London Irvine Report June 13, 2007

Food Price Inflation.

If you put the federal government in charge of the Sahara Desert , in 5 years there’d be a shortage of sand.

Milton Friedman.

The world is drifting towards a crisis in food supply, as the law of unintended consequences kick in from subsidies to divert food into ethanol. Itself, only possible in the upside down world that fiat currency generates. But first this from the international Energy Agency, global oil demand is rising by about 2% a year, a little faster than previously expected.

Oil demand ‘rising faster than expected’

By Ed Crooks

Published: June 12 2007 13:27

World oil demand is rising faster than previously expected while non-Opec supply is growing more slowly, the International Energy Agency has said in its latest monthly assessment of the market.

The rich countries’ energy watchdog warned on Tuesday of growing tightness in oil supplies in the second half of the year, and urged the Organisation of the Petrolem Exporting Countries to raise its output.

David Fyfe, an analyst at the IEA, said: “We would very much hope that Opec production is at its seasonal low at the moment… We definitely do need more crude oil.”

Market News June 12, 2007

Market closes for Tuesday, June 12, 2007:

Dow Jones 13,482.35 +187.34 or +1.41% YTD: +8.18%
S&P 500 1,515.67 +22.67 or +1.52% YTD: +6.87%
NASDAQ 2,582.31 +32.54 or +1.28% YTD: +6.92%
TSX COMP 13,859.52 +135.19 or +0.99% YTD: +7.37%
TSX VENT 3126.89 -3.03
Canadian dollar $Cdn. $U.S.
BoC Closing rate 1.0665 0.9376
Previous BoC closing rate 1.0668 0.9374

Cdn. Dollar/Euro Spot Rate 1.4188 0.7048
Gold AM PM
London Gold Fix (US) $644.10 $647.65

Spot Crude Oil Future(US) $66.26 +$0.91 or +1.39

NEWS
Stock markets racked up strong gains as traders got good news on the interest rate front, retail data came in better than expected and the U.S. Federal Reserve’s latest reading on the economy encouraged investors hoping the worst is over after a week of selling sparked by interest rate worries.

“I think we’ve certainly had a fair selloff in the last week or so, so obviously people are seeing some value at this point,” said Peter Buchanan at CIBC World Markets.

New York’s Dow Jones industrial average jumped 187.34 points to 13,482.35 after the U.S. Commerce Department reported retail sales surged 1.4% in May over April, double the increase analysts had expected.

Market News June 12, 2007

Market closes for Tuesday, June 12, 2007:
Dow Jones 13,295.01 -129.95 or -0.97% YTD: +6.67%
S&P 500 1,493.00 -16.12 or -1.07% YTD: +5.27%
NASDAQ 2,549.77 -22.38 or -0.87% YTD: +5.57%
TSX COMP 13,724.33 -108.49 or -0.78% YTD: +6.32%
TSX VENT 3129.92 -63.77
Canadian dollar $Cdn. $U.S.
BoC Closing rate 1.0668 0.9374
Previous BoC closing rate 1.0606 0.9429

Cdn. Dollar/Euro Spot Rate 1.4206 0.7039

Gold AM PM
London Gold Fix (US) $652.80 $647.25

Spot Crude Oil Future(US) $65.35 -$5.90 or -0.90

NEWS

North American stock markets sold off Tuesday during a volatile session as rising bond yields stoked worries about rising rates.

Toronto’s S&P/TSX composite index came back from a 111-point deficit to the unchanged mark before closing down 108.49 points at 13,724.33 after interest rate worries shaved more than 2% from the TSX last week.

The Canadian dollar moved lower for a second day, down 0.56 cent to 93.73 cents US.
Interest rate concerns have been the main focus of investors since last week when strong economic data and comments from U.S. Federal Reserve chair Ben Bernanke convinced markets that a rate cut isn’t in the offing, and that maybe a rate hike is in the cards.

Market News June 11, 2007

Market closes for Monday, June 11, 2007:

Dow Jones 13,424.96 +0.57 or 0.00% YTD: +7.72%
S&P 500 1,509.12 +1.45 or +0.10% YTD: +6.40%
NASDAQ 2,572.15 -1.39 or -0.05% YTD: +6.49%
TSX COMP 13,832.82 +34.32 or +0.25% YTD: +7.16%

TSX VENT 3193.69 +3.14

Canadian dollar $Cdn. $U.S.
BoC Closing rate 1.0606 0.9429
Previous BoC closing rate 1.0602 0.9432

Cdn. Dollar/Euro Spot Rate 1.4166 0.7059

Gold AM PM
London Gold Fix (US) $652.75 $650.30

Spot Crude Oil Future(US) $65.97 +$1.21or +1.87

NEWS

Reviving mining stocks pushed the Toronto stock market to a second positive session Monday, but the TSX closed well off the best levels of the day as buying interest in stocks that were beaten down during last week’s selloffs faded late in the afternoon.

New York markets found it harder to gain traction with investors unconvinced the selloff, sparked by interest rate worries, has run its course and indexes put in a flat close.

Toronto’s S&P/TSX composite index gained 34.32 points to 13,832.82 after losing more than 2% last week, a long way from the 95-point runup reached earlier in the session as early gains in financials and energy stocks fizzled.

Market News June 8, 2007

Market closes for Friday, June 8, 2007:

Dow Jones 13,424.39 +157.66 or +1.19% YTD: +7.71%
S&P 500 1,507.67 +16.95 or +1.19% YTD: +6.30%
NASDAQ 2,573.54 +32.16 or +1.27% YTD: +6.55%
TSX COMP 13,798.50 +94.62 or +0.69% YTD: +6.90%
TSX VENT 3190.55 -3.22
Canadian dollar $Cdn. $U.S.
BoC Closing rate 1.0602 0.9432
Previous BoC closing rate 1.0636 0.9402

Cdn. Dollar/Euro Spot Rate 1.4181 0.7052

Gold AM PM
London Gold Fix (US) $656.75 $655.25

Spot Crude Oil Future(US) $64.76 -$2.17 or -3.24

NEWS
Stock markets closed sharply higher Friday as investors hoped the selloff of the last two sessions was overdone and looked for beaten-down bargains, reassured somewhat by lower U.S. bond yields.

However, it remains uncertain whether this week’s retracement, sparked by worries about higher interest rates, has run its course.

Toronto’s S&P/TSX composite index moved up 94.62 points to 13,798.5 after tumbling 3.1% in the past two sessions. Overall, the TSX lost 321 points or 2.27% this past week after hitting a fresh record high on Monday.

The Canadian dollar was up 0.3 of a cent at 94.32 cents US after Statistics Canada reported an April trade surplus of $5.8 billion, which exceeded market expectations by $1 billion.

London Irvine Report June 8, 2007

Inflation + Higher Rates.
Once more unto the breach, dear friends, once more,….

Anon PPT.

Are we on the brink of the worst of all worlds – a serious global inflation pick up, triggering higher global interest rates all round? While higher interest rates are unlikely to slow much the “BRIC” countries, Brazil, Russia, India and China, if they happen they will wreak havoc on the US mortgage market, the real estate industry, and probably stop the US auto industry recovery overnight. Without the US consumer, consuming like there’s no tomorrow, the rest of the world is about to find out if “this time it’s different” and the really can shrug off trouble in the land between the shining seas. While the G-8 lie to each other and fiddle with the largely imaginary problem of man-made global warming, the problems of the fiat money, liquidity driven, low interest rate, global derivatives gambling economy, look like moving to centre stage.

We open with the scripted economy starting to go horribly wrong. Can the PPT stage yet another “do or die” Friday turnaround rally? There maybe a lot more die ahead than do. While the jury’s still out, it looks to me that US interest rates just broke out of the long term down trend that started under Paul Volker in 1981. If that’s true, the carry trade is about to get carried out. While it may get rough in precious metals for a few days, they’re the only effective hedge against a coming fiat currency race to the bottom.

Stocks end sharply lower amid rate, oil worries

Dow sinks almost 200 points as bond yield tops 5%, oil tops $67

By Nick Godt, MarketWatch

Last Update: 4:49 PM ET Jun 7, 2007

NEW YORK (MarketWatch) — U.S. stocks fell sharply on Thursday, sending the Dow Jones Industrial Average down by nearly 200 points, as the yield of a key benchmark bond surged above 5%, further challenging the attractiveness of stocks.

“We’re seeing a continuation of the sell-off of the last couple of days, based on the move up in yields, and particularly with the 10-year bond above 5%,” said Mike Malone, trading analyst at Cowen & Co.

Market News June 7, 2007

Market closes for Thursday, June 7, 2007:

Dow Jones 13,266.73 -198.94 or -1.48% YTD: +6.45%
S&P 500 1,490.72 -26.66 or -1.76% YTD: +5.11%
NASDAQ 2,541.38 -45.80 or -1.77% YTD: +5.22%
TSX COMP 13,703.88 -237.71 or -1.71% YTD: +6.16%
TSX VENT 3193.77 -55.43

Canadian dollar $Cdn. $U.S.
BoC Closing rate 1.0636 0.9402
Previous BoC closing rate 1.0580 0.9452

Cdn. Dollar/Euro Spot Rate 1.4283 0.7001

Gold AM PM
London Gold Fix (US) $670.85 $668.75

Spot Crude Oil Future(US) $66.93 +$0.97 or +1.47

NEWS
Investor worries about higher interest rates and their impact on the global economy took their toll on North American stock markets for a second straight session Thursday, with indexes in Toronto and New York falling sharply.

Toronto’s S&P/TSX composite index tumbled 237.71 points to 13,703.88, on top of a 200-point drop Wednesday for a drop of 3.1% in two sessions.

The latest market drop on the TSX, which came after the main index hit a fresh record high Tuesday, has also raised concerns that the bull market in stocks may soon be over after record highs and double digit annual gains in recent years.

London Irvine Report June 6, 2007

G-8 Day. Pass round the Valium.

“My fellow Americans, I am pleased to tell you I just signed legislation which outlaws Russia forever. The bombing begins in five minutes.”

President Ronald Reagan.

The mostly lame duck leaders of the free world gather in their luxury resort prison in Germany today, to begin 3 days of highly publicised disagreement. We wonder what is the point. Two years ago at Glen Eagles they promised to save Africa from Africans, and pledged masses of money and goodies as well. After the cameras and sound bites passed, they sobered up and did nothing of the kind. Africa today is still the mess its been since the 60’s, and anything agreed to in this G-8 meeting from climate to energy to democracy, is also likely to be just for the 24 hour news. I doubt they will tackle the coming derivatives crisis, the replacement of the dollar, the out of control lifestyle aspirations of the west, or the coming global energy crunch as oil demand starts to exceed new supply. I doubt they will tackle discretionary war, nor the hidden war coming from economic migration. Like an old fashioned council of the defunct Holy Roman Empire , each Princeling will return to lame duck reality once they return home.

We open today’s time shortened update with news that the commodities super cycle has up to 18 more years left to run.

Developing world seen driving “super cycle” of metals demand

Tue Jun 5

MANILA (AFP) – An “industrial revolution” in the developing world has created a “super cycle” of unprecedented global metals demand that could sustain the industry for up to 18 more years, an Australian industry expert said Tuesday.

Market News June 6, 2007

Market closes for Wednesday, June 6, 2007:
Dow Jones 13,465.67 -129.79 or -0.95%% YTD: +8.04%
S&P 500 1,517.38 -13.57 or -0.89% YTD: +6.99%
NASDAQ 2,587.18 -24.05 or -0.92% YTD: +7.12%
TSX COMP 13,941.59 -200.10 or -1.41% YTD: +8.00%
TSX VENT 3249.20 -29.93
Canadian dollar $Cdn. $U.S.
BoC Closing rate 1.0580 0.9452
Previous BoC closing rate 1.0630 0.9407

Cdn. Dollar/Euro Spot Rate 1.4292 0.6997

Gold AM PM
London Gold Fix (US) $669.80 $669.70

Spot Crude Oil Future(US) $65.96 +$0.35 or +0.53

NEWS
North American stock markets tumbled Wednesday as a fresh round of interest rate worries raised concerns about stock valuations at a time when indexes were at or near record high levels.

New data showed rising wage pressures in the United States, while the European Central Bank raised its policy rate by a quarter percentage point to stifle inflation.

Mining, energy and financial stocks led the way as the TSX lost 200.1 points to 13,941.59, its biggest one day drop since late April, with all sectors firmly in the red, just two sessions after closing at a record high.

London Irvine Report June 5, 2007

G-8. Nastier by the day.
“Even a paranoid has some real enemies.”

Henry Kissinger.

The big story this week is likely to be a failed G-8 summit in Rostock on the chilly Baltic. The west’s lame duck leaders are about to pitch up with Russia and China ’s leaders at the top of their game. In the western camp, the strongest leaders hail from France and Germany , they are unlikely to set much of the agenda. Unless someone adds something to the water, the violence outside the G-8 prison is likely to be matched on the inside. But first this item which if all goes wrong, might just take the focus away.

We have a most unusual super cyclone heading for the Strait of Hormuz . Currently the equivalent of a category 4 hurricane, the modellers expect it to weaken and turn north and head into eastern Iran . Other than delaying some oil tanker journey’s, at present this storm is largely expected to be a non event in oil. However, the modellers sometimes get it wrong, and something like a quarter of the world’s oil shipments pass through the Strait of Hormuz . We will be watching this storm closely for the next two days.

An Amazing Tropical Cyclone!

Updated: Monday, June 04, 2007 2:47 PM

A rare event is taking place in the Arabian Sea . Powerful tropical Cyclone Gonu with sustained winds of 160 mph as of Monday afternoon was taking dead aim toward the north coast of Oman . A landfalling tropical cyclone is almost unprecedented for Oman , which barely gets any rain to speak of, even from thunderstorms during this time of year. Gonu is expected to weaken as it approaches the coast early Wednesday, but strong winds and heavy rain are still likely.
http://www.accuweather.com/news-story.asp?partner=accuweather&traveler=0&article=5

Tropical Strom Risk. Super cyclone Gonu.

http://tsr.mssl.ucl.ac.uk/tracker/dynamic/main.html

Now back to the unfriendly skies. America ’s missiles and radars for the Czech Republic and Poland , have altered the balance in Europe . Europe is getting closer to the day it must chose between East or West. Up first, the US pokes Russia in the eye.

Bush Opens Europe Trip on Jarring Note

Jun 4, 6:20 PM (ET)
By TERENCE HUNT

PRAGUE, Czech Republic (AP) – President Bush’s European trip was jarred as it began Monday by deteriorating relations with Russia and threatening words from President Vladimir Putin.

Bush and Putin will see each other at the annual summit of industrialized nations, beginning Wednesday at the Baltic Sea resort city of Heiligendamm , Germany . In a diplomatic poke in the eye at Putin, Bush bracketed the summit with stops in the Czech Republic and Poland – the two countries where the United States wants to build a missile defense system for Europe .

Already complaining of being encircled by NATO’s expansion, Putin said putting missile defenses on Russia ‘s doorstep would ignite a new arms race. He threatened to retarget Russia ‘s missiles toward Europe .