Small Time Blog
Warren Buffett, speaking at the annual shareholder meeting for Berkshire Hathaway, echoed almost to the word what I said about the Federal Reserve Banks' famous quantitative easing program of buying US treasury bonds and mortgage backed securities in my Blogpost titled Fed Pulls Trigger on Massive Stimulus. The holders of these instruments are the ten largest banks in the US and they are using the proceeds of the sale of these assets to invest in equity markets, thus the new highs on the Dow and S&P 500.
Jim Cramer was interviewing the CEO of Kimberly-Clark, Tom Faulk, on Mad Money the other day and I was suddenly enlightened to the fact that large corporations and their CEO's aren't so evil after all. Mr. Faulk spent the entire interview talking about all the things he and his company do for the consumer, from the products themselves, everything from Huggies to Kleenex and many others, to the innovation of new products, all for the customer. I recall a night last winter when my wife had a nagging cold and a very raw nose from repeated use of toilet paper. I bought her a box of Kleenex and she was so thankful to not have to rub her nose raw any more.
Copper, Lead, Aluminum, Nickel, Zinc. These are known as the base metals and they are the raw materials of the world economy. Base metals have been falling in value since early February and on Monday of this week the selling accelerated after China reported economic growth of 7.7% for the first quarter 2013. China is seen as the driving force of demand in the world economy right now because western economies are growing at a much slower pace of around 2-3%. Think of it this way, America is built out and expanding slowly and China is moving population to urban areas like America was in the early 20th century. The growth rates of both economies reflect this reality.
Gold Futures contracts for June on the New York Comex Exchange went under $1500 for the first time in 2 years and silver was crushed even worse declining by nearly 7% to $25.95 per ounce. The people who have championed the cause for gold and silver believe that the Federal Reserve Bank's actions to stimulate the economy known as "quantitative easing" will cause the dollar to crash and thus gold to shoot over $2000 per ounce, which almost happened in September 2011 when gold reached an all time high over $1900 per ounce.
The S & P 500 stock index closed last Thursday at a new all time high at just over 1569 points (for a list of the 500 stocks that make up the S&P 500 click here). This week the two major U.S. averages continued their ascent into even more rarefied air with the S&P index nearly cresting 1600 for the first time in it's history.