So much for the validity of the GDP (Gross Domestic Product), and the PPI (Producer Price Index). They are no longer reliable indicators. Why?
The GDP is the market value of goods and services produced by labor and property in the United States. It is made up of consumer and government purchases, and net exports of goods and services.
Now that many of our labor and production jobs have been shipped overseas, our trade deficit is so out of wack that we import more than we export. This morning we received data from the Labor Department that said that the prices of imported goods rose 2.3% in September. The main culprets were natural gas imports that rose 28.8%, and oil which rose 7.3%.
The PPI, which measures wholesale changes in commodities such as food, metals, lumber, oil & gas, as well as many others, has not been painting an accurate picture either.
As a result, gold has been soaring, and today, interest rates began to pop. As a result of today's data, the Fed will continue to push interest rates higher, and as a result the dollar is rallying, and gold is selling off.
30-Year T-Bond 4.656% +0.066% 10/12/05
10-Year T-Note 4.441% +0.057% 10/12/05
5-Year T-Note 4.310% +0.048% 10/12/05
2-Year Note 4.234% +0.034% 10/12/05
It is becoming clear that commodities are going to remain strong for the next 5-10 years. Our favorites commodity plays are as follows.
(BHP)BHP Billiton Ltd: BHP is the world's largest natural resourses company. They are well diversified with carbon steel materials, aluminum, base metals, and specialty products such as titanium. The company's shares arte down over 3% today after they said "it'll miss oil and gas production targets for 2005 by 10 million barrels of oil equivalent".
(RTP)Rio Tinto:RTP is a worldwide leader in mining and processing. The company produces copper, iron ore, coal and uranium, aluminum, and diamonds.
(CCJ) Cameco: CCJ is the world's largest producer of Uranium providing almost 20% of global demand. With the soaring costs of natural gas, and a search for alternatives to coal, the demand for nuclear energy is set to soar.
On the Consumer Non-Cyclical (Staples) side, Coca-Cola (KO) is extremely attractive at current levels. The shares are currently yielding 2.7%, and has raised their dividend for 43 consecutive years. Another dividend increase is expected in February 2006.
KO's current valuation is at a 10 year low, and the shares have a limited downside.
Energy prices are coming down today in anticipation of a slowing economy. I would like to see a break below $60/bbl in crude so the market can dig its teeth into something positive.
Energies
Crude Oil (CLX5) Nov 05 63.65 -0.47 64.15 64.39 63.45 10:19
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Crude Oil (CLZ5) Dec 05 63.10 -0.51 63.60 63.80 62.75 10:19
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Crude Oil (CLF6) Jan 06 63.40 -0.48 63.88 64.00 63.05 10:19
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Crude Oil (CLG6) Feb 06 63.55 -0.55 64.17 64.17 63.40 10:16
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Gasoline Unleaded (HUX5) Nov 05 1.8050 -0.0226 1.8295 1.8340 1.7950 10:19
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Gasoline Unleaded (HUZ5) Dec 05 1.8200 -0.0182 1.8400 1.8450 1.8075 10:18
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Gasoline Unleaded (HUF6) Jan 06 1.8200 -0.0207 1.8415 1.8460 1.8075 09:56
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Gasoline Unleaded (HUG6) Feb 06 1.8350 -0.0017 1.8365 1.8365 1.8200 10:01
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Heating Oil (HOX5) Nov 05 1.9800 -0.0357 2.0150 2.0185 1.9750 10:19
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Heating Oil (HOZ5) Dec 05 2.0225 -0.0342 2.0550 2.0560 2.0150 10:18
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Heating Oil (HOF6) Jan 06 2.0550 -0.0327 2.0840 2.0875 2.0500 10:18
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Heating Oil (HOG6) Feb 06 2.0650 -0.0262 2.0910 2.0910 2.0550 10:18
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Natural Gas (NGX5) Nov 05 13.410 -0.114 13.538 13.600 13.100 10:19
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Natural Gas (NGZ5) Dec 05 13.920 -0.089 13.995 14.061 13.680 10:17
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Natural Gas (NGF6) Jan 06 14.320 -0.110 14.438 14.455 14.150 10:15
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Natural Gas (NGG6) Feb 06 14.150 -0.120 14.200 14.270 14.000 10:14
