Thursday, April 20, 2006

State of the Economy

We reached $74/barrel for Oil Today, and some rumors suggest We could reach $80/barrel, though this Author imagines (or it is only hope) that pressures will be relieved at a price of $76/barrel in this Round. Indications remain that Refining capacity has reached its bottom, and will start to increase. The Wholesale Price index was up by 0.1%, and Bank of America stated increases in Corporate borrowing. Profit Margins are being pressed, and the CPI index will rise by an Author-estimated 2.1 times the WPI index percentage increase by the clothing market season of August--at the very least. Pressure for additional Wage increases will increase by 11% on the Author's own in-house Scorecard (that means he doesn't explain it, so he won't get laughed at). Those who would desire a sensible explanation, this Author will simply state he expects Average Wages to expand by 2% by Christmas, but still run behind the Inflation rate. This can be somewhat underwritten by the slight drop in the Leading Economic Indicators, which shows Management dragging their heels because of the rising Operating Costs.

The lush Profits of the Banking industry in the face of a slowing Mortgage market remains a deep worry, as Banking service charges eat into Consumer Demand, and higher borrowing by Business for Operating Expenses dictate higher-priced Consumer Prices with lessened Consumer Demand through dragging Wages and higher Costs. The Trucking industry is starting the practice of "Cost plus Fuel premiums" Contracts which is a good idea to limit Transport by Air, but not as Wise in heavy-Weight hauling; the Split causing Profit-taking on the Cost side, and ahead-of-Cost premiums for the Fuel. The Split, therefore, could cause an artificial raise in Transport Costs of up to 4% of total Costs. One must understand the Concept of Breakpoint when studying the Economy: Booms and Busts are determined by long-range Trends, but Shift points between the Two often hinge upon the marginal rates of many elements, even to the place of determining if there will be a Shift from One to the Other. lgl

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