June 6, 2008

Market Comments for June 6, 2008

1) Crude has made the biggest move in the history of the market, soaring $18 from yesterday’s low to $139. Futures ended limit up today for the first time since the 1991 Gulf War. The initial trigger was provided by the ECB’s Trichet who said he may raise euro interest rates. This caused a collapse of the dollar which fed straight into crude and other commodities. The second leg was provided by an Israeli deputy cabinet minister of transportation who said that an attack on Iran’s nuclear facilities was ‘unavoidable.’ Then Morgan Stanley said that crude will hit $150 by July 7. Natural gas hit a new high of $12.85. As the markets are clearly going nuts here there is nothing to do here but stand aside and watch, in awe, with jaws dropped.

2) The unemployment rate for May rocketed 0.5% to 5.5%, the largest increase since 1986. Big losers were construction, while one of the only hirers was the government. This threw the stock market into a tailspin, dropping 394 points, the largest drop since 2007. We have now had five consecutive months of rising unemployment. There has never been a run of data like this without a recession. This is not good for McCain.

3) There is a flurry of rumors that Apple is going to announce the 3G IPhone at the Mac World developer’s conference on Monday. The new phone is thought to be thinner, have a longer battery life, have more features, better internet access, better screen resolution, and will offer an upgrade option to existing IPhone users. AT&T has cancelled June vacations for employees so they can handle the expected deluge of orders.

4) China has spent $20 billion on the Olympics. To cut traffic in half they are resorting to an odd/even license plate system.

5) Ed McMahon’s house is going into foreclosure after he defaulted on a $4.6 million loan.

6) The fuel bill for a Gulfstream has risen from $2,000 to $6,000 an hour over the last two years. Heartbreaking.

7) Steel is going from strength to strength. US steel demand is expected to reach 130 million tons this year against domestic production of 105 million tons. The shortfall is met from imports, formerly from China. US steel plants are operating at 100% capacity and running 24 hours a day.