Thursday, May 26, 2011

Stock Market: A New Opportunity?

The stock market is stumbling in recent days. The reason: The world economy entered a soft spot again, a phase of weakening growth. Maybe this is a chance for long term investors. Maybe the weak stock market now generates very reasonable prices for entering.

The current situation reminds one of the May/June period last year. Then the stock market was also weak because the world economy was cooling. But in late summer 2010 the world economy got on track again and the stock market (S&P 500) gaines around 20%.

The chances are high that the world economy will re-accelerate soon. The interest rates are still very low and animate investing. The profits of companies are still climbing, because they get more efficient and benefit from the high growth of the global economy, especially in China and other emerging markets. The growth in these countries is fuelled by technical progress and the high backlog demand (wealth differences between the US/Europe). The dynamics of the world economy and the rising productivity of companies could restart the rally soon!

Wednesday, May 25, 2011

Traveling: Brunch at Café Atlántico, Washington DC

Last Easter I had the pleasure to visit Washington DC. There is a lot to see. The city is a real beauty. She shows that she is the proud capital of the richest nation in the world.

If you visit WDC you might consider having brunch at Café Atlántico. place is in the center of the capital (Penn Quarter: 405 8th St. NW). They focus on Latin American cuisine, but with an interesting twist. Plus, during spring & summer they have outside seating.

On Sundays the restaurant offers something special: Their Nuevo Latino Dim Sum Brunch. It contains a small but interesting collection of dishes. This is an opportunity to go on a culinary expedition.

My girlfriend and I chose the chef selection which contains 14 dishes. It contains for example:

- Potato & vanilla mousse with caviar
- Fried egg with black beans & pork   
- Grilled skirt steak “Carne Asada”   
- Mushrooms with egg 63 ̊   
- Pork belly confit with passion fruit oil
- Pan dulce with cinnamon syrup   

You can order also from the menu, where you can find dishes like:

- Tuna ceviche with coconut   
- Grilled “Cuban” corn dipped in a queso fresco sauce, aleppo pepper   
- Pineapple shavings with corn nuts and tamarind oil
- Hot & cold foie gras and corn soup   
- Scallops with cauliflower puree   
- Coconut rice, crispy rice & ginger   


Tuesday, May 24, 2011

Oil: The Mess Goldman Sachs Made

The price of oil is rising again. Gas costs at the pump almost $4 a gallon. There is no fundamental reason for that. The world economy is cooling at the moment, as many indicators show. Less economic growth means a diminished demand for energy, which should lower the price of oil. And there is plenty of oil on the market as the weekly inventory numbers show. Added to that, members of OPEC, the cartel of the leading oil producers, are stressing, that they see no need for augmenting oil production, because there is not enough demand for it. The world has plenty of oil, they claim.

But the oil price is climbing anyway. The reason is that many funds, especially hedge funds, buy oil. They invest in energy because the price is rising and they bet that the rally continues. This is a typical herding behavior which leads to a snowball effect. Rising oil prices are generating further price rises. This dangerous behavior is fueled by some banks which pour gasoline on the fire (pun intended). They predict higher oil prices and induce therefore more oil buying which drives the prices upwardy.

Today Goldman Sachs and other banks increased their oil price forecasts. Goldman Sachs predicts now an oil price of $130 a barrel (recently $107). Morgan Stanley also raised their oil price forecast. The managers of many funds react like Pavlov´s dog, buying more oil on cue, just because the banks recommend it. The banks are heating the oil price rally because they earn billions with the trade of oil (via futures and other derivatives) and selling funds which invest in oil.

This is reminiscent of the year 2008. Then the oil price climbed to $146, even though the recession had already started then. The oil buyers ignored the weak economy, because Goldman Sachs and other banks fiercely recommended buying oil. Goldman Sachs was then the major oil price booster, because the bank set a target of $200 for the near future.

The reaction was that the rising oil price pumped billions of dollar out of the western economies and caused the recession to sharpen. Companies & consumers had to cut their budgets because of the rising expenses for oil & gas. Many commuters didn´t have the money to pay the high gas prices or their mortgages. Therefore they skipped payments to the banks, which caused the bust of many financial institutions and worsened the financal crises. The mess Goldman Sachs made led to a severe world worldwide recession.

This is also a failure for the official regulators of the financial markets. The bureaucrats are clueless and do nothing against the rising oil prices and the gossip mongering of Godman Sachs & Co, which makes billions by producing an oil crises and an economic disaster.

Thursday, May 5, 2011

Financial Markets: A Reason to Cheer

Today was a good day on the global financial markets. The price of oil crashed. The price of the commodity plunged today nearly 9 percent and settled below $100 per barrel.

It looks like the bubble on the oil market is now bursting. The oil price rally of the last months was just the outcome of a herding effect. The high inventories in the USA show that there is no shortage.

Hedge funds and other speculators bought the important commodity just because the price of oil was rising. Therefore they hoped they could sell oil for a higher price. This speculation drove the price of oil even higher and caused a snowball effect, a self-fulfilling prophecy.

This behavior got more and more dangerous, because consumers and companies have to react to rising energy expenses, especially for gas, and therefore cut their expenditures for other things. When the consumers have to pay higher gas prices they have to reduce their purchases for other goods. Therefore the oil price rally threatened to stall rising consumer demand, the motor of the whole economy.

The oil crash today could be the beginning of a relief.