Crude Oil Is Over Priced At The Moment

Crude Oil is hovering around US$90/Barrel and is looking expensive at the moment. With almost every adverse news currently being discounted at this price level, new entrants and oppurtunistic specualtors are making a quick buck in this scarce commodity, driving it's price further up. However, with US president talking hawkish against Iranian president along with continued threat from terriorism and fast growing world GDP, and winters in the northern hemi-sphere, crude oil is expected to remain warm, not withstanding
short term corrections.

Crude Oil At US$88/Barrel

Crude Oil is breaking all records and hence is a major cause of worry for nations dependent on their energy needs. Oil rich nations are making huge profits out of this run away rally in crude prices, therefore they will now have more free cash to deploy in stocks, commodities, real estate across the emerging economies, causing further asset inflation in already highly inflated assets in these economies.

Crude Oil At US$85/Barrel

Crude Oil has created a new high for itself by crossing US$85/Barrel mark. With winters approaching fast in the northern hemi-sphere along with strong global economic growth coupled with ever increasing dependance on this scarce commodity, is fuelling it's demand, and hence steep prices for this commodity. Agri commodities also are ruling high due to adverse weather patterns in fertile geographic locations, causing severe demand-supply mismatch.
Future for all these commodities looks bright, but for consumers it's a nightmare!

Equities Took Rest While Commodities Shine

Last week saw emerging market Equities taking a breather after a steep rise from August month lows, while commodities like Gold and Crude Oil scaled new highs. It will be worthwhile that emerging market equities take some consolidation before they start upword march again, it seems stock markets want to see what the US federal reserve does on the interest rate front on October 30. This will be crucial factor in deciding ongoing sharp rally in emerging markets. Also with Japanese central bank deciding to hold rates at 0.5%, implying that deflation might re-surface in the absence of any solid economic growth on consistance basis, money from japanese investors will now look for growth which is happening outside their country, especially in India, China, Taiwan, HongKong, Russia. Having said that, emerging economies will be the key beneficiaries of this huge money flow.

Gold And Silver Have Corrected Sharply

Precious commodities like Gold and Silver have corrected over the past few days as investors took profits from these commodities after a descent run in them. Crude oil is also facing selling pressure at higher levels. Copper and Zinc prices too face possibility of profit booking from their recent hefty run. Agri commodities too look strong especially Wheat and Maize from long term point of view. Stocks in Hong Kong market took a much needed correction yesterday as well as today. Volatility in stocks among emerging markets especially in Hong Kong, India, Taiwan is rising due to extremely sharp rise in valuations in a very short span of time.

Dow Jones Erupts Again

Dow Jones staged a remarkable 200 point rally yesterday with a strong belief that US fed will again cut the interest rates by 50 basis points in October. Dollar also got support from stock rally. Crude oil also cools down a bit but still hovering around US$80/Barrel. US economy is still not out of deep problems and hence dollar investors are rushing to buy into riskier assets of emerging markets like India, Taiwan, Singapore, HongKong, driving valuations of assets(stocks) in these markets to absurd levels. Well so far so good, if US fed listens to market participants and don't follow economics rationale, then we may be heading for another rate cut and further inflated asset prices.

Inflated Equities

Falling dollar is inflating riskier assets like stocks and commodities. Emerging market stocks especially in china, India, Taiwan, Singapore are amid tremendous upward momentum due to huge flow of dollars from dollar investors and this has created extremely expensive equity valuations in some of these markets, especially in India and China. Crude oil too is continously trading above US$80/Barrel and stock markets are ignoring this important commodity price completely. History is evident that whenever crude oil has skaled a new peak, equity too has formed new high! As long as financial markets expect US federal reserve to cut interest rates, equity valuations will continue to be very expensive.

Crude Oil Is Below US$80/Barrel

Crude oil is trading below US$80/Barrel after oil producing countries raise the crude output by 5,00,000 Barrel/day along with reports of rise in oil and gas inventory in the US.
However with winter approaching in the northern hemi-sphere, demand for heating oil will keep price of this scarce commodity warm.

Gold And Crude Oil

After subprime mortgage mess happened in the US, gold is seing consistent buying and is ruling around all time highs of U.S.$736.
Crude oil is also creating new records with trading above U.S.$80 per barrel for the past few trading sessions. Both these commodities are expected to do well in the medium term as in case of gold, investors are seeing it as alternative investment avenue along with riskier stocks, and for crude oil, depleting oil stocks and continous demand from a growing world GDP and with winter approaching in the northern hemi-sphere crude oil will remain warm.

Falling Dollar Is Creating Asset Inflation

After US Fed had cut interest rates by 50 basis points, dollar has been falling steadly against major currencies. This will further lead to rise in other assets like commodities, stocks. Again for the past few trading sessions, gold, copper, zinc, lead, agri commodities and crude oil are rising and are at their all time highs. Stocks across the globe are rallying for the past few days. Dollar investors are pulling their money and pouring it into these assets. This is creating inflation in stocks, commodities and thus central bankers job is now much more difficult to manage inflation. This hightened levels of asset inflation does not agour well for growth and interest rates. Investors have a tough time managing their portfolio as volatility will rise along with hightened greed of market participants.

Wheat, Maize And Crude Oil Prices

Price of commodities like Wheat, Maize And Crude Oil is rising continously for the past few months and they are creating new records. From inflation point of view, it's a cause of concern for monetary policy makers as they have to strike a balance between growth and inflation. Already financial markets are facing a fall out from slower growth expectation in the US, Japan, and Europe.
Asian countires like china are raising interest rates in order to contain a rapidly growing economy and India is also far away from softer monetary policy. Volatile times ahead for stock markets as they have to face lot of uncertainty ranging from elections next year in the US to slower world GDP growth to rising crude oil and food prices to rising fears over a possible attack on Iran and also tighter credit markets across developed nations and narrowing interest rate spread between developed countries and Asian tigers.
Happy Investing.

Crude Is Boiling

Crude oil prices have surpassed important technical level of U.S.$77.50 per barrel mark today and is a cause for concern as it will along with rising food prices can give further boost to inflation, which has become central point for many central bankers across the world. Growth has not been dominating central banks monetary policy of late as excess liquidity is amply supplying credit to fuel growth, but rather asset inflation, especially food and fuel prices are grabbing their monetary stance.
U.S. markets are feeling pain after subprime mortgage mess and continue to suffer investor apathy. Asian markets are showing great resilience and are very close to their all time heighs.

Asian Markets Are Taking A Breather Today

Today all Asian markets except China, are taking breather after moving up for the last couple of days. It seems investors and traders are back again in buying riskier assets like emerging market stocks, currencies and bonds. Crude oil is also trading below U.S.$70 per barrel mark and is a welcome sign. Yen seems to be stabalising around 116 mark against the U.S.Dollar. Agri commodities are however, ruling strong due to inevitable reason that population is growing and due to global warming, floods and other natural peril's will keep demand far more than the actual supply of these farm outputs.

Japanese Central Bank Keeps Rates Unchanged

Today japanese central bank kept the interest rate unchanged at 0.5%. That's good news from yen carry trade perspective. Yen is trading at 116.27 against the U.S.Dollar and thus fear of dollar falling further against the yen is well contained at the moment. Equities are consolidating across the world after sharp sell off, commodities like copper, alumunium, lead, nickel, zinc, crude oil are also cooling. This is good news from inflation perspective but also raises the concerns about slowing economic growth in the developed world.

Commodities Are Cooling

Commodity prices are cooling off for the past few trading sessions and this is a very welcome sign with regards to overall inflation scenario. Also with concerns of U.S. economy slowing down because of lower consumer spending and weak housing sales and serious credit squeeze in the U.S. mortgage market, commodity prices have began to ease of substantially from their recent highs.

However crude oil is still trading above U.S.$70 per barrel for the past few weeks and is a major concern.

Will The U.S. Fed Cut The Rates?

Market players are placing huge bets on a possible Interest Rate cut by U.S.Fed in it's next speech in September following the liquidity crunch in the financial system due to huge losses suffered by large players in the U.S. sub-prime mortgage paper. They also believe that to give a push to U.S. economy and to stabalise slump in the U.S. housing market, Fed will cut the rates.
However their bets can go wrong due to many reasons, one of them is since Inflation in the U.S. is still a cause of concern as Fed himself pointed out in his many speeches, also due to recent pumping of dollars in the system Inflation has the chances of getting a head up. Crude Oil is still above U.S.$70.
So markets will be watching Fed speech very eagerly and any dissapointment on rate cut can induce volatility and more nervousness among investor/trader fraternity.

Crude Oil

For the past one and a half decade, no major oil field has been found but the consumption of this scarce commodity is increasing with each passing day with continuation in the expansion of world GDP.
And with very little spend on finding alternative energy source for future use, it is more likely that crude oil prices will remain expensive. And hence crude oil will play a crucial role in keeping Inflation at high levels.

Crude Oil At U.S.$100/Barrel And Stock Markets

The very possibility of crude oil reaching U.S.$100/Barrel sends nervousness among investor class but if history is anything to go by then whenever the crude oil prices have scaled new highs, stock markets across the world have also reached new highs.
Many investors get confused by this phenomenon forgetting that if one asset (crude oil) gets inflated in price terms then people have to invest money somewhere(like in stocks) in order to earn equal or more returns for maintaing their original net-worth.
So dont get scared if oil does that, remain in peace with your good stock investments.

Yen And Oil

The massive surplus dollars that oil rich countries have is also fuelling prices in stocks and commodities and other assets.

And with japanese economy doing practically nothing for the past one decade, they have no other option but to invest massive japanese savings in other countries assets. This coupled with extremely low interest rates in Japan is fuelling borrowers greed to borrow cheaply from japanese banks at the interest rate of 0.5% annually!

Large investment bankers from developed countries like U.S. and Europe have borrowed significantly from Japanese Banks and invested that money into riskier assets like stocks in India, China, Brazil, Phillippines, Russia etc. This has resulted in massive run in these markets and raised concern about bubbles in certain pockets of these markets. Like we have heard that chinese are now selling their homes in order to buy stocks!

Volatility In Stock Markets

For some days, stock markets across the world are facing volatility due to subprime mortgage problems in the U.S., yen carry trade un-winding because of strenghting of yen against the dollar, re-adjustment of risk due to sharp rise in the price of crude oil which is hovering above U.S.$75 mark for the past 2 weeks. Hedge funds which love to play the stock and currency markets with leveraged money are facing problems due to adverse movements in certain asset prices against their bet, this is also leading to volatility in the system.