Archive for April, 2008
Wednesday, April 30th, 2008
April 30, 2008 – Courtesy of NYTimes.com – This is for those of you who have invested in Potash, Monsanto, Mosaic, Agrium, et al.
Click for the larger map.
Hat Tip: Barry Ritholtz, The Big Picture.
Wednesday, April 30th, 2008
April 30, 2008 – CIBC World Markets Chief Strategist, Jeff Rubin, says that Oil will eventually reach $150/barrel in 2010 and over $200/barrel by 2012. He cites among the leading reasons, the advent of cheap cars from India and China, or rather Tatas and Cherys, that will enable millions of middle class Asians who couldn’t previously afford a car, to do so, Take these developments and place them agaisnt the backdrop of peak oil and a decline in oil exports from key suppliers, Saudi Arabia, Russia and Kuwait, and we are in the midst of a long term supply/demand imbalance. Here are couple of excerpts:
Whether we are already at the peak in world oil production remains to be seen, but it is increasingly clear that the outlook for oil supply signals a period of unprecedented scarcity.
Our latest review of probable supply suggests oil production will hardly grow at all, with average daily production between now and 2012 rising by barely more than a million barrels per day (see pages 4-7). Despite the recent record jump in oil prices, the outlook suggests that oil prices will continue to rise steadily over the next five years, almost doubling from current levels.
While global oil supply is not growing, global gasoline demand is, and will continue to grow as cheap cars from Tata and Chery dramatically cut barriers to car ownership in the developing world. Millions of new households will suddenly have straws to start sucking at the world’s rapidly shrinking oil reserves.
Car purchases in Russia, for example, are exploding as US sales stagnate (Chart 2), while in India the advent of the Tata Nano, a car that will sell for as little as US$2,500 will allow millions of households in the developing world to own automobiles when they otherwise could not. It is the savings necessary to buy a car, not the price of gasoline that poses the greatest obstacle to fuel demand growth in those countries. But between rapidly rising domestic incomes and rapidly falling car prices, that obstacle is becoming more and more surmountable.
To read the complete report, click here:
StrategEcon: The Age of Scarcity, CIBC World Markets, April 24, 2008
Tags: Asia, Car Ownership, Car Prices, Car Purchases, Chart, Chery, China, CIBC, CIBC World Markets, Economy, energy, Excerpts, India, Jeff Rubin, Markets, Middle Class, oil, Oil Prices, Oil Production, Oil Reserves, Oil Supply, Russia, Scarcity, Tata, United States, usd
Posted in Energy & Natural Resources, Markets, Oil and Gas, Outlook | Comments Off
Wednesday, April 30th, 2008
April 30, 2008 – Kevin Phillips, author of Bad Money: Reckless Finance, Failed Politics and the Global Crisis of American Capitalism, published a recent article in Harper’s Magazine, about the way in which economic statistics have been massaged over many years by many White House administrations, one after the other, in order the mask the true nature of the US economy over the years. Here are some excerpts from this excellent article:
Ever since the 1960s, Washington has gulled its citizens and creditors by debasing official statistics, the vital instruments with which the vigor and muscle of the American economy are measured. The effect has been to create a false sense of economic achievement and rectitude, allowing us to maintain artificially low interest rates, massive government borrowing, and a dangerous reliance on mortgage and financial debt even as real economic growth has been slower than claimed.
The story starts after the inauguration of John F. Kennedy in 1961, when high jobless numbers marred the image of Camelot-on-the-Potomac and the new administration appointed a committee to weigh changes. The result, implemented a few years later, was that out-of-work Americans who had stopped looking for jobs — even if this was because none could be found — were labeled “discouraged workers” and excluded from the ranks of the unemployed, where many, if not most, of them had been previously classified. By the 1969 fiscal year, Lyndon Johnson orchestrated a “unified budget” that combined Social Security with the rest of the federal outlays. This innovation allowed the surplus receipts in the former to mask the emerging deficit in the latter.
Richard Nixon, besides continuing the unified budget, developed his own taste for statistical improvement. He asked his second Federal Reserve chairman, Arthur Burns, to develop what became an ultimately famous division between “core” inflation and headline inflation. If the Consumer Price Index was calculated by tracking a bundle of prices, so-called core inflation would simply exclude, because of “volatility,” categories that happened to be troublesome: at that time, food and energy.
Core inflation could be spotlighted when the headline number was embarrassing, as it was in 1973 and 1974. (The economic commentator Barry Ritholtz has joked that core inflation is better called “inflation ex-inflation” — i.e., inflation after the inflation has been excluded.)
In 1983, under the Reagan administration, inflation was further finagled when the Bureau of Labor Statistics (BLS) decided that housing, too, was overstating the Consumer Price Index; the BLS substituted an entirely different “Owner Equivalent Rent” measurement, based on what a homeowner might get for renting his or her house. This methodology, controversial at the time but still in place today, simply sidestepped what was happening in the real world of homeowner costs.
In addition to Phillips’ assertions here, The US Government stopped publishing money supply statistics, specifically M3, so that we would no longer be able to track the amount printed money that gets added to the country’s money supply every year since. Hmmm…?
Read this complete article here: Hard Numbers: The Economy is Worse Than You Know, Harpers Magazine, courtesy of TampaBay.com, April 25, 2008.
Tags: Arthur Burns, author, Bad Money, Bad Money: Reckless Finance, Barry Ritholtz, Bureau Of Labor Statistics, capitalism, chairman, Consumer Price, Credit, economic commentator, Economy, energy, Excerpts, Failed Politics and the Global Crisis of American Capit, Fed, Federal Reserve, Federal Reserve Chairman, food, Harper, Harper's Magazine, inflation, interest rates, John F. Kennedy, Kevin Phillips, M3, Markets, Mortgage, Reagan administration, Richard Nixon, The Big Picture, United States, Us Federal Reserve, Us Government, Washington, White House
Posted in Economy, Markets | 1 Comment »
Wednesday, April 30th, 2008
April 28, 2008 – Barron’s magazine has gotten their hands on Alan Greenspan’s Ph. D. thesis and provides analysis. The bottom line is that Greenspan long underestimated the potential effects of a popped housing bubble. Here are some excerpts:
There are only two known copies: the Maestro’s own and the one we viewed. As far as we can tell, Barron’s is the only news organization ever to have seen the thesis since a third and now missing copy was removed from the public shelves of NYU’s Bobst library at Greenspan’s request in 1987, the year that Ronald Reagan appointed him chairman of the Federal Reserve Board. Glancing at the document, we momentarily felt like Indiana Jones at the dramatic moment in which he discovers the Lost Ark of the Covenant.
We were tickled to find that the work’s introduction includes a discussion of soaring housing prices and their effect on consumer spending; it even anticipates a bursting housing bubble. Writes Greenspan: “There is no perpetual motion machine which generates an ever-rising path for the prices of homes.”
Greenspan, however, didn’t foresee a housing mania spilling into the general economy, toppling banks and brokerage houses and paralyzing key portions of the credit system. The worst he could anticipate was that a sharp “break in prices of existing homes would pull down the prices of new homes to the of construction costs or below, inducing a sharp contraction in building.” Back then, there were no home-equity lines of credit, derivatives or subprime mortgages. Mortgages were largely concentrated at savings and loans. Credit was harder to come by, too, because conventional mortgage rates were about 8.5% and headed significantly higher. Still, the thesis shows that the former Fed boss was focused on housing very early in his career. Thus, it casts doubt on his recent assertions about being surprised by the Mesozoic-era-size impact of this decade’s housing mania.
For the complete article click here: Looking At Greenspan’s Long Lost Thesis, Barron’s, April 28, 2008.
Tags: Alan Greenspan, Banks, Barron's, chairman, Credit, Derivatives, Economy, Excerpts, Fed, Federal Reserve, Federal Reserve Board, Focus, Housing Bubble, India, inflation, Markets, Monetary Policy, Mortgage, Nyu, NYU's Bobst library, Ph. D., risk, Ronald Reagan, Thesis, Us Federal Reserve
Posted in Economy, Markets, US Stocks | Comments Off
Wednesday, April 30th, 2008
April 27, 2008 – A recent Bloomberg article quotes Jim Rogers as to his bent for Chinese stocks and Commodities. Specifically, Rogers is focusing his attention in China in the areas of agriculture, airlines, tourism, and education.
“All my new money goes to commodities and China,’’ said Rogers.
“All the panic looks like a bottom,’’ he said. “I have bought in the last four to five weeks. I’ve been buying shares in China for the first time in a long time.’’
“China has a huge agricultural problem,’’ Rogers said. The “government is doing everything it can to revive the agriculture industry.’’
Rogers was bullish on the Chinese yuan, saying it could eventually rise to 2 yuan per dollar.
“Don’t sell your renminbi (yuan), because it will go a lot higher in the next 20 years,’’ Rogers said.
Apparently the folks at Morgan Stanley do not agree with Rogers, saying that China is a “sell.” Rogers appears to disagree vehemently.
Selling Chinese shares in 2008 “is a big mistake,’’ said Rogers, adding that he had also bought stocks in Singapore, Taiwan and Hong Kong. “I have never sold any Chinese shares.’’
The complete article is available by clicking below:
Investor Jim Rogers Buys Chinese Shares as Markets Hit Bottom, April 27, 2008, Bloomberg
Tuesday, April 29th, 2008
April 29, 2008 – Courtesy Barry Ritholtz, The Big Picture – The Federal Reserve is now in day 1 of their two day meeting. The statement we get tomorrow, and the minutes we will read next month are likely to be intriguing.
Examples abound: The Times of London: Food-price inflation has already pushed up a typical family’s weekly shopping bill by 15 per cent in a year (Era of cheap food ends as prices surge). Yet here in the US, the BLS has food prices up only 4.5% year over year (that’s with the dollar down ~2% vs. the pound)
The price of rice has increased dramatically in recent weeks due to crop failure overseas and resulting hoarding… Rice has doubled in price in six months. (Bay Area Shoppers Asked To Limit Rice Purchases
During the first week of April…leisure fares from traditional carriers on 280 major routes rose 13
percent from the previous year…We’ve got an industry that’s in trouble,” said Vaughn Cordle, chief
executive and chief analyst at AirlineForecasts in Washington. “If oil prices stay anywhere near $100,
$120 for the year … we’ll have a massive restructuring of the airline industry.” (Summer travel headaches loom as airlines’ woes deepen).
All these obvious price increases are begining to undermine confidence int he Federal Reserve. We see article like this one in the San Diego Union-Tribune:The Fed’s inflation gauge isn’t realistic, critics say and this one in Harpers: “Numbers Racket: Why the Economy is Worse than We know.”
Steve Hawkes, Greg Hurst and Valerie Elliott, Times Online, April 23, 2008
Moms’ new battle: The food price bulge, Parija B. Kavilanz,
CNNMoney.com, April 21, 2008: 10:33 AM EDT http://money.cnn.com/2008/04/21/news/economy/moms_foodshopping/index.htm
The Fed’s inflation gauge isn’t realistic, critics say Dean Calbreath, San Diego UNION-TRIBUNE, April 17, 2008, http://www.signonsandiego.com/news/business/20080417-9999-1n17inflate.html
Tags: airline industry, AirlineForecasts, Barry Ritholtz, Chief, Dean Calbreath, Dollar, Economy, executive and chief analyst, Fed, Federal Reserve, food ends, Food prices, Greg Hurst, inflation, inflation abounds, London, Markets, oil, Oil Prices, risk, San Diego Union, Steve Hawkes, The Big Picture, the San Diego Union-Tribune, The Times, The Times of London, travel headaches, Tribune, UK, United States, Us Federal Reserve, usd, Valerie Elliott, Vaughn Cordle, Washington
Posted in Economy, Energy & Natural Resources, Markets, Oil and Gas | Comments Off
Saturday, April 26th, 2008
April 26, 2008 – Wall Street Journal recently interviewed Peter Bernstein, Founder of Peter L. Bernstein Inc. In the interview Bernstein shares some candid thoughts about the state of the market. Here are some excerpts:
…When you think about how all of this will work out in the long run, we are going to have an extremely risk-averse economy for a long time. The lesson has painfully been learned. That’s part of the problem going forward. You don’t have a high-growth exit from this, as you’ve had from other kinds of crises…
…One of the things that gave people a sense that they could afford to take risks was the sense that the central bankers more or less know what they are doing. But I don’t think we are going to feel that way going forward…
…We have to go back to a moment when people have the courage to borrow and lenders have the courage to lend. Until credit is going up instead of down, you can’t have growth. Housing has got to be a very important part of that; it always has been. You have to reach a point where somebody says, “This house is cheap, I am going to buy it,” or where some businessman says, “This is a great opportunity for us to expand our business. Everything is available to us.”
To read the full interview, click here: WSJ: One Guy Who Has Seen It All Doesn’t Like What He Sees, April 26, 2008, Wall Street Journal
Tags: Bernstein, Businessman, Credit, Economy, Excerpts, Founder, interview, Markets, Peter L. Bernstein Inc., Wall Street, Wall Street Journal
Posted in Credit Markets, Economy, Markets | Comments Off
Saturday, April 19th, 2008
April 19, 2008 – In a recent note Dennis Gartman opines that equity markets are stronger everywhere, but that stronger upside volumes would be more re-assuring.
The more we consider the notion put forth here yesterday (following the suggestion made to us by our old friend, Mr. Mark Fisher of MBF Trading in NY at his seminar earlier this week) that we wish to buy “Necessities” and to be short of “Accessories,” the more we like it.
Consumers… as their job prospects weaken; as unemployment rises; as they begin to save more and spend less… will abjure Tiffany’s, and Coach, and Harley Davidson, and WholeFoods and will embrace Wall-Mart, and Johnson & Johnson, and Proctor and Gamble. They will abjure Moet Chandon; they will embrace Budweiser. They will toss of Panera Bread; they will instead buy Kellogs’s products.
Look then at the charts of each, and the “Necessities” are, as we like to say, moving from the lower left to the upper right, while the “Accessories” are moving from the upper left to the lower right.
Click below for the complete story
Tags: Canadian Stocks, Chart, Coach, Commodities, Dennis Gartman, Economy, Gartman, Harley Davidson, Johnson & Johnson, Kellogs, Mark Fisher, Markets, MBF Trading, New York, risk, Tiffany, Trading
Posted in Commodities, Markets | Comments Off
Saturday, April 19th, 2008
April 19, 2008 – Murray Pollitt, President of Pollitt and Co. Inc., provides an excellent account of the history of gold. If you’re wondering about the importance of gold throughout financial history, this piece is a must read. Here is an excerpt:
In normal circumstances a Central Bank can increase money supply in a nanosecond. A supermarket can increase the supply of oranges in a day or two. A mine, steel mill or oil refinery with surplus capacity can increase output in a few weeks. General Motors can increase the supply of Silverado trucks in a few months, and a farmer can increase the supply of wheat in a year. It may take two or three years to build a ship or to expand an industrial facility. But to build a greenfield oil refinery or generating plant, timing is anybody’s guess. Ten years would not surprise. Ditto for a new gold mine.
Click below for the complete story.
Gold 2008, by Murray Pollitt, P. Eng
Thanks Mr. Pollitt.
Tags: Commodities, Currency, Economy, farmer, General Motors, Gold, greenfield oil refinery, Metals, Murray Pollitt, oil, oil refinery, Pollitt and Co. Inc., president, Silver, Silverado, Steel Mill
Posted in Commodities, Energy & Natural Resources, Gold, Markets, Oil and Gas, Silver | Comments Off
Wednesday, April 16th, 2008
April 16, 2008 – Every week or two, New Yorker Magazine interviews well known authors and other culturally connected people. This week’s insightful interview is with bestselling author of The Corrections, Jonathan Franzen, about his experiences and observations from his recent journey to China. Franzen had a toy bird and wanted to see where it came from, where it was made. In the interview he discusses the country’s rapid growth, the newness of China vs. America and the pros and cons, the enviromental impact of industrialization, and his personal views and experiences in China. Its a great listen.
Jonathan Franzen talks about his journey to China.
Franzen Bio: Jonathan Franzen was born in Western Springs, Illinois, in 1959, and grew up in Webster Groves, Missouri, a suburb of St. Louis. After graduating from Swarthmore College in 1981, he studied at the Freie Universit„t in Berlin as a Fulbright scholar and later worked in a seismology lab at Harvard University’s Department of Earth and Planetary Sciences. In addition to winning a Whiting Writers’ Award in 1988 and the American Academy’s Berlin Prize in 2000, he has been named one of “Twenty Writers for the 21st Century” by The New Yorker and one of the “Best Young American Novelists” by Granta.
Mr. Franzen is the author of The Twenty-Seventh City (FSG, 1988) and Strong Motion (FSG, 1992) and is a frequent contributor to Harper’s and The New Yorker (where portions of The Corrections have appeared). He lives in New York City.
Tags: ambition, America, American Academy, author, Berlin, Bestselling Author, China, Granta, Harper, Harvard University, Harvard University's Department of Earth and Planetary Sciences, Illinois, interview, Jonathan Franzen, Journey, Missouri, New York City, Rally, REW, risk, Seventh City, St. Louis, Swarthmore College, the American Academy's Berlin Prize, The New Yorker, toy factories
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