This plan for recovery unfortunately seems to leave out one all important component, the US Citizen. Wall Street is getting back to their country clubs at the expense of the 10.2 % unemployed (and growing) by shorting the US Dollar and crowding the commodities trade. Remember last year when the political powers vilified investors who shorted bank stocks, well isn’t shorting the Dollar kind of un-American. What percentage of those banks bailed out where owned by foreign investors.

Over the recent quarter large companies have credited a large portion of their recovery to overseas sales. McDonalds over the past week announced sales for last month showing that US sales were down, but overseas sales were up. If you are a US Citizen you may or may not have money invested in the stock market, but you definitely have Dollars.

One thing is for sure, if you are an American, this recovery is hurting you.

Trading cheeseburger futures could stabilize earnings of fast food giants. Fast food giants could save on innovation in the production of cheeseburgers because when prices are high their no need to change a good thing. When prices are low they could just stop producing as many cheeseburgers thereby reducing the supply and supporting the futures price, even though demand is falling. Maybe we should also have pizza futures or even ice cream futures.

I hope you could smell the sarcasm. Just my perception on how ludicrous it is to have gasoline futures.

Since the stock markets appear to be more speculative than realistic these days, crude oil supplies look to be a better indicator to economic activity in the United States. As the old saying goes “America runs on oil”, so it stands to say that if oil demand is retrenching than probably US production is doing the same.

Here is a chart of crude inventory supplies in the USA:

Crude oil supplies have continued to build at a relatively quick pace since October 2008. You will also notice that crude oil supplies broke above the June 2007 highs in February 2009 after a brief stabilization of the inventories in January till mid February.

The stock market started its most dramatic decent in October 2008. The stock market over the past month and a half has been rallying off data showing stabilization in the economy from January and February.

Every week a report is released by the Energy Information Administration tracking crude inventory supplies in the United States. Because oil is measured by barrel, coming up with this report is not open to interpretation or future adjustments.

If you believe America truly does run on oil, then this should be a good leading indicator to how fast America really is running.

This theory is correct, but I believe the timing is too aggressive. There is another theory that does not get as much airtime as the above mentioned which explains how increased commodities prices typically brings increased supply. Basically as commodity prices rise, countries and companies ramp up exploration and extraction of the commodity to cash in on the increased prices. Also with increased prices technology improves and extraction becomes more efficient.

This increase in supply typically overshoots demand. The question is, how long will this process take? The last commodities bubble that popped took place in the early 1980’s. How much supply is really out there? The world for the most part is contracting. The process of rebalancing the supply and demand curve of oil could take some time.

The real threat to this process, in my opinion, is the artificial supply control of OPEC. They have never been successful in their efforts for the long term because their success solely depends on the cooperation of the countries that make up OPEC. If a large percentage of your GDP comes from the sale of oil and your nation is starting to starve because demand has fallen off a cliff, do you sell what you have or hold onto it with hopes that oil prices will be higher tomorrow? I think the answer to that question is, depends on how much cash reserves you have.

Supply and Demand is what sets prices, everything else is just manipulation. Manipulation can only exist in the short term; eventually reality catches up and typically overshoots in the other direction.