Last month we got on James Bullard’s case for saying he saw no evidence that QE2 was a factor in driving up commodity prices, with the St Louis Fed president suggesting it was more likely related to normal supply and demand. We think a simple glance at the charts of a host of commodities would be enough to get Mr. Bullard to recant, as he observes the steeply slanting lines running from lower left to upper right, beginning roughly in late August.
In case he needs some more “evidence,” here’s a real-world observation from Mark Millett, on Steel Dynamics’ (STLD) fourth quarter conference call today (Millett is operating chief of STLD’s OmniSource unit — emphasis added is ours):
Nonferrous shipments quarter-over-quarter were down 10% to 230 million pounds largely due to depressed foreign demand, particularly in copper — depressed copper market, while that demand was certainly not reflected in market pricing as the Comex rose 22% through the quarter, clearly demonstrating the dislocation of supply and demand metrics from the market indices and also the growing impact of hedge trading and also exchange-traded funds that require physical backing.
Comex copper was up for a second-straight day today, but is off about 2.5% from its Comex record close on January 3. It’s up more than 28% vs a year ago.
Posted by Steven Russolilloon December 22, 2010 Economy, GDP, Markets, Oil /
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Kathleen Madigan, Donna Kardos Yesalavich and I discuss the final 3Q GDP revision as well as how surging commodity prices look good but may hurt company balance sheets come 2011. Check it all and more on today’s markets hub:
Yesterday we took issue with St Louis Fed President James Bullard’s assertion during a CNBC interview that there was no evidence that QE2 is a factor in jacked-up commodities prices, though he conceded that their relationship should be studied.
Well, study this, Mr. Bullard: today US corn futures close at their highest level since July 2008 at $6.02 a bushel. Nymex Feb crude futures hit their highest close since October 2008, at $89.82 a barrel, and up 6.8% this month. Nymex heating oil at a fresh 2010 high at $2.5164 a gallon. Cotton hits a fresh post-Civil War (yes, that Civil War) high at $1.59 a pound. Comex copper futures settled at an all-time record high at $4.276 a pound.
Now, we’re not saying it’s all because of QE2 and no influence from supply/demand, China, whoever, but come on. All of these different commodities hitting fresh or all-time highs simultaneously?
Meanwhile, an asset class that Fed officials admitted QE2 was, in part, aimed at — stocks — also rose today to fresh two-year highs.
Not a coincidence. Study complete. Good luck at the gasoline pump or grocery store, citizens.
Trade deficit numbers looked much better than everybody expected, and that may mean at least that imports won’t drag on 3Q GDP the way they dragged down 2Q economic growth.
Hey, wha happen’d? As gloomy as Friday was, Monday’s twice as rosy, as just about everything just about everywhere is getting lifted higher. The spark today, as we explain on the Markets Hub, is the news out of Europe, where banks BNP Paribas and HSBC posted good financials and manufacturing data in a number of countries showed more strength than expected.
Is that a story you expect to last? Notice the yield on the 10-year Treasury (about the only assets not rallying), still below 3%. The bond market is telling a different story from the stock market.
Hey, lemme get this on the blog before it gets too stale. It’s today’s Markets Hub. We’re looking at those big, bellwether earnings reports, 3M, Caterpillar, UPS.
- “Another Lehman/AIG-type situation lurks somewhere on the European continent, and again our purported G7 (or even G20) leaders are slow to see the risk,” former IMF chief economist Simon Johnson says. “And this time, given that they already used almost all their fiscal bullets, it will be considerably more difficult for governments to respond effectively when they do wake up.”
- Between last week’s jobs report, auto sales data and declining oil and copper prices, deflationary pressures still weigh on the economy, James Hamilton writes at Econbrowser.
- AOL takes another step toward selling its ICQ instant messaging service, Kara Swisher reports.
- No one’s really talking about it, but renewed pickup in credit losses looms as concern, John Hussman cautions. “Credit spreads widened again last week, and we’re keeping a keen eye on those, as well as indications of delinquencies and foreclosures, which may become a renewed source of concern.”
- Lagging labor markets are “inconvenient, but common,” Jeff Frankel says. GDP went from negative in 1H09, to positive in 3Q and strongly positive in 4Q, suggesting the end of the recession may’ve occurred in the middle of last year.
- Advertisers are increasingly underwhelmed by TV advertising. So are viewers – Betty White aside, last night’s Super Bowl ads were a bunch of duds.
- IPad hasn’t even been released yet, but Apple’s (AAPL) supposedly considering price cuts if the device doesn’t perform as well as expected, John Paczkowski reports.
- Lloyd Blankfein’s $9M bonus is “a great move” by Goldman Sachs (GS), not only from PR perspective, but also from internal point of view, Reuters blogger Felix Salmon says.
- Former Merrill Lynch CEO John Thain returns to head embattled CIT Group, uniting two prominent causalities of the credit crisis.
- Man, what we would do to be on Bourbon Street right now.
J.P. Morgan reported some strong earnings today. But what this bloggers eye were some of the sub-numbers in the earnings report. The bank booked $1.8 billion in investment banking fees. But don’t be fooled – that wasn’t from big M&A advising. But $429 million was in advisory fees. Instead, that $1.3 billion + remaining fees […]
The bridge that collapsed on Interstate 5 bridge over the Skagit River in Washington was listed as “functionally obsolete” and “fracture critical,” which means the whole sha-bang could come tumbling down if one major part fails. Click here to read the details from USAToday. This sort of thing shouldn’t be happening in a modern, developed nation. Barry LePatn […]
