June 24, 2008

Global Market Comments for June 24, 2008

1) Rumors of an Israeli attack on Iran drove crude up to $138. It then fell back to $136. 72% of US consumers now want to buy a hybrid car but will have to contend with a long waiting list to get one. 49% are willing to pay a $5,000 premium for the fuel efficient cars. 26.8% of US oil production now comes from offshore, which is why drilling in Florida and California has become such a hot political issue.

2) The IRS is increasing its per mile expense allowance for driving personal cars for business purposes from 50.5 cents/mile to 58.5 cents/mile from July 1.

3) Shanghai had its worst week in the market in 12 years. Hyperinflation is slamming emerging market economies and stock markets as high food and fuel prices feed though. Vietnam and Russia are now suffering 25% inflation rates.

4) Hilton Hotels plans to build 300 new hotels in Asia over the next 10 years in addition to the 47 they currently have. Follow the money.

5) Dow Chemical is raising prices by 25%, something that will filter through to the entire US economy. Dow will spend $32 billion on energy costs this year, up four times in five years.

6) The S&P/Case Shiller national home price index fell 15% in April, the sharpest drop on record. Worst off were Las Vegas and Miami, down by -27%, followed by San Francisco, down -22%. Condos in Miami are trading at 40 cents on the dollar. The Midwestern cities like Chicago, Cleveland, and Denver, which never went up much, are seeing only single digit price falls and may be close to a bottom.

7) Office Depot is seeing 'unprecedented' price increases from suppliers, indicating that inflation is about to hit the US big time. Shorting long dated Treasuries is a no brainer here. Treat every three point bond rally as a gift to sell into. Treasuries are going to do this year what sub prime loans did last year.

8) According to the Conference board, the US economy is about to fall off a cliff. Its consumer confidence index fell from 58.1% in May to 50.4% in June, an all time low and one of the most rapid falls on record.