Commodities: forecast more gains http://www.bloomberg.com/news/2012-09-16/bullish-wagers-at-16-month-high-as-citi-sees-gains-commodities.html Fed Chairman Ben S. Bernanke is trying to bring down an unemployment rate stuck above 8 percent since February 2009. The central bank said it will make open-ended purchases of $40 billion of mortgage debt a month and hold the benchmark interest rate near zero at least through mid-2015. European Central Bank President Mario Draghi said Sept. 6 that policy makers agreed to an unlimited bond-purchase program, the same week in which China approved a $158 billion subways-to-roads construction plan.
More than $1.4 trillion was added to the value of global equities last week after the Fed announced a third round of bond buying on Sept. 13 to revive growth. Inflation expectations measured by the break-even rate for five-year Treasury Inflation Protected Securities surged to the highest since May 2011.
Bull Market
The S&P GSCI has jumped 25 percent since reaching this year’s low on June 22, driving the gauge into a bull market in the fastest turnaround since the depths of the financial crisis four years ago. The measure surged 92 percent from the end of 2008 through June 2011 as the Fed bought $2.3 trillion of debt in the first two rounds of quantitative easing and held borrowing costs at a record low.
Copper investors were the most bullish since early April, the CFTC data showed. Prices reached a four-month high on Sept. 14 in New York as the stimulus plans boosted demand prospects. Refined production of the metal fell short of consumption by 241,000 metric tons last year, the International Copper Study Group said last week. Supplies will also trail demand this year and next, Barclays Plc said in a report Sept. 12.
Gold bets jumped 14 percent to 165,724 contracts. Prices in New York, which climbed to a six-month high of $1,780.20 an ounce on Sept. 14, closed at $1,770.60 on the Comex today. Crude-oil holdings rose for a fourth straight week to 203,324 contracts, the longest increase since February. Futures rose above $100 a barrel last week for the first time since May.
Platinum wagers climbed 11 percent to 24,205 contracts, the highest since May 2011. Futures rose for 10 straight sessions in New York before falling today. South African workers at a Lonmin Plc (LMI) mine and nearby operations of Anglo American Platinum Ltd. (AMS), the biggest producer, are holding protests over pay.
“The Fed statement does change things,” said Jack Ablin, who helps oversee about $60 billion of assets as chief investment officer of BMO Private Bank in Chicago. “It really shows the Fed’s unwavering desire to inflate asset prices, and commodities will certainly be part of that.”
The “fiscal cliff” now looms, with the pathway for Obama and Congress to reach agreement to avert steep tax hikes and spending cuts Jan. 1 looking tenuous and uncertain. And the Greek parliament was debating a new set of controversial austerity measures Wednesday, with a failed vote risking a new wave of crisis across Europe.
Those concerns drove the U.S. stock market down more than 2 percent in morning trading Wednesday, as measured by the Standard & Poors’ 500-stock index. The Dow Jones industrial average was off 305 points, or 2.3 percent, at about 12:30 p.m. That followed a similar overnight trend in European markets, where the French, German and British stock markets were all down; they each closed down around 2 percent as well.
Even more dramatic was the swing in the bond market. Money flooded into U.S. Treasurys overnight, driving the yield on 10-year securities down 12-hundredths of a percentage point, to 1.63 percent. That is frequently a measure of fear; when investors are antsy about the global economic situation, they tend to plow money into Treasurys as a safe harbor.
In other words, on Wednesday morning, every major market indicator was pointing toward more angst about the economic future. The trading floors of Wall Street and London and beyond are jittery. A measure of expected future market volatility known as the Vix index was up 7 percent at midday.
Some of the slide could be seen as simply nervousness about the perception that Obama’s tax and regulatory agenda could damage corporate profits. That anxiety wasn’t supported by the stock market’s movements during the race itself, however, when there was little correlation between movement in the polls and the market.
The unease over a tumultuous situation in Greece explains a drop in the euro against the dollar and a spike in Spanish and Italian borrowing costs.
But there is a strong case that a major reason for the drop in the markets Wednesday morning is that global investors are starting to look ahead at what will happen to U.S. economic policy in the very near term — over the next two months — and see more reason for fear than rejoicing.
The good news for investors was that the election was reasonably crisp: Markets had feared a confidence-rattling series of recounts and legal battles over the outcome, and seeing that Obama’s victory was decisive enough to prevent that possibility initially drove Asian markets up overnight after networks began calling the race for the president.
But as investors have started to digest the morning after, they are looking at a broader set of risks presented by the election returns. The high-stakes brinksmanship that characterized the debt-ceiling standoff last summer is looking like a mere preview of an even greater, more intense series of negotiations set to begin almost immediately.
Nate Silver-Led Statistics Men Crush Pundits in Election Nate Silver was right. The Gallup Poll was wrong Silver, the computer expert who gave Obama a 90 percent chance of winning re-election, predicted on his blog, FiveThirtyEight (for the number of seats in the Electoral College), http://fivethirtyeight.blogs.nytimes.com/ that the president would receive 51 percent of the popular vote as he called each of the 50 states, including all nine battlegrounds.
“Nate Silver, right,” said Bill Burton, who moved from the White House to the pro-Obama super-political action committee Priorities USA Action.
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