Magazine article Modern Trader

From Froth to Bubbles?

Magazine article Modern Trader

From Froth to Bubbles?

Article excerpt

In late May news pages were filled with stories that the runup in commodities prices was just a "bubble," and it shouldn't last long as some prices were already coming down. Curious, we put a call into our friend Jim Rogers to see what he had to say about this. He wanted us to name names, so we did: top gurus from the likes of Morgan Stanley and Merrill Lynch were stating that gold, oil, commodities in general, were just in the middle of a "commodity bubble." Their words, not ours. After some teeth gnashing, Rogers gave us his thoughts on this so-called "bubble." We spotlight some comments in our "Chartview," page 12, however a fuller account can be found at our new and improved Web site, www.futuresmag.com.

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But it's not just commodities in a volatile mode. Today I opened the Financial Times (FT) to the headline "US is 'not ready' for Chavez oil ban threat." The piece discussed the Venezuelan president's threat of an embargo on oil exports to the United States, which gets about 11% of its crude imports from the South American country. A Government Accountability Office report the FT saw reportedly stated that a loss of "2.2 m barrels a day of crude oil for six months" would basically cause an $11 per barrel jump in the price of crude. Furthermore, the report said, that would cut U.S. economic output by $23 billion.

Meantime on Wall Street, Goldman Sachs reported a doubling in net revenue and earnings in the second quarter. The investment bank, whose chairman was just nominated to be U.S. Treasury secretary, earned $2.3 billion in the second quarter, double the previous period. Pretty damn good, right? Well, no. Shares on Goldman fell for the day.

Overall, the stock market had a rough May. The Dow Jones Industrial Average, just a step away from its all time high, fell and kept falling into June. …

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