This column suggested $78 as a target for crude oil three weeks ago as the price rose above $69. This past week managed $78.47 before falling back. It appears price is attempting to stabilize at the $74-75 level. November gasoline futures have rallied form the $1.90 level to $2.13. There is also some good news for the winter months ahead, at least for the grid providers wise enough to continue using natural gas. In the last few days it has fallen from $3 to $2.55.
States that have abandoned natural gas have significantly higher electricity costs. The sun does not shine at night and the wind does not always blow. As always California has the highest electric rates in the nation. Florida which has chosen to rely on natural gas, has lower rates than Texas. Texas has a significant solar and wind component.
Stocks continue to advance, well most of the indexes. The Industrials make a new high at 42,745. Yes the index is overbought. The tech heavy NASD 100 has not taken out its earlier August high. SOX is making a new high at 5,817. The Russell 2000 and S&P Mid Cap Indexes have not recorded new highs. It appears the stock rally will continue into next week.
The financial press hails the FED Chair with the equivalent power on the order of King Arthur’s Merlin the Magician or perhaps Lord of the Rings’ Gandalf, the Wizard of the Istari order. Not so fast, the FED merely follows the market rather than leading it. The Fed had to reduce the overnight lending rate by a half percent as 3 Month T Bills were even below five percent. The FED overnight rate was at 5.5%. How is that working out? The ten year note yield has risen from 3.6% to 4.1% since that cut. The three month T Bill is yielding 4.5%, still below the FED overnight rate. And now the Two Year Note rate is 3.96%, about the same as the Ten Year Treasury. For a short time rates returned to normal with longer rates higher than shorter. Now we are going back towards another inversion. This rise in longer term rates tells us the market, always wiser than the politicians, does not believe inflation has been beat.
As Kamala ducks and dodges questions on her intended policies, evidence of much higher tax rates in her administration abound. One study noted that if all her corporate, capital gains, and ordinary rates were enacted along with high tax states like California and New York, government would be taking about 50% of all that is produced. It is hard to see a growing economy with those onerous tax rates.
