Readings: $250 oil, PE & Infrastructure, Fed credibility
Alexei Miller, chief executive officer of OAO Gazprom, the world’s biggest natural- gas company, said June 10 that crude will climb to $250 a barrel in the “foreseeable future.”
Some investors are already betting on Miller’s forecast. At least 3,008 options contracts have been purchased giving holders the right to buy oil at $250 a barrel in December.
Rising oil costs have been responsible for a third of global food inflation since 2004.
Extrapolation to the extreme!
- Business Standard: Private equity players still chases infrastructure profits
Major private equity players, who invested Rs 5,730 crore in infrastructure companies in calendar year 2007, have seen the market value of their holdings erode by over 40% due to recent slump in the domestic equity market.
“At the time of investing, private equity players had too much expectations from infrastructure growth. However, higher inflation, rising crude oil prices, tightening liquidity, higher interest rate, slowdown in industrial growth, among others, have started putting pressure.”
The Fed is on the fast track to destroying its own credibility. In my view, no sooner will all of this “tough love” leave the lips of Fed governors than the Fed will be forced to announce some novel emergency “liquidity facility” to address a fresh round of credit concerns.
. . . it is typical for commodity prices to “hang on” early into a recession and then dive as employment losses build . . . commodities typically don’t perform well during recessions once real interest rates trough (as they appear to have done).
If the government insists on creating huge volumes of debt, it must either be held by the public in the form of Treasury securities (putting a demand on funds that would otherwise be available for domestic investment), or else the Fed has to buy the Treasuries and create base money.
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