Beware Wall Street 420 Point Rally...With Dollar Weaker, Expect OPEC To Find Excuse To Raise Prices

Although Wall Street was hoping for a full point rate cut, but only got a 3/4 point cut, looks like it was enough for the Dow Jones index to rally up 420 points for the day (closing at 12391). Better than expected earnings in the brokerage sector was a big boost, too! Overall, best UP day on the Dow since April 2001 and best day for the S&P since October 2002.

However, this Fed funds rate cut (on top of other recent rate cuts) has sent the dollar to record lows (a weaker dollar).

Well, if OPEC (Oil sheiks) get paid in dollars...how do you think they feel being paid in dollars that are becoming lower and lower in value? And they don't feel like taking a pay decrease. So look for them to figure out a way to keep the price above $100 a barrel (on the way to $110, $115, etc.) per barrel. An unexpected production disruption is always a good way to achieve this goal.

With oil at, or around $100 (plus) per barrel as it has been this year creates a major problem for many, many -- many U.S. companies who were planning on oil being $85 per barrel when they made their annual projections for investors.

Airlines for one will be hit hard. But beyond the obvious, take a company like Dow Chemical -- whose CEO said they plan on oil being $85 a barrel in '08. Any company that uses plastic will be hit with increases since oil is used for plastic. What is going to happen to these companies' profits at $100 (plus) per barrel?

And what is going to happen to food costs when farmers who grow corn and wheat when these higher fuel costs are passed on to farmers? And higher wheat and corn prices for human consumption, means higher prices to feed the cows and chickens for meat, too. Plus, the added fuel cost to deliver products. All of it will mean added inflation in the production and transportation of U.S. goods and services. (Inflation spiral up, y'all!)

Former Fed Chairman Greenspan urged the oil sheiks in Saudi Arabia to move the oil exchange off of dollars and into Euros. That would make the inflation in the Gulf region lessen substantially since Euros are now worth more than dollars. This will make matters even worse for the U.S. by de-valuating its currency by about 20% overnight if they act on his recommendation.

GOLD is down from record highs over $1000 this week (as high as $1028 this week), possibly because investors were looking for a full point rate cut; investors need to sell profitable gold positions to cover losing margin calls elsewhere; and because the Fed cut causes an initial boost of cash into the U.S. market (driving gold down) -- but the Batcomputer says with oil at $100 -- and credit spreads (derivatives market) widening -- the 3/4 point cut won't be enough to get in front of the curve.

So enjoy the rally, but this might be a good time to increase your position in gold (because the trend line says gold is only going higher in '08 as inflation worsens) -- and it'll be tough to make a buck with oil at these prices.

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WALL STREET ALERT: We Warned You It Was A Suckers Rally!!! Gonna be a painful day for Dow Jones

Zuma's Batcomputer just sent a Wall Street alert that today is gonna be a "DOW-N" day for the Dow. One of those painful down days that reminds you how fragile the economy is. Oil at $110 per barrel ain't helping the already sucky housing, credit and bond markets and weaker than ever dollar. Margin calls are hitting some of the big boys real hard! (See Carlyle story). Oil will continue to skyrocket higher than your worst nightmare ($145-$150 in the short run.) What is causing the rise in dollars per barrel? The U.S. is backing Columbia vs Venezula's Hugo Chavez, so the risk of oil supply disruption is already driving the price up. (Hugo might turn off the oil switch.) Remember, when oil goes up -- so does gold. Silver ain't doing bad, either. GOLD is at $990 and SILVER is at $20.42 in overnight trading.





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LA Daily Blog Wall Street Update for Thursday March 6, 2008

DOW JONES CURRENTLY DOWN 116 POINTS (10:48 AM)

Oil, gold, silver, platinum, cooper, wheat, agro, all hit record levels yesterday and oil broke the $105 mark today. A weak dollar, housing and credit problems, and rising cost of commodities means it's time to check in with the StrategyUpdate.com News Wire.




NEW STRATEGY UPDATE BUZZWORDS:

"Reflation" (Recession during inflation)
"Incession" (Inflation during recession)
"Fuctconomy" (U.S. position in global market)

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LADailyBlog News Wire For Tuesday Morning

MAYBE HE THOUGHT NO ONE WOULD NOTICE AS LONG AS ROBIN KRAMER IS CHARGE:
Los Angeles Times - Opinion: Voters will have to decide if the mayor's travels to campaign for Hillary Clinton are hurting or helping the city. The Times reported Monday that Villaraigosa has spent 18 of the last 65 days out of town, campaigning for Clinton. In just over two months, that's nearly a third of his time. Traveling with him are City Hall aides (using vacation days) and his police security detail. Is Los Angeles winning or losing from this arrangement? (See article under "Zuma's News Wire")

HILLARY IS HOT: Don't confuse the commentary with support, but Hillary has finally found her voice, and has been kicking ass this weekend in Ohio, and Monday night in Texas. Not that she would have been able to stop the Obama train, but I think she would he a hell of a lot better off, today...if the campaign was just starting based on how she is finally doing the best that she has done in front of the cameras. (Even if her voice is still annoying in big crowds, that won't be a factor after the election.)

WEAK DOLLAR: Glad I don't have any! Former Fed Greenspan was heard suggesting to the United Arab Emirates to dump the dollar. (I wonder if they can pay Related Co in foreign currency for the Royal Family of Dubai's investment at Grand Avenue Project. And CNBC reported that some NYC retailers are now accepting the Euro.


GOLD & COMMODITIES ARE HOT: Even Calpers has pulled out of Grand Ave Project and dumped money into commodities. Some say it's all a bubble is going to burst, but others (like ZD) feel it is demand based and will keep rising. Jim Cramer says gold is going to $1600 and silver is just as good. Plus the agriculture sector.StrategyUpdate.com for 24 hour gold and metal charts and Wall Street analysis by global economy guru MC Zuma Dogg.


MATT DOWD COMMENTS ON VENICE BEACH: CM Bernard Parks warned that Tennie Pierce's dog food settlement would be cheaper, while CM Dennis Zine says you gotta fight for your right/no settlements. (See thread below for extra $1.6 million on top of it all.) Not that this has anything to do with that...unless it does. (See first comment of this thread for more.)

MATT DOWD & ZUMA DOGG "LIVE" (Many rock stars are also influential political figures! Matt & ZD are no exception.)







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Dow Jones Down 315Points!!!

Zuma Dogg has been warning of economic problems that would be affecting the stock and bond market over the past few months. I posted a subprime bubble burst warning (that would trigger a recession at year's end) in May '07 that came true, right on time. I started a website for all my friends and family to monitor the market and a place to blog my predictions and analysis. StrategyUpdate.com

If you are wondering why the DOW is down 315 points today, although I haven't blogged anything new this week, it's all about what has already been posted that is causing today's sell off. Monday ain't gonna be pretty, either. Neither is this year. (Or next.)

Bond insurer crisis, credit markets (spreads getting wider=bad news), subprime foreclosures, bad job numbers, higher commodity prices, gold/oil at record levels, Fed Chairman Bernanke's doom and gloom comments yesterday, and the muni bond market failing (links to stories on this blog) are all contributing factors, like one big symphony playing a sad, depressing tune.

Gold, wheat, oil, copper, metals, commodities all on a long term upward trend. This isn't your college professor's textbook market anymore. Need to write some new chapters on "global economy and fundamental shifts".

GOTTA FOOD?: Emerging markets like China, India and others gotta eat and they will be consuming more expensive food sources like protein (meat, chicken) as these populations become wealthier, like Americans, now that they have profited off the U.S. long enough, so they are now living the American Dream, causing the market to drop 315 points today (at the time of this post), making it an American Nightmare in the U.S.


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