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Welcome to the "Wolf Creek Pass" School of Monetary Policy

I don’t know if you folks remember that hit ditty: a humorous tune about two truckers attempting to manhandle an out-of-control 1948 Peterbilt down the “other side” of Wolf Creek Pass – a death-taunting section of U.S. Highway 160 where the elevation drops a hefty 5,000 feet in a relatively short distance.

The song’s two characters – a truck driver named Earl and his brother, who’s his partner as well as the song’s narrator – are taking a flatbed load of chickens on a speedy trip down this winding, two-lane Colorado highway. After the narrator gives Earl the above-mentioned warning, the ancient semi’s brakes fail.

From there on down, the narrator tells us that the brothers’ trip “just wasn’t real pretty.” The truck careened around hairpins and switchbacks, and then raced at an uncontrolled 110 mph toward a tunnel with “clearance to the 12-foot line” – with chicken crates sadly “stacked to 13-9.”

The drivers and the runaway Peterbilt “went down and around and around and down ’til we run outta ground at the edge of town… and bashed into the side of the feed store – in downtown Pagosa Springs.”

Believe it or not, I started thinking about this funny old country tune the other night – right after I’d read a piece about QE3 and the U.S. Federal Reserve.

As zany as it first sounds, the parallels are striking.

July 2010 - Page 2 of 11 - Money Morning - Only the News You Can Profit From- Money Morning - Only the News You Can Profit From.

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    Success in the business world is most often achieved by those with a competitive edge.

    That's why, here at Money Morning, helping readers find that edge for their investment toolkit is Job One. In the past week alone, we've introduced readers to two little-followed indicators that have big proven payoffs. The first was the Baltic Dry Index, a shipping index that provides a panoramic view of the global economy. And the second was the "Gold Spike Indicator," which helps gold investors time their purchases.

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  • We Want to Hear From You: Will BP's Makeover Restore the Oil Giant's Image?

    BP PLC (NYSE ADR: BP) confirmed Tuesday that embattled Chief Executive Officer Tony Hayward is being replaced by Robert Dudley – an American and a company insider – in a move that's intended to improve the oil giant's battered image.

    Dudley, who takes over Oct. 1, will have to take on a double-edged challenge. He has to continue the cleanup effort that he's headed since June. And he must also persuade the U.S. government that BP should be allowed to continue offshore drilling work in the Gulf of Mexico – the region it has targeted for 25 of its 40 future production operations over the next five years.
    Because he's led the BP oil-spill-response efforts since June, Dudley has developed a much closer rapport with U.S. officials than his predecessor. Make no mistake: The respect he commands was a key reason for BP's swap at the top.

  • The Housing Market Still Wobbly Despite May's Home Price Improvement

    The S&P/Case-Shiller index of home prices increased more than forecast in May, but the combination of a now-expired government tax credit, skyrocketing foreclosures and deteriorating consumer confidence is expected to keep a lid on the housing market in the second half of 2010.

    Home prices in 20 major U.S. cities climbed 4.6% from May 2009, the biggest year-over-year gain since August 2006. However, analysts say the increase was artificially buttressed by seasonal factors and the residual impact of the homebuyers' tax credit.

    "While May's report on its own looks somewhat positive, a broader look at home price levels over the past year" doesn't show that the housing market "is in any form of sustained recovery," David M. Blitzer, chairman of S&P's index committee told The Wall Street Journal. "Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level."

  • Shah's Predictions for the Second Half

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    "It has enormous ramifications for the fall and clearly will be one of the dominant issues," Sen. Ron Wyden, D-OR, told The New York Times. "This is code for the role of the federal government, the debate over the size of government and the priorities of the nation."

    Democratic party leaders, including President Barack Obama, have said they want to extend the tax cuts for individuals earning less than $200,000 and families earning less than $250,000, while letting the cuts expire as scheduled for those exceeding those thresholds.

    Most Republicans, and some Democrats, want to extend the tax cuts for everyone, characterizing any tax increases on anyone in this fragile economy as unwise. If no action is taken, taxes on income, dividends, capital gains and estates will all rise.

  • BP Hopes for a CEO Savior in American Robert Dudley

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    Is he right? And does the newly passed Wall Street Reform and Consumer Protection Act correct their flaws, or does it make matters worse? It's a question that affects all investors – even those of us that don't invest in bonds, as we'll soon see.

    To understand how credit-raters will influence investments going forward, please read on…

  • Stocks Stuck in Trading Range Despite Positive Earnings Reports

    Despite positive earnings reports last week from more than a few bellwether companies, stocks remain stuck in a trading range that continues to test investors' patience and skill.

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