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Five Things You Need to Know: Bernanke Boots His Rally, Commodities, Bolivia, Intel, Iran


What you need to know (and what it means).


Five things you need to know to stay ahead of the pack on Wall Street.

1. Bernanke Boots His Rally?

Today conventional wisdom everywhere is that new Fed Chairman Ben Bernanke (perhaps inadvertently, perhaps not) booted his very first rally after whispering over the weekend to CNBC reporter Maria Bartiromo. We're not buying it.

  • Yesterday afternoon, Maria Bartiromo reported on CNBC that over the weekend at a White House correspondents' dinner Fed Chairman Ben Bernanke said the media had misinterpreted his congressional testimony last week.
  • The market view reportedly being "corrected" is that the Fed would be one and done after the next 25 basis point rate hike.
  • What?! We're not sure how that "market view" was obtained. After all, the policy was widely reported in the media as a simple "pause." To wit, headlines from April 27 and April 28:
    - Fed may pause on rates: Bernanke - India Economic Times
    - US Treasuries soar as Bernanke says Fed may pause - Reuters
    - Bernanke Signals Fed May Pause - Bloomberg
    - Markets now expect Fed to pause in June - MarketWatch
    - Bernanke: Fed May Pause With Rate Hikes - LA Times
  • What is a pause? Everyone knows a pause is a temporary halt before a resumption.
  • Seriously. Think about it. This is the DIGITAL AGE. Every CD and DVD player in existence has a pause button, which temporarily pauses, and a stop button which stops.
  • So, if by "market misunderstood Bernanke's Fed testimony," one means, "a reporter misunderstood Bernanke's Fed testimony," then yes, perhaps that is the case.

2. Commodities Leverage

The head of privately-held commodities giant Cargill, said yesterday that hedge funds have too much leverage in the commodities market, and that it is "only a matter of time" before a "blow up" occurs.

  • Cargill CEO Warren Staley said that investors in search of the "next big return" and who are uninformed about commodities are largely responsible for an unsustainable build-up in liquidity.
  • "There's more liquidity than I ever remember in my career," Staley told Dow Jones Newswires.
  • Staley suggested Cargill may need to "stay out of the way" and stick to investments in physical commodities, as opposed to leveraged futures markets where hedge funds are active.
  • On a related note, late last week Merrill's Economic Outlook from David Rosenberg suggested that commodity prices are more speculative than real.
  • "By our estimation, the most recent parabolic surge in base metal and oil prices has gone well beyond pricing in a decent global economic expansion, and is increasingly reflecting demand that we can only refer to as speculative in nature," the report said.
  • According to Commitment of Traders data, speculators have been net long gold every week since January 2002, net long silver every week since April 2003 and net long oil
    every week since September 2003.
  • According to the Wall Street Journal, portfolio managers now own between $100-$200 billion in commodities, up from $6 billion in 1999.
  • Also, as Minyanville's Five Things You Need to Know...pointed out following the most recent IMS report, not a single purchasing manager in the U.S. reported a single commodity in short supply.

3. Klonopin Shortage as Seizures Spread from Venezuela to Bolivia

Following the Venezuelan paradigm, Bolivia nationalized its Natural Gas industry, seizing control of the country's biggest natural gas field.

  • Venezuelan President Hugo Chávez in early April seized control of two oil fields from foreign companies.
  • Following suit, Bolivian President Evo Morales yesterday announced the nationalization of his country's biggest natural-gas field.
  • While Bolivia owns the second-largest natural-gas reserves in South America, it isn't ranked in the top 20 of the world's biggest gas deposits.
  • "This is just the start ... tomorrow or the day after it will be mining, then the forestry sector, and eventually all the natural resources for which our ancestors fought," Morales told a jubilant crowd in La Paz's main plaza, according to the Australian Herald.
  • In Peru, presidential candidate Ollanta Humala, who last month won a first round of voting in elections and now faces a run-off, has called for nationalizing the country's mining and natural-gas industries, spooking foreign investors.

Butch Cassidy: Jeesh, all Bolivia can't look like this.
Sundance Kid: How do you know? This might be the garden spot of the whole country. People may travel hundreds of miles just to get to this spot where we're standing now. This might be the Atlantic City, New Jersey of all Bolivia for all you know.

4. Intel finds that you so poor you think a napkin and a pencil is a laptop computer; vows to spend a billion

Intel (INTC) says it plans to spend $1 billion to promote Internet use and computer training in developing countries such as Mexico, India and China.
  • The program, called World Ahead, hopes to deliver broadband PC access to developing countries.
  • The company plans to customize PCs for individual developing country markets, focusing on issues such as energy usage and costs.
  • Of course skeptics, people like us, might suggest the timing of the program simply says the company's current market is mature and that the potential for growth in existing markets is slowing.
  • INTC rival Advanced Micro Devices is already making inexpensive computers that cost around $100.
  • Microsoft's Bill Gates has criticized the cheap computers saying they fail to provide the poor of important computing functionality.

5. Iran Goes to 4.8%

Not interest rates, uranium enrichment.
  • Iran has enriched uranium to 4.8 percent.
  • What does this mean? It means that Iran has successfully enriched uranium in the range necessary for the low level used in nuclear power reactors.
  • Give it to us straight doc, do they got 'em one of them there nukuler bombs?
  • Not quite, although to read the hysteria from Washington one might reasonably believe Iran is right now aiming ICBMs at the Ozarks.
  • For nuclear weapons, uranium must be enriched to around 90%.
  • Of course, as Bloomberg noted, "Iran Increases Uranium Enrichment to 4.8% From 3.6% in 2 Weeks!"
  • Let's use interesting but irrelevant math! Extrapolating the 3.6% to 4.8% two-week growth rate of approximately 33% forward, Iran will have obtained uranium enrichment approaching the 90% weaponry threshold by the end of October!


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