Week ending 21st July 2006      

Turning to finance, rather than Wall St all eyes were on 20th Street and Constitutional Avenue, the Federal Reserve’s Washington address. Although US CPI for June came in at a higher than expected 0.3% core rate (up by 4.3% over the past year), investors’ preferred to listen to Ben Bernanke’s soothing words, in his first testimony on monetary policy to Congress, that he expected inflation to moderate in the coming months Meanwhile, US housing starts fell by 5.3% in June and has now been slowing for 6 months. On the tech front, Dell and Intel gave disappointing Q206 results, whilst Apple and Google pleased. Microsoft announced a 24% fall in earnings, but saw its share price rally on the back of a $40bn share buy back announcement. The “Bernanke” speech resulted in the 2nd best one-day rally for US stocks but the enthusiasm was reversed by Friday’s close. Over the week the Dow was higher by 1.2%, the S&P 500 by 0.3% whilst the tech rich Nasdaq eased by 0.8%.

Europe’s largest economy, Germany, saw business confidence fall for the 6th month in a row in June, whilst UK economic growth grew by 0.8% in Q206, according to the ONS, the fastest rate in two years. Staying with the UK, inflation rose to 2.5% in June versus 2.2% in May and is now running at well above the 2% pa target rate set by the Bank of England. The troubled European aircraft maker, Airbus, received a welcome vote of confidence this week, as Singapore Airlines signed up for 20 medium capacity planes plus 9 more of the A380 super jumbo’s. The UK FTSE 100 rose by a modest 0.2% over the week, whilst the French CAC and the German DAX indices closed higher by 0.8% and 0.5% respectively.

Out East, China raised bank reserve requirements once again, in an effort to slow down rampant credit growth and house price inflation, whilst in Japan a report confirms that the country's pension funds, insurers and individual savers, hold assets abroad totalling $2.5 trillion, mainly amassed during the past 6 year period of zero interest rates in Japan. Now that interest rates are rising, one wonders just what the effect may be as these holdings start to head back home. For the week, Japan’s Nikkei Dow eased by 0.2%, whilst the Hang Seng gained 2%.

On the currency front the $US index lost 0.2%, whilst US treasury yields eased once again, re-assured by “Billy Boy Ben” that US inflation will moderate.

Within the commodities complex, the $Oil price fell by 5.4% to $74.4 a barrel, despite the continued Middle East tension. Likewise with $Gold, as it fell by 61/4% or nearly $50 to end the week at $623oz.

Next week sees US existing home sales data and Durable goods orders for June, June money supply data for the Euro zone and inflation numbers out of Japan.

Returning to the bankrupt USA, fresh on the heels of a “Barron’s magazine article”, by the talented Ned Davis, in which he confirmed that America’s “funded debt” is now at $40trillion or 315% of US GDP, research by Professor Kotlikoff, of the Federal Reserve Bank of St Louis, states that the “unfunded debt” is now at an awesome $65.9 TRILLION! The Professor goes on to say, that by some measures “The US Government is indeed bankrupt”.

“Today, there are three kinds of people: the haves, the have-not's, and the have-not-paid-for-what-they-have”

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