TGIF

Markets

More wasted air time on Babblevision. The "face" is asking some fellow about the "fate" of FNMA and FreddieMac. What the hell does he know ? You ask, "OK, Bunkerman, what do you think ?"

First, I define a useful abbreviation - the "Two Fs" = FNMA plus FreddieMac.

Here is the answer: Nothing should happen until the actual losses arise on the actual mortgage loans on the books of the Two Fs really do reduce their equity to near zero. Treasury should quote J. P. Morgan that markets will fluctuate and no decision about taxpayer money for the Two Fs will be made due to market speculations in the price of their stock. Treasury should say it stands ready to support the debt and mortgage backed securities of the Two Fs. Any decision on the capitalization of the Two Fs will be made with real loss data. Then shut up.

Commodities

I see the blather about the end of the commodities is vaporizing. Copper is back at $3.50, right in the middle of its trading range for about a year or more, viz. $3 to $4. Oil is bouncing a bit. I still think it slowly goes to about $100 due to demand declines. Other metals prices popped up. I guess the world economic slowdown - it it exists - isn't a collapse.

Does anyone except me realize the difference between growth and demand ? If world GDP is stagnant, would not demand for commodities stay the same as before ? If the world produces the same amount of goods & services, would not it need the same amount of commodities to do that ? So growth means an increase in demand, barring substitutions. Demand is demand; growth is an increase in demand. They are NOT the same thing at all.

OK, these two concepts are not perfectly separate as some commodity demand is to build new capacity for the growth, not current consumption. But let's not fool ourselves - most commodity demand is for current uses, not to create growth.

So mirabile dictu, as the beefer speculators stop pushing the trend down, prices on many commodities stabilize. Golly, babblevision is so vacuous !

This reasoning is why I bought DVN, CVX, FCX and RIG on the recent big dips. These positions are doing very well lately, offsetting some weakness in the big fins.

Word of the Day

"Invidious" - adjective [$10]
Invidious means (of an action, conduct, attitude, etc.) likely to excite resentment or indignation against a person responsible, especially by real or seeming injustice- an invidious position; an invidious task.
Sentence: The invidious Russian activities in Georgia will be a long term sore, as they announced intent to permanently occupy checkpoints at key locations.