Heard Around The Money Jungle

Crude futures have fallen more than 20% from their early July highs on the New York Mercantile Exchange. But at just shy of $114 a barrel, they’re now hovering right around the daily average close so far this year, which is still more than 55% above 2007’s average.

“In a classic bubble pattern, China’s Shanghai Composite is now down 60% since just last October. It is now just 9% above its highs from 2001, and it is on the verge of giving up nearly all of its parabolic gains following its breakout in 2006. Anyone hoping that the Olympics would give ailing Chinese stocks a boost have gotten a rude awakening. Since the opening ceremony on lucky 8/8/08, the Shanghai Composite has had three straight daily declines of 4.47%, 5.21% and 0.52%”

“In July, the bet on long commodities and short financials didn’t work as well for hedge funds”

“Fund managers are no longer worried about inflation — an extraordinary turnaround in the space of just two months”

“Wall Street has been thinking more of a series of events that would lead to lower inflation. Main Street remains focused on gasoline and food prices”

Traders say that with the slide in the metals markets gaining steam, trading programs that are designed to limit losses are adding to the downward tumble. “Selling came in and triggered a lot of stops below the market”

Given that exports played such a significant role in powering the U.S. economy forward in the second quarter, offsetting at least some of the drag from the housing downturn, that is likely bad news for the U.S., and a good reason to question how far the dollar can run. “The combination of deepening weakness in Europe and Asia coupled with an appreciating U.S. currency may jeopardize any hopes of a decent US recovery, especially if protracted dollar strength erodes the vital contribution from net U.S. exports (exports minus imports) on U.S. GDP growth”

Think about that — over two-thirds of the US GDP growth in the second quarter was due solely to the decline in import volumes

p/s photos: Sara Malakul Lane