On June 11th I outlined the "Bull Case Scenario"
Now let's look at the score: in the piece I stated that if higher interest rates lead to an easing of the pressure on commodities, this would allow equities to rally. The problems were terrorism, lack of fiscal discipline and fed mismanagement.
In short, the bull case scenario is not materializing, and instead the simpler bear case scenario is: speculators push up the price of oil, and policy makers stand around like idiots, while Wall Street Analysts bait the bear. Which is very real. And.is.going.global.
The Fed hasn't mismanaged the transition, there have been no market failures in the bond market either, as there were last year. Score: Gentleman's B for the Fed. C- for the Treasury, which still has a borrowing curve that is a disaster waiting to happen.
However, the other two requirements for a soft landing have not been met. First because Congress has injected another round of junk stimulus - the defense and security budget - and is pursuing a massive corporate tax break bill. Score D-. Not an F because they haven't passed a bill to reinstate the gold standard or make tax breaks "permanent".
Security. The repeated shutdowns in Iraq required a good deal less terrorism than I had envisioned to put oil over $45. There is a vicious cycle going, of investors around the world dumping equities and hedging into commodities. Since commodity markets are not large compared with credit, currency and equity markets, it takes rather little money to put pressure on commodity prices. Score F.
B/C-/D-/F is a typical Bush report card.
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