HARD EVIDENCE

Ho-Hum... China’s manufacturing expanded at a faster pace than expected. A paean to the economic juggernaut that is supposed to lead the industrial economies out of recession. Supposedly, this has  tempered concern that inventories are excessive. A hope juxtaposed against fact, guess which will eventually prevail?

API reported yesterday afternoon that crude stocks had risen almost 5MM bbls. If EIA produces similar results this morning, new lows for this move may be at hand. The storm that will hug the US East coast for the next few days is expected to hit gasoline demand, just as the Labor Day holiday is about to commence capping an already disappointing driving season.

There has been nothing in either the Federal Reserve Chairman's comments last week or from the President, or from the action in correlative markets that deters us from our thinking that a deflationary spiral is already underway.

As most of our reader's should remember from Economics 101, this is a period characterized by falling prices and wages. With fiscal and monetary policy now seized up, expect more revisions for oil price projections for the year.

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