No change, the Fed does nothing

No change to interest rate! The Fed may be going into hibernation. Just do nothing and sleep for another decade? Good, this is what Wall Street wants?

What will happen to USD? Well, isn't it getting stronger? Yes, the other major currencies are competing by self-devaluation. Rate cut is spreading around: Canada, New Zealand, UK, Korea,...

What will happen to oil and commodities? They are getting the Bear Flu. The curious point is there seems to be no reason for contracting the disease. Demand for oil has not fallen dramatically and definitely it is not cut by 10-20%. If you believe that the weak USD is not the primary force for the rise in oil price, then a more stable USD won't cut down the price as well. It's politics? May be. China is trying to lower oil consumption by raising prices; US is giving pressure to the Middle-East and recent report shows that oil demand in US is slowing down; major developed and developing countries are becoming very active in lowering oil price. So, politics should be the cause for the commodity Bear Flu.

An equally significant development is that the appreciation of the Chinese Yuan is also slowing down. RMB, the Chinese Yuan, oil, USD - they are a fantastic "trilogy." If RMB goes up, oil goes up and conversely, if USD goes up, oil goes down. They move or swing together but not in the same direction.

Once the swing changes direction, oil may go up again and very fast too. If US and other developed countries demand RMB to appreciate higher and quicker, oil will follow the movement of the RMB swing. If the demand for RMB appreciation gets weaker, then oil price may slow. What an inextricable relationship!

So do you think oil and commodities will go up again? Yes, the recent "correction" is not caused by a change in fundamental conditions. When the Fed has no choice but to revive the rate cut to save the unending fall in the US housing and credit markets, when China continues to experience high inflation and growth, when the oil countries forget about political pressure from the developed countries, oil and commodities will rule again.

Indeed, as we go further into this 21st century, the demand for oil and other commodities will certainly go up and up. Population is growing everyday, the weather is getting warmer and warmer, the world is becoming smaller and smaller, pollution is getting worse everyday, diseases or new diseases are coming up everyday,...The resources of the earth may become inadequate for the whole human race. This trend can't be reversible.

In the medium and long term, oil and other commodities will continue to go up. This may be very unfortunate to most people but unless we can do something about it, we can't change such future. The Fed is definitely not doing anything now!