The markets are certainly continuing to give our Presidential Candidates a lot of talk about! After a few days of positive price action last week, global equities once again cast their vote of no confidence. As mentioned previously the markets are reacting passionately to the latest piece of economic data, and this time it was the Institute for Supply Management’s Report telling us the service sector is in trouble. The DOW, now down 3.75% is still off it’s lows, but today’s price action continues to leave cause for worry. Behind this front-page headline was a piece on C-7 that caught my attention – “Wheat Futures Set a Record.” They go on to tell us that the March contract traded at the “highest price for any wheat contract.” ( up 41 % on the year ) Although I personally am trying to follow a gluten free diet, I think most of America eats bread, and a lot of it. Agricultural commodities in general, like precious metals, have been on fire and that is part of the reason I do not understand the reported low CPI numbers – oh ya, they usually report them ex- food and energy. I want to see the pure food and energy CPI, especially when they factor in where all the futures are trading, not just 3 months down the road, but 10 years down the road. I have read some deeply alarming statistics around the growing demand for food which is leaving me long time bullish on not only broad based commodities, but the companies that are involved in global food production. There is a longer story there which will most certainly follow.
So what can we expect for the rest of the week? Month? I think we will continue to experience a lot of volatility in this bear market. I remain firm in my view that the US is in a recession, the party of US consumer spending is over, and the rest of the world will feel the pain. Besides providing direct liquidity in to the banking system via their window, the fed has no juice left in the needle to provide temporary boosters to the market by means of rate cuts until mid march. It is too early to expect a lot of good news to hit the markets that will fundamentally change this markets direction.