Links and More for Wednesday
There are several technical — and temporary — reasons the major indices rallied hard yesterday. Traders seemed to anticipate a large cut to the Fed Funds rate today. The market was technically oversold. Governments everywhere are riding to the rescue on a flood of liquidity. And the yen carry trade (when traders borrow in low-interest yen to buy speculative assets) had been unwinding in a hurry, but that seems to have temporarily reversed, thanks to Japanese government intervention.
We could see more of a rally in the short-term, but fundamentals need to change to get the groundwork for a real, lasting rally. And that hasn’t happened yet.
The US economy is still tumbling into the worst recession in three decades, with no light at the end of the tunnel yet. Corporate financing is still incredibly tight. Earnings estimates are way too high, and will probably be hacked lower. Oil demand is lower, and lower prices haven’t helped, not yet anyway. The reason oil prices are rallying is because stock prices are going up … not exactly the basis for a sustainable rally.
One factor that could go either way: The notification date to withdraw from many hedge "fund of funds" is Nov. 15. According to an article by Real Money contributor Vince Farrell, because of the strength of the government bond market and the weakness of the stock market, pension fund asset allocations are out of whack and need rebalancing. Many funds are apparently overweight the bond market by 4% and underweight equities by about the same.
Farrell thinks this could lead to continued stock buying leading up to November 15. On the other hand, it could also lead to more and deeper selling of stocks if investors decide to cash out of those “funds of funds.”
It's all interesting. Here's what I'm watching ...
Gold Gains for Second Day in London as Global Equities Rally, Dollar Drops Gold rose for a second day in London as the dollar fell against the euro, buoying demand for the metal as an alternative to the U.S. currency. Silver gained.
Sean's note -- all eyes are on gold, but take a look at silver ...
That's what humans will need by the mid-2030s to keep up with our demand for metals, fossil fuels, timber and waste disposal, the environmental group WWF said in a global survey that found the United Arab Emirates to be the most wasteful country.
"We think we are different," says Jared Diamond, the American evolutionary biologist. "In fact...all of those powerful societies of the past thought that they too were unique, right up to the moment of their collapse." The Maya, like us, were at the apex of their power when things began to unravel, he says. As stock markets zigzag into uncharted territory and ice caps continue to melt, it is a view increasingly echoed by scholars and commentators.
What, then, is the story of the Maya? And what lessons does it hold for us?
According to Diamond's thesis, this: the ancients built a very clever and advanced society but were undone by their own success. Populations grew and stretched natural resources to breaking point. Political elites failed to resolve the escalating economic problems and the system collapsed. There was no need for an external cataclysm or a plague. What did for the Maya was a slow-boiling environmental-driven crisis that its leaders failed to recognise and resolve until too late.
The IEA believes oil companies and oil-producing countries will need to invest a total of about $360bn a year until 2030 to replace falling oil production and increase supply by enough to satisfy the demands of emerging countries such as China.
Investment decisions by Opec will be critical, the study argues, adding that the share of world oil production from members of the cartel, particularly in the Middle East, will grow significantly, from 44 per cent in 2007 to 51 per cent in 2030.