MARKET COMMENT
January 30, 2007
Special message:
Yesterday we conducted a lengthy podcast interview with Kevin Rich of Deutsche Bank
regarding the spate of commodity ETFs issued by them
in concert with PowerShares.
ItI is available free to the public without
registration HERE.
Given today’s action in commodity markets,
you may find it enlightening.
Did Saudi officials read the Sunday
NY Times featured here just yesterday?
The article suggested that they were behind a move to push crude oil
prices lower and to stabilize them at around $50.
Well, they reacted quickly today by
announcing a further cut in production by 156K barrels per day after no doubt
feeling some pressure from their OPEC peers.
Crude oil prices shot up nearly 6% on that news causing a short squeeze.
Natural Gas prices rocketed 12%.
Are high oil prices good for stocks?
They were for the S&P 500 which is
heavily weighted by energy sectors and out-performed other major market indexes
with the natural exception of energy sectors themselves.
I can’t imagine rapidly rising energy prices being a good
thing for investors generally however.
We discussed what I described as the “ephemeral link between
gold and oil prices” which rang true today as gold was only up slightly while
we know what energy markets did.
Today Carl “on cue” Icahn noted
that he had taken a large position in MOT and wanted a seat on the board.
Only yesterday we noted his Bloomberg interview
two days earlier where he was quoted as saying that 20% of the S&P 500 or
100 companies were exposed to either LBOs or private
equity deals.
Curiously, JPM chief Jamie Dimon
stated, “home equity is subject to a deterioration”
noting that 2% of their mortgages were at risk.
This doesn’t seem a lot but he went on to say that this “might signal a
recession ahead”.
Naturally, in true Alice in Wonderland
fashion this bought out “some” buyers in XHB [Homebuilder’s ETF].
What the Fed does or doesn’t do may impact real estate more
than any other thing.
While energy gushed higher, airlines were hurt, but the
overall transportation index as reflected by IYT [Transportation ETF] barely
budged.
Why?
Stronger overseas shippers pushing fuel
surcharges and some truckers.
Elsewhere,
airlines and air cargo companies took a hit.
Emerging Markets that were hit yesterday by some
profit-taking were all higher along with commodity markets.
Is water a commodity play?
Why not!
Unlike yesterday it was an exciting day today.
I hope everyone was on the right side of
things especially in energy markets.
Tomorrow is Fed Day and we’ll see if they do or say anything
unexpected.
From our perch everything in
the economy looks okay, but then what do we know?
One thing is true, the Fed and other central
banks don’t like high gold and commodity prices since the former challenges
their policies in the truest way.
We also have the PMI, GDP numbers tomorrow and it’s also the
last day of January.
Good riddance I
say!
By the way, Friday is employment
data.
I guess the NY Times article was either right on causing the
Saudi’s to respond, or was just totally off the mark.
We’ll have to wait and see.
Disclaimer:
Among
other issues, the ETF Digest maintains positions in: DBB, DBA, DBP, DBV, SPY,
QQQQ, FDN, IWM, MDY, GLD, RCD, EEM, ILF, EWW, EWZ, EWA, EWM, FXI, INP and PHO.