, senior fellow at the institute, told a Governmental Research Association convention in Washington, D.C., July 27. “It can take three or four years before finances recover, even if economic recovery comes sooner.” (more)

Financial Sense Newshour

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Marc Faber the recent rally is the result of excess liquidity The worst is still to come

The Road to Financial Serfdom

On Thursday with the S&P 500 inching closer to the 1,000 mark it is near impossible to silence the “recession is over” media hype. Of course, this is the same media that missed the biggest economic collapse since the Great Depression but here they are predicting the end of the recession. The problem of course is they do not define the end of the recession clearly. In their mind’s eye, the end of the recession means Wall Street profits and largesse pouring into the banking coffers. What about jobs? What about $14 trillion in lost household net worth? The U.S. Treasury and Federal Reserve are suddenly neo-Keynesians but only when it comes to saving themselves which is convenient. If you think of the stimulus plan for example, it was passed in February and had a price tag of $789 billion. This may seem gigantic but compared to the $13.5 trillion banking and Wall Street bail out it is relatively small. (more)

Faber: China Really Growing At 2 Percent

China's economy is growing at 2 percent, not the 7.8 percent its government claims, says economist Marc Faber, publisher of the Gloom, Boom and Doom report.

“The Chinese government is one of the few governments in the world that knows its GDP numbers three years in advance,” Faber told CNBC.

“I’d be a bit careful about China.”

A growing number of investors turned bullish on China after its markets began to rise last March, Faber notes, adding that it’s possible Chinese markets will continue to rise for a while. (more)

Dead banks walking

In recent weeks, the financial world has been dazzled by strikingly high earnings reported by our leading investment banks, or at least what we used to call investment banks. The numbers are reminiscent of another era, the one that came to a crashing end last September.

The euphoria is keyed to the record US$3.44 billion second-quarter profit announced by that branch office of the Treasury Department also known as Goldman Sachs. Wells Fargo, JP Morgan Chase, and State Street also chipped in with strong numbers. (more)

PBS: Bernanke On The Record

6 part video series

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