Wednesday – What Color Is Your Beige Book?

The Fed’s Beige Book comes out at 2pm today.

Our last Beige Books came out Jan 14th (down 250), March 4th(up 100 ahead of huge drop)and April 15th (up 100) so we are anxious to hear what the Fed has to say today in their anecdotal report of economic conditions through the end of May. On May 20th we had Fed minutes and the market didn’t like that one bit. so let’s hope they’ve cheered up since that last meeting.

Oil has cheered up, hitting $71.50 in pre-market trading. All of our indexes are flying as Asian trading rocketed higher on a RUMOR that China’s Friday Industrial Production Report rose 8.9% in May and Tomorrow’s Fixed Asset Investment Report willrise 37% for the month. This camefrom the Ming Pao Daily, who cited “unnamed market sources.” This information is stunning, especially in light of the ACTUAL PPI falling 7.2% for May and the ACTUAL CPI, that showed a 1.4% decline but, since we have long ago entered the “no thinking zone” (in fact, on Mad Money yesterday, Cramer made fun of us for thinking!), so happy rumors trump ugly facts every time.

Perhaps it’s true, perhaps China did increase Industrial Production 9% while driving input costs down 7% during a month when commodities rose over 20%. If so, all the more reason the Republicans should shut up and let us go Communist ASAP because those guys REALLY know how to get things done! We’re already giving them Hummer and it’s very likely, by 2011, we’ll be importing 2M Electric Hummers a year from China. Boy that joke will be on us, right?

China is leading the global stimulus bandwagon, of course with a massive increase in debt financing this year. “There is no such thing as a free stimulus package. There is a huge amount of unreported government debt, and we’re adding to it now clearly,” said Stephen Green, an economist for Standard Chartered in Shanghai.

The stimulus package in China is working so well that there is now a 2-month wait to buy a car in China as direct subsidies and a cut in retail taxes has pushed millions of Chinese into auto dealerships. Gee, rather than give the auto companies $30Bn three months before they went bankrupt – do you think the US could have offered $5,0000 incentives on 6M cars to boost demand AND help the consumer? Like I said – when can we go communist?

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