Rebate Checks, Energy Prices, Sell In May, The U.S. Recession, and More!

What intel do you suppose the commander in chief has gotten in order to speak so confidently on the matter?

“By law,” comments government stats watchdog John Williams, “neither the White House nor the Fed is supposed to get an advance look at the GDP data until after the markets close on April 29. But politics prevent the president or the Fed chairman from being embarrassed by data surprises.

“The surprises never occur when the numbers are being massaged to meet political or financial market needs. It is now almost a sure bet that the ‘advance’ estimate of first-quarter GDP from the Bureau of Economic Analysis (BEA) will not show a contraction. Unfortunately, the GDP series has been so gutted of integrity over time that it remains little but propaganda.

“If the GDP growth rate remains positive in the first quarter, the spinmeisters on Wall Street will have a good time explaining how the economy dodged a bullet.”

But who cares, really? Today, we’re getting stimulated… electronically.

The IRS will inject its first round of “economic stimulus” rebates today directly into the bank accounts of a million taxpayers. If you’ve filed a return, you stand to win between $300-600 or more. Each U.S. family could win as much as $1,800!

Publishers Clearing House? No… It’s YOUR Government. That mannequin beside your winnings? She’s second in line to the Oval Office.

(BTW… if you’d like to know if, when, how or what it’s going to feel like to get stimulated by the government, visit this site. Like Nancy Pelosi herself… it’s not very exciting, a little plastic and self-serving as hell.)

The truly puzzling thing is… they’re not even embarrassed by this display. They’re just pissed they’re not getting it themselves. “It’s galling to think that taxpayers’ stimulus checks will be lining the pockets of OPEC,” lamented Sen. Chuck Schumer this morning. “The sad truth is that the average American family will spend almost their entire stimulus check on higher gas prices this year.”

Aside from gas, late mortgage payments and credit card debt, how, we wonder, will Americans spend their generous allowance from Washington? This chart from MasterCard helps:

“People have started to shift spending as if we were in a recession,” said Michael McNamara, the man responsible for the data above. Apparently, electronics and men’s clothing are the hot recession tickets.

Oy… we won’t even try to reason our way through that one.

Maybe the average Joe will use his U.S. citizens’ bounty to keep the lights on.

The number of families currently receiving federal energy assistance funds is at a 16-year high. For the 2008 fiscal year, 5.8 million households asked the government to help pay their utility bills, up nearly 4% from 2007.

“The underlying problem is many families are becoming poorer and have to pick which bills to pay,” says Mark Wolfe of the National Energy Assistance Directors’ Association (NEADA). We suppose when you have to pick between food, your mortgage or the heating bill… the choice isn’t that hard.

Wolfe said that several states are lobbying to extend the date when utilities are legally allowed to shut off the juice.

Oil’s back up to a record high.

Light sweet crude had retreated to $115 on Friday morning as a dollar rally gained momentum. But later that day, a cargo ship carrying supplies for the U.S. military fired warning shots at Iranian boats in the Persian Gulf.

You know the drill: A few cocksure Iranians on joy ride in a speedboat… trigger-happy contractors with nervous captains… happy gestures and insults hurled across open water… a couple of rounds fired into the air. Someone’s feelings were even rumored to have been hurt.

Voila: Oil is back at $118.

Then… the Nigerian uprisings and U.K. refinery strikes we told you about last week apparently got worse over the weekend. Now we’re looking at $119.93 per barrel of black goo. So it goes.

In lock step with crude, gasoline’s historic rise is showing no signs of fatigue. The national average rings in at $3.60 a gallon this morning — up 30 cents in April alone.

“God, deliver us from these high gas prices” implored a group of the devout at a “pray-in” at a Chevron station this weekend.

We’re not kidding.

Led by Rocky Twyman, a Washington, D.C., choir director, a spiritual bunch crowded outside a San Francisco gas station over the weekend to ask the man himself for lower gas prices. Twyman is touring the country’s most gas-expensive cities. With the average California price ringing in at $3.89… San Francisco seems as good a place to start as any.

Praise the lord… and fill up my gas tank.

Midwest farmers might want to take Twyman’s lead. “Most farmers,” says Kevin Kerr, “are waking up in a cold sweat over diesel prices.”

The national average price for a gallon of diesel is now $4.24, a new record this morning. Diesel has shot up over 45% in the last 12 months. Compared to gas — up 22% year over year — anyone running on diesel is feeling particularly gouged.

“Many of the farmers I spoke with on my recent Midwest Farm Tour,” Kevin says, “felt that many Americans don’t have a clue about how much the farmer is being squeezed. There seems to be a perception that farmers run all of their equipment on ethanol, but in actuality, none of it does. Those big John Deere combines, tractors, seeders, etc. all run on diesel. Maybe 2% run on gasoline. I know of none that runs on ethanol.

“It used to cost about $22 to seed one acre; now that cost is more like $77. Seed is more expensive. Fertilizer is more expensive. And diesel is certainly more expensive.

“While the average consumer may think the farmers are getting fat and happy, think again: They are paying through the nose to get these crops from field to fork, and those costs roll downhill right to you and me.”

Kevin’s been updating the Resource Trader Alert portfolio to brace for this “perfect storm” surrounding the U.S. agricultural industry. Cold, wet conditions; record high fuel costs; government growing mandates; and rising planting costs… the stars are aligned for higher food costs and big resource profits. If you’d care to learn how to trade commodities, ride along with our Maniac Trader here.

Higher energy prices, multidecade-low consumer confidence data and a gloomy outlook from Microsoft and American Express started Friday off on a down note for the stock market Friday.

But then investors took a three-Prozac lunch and came back happy and oblivious and bought… umn… financials and retailers, naturally. By the end of the day, the Dow and S&P 500 saw 0.3% gains. The Nasdaq gained 0.7%.

The Dow has slowly puffed its way back to a four-month high.

At 12,891, the index is down around 3% year to date, and has all but recovered from the “credit crisis” shellacking of January and February.

Might be a good time to follow some advice from the old-timers: “Sell in May and walk away,” the saying goes. As you’re undoubtedly considering what’s next for your portfolio, check this out… the old cliché is based in some truth:

Not to mention, this could be a doozy of a week for the economy: Over the next few days, we’ll see the latest S&P/Case-Shiller Home Price Index, the ADP private employment report, the Labor Department’s jobs report and personal income numbers, the ISM’s manufacturing index and… drumroll please… the “are we in a recession or not” first-quarter GDP reading.

Coupled with the latest interest rate decision from the Fed on Wednesday… could be a roller coaster ride for big-ticket stocks.

Gold stayed put over the weekend. After the wave of selling late last week on dollar strength, gold remained around $890 over the weekend and this morning.

The dollar has taken a breather, too. After spiking up to 73 on Friday, the dollar index trended down over the weekend, to 72 and change.

As the dollar rally sputtered, the euro tied off its own latest bloodletting. After falling 4 full cents from Wednesday to Friday, the euro has found some support at $1.56. The pound’s done one better, up nearly two cents this morning, to $1.99.

The yen is still stuck at 104.

Russia’s sovereign wealth fund announced it’s nearly ready to invest about $25 billion in foreign securities. Officials in charge of Russia’s $130 billion reserve and $32 billion national wealth fund say that Mother Russia will soon begin to snatch up foreign company holdings as large as 4%… mostly via derivatives and corporate bonds.

We told you a few months back that the same bigwigs at the same two Russian SWFs were eyeing Fannie Mae and Freddie Mac bonds. We’d be willing to bet they’re singing a different tune now.

If you haven’t read Christopher Hancock’s special report on SWFs and how they can affect your investments, check it out here.

Jerome Kerviel, the former Societe Generale “rogue trader” who lost the bank some $7.6 billion, has a new job.

If you recall, Kerviel infiltrated SocGen’s trading systems and built a huge broad market bullish position… right before the credit crisis entered full bloom. We learn today he has a new gig at a firm specializing in computer security and development. Seems like a good fit, wouldn’t you say?

“Bush’s ‘stimulus’ package will go down like a one-time (hopefully) welfare payment,” writes a reader. “It will result only in a short-term blip of drunken weekend consumerism to convince America that the Fed Reserve cruise ship is being steered in the right direction. What chutzpah!

“It’s like being given cash paid for with your own credit card just before the bank calls in your defaulted mortgage loan. But I guess that’s OK… because none of that debt will ever have to be repaid… right? All we have to do is declare bankruptcy and all will be forgiven, right?”

The 5 responds: Sure feels like we’re going to find out, doesn’t it? We were in a radio interview on the local NPR station on Friday. The host asked me what the implications of the rising federal debt and the economic stimulus package would be.

“Well, David Walker,” I responded, “the guy whose job it was until February to watch Congress’ books, quit because he thinks we’ve got five-10 years to come up with a plan to deal with the nation’s fiscal challenges… or, worst case scenario, U.S. Treasuries could, as the IMF also just warned, be downgraded.”

“So what?” she asked. “Sounds like a problem only rich people and investors with a lot of money have to worry about. What’s it have to do with me?”

“I would say,” I said, “given the state of the U.S. dollar and prices for food and energy on the rise, you’re already feeling the effects of stress in the financial system.”

She scoffed. And frankly, didn’t believe me. A 40-minute interview will be distilled down to six minutes and aired tomorrow. We’ll let you know how it goes.

“This is worse than the S&L crisis,” said our friend Jim Rogers in an interview with Bloomberg recently. “This is the worst credit bubble we’ve ever had in American history. Never in American history have people been able to buy a house with no money down — never.

“That’s never happened anytime in the world. So we have the worst credit bubble. It’s going to take a long time to work its way out. You don’t cure a bubble in five or six months… It takes five or six years.”

Best,

Addison Wiggin
The 5 Min. Forecast

P.S. Jim Rogers has masterfully survived both market crises of this decade. He bought commodities in 1998 when everyone was going ga-ga for all things dot-com. And this year he traded his U.S. stocks for gold and Yuan… right before the credit crunch. Both of these themes – the rise of the commodity market and the fall of the U.S. financial system – will be thoroughly explored at our Vancouver event in July. You should join us.

P.S. If you’d like to join us in Vancouver for free, here’s a really easy way to do so: Your last chance to celebrate The 5’s one year anniversary by joining The Agora Financial Reserve.