Market Talk

**teknobucks** · 04-12-2005, 08:10 AM

Costs of oil, raw materials renewing fears of inflation
Knight Ridder News
April 10, 2005

SHADY SIDE, Md. - Soaring fuel costs, rising interest rates and creeping retail prices are hitting American pocketbooks in a combination unseen since the early '80s.

Inflation isn't surging anywhere near the 13.5 percent peak of 1980, but it's rising worrisomely as the economy suffers many strains, with a common root in global competition.

Oil prices grab the headlines, but prices for raw materials such as steel and even meat are rising too. Growing global demand is to blame. China, India and Brazil - emerging economies expanding fast - are competing with U.S. business for raw materials, driving up their prices.

Oysterman Don Sheckells feels the inflationary pinch of high fuel prices, which are driving many Maryland watermen to other jobs. He's one of the few still in Shady Side, working the Chesapeake Bay as he has since 1972. Disease has ravaged the oysters and cut their harvests, and the jump in marine fuel costs hit Sheckells hard.

"It used to be 80 or 90 cents a gallon'' less than 10 years ago - adjusted for inflation, 85 cents in 1997 would be a bit over $1 today - "but now it's double that,'' said Sheckells, bracing for $2 or more per gallon at his next fill-up. "It's going to hurt.''

When prices of goods and services rise, that's inflation.

Oil prices are now inflation's biggest driver: They reached $57 a barrel earlier this month before tapering off to around $54 last week.

Higher oil prices raise operating costs and eat into the profits of fuel-dependent businesses such as airlines, cruise ships and package-delivery firms, not to mention anyone who drives. The costs of other raw materials are soaring too.

Fastest pace in 20 years

This month, prices of core intermediate goods - semifinished goods, such as the nylon used to make a tent - are rising at an annual pace above 8 percent, the Labor Department reported. That's the fastest in 20 years. Prices on finished goods rose at a much slower pace: 2.8 percent, still the fastest since 1992.

To quell inflation, the Federal Reserve is raising interest rates. Higher interest rates tend to reduce purchases of homes, cars and other big-ticket items. That eventually takes the steam out of inflation - and sometimes out of the economy.

If the Fed slows things too much, that can tip the economy into recession, as it has several times in the past 50 years. Sometimes that's the only way to stop inflation.

When commodity prices began rising last year, many businesses ate the costs and tried to offset them by working more efficiently or cutting back elsewhere. Now they're starting to pass them on to clients in the form of higher prices. That means prices are rising throughout the manufacturing chain, and the results eventually show up on store shelves.

"This suggests some further pass-through into higher consumer prices will occur in the months ahead,'' warns investment bank Goldman Sachs in New York.

Miami-based Carnival Corp., the giant cruise-ship line, anticipates a 23 percent increase in fuel costs this year.

Fuel surcharge imposed

United Parcel Service operates more than 500 planes and 88,000 delivery vehicles. It tries to control costs by purchasing fuel in bulk. Last year those costs exceeded $1.4 billion. With oil prices spiraling, UPS imposed a fuel surcharge March 7 to pass along some of the higher cost to consumers.

Higher oil prices hit manufacturing, too. PPG Industries of Pittsburgh makes brand-name retail paints such as Olympic, Lucite and Pittsburgh. On March 15 it announced price increases to defray "the rapid escalation of raw-material costs.''

Petrochemicals are used to make paint. When oil prices go up, paint gets more expensive. PPG spokesman Jeff Worden said that in the first three months of this year, the company's raw-material costs rose by $50 million.

The Polymer Group of North Charleston, S.C., makes textiles that are used in doctors' scrubs and disposable diapers for consumer-product giants such as Johnson & Johnson and Procter & Gamble. Its products contain polyester and polypropylene, both of which come from petroleum.

"We haven't passed on 100 percent'' of the cost increases, said Dennis Norman, the company's vice president of strategic planning. "We're doing everything we can to mitigate the cost increases to customers.''

Higher steel prices are making Whirlpool washing machines and Caterpillar tractors more costly. Higher global meat prices forced Bruce Rohde, the chairman of Con-Agra Foods Inc. in Omaha, Neb., to announce aggressive price increases for lunch meats. Con-Agra owns brands such as Armour hot dogs, Butterball turkeys and Hebrew National lunch meats.

Fed boosts interest rates

To clamp a lid on this incipient inflation, the Fed has increased short-term interest rates seven times since last June. At its most recent move, on March 22, it noted that "pressures on inflation have picked up in recent months'' and signaled that more aggressive rate increases may be necessary.

A day later, the Labor Department reported that the consumer price index had shot up by an unexpectedly robust 0.4 percent in February.

The Fed is trying to ease off the gas instead of stepping on the brakes, but getting the balance right is tricky. If it raises interest rates too far, that could threaten the hot housing market.

Home prices have risen more than 40 percent over the past four years in many metropolitan areas. Many economists think they're going up largely on expectations of even higher prices rather than economic fundamentals, making home prices a speculative financial bubble that could burst.

Mortgage interest rates tend to rise with Fed rate increases. If they go high enough, buyers may dwindle and home prices could fall. That could lead to defaults on mortgages and bankruptcies.

The benchmark 30-year fixed-rate mortgage climbed to 6.01 percent this week, compared with 5.40 in the same week of March 2004. Today's rates remain historically low, but some analysts think there's a psychological barrier at 7 percent, since the 30-year rate has been under that since March 2002, and under 8 percent since August 2000. Exceed those numbers and buyers may disappear.

Waitress Sandra Howes has had her home near Annapolis on the market since December. She greets rising mortgage rates with a brave face.

"Maybe they'll help sell my house more quickly,'' she reasoned between customers at the Double T, an old-fashioned diner. She hopes someone will snap it up soon to stay ahead of rising borrowing costs.

So far, consumers appear only a little worried about rising prices and interest rates. The Consumer Confidence Index dipped only slightly for March. It's published monthly by The Conference Board, a private business-research center.

"We haven't seen much of a drawback on spending. It would really depend on how high and how long; I think duration is important here,'' said Lynn Franco, a Conference Board economist. "So far, we've seen consumers at least weathering the hikes well.''

The test is how far rates have to rise. Fed Chairman Alan Greenspan, who's balanced these risks since 1987, knows the danger. As economist Ed Yardeni noted this week: "The Fed chairman retires on February 1, 2006. He certainly doesn't want to burst the housing bubble now and push the economy into a consumer-led recession.''

http://www.billingsgazette.com/index.php?id=1&display=rednews/2005/04/10/build/nation/65-energy-...

**teknobucks** · 04-12-2005, 08:12 AM

Monthly Market Watch
The Future is in Futures
by Pearce Financial, LLC
APRIL 2005

Stock indices - The June S&P 500 looks like it has ended the short-term down trend. After making lower weekly lows for four weeks and lower weekly highs for three weeks the market rallied above a two week high and closed back above the 18-day Moving Average for the first time in nearly a month. A rally above last week's high of 1195.70 should confirm that the up trend has resumed. This should clear the path for the S&P 500 to test the current daily Fibonacci .618 retracement at 1208.40. Further resistance is at the contract high of 1234.10. A break out to new highs could push the market up to the major monthly Fibonacci .618 retracement at 1265.90. Near term support is clustered between the daily March low of 1166.80, the current minor weekly Fibonacci .382 retracement at 1165.00 (as measured between last year's weekly low of 1060.20 and this years' current weekly high of 1229.80), and this year's current weekly low of 1064.50. A break below it should immediately trigger a sell off to the monthly 18-bar Moving Average at 1140.00. This is an important area to watch for buy set ups. The S&P 500 has not closed below the monthly 18-bar Moving Average since May of 2003. A close below this monthly 18-bar Moving Average would be a warning sign that an important trend change could be under way. This occurrence could quickly break the market to the psychological 1100 mark. Further support is located between last year's weekly low of 1060.20 and the major weekly Fibonacci .382 retracement at 1053.20. Open Interest is flat. The %R overbought/oversold indicator shows that the S&P 500 is overbought on the monthly chart. Seasonally, the S&P 500 should make a decline in mid-April and then rebound quickly. Commercials are holding the smallest net short position in five months. Large traders (hedge funds) are still holding about the same size of a big net short position they had back in August. Small traders are holding the smallest net long position in over four months.

The June NASDAQ 100 made an outside reversal down on the weekly chart at the end of March. This was bearish price action. Then the market reversed last week and took out a two week high. It look's like the bull has conquered the bear once again. A rally above last week's high of 1511.00 could send the market back up to the daily March high of 1563.50 or the current major daily Fibonacci .618 retracement at 1576.00. Further resistance is at this year's current high of 1643.00. A break out to new contract highs could send the NASDAQ 100 soaring to the December 2001 high of 1738.00. A break below the March low of 1466.00 should allow the market to quickly test the minor weekly Fibonacci .618 retracement at 1432.20. Bigger support is found between the major weekly Fibonacci .382 retracement at 1319.80 and last year's low of 1302.00. Open Interest is at multi-month lows. The NASDAQ 100 should move sharply lower in the first half of April and then recover in the second half of the month. Commercial interests are holding the biggest net long position in three and a half months. Large traders (hedge funds) have hardly budged on the big net short position they have been holding for two months. Small traders are holding the smallest net long position in nearly four months.

Interest rates - June T-bonds snapped out of their down trend after the monthly unemployment report on April Fool's day. The market cracked above the previous week's high and closed above the 18-day Moving Average for the first time since mid-February. A rally above last week's high of 110-00 and the April 1st high of 110-02 should take the market right to the major daily Fibonacci .618 retracement at 110-23. Further resistance is at the contract high of 112-16. A break out to new contract highs should allow June T-notes to test this year's weekly September high of 113-125. If the rally does not end here T-notes could easily test the weekly September high of 114-12. Near term support is found at the double bottom at this year's current weekly low of 107-265 and last year's weekly low of 107-255. A clean break below it could hammer the market down to the 105-00 area very quickly. Open Interest hit is still near the all-time high. T-notes have a seasonal tendency to move sideways in the first half of April and then decline in the second half of the month. Commercial sold just a fraction of their record net long position. Large traders (hedge funds) are holding a near record net short position. Small traders covered a small amount of their record net short position.

June T-notes find near term support clustered between last week's multi-month low of 109-12, the major daily Fibonacci .382 retracement at 109-07, and the intermediate weekly Fibonacci .786 retracement at 109-065. If the market does not stabilize here look for a decline to the major daily Fibonacci .618 retracement at 107-065. Near term resistance is found at last week's high of 110-18 (T-notes have made lower weekly lows and lower weekly highs for three consecutive weeks) in confluence with the current daily Fibonacci .382 retracement at 110-185. If the market makes it past this mark it should go to the current daily Fibonacci .618 retracement at 111-10. A rally above it could take June T-notes to the contract high of 112-16. A break out to new highs should send this market up to the weekly February high of 113-125. Open Interest pulled back slightly from the all-time high. The %R overbought/oversold indicator shows that T-notes briefly reached oversold territory on the daily chart. T-notes have a seasonal tendency to drop sharply in March. Commercials sold just a fraction of their record net long position. Large traders (hedge funds) are holding a near record net short position. Small traders covered a small amount of their record net short position.

Small traders are holding the largest net long position in years.

http://www.financialsense.com/editorials/pearce/2005/0411.html

**teknobucks** · 04-12-2005, 08:14 AM

THE WIND OF CHANGE
by Stephan Bogner

http://www.[[financialsense.com/fsu/editorials/bogner/2005/0411.html

BANGALORE, India (AP) -- Chinese Premier Wen Jiabao said on Sunday that China and India should work together to lead the world in information technology, jointly heralding a new "Asian century."[/b]

http://edition.cnn.com/2005/WORLD/as...china.india.ap

**teknobucks** · 04-12-2005, 08:15 AM

PUNDITZ WATCH....

The Coming Deflation Scare
by Steve Saville
April 12, 2005
http://www.safehaven.com/article-2888.htm

Don't Discount Discounted Dividends
by John P. Hussman, Ph.D.
April 11, 2005
http://www.gold-eagle.com/editorials_05/mauldin041105.html

Global: The Danger Zone of Global Rebalancing
by Stephen Roach
April 11, 2005
http://www.morganstanley.com/GEFdata/digests/latest-digest.html

Gold: The only currency that can't be printed
by Bill Fleckenstein
April 11, 2005
http://moneycentral.msn.com/content/P113717.asp

Roach, Hoye and Russell All Point Toward Deflationary Pressures
by Jay Taylor
April 11, 2005
http://www.howestreet.com/mainartcl.php?ArticleId=1109&PHPSESSID=dcf93fb 898fbec64cb9c7b7cca0fe40...

http://www.gillespieresearch.com/cgi...article/id=523

and oh yeah of course.... http://www.maui.net/~mauiben/april10dow2005.swf

turn volume up 4 the last one....LOL

Tekno

G/L

**teknobucks** · 04-12-2005, 08:18 AM

brain food:

http://stockcharts.com/def/servlet/F...t?obj=ID641835

**teknobucks** · 04-12-2005, 08:23 AM

The Search for Alternative Energy
Clif Droke
April 11th, 2005
Lately the energy sector has dominated the headlines. Rising oil, gas and electricity prices have taken a toll on the consumerâ€™s wallet not to mention the rising cost of production and transportation across the general economy.
In such times itâ€™s easy to get caught up in the fear-laden rhetoric of the mainstream press and the talk of $100/barrel oil. The press is apparently so confident that oil will keep rising and that consumers will spend more on gasoline this summer that the following presumptuous headlines have recently appeared: "Oil to rise despite step back from all-time high," "Oil to explode higher analysts say," "Americans will pay high price at the pump this summer." Considering that newspapers arenâ€™t supposed to be in the forecasting business these headlines sound a bit too much like they are doing someoneâ€™s propaganda (i.e., psychological prep work)...wouldnâ€™t you agree?
Or maybe the media have simply gotten carried away in all the excitement. The press articles cite surging oil prices, refineries "running nearly flat out" and demand for gasoline and diesel growing as the rationale for their "safe bet" that motorists will be paying a significant premium at the pump this summer. And who knows, maybe we will!

The good news about rising fuel and energy prices is that above $40/barrel oil, it becomes economically feasible to rigorously pursue alternatives to oil-based fuels

http://www.321energy.com/editorials/...oke041105.html

**teknobucks** · 04-12-2005, 08:25 AM

the yellow stuff:

http://www.quasimodos.com/cgi-bin/in...mp;Command=606

http://www.321gold.com/editorials/ho...erg041105.html

**teknobucks** · 04-12-2005, 08:37 AM

can ya tell i'm not sleeping well tonight yet??

http://www.keyhole.com/gmvery cool on line toy 4 the insomniac!!!

demo: http://toolbar.google.com/keyhole/boston1.wmv

7 days free...check it out!

tekno

ps; pushing back from the keyboard now...LOL

**Rolo** · 04-12-2005, 12:57 PM

Spaf wrote:

Let the dead bury the dead!

Divine words indeed! :^

Tekno, are you already retired? That, or you are a really quick study!

**Spaf** · 04-12-2005, 05:27 PM

Well why the slump in the market today. Well, well, well, and the answer is:

http://www.briefing.com/Silver/InBrief/PageOne.htm

that explains everything. The I-Horseman!

:?

**grandma** · 04-12-2005, 05:53 PM

teknobucks wrote:

and oh yeah of course.... http://www.maui.net/~mauiben/april10dow2005.swf
turn volume up 4 the last one....LOL
Tekno

Is this typed right?maybe 0315 is a bad hour for you?:shock: (wide-eyed)

...or 1300 is a bad one for me.........!! :zz

It's not there, for me, anyway....