Is the Oil elevator full yet?

Headlines in all the major business sections lead off with the price of oil. Currently trading at 129 for July. On top of that, the talking heads on the financial stations are now talking of the contango in the oil futures mkt. Dec. 2016 now at 140$ with increasing open interest. This could be the beginning of the super spike that eventually crushes demand-just like gold and silver in 1980. I expect margin requiremnts for future contracts to start increasing.

Related news. Petrobras is ordering $30 billion in deepwater rigs for their recently discovered off shore oil firelds. In addition, PBR has locked up 80% of the deep water rigs (16 of 21) for the next several years. Looks like future oil is going to be more expensive that oil 5 yrs ago. The oil mkt is trading similar to the gold mkt as it breached the 1000$ level. Once the upward momentum wanes, it will crater and find its true level around 105 to 110. 95 to 100 is the max downside I see.

Refiners are starting to trade better. Either gas prices are going higher, or the cost of crude is going lower. WTIC is trading at a discount to its normal relationship with Brent.

Tech Upgrade by several Analysts

Tech Stocks are about to sold by the Wall Street and Conn. crowd. A plethora of upgrades by the Wall Cheat analysts will more than likely result in the blind, underperforming mutual funds buying positions in tech. TECH is cyclical and the US economy is heading South and at best, heading East(ie flatlining). What the BRICs buy in terms of tech is up for discussion, but tech spending in the BRIC nations is not close to tech spending in Europe and North America.
Tech is cyclical, not secular. Tech is cyclical repeat and repeat again. As Don Coxe states-INTC sold at 11X earnings in 1994, before it morphed into a hyper growth stock to trade at 50+X peak earnings. It will trade at 11X earnings again. same with the rest of tech.

Oil Prices

What is up with oil prices. 125 and tight despite dropping US demand and now increased Saudi output. Saudi increasing production 300k bpd starting June 1. No impact. Mkt is realizing that BRIC demand will outpace US and European demand destruction.

Gas at the pump must rise in order to slow demand growth even more.

Fannie and Freddie being sacrificed

Here we go again-US politicians creating more problems by trying to solve existing ones. The US Congress is meddling in the housing mkt trying to stop the tidal wave of foreclosures. It wil not help until prices drop to levels where real buyers emerge. In the latest move, FNM and FRE are allowed to buy larger loans with only 3% downpayment. Isn't that how the mkt got in this mess. BAD BANKING practices. God help the US taxpayer. Once again the profits are privatized and the losses are socialized.
FNM and FRE are going to lose money hand over fist as the toxic waste get rammed down their throat. The taxpayer eventually finances these GSEs and it is another round about way of the PTB unloading the problem onto the US taxpayer, and in particular the middle class.

April CPI-the joke continues

April CPI released- +.2%, core +.1 %

Food up.9%. energy flat in April vs March. Are you kidding me. Oil is has gone from 110 to 125. Nat gas is pressing 12. I guess all those cheap wind and solar farms are producing cheap energy.
I suspect the Owners equivalent rent and car prices dragged the index lower.
Given that number, any suspicion of higher rates from the FED just went out the window.
So what do we have-a FED giving credit away-that sets the stage for problems down the road. Bernanke is trying to save his job and his Republican masters. Full speed ahead into November.

Deer in the headlights

Fed Chair Bernanke looked like a deer in the headlights y'day as he spoke to the Atlanta Fed. He was either suffering from a severe case of gas, or he was lying through his teeth. Terrible poker player. (still looking for video)
His suggestion of an increase in the TAF auction coupled with comments about the financial mkts being far from normal indicate that there is more pain to come. Expect rates to remain low for a while-even if inflation kicks up. Fed can always stop inflation-crank up rates, but stopping a Japanese style deflation is much more difficult. So far devaluing the USD and making money free is delaying the process. Time will tell if this strategy works. The US financials remain on life support. More equity raising coming from both Freddie and Fannie. Citi will be back as will MER and LEH.

Deleveraging

Hedge Funds are being targeted by the prime brokers. The prime brokers are forcing the hedge funds to reduce their leverage ratios as the need for capital continues to intensify. FED Chair Bernanke stated that he is prepared to raise the TAF auctions. I thought things were getting better, but that announcement indicates things are getting worse. The traditional ratios are all breaking down. Gold/USD, Gold/oil, yield curve, carry trades. The mkts are being dislocated as the hedge funds all switch from one side of the boat to another. The old boys club is all trying tosqueeze through the same fire exit. Despite record short interest, the equity mkts trade well. Either there is a pile of pairs trade, or the mkt is setting up for a fall. With the Fed and other central banks forcing credit down the banks throat and then not giving them any benefit to sit in cash, it is flowing to the most liquid asset-stocks.