No meaningful news from New York overnight. The Dow tumbled in the last hour of trading to close down nearly 100 points and end at 13,214. The market now seems convinced that there is more trouble in the credit markets, but thoroughly confused if that trouble will do damage to the real economy.
Moments of confusion are always the best time to slip away, when no one will notice. We wonder how many American investors are actively getting out of the dollar while the getting is good (or at least not a panic).
There’s been an earthquake in Chile. Chile is the world’s largest producer of copper. Copper prices jumped 6.1% in New York, the most in 16 months. Markets react (or over-react) quickly these days.
Power to Chile’s copper producing region was cut according to early reports from Bloomberg. A supply disruption would result, you’d think. What’s copper being doing lately? “Copper, which generally moves in line with economic expansion, had fallen 11 percent this month before today on concern a slowdown in the US would damp global growth,” reports Bloomberg.
OPEC meets in Riyadh this week. But it’s not just any meeting. It’s OPEC’s third-ever summit—which suggests it’s the kind of meeting that might produce a fundamental shift in OPEC’s policies. Or not. So what will happen?
“There is a very heavy tension quietly underlying the summit,” reports David Ebner at The Globe and Mail. “Saudi Arabia, the cartel’s de facto leader, is worried about shaking the global economy with US$100 a barrel oil—but it at the same time badly needs the money record crude prices are bringing to the kingdom. And there’s a sense among Saudis that they were misled for years by the Western world, which claimed the global economy would be broken by too-high oil prices.”
The world hasn’t seen high oil prices yet. It’s seen nearly US$100 oil. But that is just a pale reflection of the falling US dollar. High oil prices would be more like US$120 or US$150. As we mentioned earlier this week, consumers in Asia are largely cushioned from high oil prices with subsidies. And let’s face it, even though gasoline is US$3 per gallon in the States, it’s still cheaper than Coca Cola. Good grief.
We’ll report back on the Third Summit if we find anything interesting its 91 page guide book.
The Daily Reckoning Australia