MaxedOutMama
Monday, June 30, 2008
The Demand Word Is Spoken
A Bloomberg article covering the drops in demand for various commodities. After itemizing stuff like China's 19% drop in copper imports, and India's 50% drop in gold purchases, the article then turns to supply.
The smell of money burning in the summer can lead to very unpleasant circumstances!
What happens when this collapse is layered on top of all the other problems? It's going to be very interesting, in a Night-Of-The-Living-Undead sort of way.
Slowing global growth signals commodity demand will ``soften,'' the International Monetary Fund said in March. During the last U.S. recession in 2001, the CRB index plunged 16 percent.Well, commodities always seem to be the last bubble, and like all bubbles, they are money-driven, not fact driven. These bubbles will drop when the flow of money into commodities can't be sustained:
Commodities advanced this year during a ``buying orgy'' by investors seeking better returns than stocks and bonds, Paul Touradji, founder of the $3.5 billion hedge fund Touradji Capital Management, said in March.
Second-quarter net inflows into European exchange-traded products linked to commodities fell about 58 percent to $800 million from the previous quarter, Barclays Capital said.However the load of belief about oil, for example, is such that I doubt the bubble will break until people find themselves stuck with contracts worth about $20 or $30 less. The problem is that when that happens, they may be worth $40-$50 less.
The smell of money burning in the summer can lead to very unpleasant circumstances!
What happens when this collapse is layered on top of all the other problems? It's going to be very interesting, in a Night-Of-The-Living-Undead sort of way.
Sunday, June 29, 2008
Carl Puts Heller To Bed
Carl at No Oil For Pacifists pretty much slams the door on the helpless, outraged horror of those who claim the Supreme Court made up an individual right. It is, of course, made exceptionally easy by the fact that the dissents in DC v Heller also concede that the Second Amendment confers an individual right, with the real variance being on the topic of what that individual right might mean. For more on that, start at Volokh.
Funniest thing I have heard on this topic from one gunowner "I printed the ruling out and I sleep with it under my pillow." If you currently have the Supreme Court's decision tucked under your pillow, you will enjoy Carl's post and the links a great deal.
Carl's prior post on the topic initiated a comments brawl. I think perhaps the content-rich environment of Carl's current post might scare away the Anons, but we'll see. One of the reasons that some people react with abject fear at the idea that average people might have guns in their houses is the habit of the intemperate left of wishing a torturous end upon their political enemies. To demonstrate, I bring you this thread from DU, which begins with an original post of:
Funniest thing I have heard on this topic from one gunowner "I printed the ruling out and I sleep with it under my pillow." If you currently have the Supreme Court's decision tucked under your pillow, you will enjoy Carl's post and the links a great deal.
Carl's prior post on the topic initiated a comments brawl. I think perhaps the content-rich environment of Carl's current post might scare away the Anons, but we'll see. One of the reasons that some people react with abject fear at the idea that average people might have guns in their houses is the habit of the intemperate left of wishing a torturous end upon their political enemies. To demonstrate, I bring you this thread from DU, which begins with an original post of:
I hope ferrets eat Lieberman's face.. that's all I have to say right now....It does not really improve from there IMO. It's not as if no one demurs:
14. What do you have against ferrets?Such simple elegance of thought, and rhetorical brilliance! I suppose if I were in the habit of wishing this type of fate upon political opponents I'd be scared of them owning weapons also.
They are cute little critters, are you trying to poison them with that kind of diet.
Friday, June 27, 2008
A Look At Europe
Until oil remits to lower levels, which it will do, the European and US economies are slated to experience extreme difficulties. Let's look at Europe:
Spain: It is being hurt very badly by the end of the housing boom. Construction was estimated to account for about 18% of GDP a few years ago, so a slowdown has a major impact on the economy. Sales of cars have been reported down by as much as 20% this year, for example.
Germany: In part, I think there is a banking problem here. The European lending survey showed banks drawing back, and in Germany in particular industry is tied to bank loans to a greater extent than in the US. The expectation is that Deutsche Bank needs to raise capital, and other banks have been either moving to consolidate or requiring similar measures. Also German inflation is running pretty high - food is over 6%. This is similar to most other states in Europe, and it is intimately related to fuel prices. In general the stronger Euro hasn't helped German businesses compete, so there is probably something of a double whammy as world growth slows, input prices rise, and domestic consumption lags. On the other hand, the German economy has a good ratio of production to services so it should remain stronger as a whole than many other regional economies.
Romania/Eastern Europe: Fast growth regions in eastern Europe are generally experiencing epic inflation but expanding economies. But when private debt growth accounts for over 40% of your economy in times like this, central bankers are right to demand changes ASAP. This cannot continue; it will not continue, and when it stops, a bunch of this debt is going to go bad at once. Romania's 61.3% annual growth in private debt is not all that out of line with other similar countries, but it must end:
France & Europe as a whole: Consumer confidence and retail spending is falling fast:
UK/Ireland: Ireland's economy had become too dependent on housing a la Spain. The UK is heavily impacted because of its reliance on services and financials. The outlook is bad and getting worse momentarily. UK services fell to a 12 year low, and Q1 GDP was revised down:
Now, against this backdrop, the chance for either the ECB or BofE to raise rates is minimal. They may do so one time as a shot against the onrushing current, but when you have banks struggling for money, constrained lending, and high private debt combined with rapid import price inflation you cannot control inflation by raising your rates. All you can do is control the expectation of inflation, which is a second order effect, and in exchange for that you run the chance of cliff-diving. With Brad & Bing, Barclay's and A&L in dicey straits, the UK is getting a retraction of easy money from the marketplace already.
Even though the US is suffering from a big housing bubble deflation, it is now in a more stable position than the UK, Ireland or Spain. Two graphs and posts from the most excellent UK Housing Bubble blog should demonstrate:
The US housing bubble wasn't as large in relative terms:
And the US housing bubble is further along in remediation:
As for Spain, well, US construction never got over 7% of GDP at the absolute highest, whereas Spain had moved into the 18% range.
The UK is now in the stage at which credit card spending is going up as people try to maintain living standards in the face of declining real incomes. This is the last gasp for the UK, and will end in a pretty strong downturn, because UK household debt cannot keep increasing at these levels. Please see the link for a piece of excellent analysis by Alice Cook. Bottom line, this is an inflation signature.
So what now? We have global correlations. I guess we all watch as oil rises every time stock markets drop on realistic expectations. It appears that oil speculation is the last refuge of idiots.
The entire world cannot support global growth based on nothing but spending increases in oil-exporting countries, so the game is over. The only question is whether we get a pretty strong global recession, or whether we get a global depression type event.
If the EU were to have its member countries cut fuel taxes sharply, it would help. At this point, any marginal gains in sanity are important steps to staying in global recession territory.
Spain: It is being hurt very badly by the end of the housing boom. Construction was estimated to account for about 18% of GDP a few years ago, so a slowdown has a major impact on the economy. Sales of cars have been reported down by as much as 20% this year, for example.
Germany: In part, I think there is a banking problem here. The European lending survey showed banks drawing back, and in Germany in particular industry is tied to bank loans to a greater extent than in the US. The expectation is that Deutsche Bank needs to raise capital, and other banks have been either moving to consolidate or requiring similar measures. Also German inflation is running pretty high - food is over 6%. This is similar to most other states in Europe, and it is intimately related to fuel prices. In general the stronger Euro hasn't helped German businesses compete, so there is probably something of a double whammy as world growth slows, input prices rise, and domestic consumption lags. On the other hand, the German economy has a good ratio of production to services so it should remain stronger as a whole than many other regional economies.
Romania/Eastern Europe: Fast growth regions in eastern Europe are generally experiencing epic inflation but expanding economies. But when private debt growth accounts for over 40% of your economy in times like this, central bankers are right to demand changes ASAP. This cannot continue; it will not continue, and when it stops, a bunch of this debt is going to go bad at once. Romania's 61.3% annual growth in private debt is not all that out of line with other similar countries, but it must end:
Private debt in Romania increased an annual 61.3 percent in May, the Banca Nationala a Romaniei said on June 24.Needless to say, one wonders how much of that 83% of Euro-denominated debt is stable!
...
Borrowing in foreign currencies, mainly euros, rose 83 percent in the period while debt in lei increased 45 percent, the bank said.
Private debt accounts for about 40 percent of gross domestic product, similar to the level in Poland, Isarescu said.
France & Europe as a whole: Consumer confidence and retail spending is falling fast:
``The economy has hit the wall,'' said Ken Wattret, senior economist at BNP Paribas SA in London. ECB officials ``run the risk of tipping the euro area into a recession'' as the inflation outlook increases the risk that the central bank ``may need to go beyond one rate rise.''Overall, virtually all of the major economic Q1 GDPs were revised lower. France was no exception:
...
The Bloomberg retail index, based on a survey of more than 1,000 executives compiled by Markit Economics, fell to 44 this month from 53.1 in May. A reading below 50 indicates contraction. Europe's manufacturing and services industries also contracted this month.
France's gross domestic product rebounded less than initially estimated in the first quarter as household spending, the driving force of the economy, failed to grow.What the spirit world has to do with GDP I do not know, but the very sharp drop in the retail index and stagnant French household incomes are going to also cause employment problems. So for the Eurozone as a whole we have declining retail PMI, declining manufacturing, and declining services. Barring massive increases in household debt a la Romania/Poland, nothing's going to keep this train moving down the tracks. The plummet in retail PMI down to the 44 range is probably just a signature of inflation. Carrefour had reported that spending on non-food items in its Walmartish stores dropped 8.8% in Q1. Retail spending in the big economies was very bad and appears to be continuing its drop:
...
The first quarter ``was a bit supernatural,'' said Jean- Christophe Caffet, an economist at Natixis in Paris. ``From there on, growth figures will be particularly bad.''
Sales fell across Germany, France and Italy -- the largest economies in the euro zone -- led by Italy, where retail spending dropped at the fastest rate in the survey's history. A measure of employment in the euro region fell to 48.6 in June from 49.9 in May, the report showed, staying below 50 for a third month.The impact on employment varies depending on how much of these individual economies is rooted into fundamental industry, and how much is based on construction/services, but employment in general is going to be constrained.
UK/Ireland: Ireland's economy had become too dependent on housing a la Spain. The UK is heavily impacted because of its reliance on services and financials. The outlook is bad and getting worse momentarily. UK services fell to a 12 year low, and Q1 GDP was revised down:
King said on May 14 that the country may experience the ``odd quarter or two'' of contraction. The bank predicted that the annual rate of economic expansion will drop to around 1 percent early next year, the lowest since 1992.It could be way more than the "odd quarter or two" of contraction. Household spending is worse than it appears judging by retail actions:
Consumer Spending
Household spending, which drove the fastest expansion in three years in 2007, is set to slow, King said. Higher fuel prices and the dearth of credit pushed consumer confidence to the lowest level since Margaret Thatcher was ousted from office in 1990, GfK NOP Ltd. said May 30.
Tesco Plc, the U.K.'s biggest supermarket chain, and nearest rival Asda said they have cut prices further as grocery retailers battle for business from customers struggling with higher mortgage, energy and food bills.What's happening is that the higher-end retailers are fighting to hold market share. Needless to say profits will drop in tandem, and employment is going to be a bit tight, wouldn't you say?
Cheshunt, England-based Tesco reduced prices on 5,000 items this week and will cut 3,000 more from June 30, spokesman Trevor Datson said today in an e-mail. Asda, a unit of Wal-Mart Stores Inc., lowered the price of 10 top-selling products including bread and eggs for three days from today in a promotion it says will slash the cost of a basket of shopping by 54 percent.
...
Recent figures have shown that the credit crisis has caused a sales boom at supermarkets such as Aldi and Lidl, with Aldi experiencing a 20 percent sales increase in the past four weeks, the London-based Times reported today.
Now, against this backdrop, the chance for either the ECB or BofE to raise rates is minimal. They may do so one time as a shot against the onrushing current, but when you have banks struggling for money, constrained lending, and high private debt combined with rapid import price inflation you cannot control inflation by raising your rates. All you can do is control the expectation of inflation, which is a second order effect, and in exchange for that you run the chance of cliff-diving. With Brad & Bing, Barclay's and A&L in dicey straits, the UK is getting a retraction of easy money from the marketplace already.
Even though the US is suffering from a big housing bubble deflation, it is now in a more stable position than the UK, Ireland or Spain. Two graphs and posts from the most excellent UK Housing Bubble blog should demonstrate:
The US housing bubble wasn't as large in relative terms:
And the US housing bubble is further along in remediation:
As for Spain, well, US construction never got over 7% of GDP at the absolute highest, whereas Spain had moved into the 18% range.
The UK is now in the stage at which credit card spending is going up as people try to maintain living standards in the face of declining real incomes. This is the last gasp for the UK, and will end in a pretty strong downturn, because UK household debt cannot keep increasing at these levels. Please see the link for a piece of excellent analysis by Alice Cook. Bottom line, this is an inflation signature.
So what now? We have global correlations. I guess we all watch as oil rises every time stock markets drop on realistic expectations. It appears that oil speculation is the last refuge of idiots.
The entire world cannot support global growth based on nothing but spending increases in oil-exporting countries, so the game is over. The only question is whether we get a pretty strong global recession, or whether we get a global depression type event.
If the EU were to have its member countries cut fuel taxes sharply, it would help. At this point, any marginal gains in sanity are important steps to staying in global recession territory.
Thursday, June 26, 2008
DC v Heller
Bush is a much better president than commonly now thought. However this is one of his great achievements, which would not in fact have occurred without the pressure from the Great Rightwing Menace over Supreme Court appointees. The five justice majority in DC v Heller is Scalia (who wrote the opinion), Roberts, Kennedy, Thomas and Alito. From the syllabus (read the whole thing here):
So all you gunnies can settle down to roll around in Scalia's scholarly exercise in the explication of the blindingly obvious. Enjoy his merciless flogging of Stevens:
Manna:
If any reader knows where to find these street corner ATMs that sell nuclear missiles, let me know, okay? In GA we don't have them. It must be a Yankee thing, which is surprising, because generally you can only buy fireworks in the south. And won't it be a nice Fourth this year?
In conclusion, I think the Democratic party should be very careful about yapping about this decision. Second Amendment types cross all parties and are generally quite serious about the topic, to the point of voting all the time, and they even know how to spell Gandhi's name. Plus, apparently many of them will be able to pick up nuclear missiles on street corners now, so we will have Gandhi-quoting gun nuts roaming the streets with handheld nuclear missiles frowning at politicians. Are those really the type of people politicians should needlessly irritate?
I mean, if we are supposed to be talking nice to the Iranians who want all the Jews dead, shouldn't we also appease the Gandhi gun nuts? Also, if the Iranian nutso should be allowed to have nukes, what is wrong with the Gandhi-quoting gun nuts having them? Some of these people are even Jewish, and some are gay, and everyone knows that gays have been historically discriminated against and are constantly being beaten to death on the streets of progressyve Amerikkka. Therefore, if they want weapons they should be allowed to have them, surely? If you're gonna appease, I say appease!!
I leave you with a Full Auto Car Shooting Okie style. The little girl is cute. I have no idea where I got that, so I apologize to some unknown blogger. I was saving it to send to my brother as soon as his baby-on-the-way is official (especially if a girl), but I share with the world to celebrate this occasion. Remember to stress the importance of ear protection when you are training your little girl on the proper launching of nuclear missiles.
Now if we could only get this court to agree that those words in the First Amendment "Congress shall make no law ... abridging the freedom of speech" mean that Congress shall make no law abridging freedom of speech, such as the right of citizens to band together to take out an ad right before an election mentioning their Congress Critter's voting record on say, gun rights, I'd be really happy. Really, really happy.
Held:It's a day of joy for gunowners. Many constraints on this right are noted, but overall this is the ruling gunowners have been craving - the Second Amendment refers to an individual right. Eugene Volokh is cited!
1. The Second Amendment protects an individual right to possess a firearm unconnected with service in a militia, and to use that arm for traditionally lawful purposes, such as self-defense within the home.Pp. 2–53.
(a) The Amendment’s prefatory clause announces a purpose, butdoes not limit or expand the scope of the second part, the operativeclause. The operative clause’s text and history demonstrate that itconnotes an individual right to keep and bear arms. Pp. 2–22.
(b) The prefatory clause comports with the Court’s interpretation of the operative clause. The “militia” comprised all males physicallycapable of acting in concert for the common defense. The Antifederalists
feared that the Federal Government would disarm the people in order to disable this citizens’ militia, enabling a politicized standing army or a select militia to rule. The response was to deny Congress power to abridge the ancient right of individuals to keep and beararms, so that the ideal of a citizens’ militia would be preserved. Pp. 22–28.
(c)
The Court’s interpretation is confirmed by analogous arms-bearing rights in state constitutions that preceded and immediatelyfollowed the Second Amendment. Pp. 28–30.
(d)
The Second Amendment’s drafting history, while of dubious interpretive worth, reveals three state Second Amendment proposals that unequivocally referred to an individual right to bear arms. Pp. 30–32.
(e)
Interpretation of the Second Amendment by scholars, courts and legislators, from immediately after its ratification through the late 19th century also supports the Court’s conclusion. Pp. 32–47.
(f)
None of the Court’s precedents forecloses the Court’s interpretation.
Neither United States v. Cruikshank, 92 U. S. 542, 553, nor Presser v. Illinois, 116 U. S. 252, 264–265, refutes the individual-rights interpretation. United States v. Miller, 307 U. S. 174, does not limit the right to keep and bear arms to militia purposes, but rather limits the type of weapon to which the right applies to those used by the militia, i.e., those in common use for lawful purposes. Pp. 47–54.
So all you gunnies can settle down to roll around in Scalia's scholarly exercise in the explication of the blindingly obvious. Enjoy his merciless flogging of Stevens:
Between the Restoration and the Glorious Revolution, the Stuart Kings Charles II and James II succeeded inusing select militias loyal to them to suppress political dissidents, in part by disarming their opponents. See J. Malcolm, To Keep and Bear Arms 31–53 (1994) (hereinafter Malcolm); L. Schwoerer, The Declaration of Rights, 1689, p. 76 (1981). Under the auspices of the 1671 Game Act, for example, the Catholic James II had ordered general disarmaments of regions home to his Protestant enemies. See Malcolm 103–106. These experiences caused Englishmen to be extremely wary of concentrated military forces run by the state and to be jealous of their arms.Really, it's worth the read. DU has many avid RTKB supporters, and the thread on this decision is nearing 300 comments. To a certain type of person, this is manna from heaven. To another type of person, it is coals of fire:
...
By the time of the founding, the right to have arms had become fundamental for English subjects. See Malcolm 122–134. Blackstone, whose works, we have said, “constituted the preeminent authority on English law for the founding generation,” Alden v. Maine, 527 U. S. 706, 715 (1999), cited the arms provision of the Bill of Rights as one of the fundamental rights of Englishmen. See 1 Black-stone 136, 139–140 (1765). His description of it cannot possibly be thought to tie it to militia or military service. It was, he said, “the natural right of resistance and self-preservation,” id., at 139, and “the right of having and using arms for self-preservation and defence,” id., at 140; see also 3 id., at 2–4 (1768). Other contemporary authorities concurred. See G. Sharp, Tracts, Concerning the Ancient and Only True Legal Means of National Defence, by a Free Militia 17–18, 27 (3d ed. 1782); 2 J. de Lolme, The Rise and Progress of the English Constitution 886–887 (1784) (A. Stephens ed. 1838); W. Blizard, Desultory Reflections on Police 59–60 (1785). Thus, the right secured in 1689 as a result of the Stuarts’ abuses was by the time of the founding understood to be an individual right protecting against both public and private violence.
Manna:
120. What a happy day! I couldn't have HOPED for a better ruling!Coals of Fire:
It would have been nice if they somehow could have added 14th amendment incorporation, but that wasn't the question in front of them.
OUR RIGHTS ARE SAFE!!!
Whoo-Hoo!
I am SO stoked today. I'm walking on clouds!
2. It is just what BushCo and minions ordered!!!The debate gets heated. One guy chimes in a la Europe:
Tell me again how there was no difference between Bush and Gore ...or Bush and Kerry!!!!!!!!!!!
They have made a mockery of the Supreme Court..
Only political solutions and peaceful solutions will ever do anything. Meanwhile, you'll feel safe thinking you will know what to do when that Hollywood script presents itself. I find this whole debate laughable.Another:
No wonder America has selected the likes of Bush for two terms. Everybody thinks they are John Wayne.... FEAR without THINKING. More guns will only make us less secure and de-evolved as a society. May as well get rid of the Police Force too... who needs their protection anymore, we'll just privatize security and leave personal security up to the individual.
123. Kind of a moot point...But wait!! The gunnies have been researching the point and fire back with Gandhi quotes:
... since gun nuts don't wish to avail themselves of the services of police, preferring instead to just blast away at anything that moves and then pat themselves on the back for having defended themselves. It's so much tidier that way: with your victim dead, there's no way s/he's going to contradict your side of the story. With police, you've got all of those inconvenient things like due process of law, it's just a nuisance. Gun owners don't need no stinking badges, they have an innate sense for who deserves to die, no need to muddy the waters.
I see you are a fan of Gandhi. So am I:And another commenter:
"Taking life may be a duty...Suppose a man runs amuck and goes furiously about, sword in hand, and killing anyone that comes in his way, and no one dares to capture him alive. Anyone who despatches this lunatic will earn the gratitude of the community and be regarded as a benevolent man." -- Gandhi, M., SELECTIONS FROM GANDHI, by Nirmal Kumar Bose, Navajivan Pub. House, Ahmedabad, 1948.
"Among the many misdeeds of the British rule in India, history will look upon the Act depriving a whole nation of arms as the blackest." -Mahatma GandhiThis is too much!! Not only do the gunnies want to spray the streets with fire and mow down innocent bystanders, now they're torturing Gandhi posthumously!! The viciousness!
198. Ironic...Most of the commenters are favorable, but our Gandhi-deprived individual is inconsolable:
... that out of of all of the teachings of a man renowned for his abhorence of violence and devotion to peaceful resolutions of disputes, even at the cost of self-sacrifice, you should latch on to that one quote. Ghandi must be spinning in his grave.
114. Actually, this was too right-wing for even the bushistasSo it goes. The irony of the above exchange is that it was a policeman who challenged the handgun ban. He wanted to keep one in his house.
They opposed this, as it renders unconstitutional any attempt to regulate any weapons in anyone's hands. The shrub's crazy enough for that kind of reich-wing decision, but I think he must suspect that he's not terribly well-loved in this country and now that any escaped mental patient can assert a constitutional right to purchase a nuclear missile at any street corner ATM, he's got to be a bit worried. No, it took the Federalist Society half a century to stack the Supreme Court with wackos sufficiently right-wing to overturn the Constitution and 200+ years of legal precedent. A dark day for American jurisprudence indeed.
If any reader knows where to find these street corner ATMs that sell nuclear missiles, let me know, okay? In GA we don't have them. It must be a Yankee thing, which is surprising, because generally you can only buy fireworks in the south. And won't it be a nice Fourth this year?
In conclusion, I think the Democratic party should be very careful about yapping about this decision. Second Amendment types cross all parties and are generally quite serious about the topic, to the point of voting all the time, and they even know how to spell Gandhi's name. Plus, apparently many of them will be able to pick up nuclear missiles on street corners now, so we will have Gandhi-quoting gun nuts roaming the streets with handheld nuclear missiles frowning at politicians. Are those really the type of people politicians should needlessly irritate?
I mean, if we are supposed to be talking nice to the Iranians who want all the Jews dead, shouldn't we also appease the Gandhi gun nuts? Also, if the Iranian nutso should be allowed to have nukes, what is wrong with the Gandhi-quoting gun nuts having them? Some of these people are even Jewish, and some are gay, and everyone knows that gays have been historically discriminated against and are constantly being beaten to death on the streets of progressyve Amerikkka. Therefore, if they want weapons they should be allowed to have them, surely? If you're gonna appease, I say appease!!
I leave you with a Full Auto Car Shooting Okie style. The little girl is cute. I have no idea where I got that, so I apologize to some unknown blogger. I was saving it to send to my brother as soon as his baby-on-the-way is official (especially if a girl), but I share with the world to celebrate this occasion. Remember to stress the importance of ear protection when you are training your little girl on the proper launching of nuclear missiles.
Now if we could only get this court to agree that those words in the First Amendment "Congress shall make no law ... abridging the freedom of speech" mean that Congress shall make no law abridging freedom of speech, such as the right of citizens to band together to take out an ad right before an election mentioning their Congress Critter's voting record on say, gun rights, I'd be really happy. Really, really happy.
LaLa Later
I've got a bunch to do today, so the substantive post will be later. We have final GDP and weekly claims in. GDP is up (1.0), and weekly claims just suck, with everything pretty much rising. Claims are squarely in recession territory. However I want to see June's ending FUT before figuring current rolling employment status. We also have existing home sales due soon.
If you look at Table 12 on GDP, you see massive drops in corporate profits pretty much across the board. It is definitely not time to be thinking about increasing corporate taxes!! The trajectory for all domestic corporations over the last four quarters is:
I still think fair valuation for the Dow is between 11,200 and 11,800, but it could go lower for a few months. Things are getting to the reality-based stage.
If you'd like to read about a disaster that's not happening, I recommend this pdf file of McIntyre's Ohio presentation on his work checking the IPCC climate proxies. The IPCC does not come off well, which is probably part of the reason Hansen has descended into barking insanity.
Data from Europe continues to show incremental weakening. Except for Spain, which is the European equivalent of Florida or southern California, it's mostly related to energy prices. So there is nowhere left to run except into commodities to get your 2 and 20. And running they are.
Eventually, there's going to be another round of losses related to that run. So I really recommend the McIntyre IPCC file. It's 45 pages of sanity, which you will not get in the markets this week. Just remember, many disasters don't happen as scheduled.
If you look at Table 12 on GDP, you see massive drops in corporate profits pretty much across the board. It is definitely not time to be thinking about increasing corporate taxes!! The trajectory for all domestic corporations over the last four quarters is:
+ 84.4So it does not seem that corporations will be on a spending binge, and needless to say this is bad for stocks. With inventory valuation adjustment, the net drop in profits is 172.9 billion. Market based PCE deflator is 3.8, compared to the fourth quarter's 4.0. Smirk. Anyone care to hazard what it will be for second quarter?
- 43.8
-104.6
-150.1
I still think fair valuation for the Dow is between 11,200 and 11,800, but it could go lower for a few months. Things are getting to the reality-based stage.
If you'd like to read about a disaster that's not happening, I recommend this pdf file of McIntyre's Ohio presentation on his work checking the IPCC climate proxies. The IPCC does not come off well, which is probably part of the reason Hansen has descended into barking insanity.
Data from Europe continues to show incremental weakening. Except for Spain, which is the European equivalent of Florida or southern California, it's mostly related to energy prices. So there is nowhere left to run except into commodities to get your 2 and 20. And running they are.
Eventually, there's going to be another round of losses related to that run. So I really recommend the McIntyre IPCC file. It's 45 pages of sanity, which you will not get in the markets this week. Just remember, many disasters don't happen as scheduled.
Wednesday, June 25, 2008
And Nothing Ever Changes?
Durable goods still shows us in the same territory, with substantial improvement over the prior year. The shipment/inventory ratios are what I use to figure impetus, because when you see such large price moves, the dollar figures are unreliable. Usually at the end of June I sit down and look at the trajectories over the longer term to see if I can pick up patterns; maybe I'll get that done and post it next week. My hunch is that this is slowing, but I can't prove it from the figures so far. Also, the auto slowdown is distorting things. It still amazes me that the figures look so good considering the depth of the auto sales drop, but this is consistent with other reports I watch like NACM. Somewhere there is strength in production, and it isn't just in grains. Fabricated metals ratios are surprisingly good, and both non-defense and ex-aircraft capital goods are decent.
Overall, the midwest had been the worst area for mortgage defaults for the last few years. That wave seems to have bottomed out, which is another indicator supporting the general picture in this report.
New Home Sales shows a little more movement. Most of it is downward. The first thing that's notable about this report is that the YoY monthly drop entered the 40% range. Not a good sign at all. The second notable point is that MoM sales declines in the west and the northeast are much more pronounced. The debacle in the financial industry probably has more to do with the YoY 57% plus drop in the northeast. Needless to say, this augers a lot more trouble for mortgage companies and mortgage insurance companies! Sales in the west dropped sharply in May -11.6%. That is not statistically significant, but it does fit the general pattern. In any case, because of the regional changes, the median and average sales prices mean absolutely nothing.
As to whether we are close to bottom, I think not. First, the number of completed new homes for sale this May is exactly what it was last May - 182,000. Second, median months for sale has risen from 5.6 last May to an awesome 8.5 months this May. Sales of completed homes dropped from 21,000 to 18,000 MoM, whereas sales of not-started homes rose from 12,000 to 14,000 MoM. This is the reason I believe the western drop - I think the REO inventory in the higher brackets is building enough to blow up builder sales there.
More builder bankruptcies are to be expected!
As to the petroleum report, it seems to indicate that the drops in demand are concentrated at the retail/consumer level, not in industry:
This is going to blow out big time. Here's why:
The next big demand wave in the US is heating oil, and at the current offered prices, people are going to cut way back. A lot of people have a budget plan, and a lot of people buy a contract in the summer. Well, those contracts are way, way up. I spoke to one of my brothers, and his offering was more than $2 a gallon higher than last year's. At these prices, people just won't be able to buy anything near the same quantities. Also, at these prices, people will substitute electric heaters and wood heating (which already happened to some extent last year) for a portion. So demand for heating oil will drop substantially.
You can buy a few electric strip heaters and pay considerably less for that portion of your heating in most of the northeast. And when people get those offers from their heating oil companies, the panic will be on. A $2 rise will fund a lot of equipment replacement in one year! At 1000 gallons, that's $2,000 to pay for installing another type of heating plant, insulation, etc.
Utility companies in the north that don't depend substantially on oil may do well this year. On the other hand, some of them will find themselves selling energy for less than it costs to produce....
YoY gross imports are down 2.7%. I think this trend will continue, because one of the ironclad rules of economics is that people don't pay for what they can't pay for. Ignoring that simple rule caused the mortgage boom and collapse, and it will do the same for oil.
Now that the Asian countries have pretty much all reduced subsidies, adjustments will occur there as well. However there is a big difference between futures prices and delivered average prices, and a substantial lag. The futures price now is sharply higher than the delivered price that is causing demand to shrink in the areas in which that price increase is reflected in enduser prices. So the real bet that the futures junkies are making is that the Asian countries will continue to make up the difference. But they can't, as has pretty well already been proven.
If they did, India would end up with something like a 7-9% current account deficit. Eventually many of the other Asian countries would follow. In India, which tipped over this year, it has already caused the rupee to drop substantially and is fueling the exodus of foreign capital, which is jacking inflation considerably higher. And China, Inc., is facing the same limits. People look at figures like 30% plus export increases, and they don't realize how much of that is inflation in prices versus increase of volume. When your volume of business is stagnating, you cannot continue to raise prices forever. What happens (and probably what accounts for the relatively good US durable goods report) is that your prices eventually advantage other locations. You then lose business, and your fuel usage stops escalating or escalating so much.
The same fallacy that caused the mortgage collapse is going to cause the oil bubble to collapse. It's going to hit hard and it's going to hit quickly. I very much doubt how much oil is going to actually trade at $130 plus a barrel. Most of what is actually moving is moving at substantially lower prices. Marginal demand will fall rapidly to compensate. It will fall unevenly in different countries because of differing price levels, but it really doesn't matter over six months to China if it can sustain its current level of subsidies while they lose a bunch of exports because US consumers are spending all their money buying bread at $5 a loaf and shivering in 60 degree houses. There are limits to this price system, and they will start asymptotically breaking toward sustainability if they haven't already. Sustainability is a hell of a lot closer to $100 a barrel than $130!!
There is a double effect here as well. To the extent that US consumers do pay increased costs for gas, heating and utilities, it withdraws spending power. We are already seeing that in auto sales. Just sit down and think about how much energy is not consumed when the yearly average of cars sold drops a couple of million units. The steel, the factories, the shipping of all those parts and cars....
Anyway, the Chinese consumption curve will lag the US consumption curve by about six-nine months, the US consumption curve is going to keep slumping, and the first impact in Asia has already been felt with the pretty widespread increases of end user costs. For countries like Malaysia, that produce a lot of their consumption, the effect is less dramatic but shows up in higher export shipping costs and lower demand for their goods. China would be in between Malaysia and India, I think.
Overall, the midwest had been the worst area for mortgage defaults for the last few years. That wave seems to have bottomed out, which is another indicator supporting the general picture in this report.
New Home Sales shows a little more movement. Most of it is downward. The first thing that's notable about this report is that the YoY monthly drop entered the 40% range. Not a good sign at all. The second notable point is that MoM sales declines in the west and the northeast are much more pronounced. The debacle in the financial industry probably has more to do with the YoY 57% plus drop in the northeast. Needless to say, this augers a lot more trouble for mortgage companies and mortgage insurance companies! Sales in the west dropped sharply in May -11.6%. That is not statistically significant, but it does fit the general pattern. In any case, because of the regional changes, the median and average sales prices mean absolutely nothing.
As to whether we are close to bottom, I think not. First, the number of completed new homes for sale this May is exactly what it was last May - 182,000. Second, median months for sale has risen from 5.6 last May to an awesome 8.5 months this May. Sales of completed homes dropped from 21,000 to 18,000 MoM, whereas sales of not-started homes rose from 12,000 to 14,000 MoM. This is the reason I believe the western drop - I think the REO inventory in the higher brackets is building enough to blow up builder sales there.
More builder bankruptcies are to be expected!
As to the petroleum report, it seems to indicate that the drops in demand are concentrated at the retail/consumer level, not in industry:
Total products supplied over the last four-week period has averaged 20.2 million barrels per day, down by 2.3 percent compared to the similar period last year. Over the last four weeks, motor gasoline demand has averaged about 9.3 million barrels per day, down by 2.1 percent from the same period last year. Distillate fuel demand has averaged nearly 4.1 million barrels per day over the last four weeks, down by 1.1 percent from the same period last year. Jet fuel demand is 3.6 percent lower over the last four weeks compared to the same four-week periodOil prices cannot hold much longer. For background, this 2007 BBC article is pretty good. The OPEC basket is still rising, but a shelf formation shows in WTI:
last year.
This is going to blow out big time. Here's why:
The next big demand wave in the US is heating oil, and at the current offered prices, people are going to cut way back. A lot of people have a budget plan, and a lot of people buy a contract in the summer. Well, those contracts are way, way up. I spoke to one of my brothers, and his offering was more than $2 a gallon higher than last year's. At these prices, people just won't be able to buy anything near the same quantities. Also, at these prices, people will substitute electric heaters and wood heating (which already happened to some extent last year) for a portion. So demand for heating oil will drop substantially.
You can buy a few electric strip heaters and pay considerably less for that portion of your heating in most of the northeast. And when people get those offers from their heating oil companies, the panic will be on. A $2 rise will fund a lot of equipment replacement in one year! At 1000 gallons, that's $2,000 to pay for installing another type of heating plant, insulation, etc.
Utility companies in the north that don't depend substantially on oil may do well this year. On the other hand, some of them will find themselves selling energy for less than it costs to produce....
YoY gross imports are down 2.7%. I think this trend will continue, because one of the ironclad rules of economics is that people don't pay for what they can't pay for. Ignoring that simple rule caused the mortgage boom and collapse, and it will do the same for oil.
Now that the Asian countries have pretty much all reduced subsidies, adjustments will occur there as well. However there is a big difference between futures prices and delivered average prices, and a substantial lag. The futures price now is sharply higher than the delivered price that is causing demand to shrink in the areas in which that price increase is reflected in enduser prices. So the real bet that the futures junkies are making is that the Asian countries will continue to make up the difference. But they can't, as has pretty well already been proven.
If they did, India would end up with something like a 7-9% current account deficit. Eventually many of the other Asian countries would follow. In India, which tipped over this year, it has already caused the rupee to drop substantially and is fueling the exodus of foreign capital, which is jacking inflation considerably higher. And China, Inc., is facing the same limits. People look at figures like 30% plus export increases, and they don't realize how much of that is inflation in prices versus increase of volume. When your volume of business is stagnating, you cannot continue to raise prices forever. What happens (and probably what accounts for the relatively good US durable goods report) is that your prices eventually advantage other locations. You then lose business, and your fuel usage stops escalating or escalating so much.
The same fallacy that caused the mortgage collapse is going to cause the oil bubble to collapse. It's going to hit hard and it's going to hit quickly. I very much doubt how much oil is going to actually trade at $130 plus a barrel. Most of what is actually moving is moving at substantially lower prices. Marginal demand will fall rapidly to compensate. It will fall unevenly in different countries because of differing price levels, but it really doesn't matter over six months to China if it can sustain its current level of subsidies while they lose a bunch of exports because US consumers are spending all their money buying bread at $5 a loaf and shivering in 60 degree houses. There are limits to this price system, and they will start asymptotically breaking toward sustainability if they haven't already. Sustainability is a hell of a lot closer to $100 a barrel than $130!!
There is a double effect here as well. To the extent that US consumers do pay increased costs for gas, heating and utilities, it withdraws spending power. We are already seeing that in auto sales. Just sit down and think about how much energy is not consumed when the yearly average of cars sold drops a couple of million units. The steel, the factories, the shipping of all those parts and cars....
Anyway, the Chinese consumption curve will lag the US consumption curve by about six-nine months, the US consumption curve is going to keep slumping, and the first impact in Asia has already been felt with the pretty widespread increases of end user costs. For countries like Malaysia, that produce a lot of their consumption, the effect is less dramatic but shows up in higher export shipping costs and lower demand for their goods. China would be in between Malaysia and India, I think.
Monday, June 23, 2008
Another Day, Another Cultist
At Democratic Underground they are discussing Hansen's statement to The Guardian:
DU believes he did, though, and a hot debate breaks out. Best comment IMO:
Maybe there will be a transcript to which we can refer for the real story. I've explained as simply as possible why I believe the IPCC runaway CO2-forced warming theory is falsified, but I'd never claim that people who disagree with me should be tried for crimes against humanity!!!
I really have major doubts that The Guardian is reporting accurately.
Speaking before Congress again, he will accuse the chief executive officers of companies such as ExxonMobil and Peabody Energy of being fully aware of the disinformation about climate change they are spreading.I don't have a problem with the political campaigning - if he believes it, he should have the right to advocate it. However he is a government employee, and he'd better not be using government resources for this. I have a hard problem believing that Hansen actually said the following:
In an interview with the Guardian he said: "When you are in that kind of position, as the CEO of one the primary players who have been putting out misinformation even via organisations that affect what gets into school textbooks, then I think that's a crime."
He is also considering personally targeting members of Congress who have a poor track record on climate change in the coming November elections. He will campaign to have several of them unseated.
James Hansen, one of the world's leading climate scientists, will today call for the chief executives of large fossil fuel companies to be put on trial for high crimes against humanity and nature, accusing them of actively spreading doubt about global warming in the same way that tobacco companies blurred the links between smoking and cancer.Read the NY Times story for a calmer depiction of Hansen's views. The Guardian better have proof that Hansen said this!
DU believes he did, though, and a hot debate breaks out. Best comment IMO:
4. That worked so well during the InquisitionWell, actually, I haven't seen the Pope demanding that those who are sure that God doesn't exist be put on trial. That's why I think this brand of climate science is a cult. It's not just a religion, it's a cult. And on DU, there are some true believers:
So let's do it again!!!
The critical quote: "...I think that's a crime." As a legal theory, the rule that "if James Hansen thinks it's a crime, then it is," has a few shortcomings.
Criminalizing speech would be the actual crime. The Bill of Rights has to protect everyone, even (or especially) the assholes, or you might as well wad it up and throw it away.
That Hansen said this indicates his outlook has moved from scientific towards religious. Persecution of nonbelievers is a defining religious indicator.
7. We're talking about CRIMES against humanity, the planet - billions of lives are at stakeDarned if I know whether to laugh or cry. Hundreds of years of the Enlightenment dumped in one fell swoop.
Spreading doubt about climate change IS a crime, IMHO. Climate change is a PROVEN FACT, and unless we take immediate steps to rein it in, will kill BILLIONS of people over the next century. That doesn't even begin to take into account the countless species that will become EXTINCT.
This isn't about free speech. The time for debate is OVER, there is no more debate - how can you debate something that is a proven scientific fact? But unlike the "debate" over evolution, this one is going to have deadly consequences.
Maybe there will be a transcript to which we can refer for the real story. I've explained as simply as possible why I believe the IPCC runaway CO2-forced warming theory is falsified, but I'd never claim that people who disagree with me should be tried for crimes against humanity!!!
I really have major doubts that The Guardian is reporting accurately.
Update on Gitmo Case
Carl at NoOilForPacifists has a very comprehensive post up explaining a great deal about the ruling and its relationship to other cases. The military justice system is so separate that a lot of lawyers know little about its workings.
Why We Should Drill
Mind you, I think US energy policy has to open up on all fronts. We need to expand nuclear power drastically, knock down some of the barriers to wind power, etc. It has come to the point in the US that there are huge barriers to almost any power production developments, and environmental groups or frustrated landowners can use existing statutes to sue and block development for years, thus escalating the cost of projects to the point that they become unworkable.
But nonetheless we do need to open up the coasts to drilling, and probably ANWR also. The reason is that the climate is probably going to inflict heavy damage quite shortly.
While Al Gore is still roaming the halls of academia giving very pricey speeches about the perils of carbon (into which exalted occasions no reporters are admitted), the CO2-disastrous warming IPCC thesis has already been falsified. Instead we now may have another problem entirely - that of a temporary cool-down equvalent to the middle of the last century.
The CO2 signal may have coincided with a temperature rise in the 20th century, but so did the solar signal:
Given that in the past changes in solar irradiance seem to have corresponded with temperature changes:
(Note the drop off that corresponded with the Little Ice Age, and the low starting around 1800 which is known as the Dalton Minimum. See NASA site.)
one would have expected more caution on the part of the carbon bugs. However instead of caution we got stuff like the Mann hockey-stick graph, which removed the temperature changes of the recent past and amplified the current warming. Most recently, they have resorted to the Artic sea-ice changes as proof of warming, even though the Arctic Oscillation is relatively well understood:
Unfortunately, stuff that ridiculous is doomed to raise the ire of other scientists, so the Mann hockey-stick graph turned into a major embarrassment and the Arctic will shortly return to previous states. You can track what is happening there every day. Start with this comparison, then look at the 1998 vs 2008.
Now the patriarchal Sun-God Rah has apparently decided to kick the collective asses of the matriarchal Gaia-worshippers, potentially causing a reprise of the Dalton Minimum. This is a graph from the Wood For Trees site:
The red line (SIDC) is sunspot numbers, which is a proxy for solar flux. Note that it has established a downward trend beginning in SC 23. Note that since it changed direction, there hasn't been any warming trend. The green upward line is the Mauna Loa CO2, which continues its inexorable climb. This is a very strong hint that the observed 20th century warming had more to do with changes in the sun than with changes in atmospheric CO2..
If you go to the Dalton Minimum paper, you'll get a bit more of an explanation and predictions. The bottom line is that we are a northern hemisphere country, and the probability that over the next 20 years we will be needing more powerl for space heating is galloping upwards.
The thing about the scientists who have advanced a larger role for the sun is that they have good past fits in their modeling and they have been making predictions about this for years now, and their predictions are bearing out. Whereas the carbon bugs have been reduced to trying to prove that what happened in the past didn't happen and pretending that what is happening right now isn't happening.
It is, of course, up to you whether you believe the carbon bugs or the rest of the scientific community. However, I will think very badly of you if you believe that the people whose predictions are wrong and who are trying to rewrite history to bolster their argument are credible.
As for the current price of oil, it is not justified. The reason why is that there is potential demand at a lower price, but the fact is that at these contract prices, demand will fall off a cliff. Believing that oil demand at $130 will remain anywhere near constant is even sillier than still being a carbon bug with the current data, which is saying a lot.
For a rather simple explanation of just why the theory of CO2 as a primary climate driver is falsified, see this post at The Reference Frame. The bottom line is that carbon dioxide has a bottom-weighted effect, so even assuming no negative feedback, we've already seen the majority of the shift. You can intuitively understand this by thinking about putting a tinfoil wrapper over a hot pan of food. That will trap heat, but adding another layer of tinfoil will change very little.
And since it is now apparent that the sun has produced at least a substantial portion of the recent warming, it appears that negative feedbacks do exist. Thus the theory that water vapor is going to reinforce CO2 effects, which was never very credible due to the substantial overlap in the absorption spectrum, is now falsified by both history (ice core lags) and experiment (current trends). The last gasp of hope for the IPCC-theory of major catastrophic CO2-induced warming expired when the deeper ocean temps turned downwards. If the heat isn't in the oceans, it isn't anywhere.
There is, btw, a word for a theory which is not falsifiable by evidence, and that word is "cult". You can't even use the word religion to describe such belief systems, because in fact the major religions do have a lot of experiential testing in them as well as faith-based elements, and Judeo-Christian religion rests on a God of history, and is thus not afraid of the test of reality.
The cultists understand the science so darned well that they are currently searching out the hydrogen mines (hat tip Photon Courier June 17th post). This no longer science. It used to be - the original theory is well over a century old - but genuine scientific research has now set limits to CO2's control of climate. That's what scientists do - they form theories, investigate, and verify or falsify those theories. The real climate scientists out there are now trying to figure in the effects of low-level cloud formation, for example, to create models which work.
But nonetheless we do need to open up the coasts to drilling, and probably ANWR also. The reason is that the climate is probably going to inflict heavy damage quite shortly.
While Al Gore is still roaming the halls of academia giving very pricey speeches about the perils of carbon (into which exalted occasions no reporters are admitted), the CO2-disastrous warming IPCC thesis has already been falsified. Instead we now may have another problem entirely - that of a temporary cool-down equvalent to the middle of the last century.
The CO2 signal may have coincided with a temperature rise in the 20th century, but so did the solar signal:
Given that in the past changes in solar irradiance seem to have corresponded with temperature changes:
(Note the drop off that corresponded with the Little Ice Age, and the low starting around 1800 which is known as the Dalton Minimum. See NASA site.)
one would have expected more caution on the part of the carbon bugs. However instead of caution we got stuff like the Mann hockey-stick graph, which removed the temperature changes of the recent past and amplified the current warming. Most recently, they have resorted to the Artic sea-ice changes as proof of warming, even though the Arctic Oscillation is relatively well understood:
Unfortunately, stuff that ridiculous is doomed to raise the ire of other scientists, so the Mann hockey-stick graph turned into a major embarrassment and the Arctic will shortly return to previous states. You can track what is happening there every day. Start with this comparison, then look at the 1998 vs 2008.
Now the patriarchal Sun-God Rah has apparently decided to kick the collective asses of the matriarchal Gaia-worshippers, potentially causing a reprise of the Dalton Minimum. This is a graph from the Wood For Trees site:
The red line (SIDC) is sunspot numbers, which is a proxy for solar flux. Note that it has established a downward trend beginning in SC 23. Note that since it changed direction, there hasn't been any warming trend. The green upward line is the Mauna Loa CO2, which continues its inexorable climb. This is a very strong hint that the observed 20th century warming had more to do with changes in the sun than with changes in atmospheric CO2..
If you go to the Dalton Minimum paper, you'll get a bit more of an explanation and predictions. The bottom line is that we are a northern hemisphere country, and the probability that over the next 20 years we will be needing more powerl for space heating is galloping upwards.
The thing about the scientists who have advanced a larger role for the sun is that they have good past fits in their modeling and they have been making predictions about this for years now, and their predictions are bearing out. Whereas the carbon bugs have been reduced to trying to prove that what happened in the past didn't happen and pretending that what is happening right now isn't happening.
It is, of course, up to you whether you believe the carbon bugs or the rest of the scientific community. However, I will think very badly of you if you believe that the people whose predictions are wrong and who are trying to rewrite history to bolster their argument are credible.
As for the current price of oil, it is not justified. The reason why is that there is potential demand at a lower price, but the fact is that at these contract prices, demand will fall off a cliff. Believing that oil demand at $130 will remain anywhere near constant is even sillier than still being a carbon bug with the current data, which is saying a lot.
For a rather simple explanation of just why the theory of CO2 as a primary climate driver is falsified, see this post at The Reference Frame. The bottom line is that carbon dioxide has a bottom-weighted effect, so even assuming no negative feedback, we've already seen the majority of the shift. You can intuitively understand this by thinking about putting a tinfoil wrapper over a hot pan of food. That will trap heat, but adding another layer of tinfoil will change very little.
And since it is now apparent that the sun has produced at least a substantial portion of the recent warming, it appears that negative feedbacks do exist. Thus the theory that water vapor is going to reinforce CO2 effects, which was never very credible due to the substantial overlap in the absorption spectrum, is now falsified by both history (ice core lags) and experiment (current trends). The last gasp of hope for the IPCC-theory of major catastrophic CO2-induced warming expired when the deeper ocean temps turned downwards. If the heat isn't in the oceans, it isn't anywhere.
There is, btw, a word for a theory which is not falsifiable by evidence, and that word is "cult". You can't even use the word religion to describe such belief systems, because in fact the major religions do have a lot of experiential testing in them as well as faith-based elements, and Judeo-Christian religion rests on a God of history, and is thus not afraid of the test of reality.
The cultists understand the science so darned well that they are currently searching out the hydrogen mines (hat tip Photon Courier June 17th post). This no longer science. It used to be - the original theory is well over a century old - but genuine scientific research has now set limits to CO2's control of climate. That's what scientists do - they form theories, investigate, and verify or falsify those theories. The real climate scientists out there are now trying to figure in the effects of low-level cloud formation, for example, to create models which work.
Thursday, June 19, 2008
Unbelievable Canadian Story
The Anchoress has a roundup post about some of the recent Canadian be-nice society developments, culminating in the story of a disobedient child who was refused permission to go on a school trip by her custodial father. The mother sued (officially the child did), and won.
The Anchoress asks if Canada is a Stepford Nation. Maybe so! Certainly this is not going to end well for the nation or for that child. Life is tough, and if the worst thing that happens to you is that you didn't get to go on a school trip, then you have been fortunate indeed!!
Haha. I could tell you some really terrible stories about things that have happened on school trips with unruly children. How about a learning-disabled girl about this age who was raped by two older men? They started talking to her and she just went off with them.... They were never prosecuted, because they were never identified.
I'll never forget how upset my mother was over that one. It wasn't her student, and she wasn't on the trip, but it did happen at her school.
Honestly, you shouldn't let an unruly child go on an overnight school trip. There's no way the supervision is good enough.
The Anchoress asks if Canada is a Stepford Nation. Maybe so! Certainly this is not going to end well for the nation or for that child. Life is tough, and if the worst thing that happens to you is that you didn't get to go on a school trip, then you have been fortunate indeed!!
Haha. I could tell you some really terrible stories about things that have happened on school trips with unruly children. How about a learning-disabled girl about this age who was raped by two older men? They started talking to her and she just went off with them.... They were never prosecuted, because they were never identified.
I'll never forget how upset my mother was over that one. It wasn't her student, and she wasn't on the trip, but it did happen at her school.
Honestly, you shouldn't let an unruly child go on an overnight school trip. There's no way the supervision is good enough.
That Tinkling Sound You Hear
Is the sound of a million price chains breaking. Well, maybe you are deaf, so let me describe the scene.
Imagine a diaphanous network of chains composed of glass and rubber links stretched like a huge, disorderly spiderweb across the globe. That is global trade. The rubber links in the chains can stretch to a certain point, but after that point the pressure is shifted to the glass links, and they begin to snap.
I have never seen anything like this. At these fuel prices, it becomes uneconomic to ship a bunch of products. What is Hawaii going to do? I have no clue!
Like the first snow of fall, shards of glass are drifting downward almost unnoticed. They will accumulate rapidly, and abruptly overages and shortages of products will appear. There will be sharp increases in the prices of some materials, as enterprises drop out after prices plummet unpredictably for a time.
The result is a massive overcapacity of production in some areas, and the need to expand capacity in others. But that is globally speaking, inefficient, and it sucks up capital. Many of the highly leveraged companies are now in deep trouble, which will show up on the spreadsheets of the financials relatively quickly. The cost of paying for budget deficits is rising sharply for many Asian countries (see Indonesia, for example), even while growth is slowing substantially.
The thing to stay away from is corporate debt unless they are bonds from a very strong company with very low leverage. Banks continue to be a no-no. The best sectors are fundamental ones that have already sold off, like some groceries.
Fund investing is awesomely dangerous at this time.
Update: And China makes its move.
Imagine a diaphanous network of chains composed of glass and rubber links stretched like a huge, disorderly spiderweb across the globe. That is global trade. The rubber links in the chains can stretch to a certain point, but after that point the pressure is shifted to the glass links, and they begin to snap.
I have never seen anything like this. At these fuel prices, it becomes uneconomic to ship a bunch of products. What is Hawaii going to do? I have no clue!
Like the first snow of fall, shards of glass are drifting downward almost unnoticed. They will accumulate rapidly, and abruptly overages and shortages of products will appear. There will be sharp increases in the prices of some materials, as enterprises drop out after prices plummet unpredictably for a time.
The result is a massive overcapacity of production in some areas, and the need to expand capacity in others. But that is globally speaking, inefficient, and it sucks up capital. Many of the highly leveraged companies are now in deep trouble, which will show up on the spreadsheets of the financials relatively quickly. The cost of paying for budget deficits is rising sharply for many Asian countries (see Indonesia, for example), even while growth is slowing substantially.
The thing to stay away from is corporate debt unless they are bonds from a very strong company with very low leverage. Banks continue to be a no-no. The best sectors are fundamental ones that have already sold off, like some groceries.
Fund investing is awesomely dangerous at this time.
Update: And China makes its move.
Tuesday, June 17, 2008
As The Asian Countries Are Hit
I've been writing about this for some months now, and the moves here have very little to do with Fed policy. They have to do with fundamental economics.
India:
Argentina's getting hit too. Brazil still relatively stable, but.... Shanghai (SSE) has taken a pasting.
The next collapse of funds is on its way as predictably as the sun is going to rise. However, it should be noted that the sun may predictably rise, but it sure doesn't exude a lot of heat these days.
India:
The central bank has raised rates to 8pc to curb inflation and halt a run on the rupee, but critics still say the country waited too long to tackle overheating. The current account deficit has shot up to near 3.5pc of GDP. A plethora of subsidies has pushed the budget deficit to 9pc of GDP.And ROEM:
Russia, Brazil, India, Vietnam, South Africa, Indonesia, Nigeria, and Chile - among others - have all had to raise interest rates or tighten monetary policy in recent days. Most are still behind the curve.Yes, it is long past time to say yikes and head for the exit, but exactly how does anyone believe that this will support world oil prices? This pyramid is about to execute a Tower of Babylon impression.
...
The currencies of Korea, Thailand, the Phillippines, and Malaysia have come under pressure this week as investors scramble for dollars in moves that echo the East Asia crisis in 1997-1998.
Argentina's getting hit too. Brazil still relatively stable, but.... Shanghai (SSE) has taken a pasting.
The next collapse of funds is on its way as predictably as the sun is going to rise. However, it should be noted that the sun may predictably rise, but it sure doesn't exude a lot of heat these days.
Monday, June 16, 2008
Empire State Manufacturing
June was published today:
The general business conditions index fell 5 points, to -8.7. The indexes for new orders, shipments, and unfilled orders were negative and lower than their May levels. The prices paid index remained elevated, falling only slightly below last month’s record high. The prices received index rose markedly and, at 26.7, approached a record level; the future prices received index also rose sharply, reaching a record high of 47.7. Employment indexes hovered around zero.
Friday, June 13, 2008
US Soldiers In Danger, Do Something About It!
The Supreme Court's ruling is here, and the 130 odd pages include the dissent by Roberts and the dissent by Scalia. I have not read even most of it yet and before I can really comment too much on any broader issues, I need to do that and think about the arguments. My current focus is just on the situation of the soldiers who may have their identities exposed in civilian courts.
This bit of Scalia's dissent will show, I think, why the whole thing is worth reading:
Forcing soldiers to be named and testify in habeas corpus proceedings may expose those soldiers and perhaps their families to attack in response. This is not an unfounded speculation of mine - it happens in Iraq now to the families and principals.
Patterico's interview with an unnamed Gitmo soldier who was in mental health elicited the startling information that he himself (forbidden to testify against, and charged with caring for, detainees), had been personally threatened and had had his family threatened. For this reason, the soldiers who worked with the detainees were not named!!!
Obviously, in a civilian court conducting a habeas corpus proceeding, Stashiu's anonymity would be revoked were he called to testify, or were the soldiers who originally captured called to testify or make depositions. I speak for the soldiers and their families when I say that this is just not right. This is not a danger that US Armed Forces personnel should be forced to run. I hope Congress will immediately take this up. I encourage all readers to contact their senators and representatives over this issue. Neither the lawyers nor the petitioners should ever have access to the soldiers' personal information.
I console myself slightly with the theory that the judges who now must hear these cases are perhaps at risk as well. That will not be a consolation to the judges, but eventually it will moderate this fine furor of constitutionality.
Stashiu was told by a detainee whom Stashiu said liked Stashiu that the detainee knew Zarqawi, and would have Zarqawi cut the heads off Stashiu's family while Stashiu watched, and then behead Stashiu. Stashiu's words when asked about releasing the individuals with whom he worked:
Carl at NOFP has written a first post on the decision. There is a series of posts on various issues up at Volokh. See Betsy Newmark's post. If you doubt the danger, AQ is quite active in Europe. See this post at Iberian Notes.
I am not addressing the question the Supreme Court addressed in this post; I am confining myself to the necessary and foreseeable consequences of that decision which include specific additional danger to Armed Forces personnel. I will contact my Congress Critters about this issue, and I would urge everyone to do the same.
Remember, what goes around comes around. It's not at all inconceivable that failing to act to protect the soldiers here could expose you and your family in prospective danger.
This bit of Scalia's dissent will show, I think, why the whole thing is worth reading:
In the long term, then, the Court’s decision today accomplishes little, except perhaps to reduce the well-being of enemy combatants that the Court ostensibly seeks to protect. In the short term, however, the decision is devastating.One of my concerns is that the history of Islamic terrorist organizations includes revenge attacks upon judges and families. It's not a rarity; journalists, officials, and indeed anyone in the public sphere who opposes the terror are targets. The Mafia in Sicily attempted to enforce an extralegal immunity for their actions using much the same tactics, and currently in some areas in Mexico the criminal gangs do the same.
At least 30 of those prisoners hitherto released from Guantanamo Bay have returned to the battlefield. See S. Rep. No. 110–90, pt. 7, p. 13 (2007) (Minority Views of Sens. Kyl, Sessions, Graham, Cornyn, and Coburn) (hereinafter Minority Report). Some have been captured or killed. See ibid.; see also Mintz, Released Detainees Rejoining the Fight, Washington Post, Oct. 22, 2004, pp.A1, A12. But others have succeeded in carrying on their atrocities against innocent civilians. In one case, a detainee released from Guantanamo Bay masterminded the kidnapping of two Chinese dam workers, one of whom was later shot to death when used as a human shield against Pakistani commandoes. See Khan & Lancaster, Pakistanis Rescue Hostage; 2nd Dies, Washington Post, Oct. 15, 2004, p. A18. Another former detainee promptly resumed his post as a senior Taliban commander and murdered a United Nations engineer and three Afghan soldiers. Mintz, supra. Still another murdered an Afghan judge. See Minority Report 13. It was reported only last month that a released detainee carried out a suicide bombing against Iraqi soldiers in Mosul, Iraq. See White, Ex-Guantanamo Detainee Joined Iraq Suicide Attack, Washington Post, May 8, 2008, p. A18.
These, mind you, were detainees whom the military had concluded were not enemy combatants. Their return to the kill illustrates the incredible difficulty of assessing who is and who is not an enemy combatant in a foreign theater of operations where the environment does not lend itself to rigorous evidence collection. Astoundingly, theCourt today raises the bar, requiring military officials to appear before civilian courts and defend their decisions under procedural and evidentiary rules that go beyond what Congress has specified. As THE CHIEF JUSTICE’s dissent makes clear, we have no idea what those procedural and evidentiary rules are, but they will be determined by civil courts and (in the Court’s contemplation at least) will be more detainee-friendly than those now applied, since otherwise there would be no reason to hold the congressionally prescribed procedures unconstitutional. If they impose a higher standard of proof (from foreign battlefields) than the current procedures require, the number of the enemy returned to combat will obviously increase.
But even when the military has evidence that it can bring forward, it is often foolhardy to release that evidence to the attorneys representing our enemies. And one escalation of procedures that the Court is clear about is affording the detainees increased access to witnesses (perhaps troops serving in Afghanistan?) and to classified information. See ante, at 54–55. During the 1995 prosecution of Omar Abdel Rahman, federal prosecutors gave the names of 200 unindicted co-conspirators to the “Blind Sheik’s”defense lawyers; that information was in the hands of Osama Bin Laden within two weeks. See Minority Report 14–15. In another case, trial testimony revealed to the enemy that the United States had been monitoring their cellular network, whereupon they promptly stopped using it, enabling more of them to evade capture and continue their atrocities.
Forcing soldiers to be named and testify in habeas corpus proceedings may expose those soldiers and perhaps their families to attack in response. This is not an unfounded speculation of mine - it happens in Iraq now to the families and principals.
Patterico's interview with an unnamed Gitmo soldier who was in mental health elicited the startling information that he himself (forbidden to testify against, and charged with caring for, detainees), had been personally threatened and had had his family threatened. For this reason, the soldiers who worked with the detainees were not named!!!
Obviously, in a civilian court conducting a habeas corpus proceeding, Stashiu's anonymity would be revoked were he called to testify, or were the soldiers who originally captured called to testify or make depositions. I speak for the soldiers and their families when I say that this is just not right. This is not a danger that US Armed Forces personnel should be forced to run. I hope Congress will immediately take this up. I encourage all readers to contact their senators and representatives over this issue. Neither the lawyers nor the petitioners should ever have access to the soldiers' personal information.
I console myself slightly with the theory that the judges who now must hear these cases are perhaps at risk as well. That will not be a consolation to the judges, but eventually it will moderate this fine furor of constitutionality.
Stashiu was told by a detainee whom Stashiu said liked Stashiu that the detainee knew Zarqawi, and would have Zarqawi cut the heads off Stashiu's family while Stashiu watched, and then behead Stashiu. Stashiu's words when asked about releasing the individuals with whom he worked:
I don’t know that anyone is beyond reason, but I also don’t know more than a couple who I think might be ok to release. “Might” being the operative word there, I wouldn’t give the go-ahead on my own for any of them. There I are couple I could understand and would not go out of my way to protest their release. I can tell you that if I ever saw a detainee face-to-face here in the States, I would immediately assume that I was targeted and do my best to kill them without further warning. If I turned out to be wrong about their intent, I could live with that.The danger to the soldiers is real. It is a civilian duty to address it by petition to your elected officials in Congress. If you don't understand my concerns, please read the Patterico interview with Stashiu, which is in multiple parts. Stashiu was kind enough to answer many questions which were posted in the comments as well.
Carl at NOFP has written a first post on the decision. There is a series of posts on various issues up at Volokh. See Betsy Newmark's post. If you doubt the danger, AQ is quite active in Europe. See this post at Iberian Notes.
I am not addressing the question the Supreme Court addressed in this post; I am confining myself to the necessary and foreseeable consequences of that decision which include specific additional danger to Armed Forces personnel. I will contact my Congress Critters about this issue, and I would urge everyone to do the same.
Remember, what goes around comes around. It's not at all inconceivable that failing to act to protect the soldiers here could expose you and your family in prospective danger.
Thursday, June 12, 2008
Last Year I Commented On Shipping Line Sales
Insiders were selling out.
Bloomberg:
Bloomberg:
Most Asian stocks fell, led by financial companies and shipping lines, on concern credit-market turmoil and slowing global growth will erode profit.Not really good for commodities. I noticed about six weeks ago that some of the Malaysian domestic lines were agitating to get the government to control foreign competition, so I'm guessing the problem is widespread.
...
Mitsui O.S.K. Lines Ltd. dropped after rates for transporting commodities by sea had a record decline.
Initial Claims And The Future
While investors with half a brain start to worry a bit about China, US lawmakers should start getting serious about the domestic situation. The wave of a pretty hefty consumer downturn is just about to break.
The first shot across the bow comes in today's initial claims release. At this time of year school systems begin shutting down, and in some states those employees are eligible for unemployment over the summer break. Therefore SA is the best number, and it showed an increase of 25,000 to 384,000 claims. NSA and SA continuing claims are rising as well. On an NSA basis, YoY continuing claims have increased over 560,000. That is a lot of people without money to spend this summer. The June employment report is going to be a shocker.
The retail sales report headline trumpets an increase above economist's assumptions. Except that the details in the report are ominous; the apparent sales increases are all due to inflation, and in fact retail sales YoY increases are now well below the inflation rate. The Memorial holiday came early this year, which shifted some June spending into May. When you look at the report (Table 2b) and compare May 2008 to May 2007, it seems clear that spending is steadily being shifted to the essentials:
By August, northern consumers will be directing a great deal of free cash toward winter heating bills. That is when the full pulse of the fuel shock will hit the economy, and it will be a brutal one indeed.
The Fed will not be raising interest rates this year. It won't have to, because enough capital is going to come into the US to support the dollar.
The EU is set for trouble this summer, I think, and others are beginning to share my view:
US lawmakers need to stop with the posturing and pass unemployment extensions for the states hit hardest, like Michigan. However the Dems need to stop with the BS - extended unemployment benefits should only be available to the long-term employed, and should not be granted to every state. The US economy is growing in sectors and declining in sectors.
Another very important step would be to revise government policy and open up the oil sands for development, plus allow ANWR drilling, and review the coastal drilling restrictions. The US has a very clear choice. It can either go through a three or four year recession, or it can wake up to reality and implement a realistic energy policy. At prices approximately 20% below current, US consumption is restricted. Eventually, the biggest Asian countries will run into the wall and have to bring pricing up to levels that factor fuel constraints into economic decisions. If they don't, most of them will bust their currencies and see inflation rise to sky-high levels.
While changing US policy wouldn't immediately affect supply, it would generate extremely rapid internal growth in the form of capital investment, jobs and development. It would support the economy IMMEDIATELY. It would also scare the speculators a bit and tend to bring energy prices down somewhat.
One of the problems with fuel supply is that some of the countries with large reserves (such as Venezuela) have completely dysfunctional economies and can't get it out of the ground. Right now we are not in a peak oil scenario, but in a stupid-government scenario. Ours is among the stupidest.
Most of the US economic problems really trace back to energy policy. Congress is bleating about suing OPEC as just a diversion from their own failures.
Whichever party gets serious about fundamental economic issues first will establish a near hegemony in US politics, but the presidential pick matters far less than congressional policy. US presidents. Right now, neither party is even close to grappling with the economic realities. Congress is so far out of tune with its constituents that it appears to be seated on Mars, still trying to get the fuel sample into the chamber.
For the long term, the US simply must move heavily into nuclear power. That is the only way to generate the electricity necessary. If we had the electricity, we could shift to electric-gas hybrids for a majority of light passenger use. We have to have oil for trucking, freight, military and industrial vehicle purposes. All the blah-blah about biofuels is inoperative at the present time. It is possible that fundamental energy costs have shifted enough to make algae-based biodiesel production economically effective, but it has not been demonstrated.
The situation for the BRIC countries is not good at all. They now have to face worsening circumstances while reshaping their energy strategies. It will not be easy, and they need some margin to do it.
In terms of global distribution of the shock:
EU - depends on government policies, mostly. Currently it appears that they are not dealing with reality, but if they cut fuel taxes, the EU could still slog through this with only a mild recession. Will they? I doubt it. They have created a very unwieldy instrument in the EU government. I suppose the individual countries could rebel.
China - Big worry. Not only does China have to raise energy costs pretty shortly, it is spending a lot to guard the oilfields (such as in Sudan and Nigeria) that it depends on. I suspect that there is more trouble than we see. They've made great strides, but consumer demand for many of their products is not going to be growing in the developed world, and they seem to have run into a brick wall internally in distributing and investing wealth.
India - It should have a good future, but this is a real test for its economy and its government. Over the short term, per capita income growth is not going to keep pace with inflation. How does it handle the tensions and the shock?
US - the best so far, but Congress can make it or break it. The speculative boom was relatively larger in many other countries, and the US preserves high growth potential. I can't see any way in which the US dollar shouldn't strengthen on its own over the next six months, and after that, it will be a matter of whether the next election brings a focus on basics or an excursion into lala land. So far, Pelosi type organic-cafe thinking is predominating. When that ends, the economic pain should begin to lift. It is largely self-inflicted.
The bottom line for the world economy is that it grew a lot, but much of the wealth was shunted into speculative, poorly grounded investments globally, and little attention was paid to the balance of trade and energy needed to sustain world growth. The last few years of massive Asian growth have been largely a chimera based on non-recognition of fundamental input costs. Therefore the focus has to shift back to producing food and energy, in which field the US can do very well indeed.
South America - every non-lunatic country can do pretty well. Unfortunately, lunacy in South America governments is a long and strong tradition with deep cultural roots.
Japan - their own sources seem to feel that they are headed for a recession or near recession due to declining demand and internal inflationary pressures. Japan as a country is extremely sensitive to food and fuel costs, because it just cannot grow enough food to feed its population.
The first shot across the bow comes in today's initial claims release. At this time of year school systems begin shutting down, and in some states those employees are eligible for unemployment over the summer break. Therefore SA is the best number, and it showed an increase of 25,000 to 384,000 claims. NSA and SA continuing claims are rising as well. On an NSA basis, YoY continuing claims have increased over 560,000. That is a lot of people without money to spend this summer. The June employment report is going to be a shocker.
The retail sales report headline trumpets an increase above economist's assumptions. Except that the details in the report are ominous; the apparent sales increases are all due to inflation, and in fact retail sales YoY increases are now well below the inflation rate. The Memorial holiday came early this year, which shifted some June spending into May. When you look at the report (Table 2b) and compare May 2008 to May 2007, it seems clear that spending is steadily being shifted to the essentials:
Total: +3.0%The effect this will have on employment will be quite dramatic over the next six months. A lot of retail jobs are going away. The fact that groceries increased more than food and beverages is an indication of real trouble this month. Expect restaurants to begin shutting down and a wave of specialty retail bankruptcies. Mind you, the stimulus checks had hit quite a few of the consumers for this period.
MV dealers: -9.1%
Food & Bev: +8.0%
Groceries: +8.5%
Gasoline +15.3%
By August, northern consumers will be directing a great deal of free cash toward winter heating bills. That is when the full pulse of the fuel shock will hit the economy, and it will be a brutal one indeed.
The Fed will not be raising interest rates this year. It won't have to, because enough capital is going to come into the US to support the dollar.
The EU is set for trouble this summer, I think, and others are beginning to share my view:
``Some weakness could be in store for euro-zone industrial production in May,'' said Marco Valli, an economist at UniCredit in Milan. ``Hard data for the second quarter have just started to come through, but so far they seem consistent with our view that GDP growth will come to a complete halt in the second quarter.''Chances of a global recession in 2009 are over 80%.
Valli said part of the second-quarter slowdown in economic expansion ``needs to be seen as payback after the amazingly strong first quarter,'' when growth in gross domestic product accelerated to 0.8 percent from 0.3 percent.
US lawmakers need to stop with the posturing and pass unemployment extensions for the states hit hardest, like Michigan. However the Dems need to stop with the BS - extended unemployment benefits should only be available to the long-term employed, and should not be granted to every state. The US economy is growing in sectors and declining in sectors.
Another very important step would be to revise government policy and open up the oil sands for development, plus allow ANWR drilling, and review the coastal drilling restrictions. The US has a very clear choice. It can either go through a three or four year recession, or it can wake up to reality and implement a realistic energy policy. At prices approximately 20% below current, US consumption is restricted. Eventually, the biggest Asian countries will run into the wall and have to bring pricing up to levels that factor fuel constraints into economic decisions. If they don't, most of them will bust their currencies and see inflation rise to sky-high levels.
While changing US policy wouldn't immediately affect supply, it would generate extremely rapid internal growth in the form of capital investment, jobs and development. It would support the economy IMMEDIATELY. It would also scare the speculators a bit and tend to bring energy prices down somewhat.
One of the problems with fuel supply is that some of the countries with large reserves (such as Venezuela) have completely dysfunctional economies and can't get it out of the ground. Right now we are not in a peak oil scenario, but in a stupid-government scenario. Ours is among the stupidest.
Most of the US economic problems really trace back to energy policy. Congress is bleating about suing OPEC as just a diversion from their own failures.
Whichever party gets serious about fundamental economic issues first will establish a near hegemony in US politics, but the presidential pick matters far less than congressional policy. US presidents. Right now, neither party is even close to grappling with the economic realities. Congress is so far out of tune with its constituents that it appears to be seated on Mars, still trying to get the fuel sample into the chamber.
For the long term, the US simply must move heavily into nuclear power. That is the only way to generate the electricity necessary. If we had the electricity, we could shift to electric-gas hybrids for a majority of light passenger use. We have to have oil for trucking, freight, military and industrial vehicle purposes. All the blah-blah about biofuels is inoperative at the present time. It is possible that fundamental energy costs have shifted enough to make algae-based biodiesel production economically effective, but it has not been demonstrated.
The situation for the BRIC countries is not good at all. They now have to face worsening circumstances while reshaping their energy strategies. It will not be easy, and they need some margin to do it.
In terms of global distribution of the shock:
EU - depends on government policies, mostly. Currently it appears that they are not dealing with reality, but if they cut fuel taxes, the EU could still slog through this with only a mild recession. Will they? I doubt it. They have created a very unwieldy instrument in the EU government. I suppose the individual countries could rebel.
China - Big worry. Not only does China have to raise energy costs pretty shortly, it is spending a lot to guard the oilfields (such as in Sudan and Nigeria) that it depends on. I suspect that there is more trouble than we see. They've made great strides, but consumer demand for many of their products is not going to be growing in the developed world, and they seem to have run into a brick wall internally in distributing and investing wealth.
India - It should have a good future, but this is a real test for its economy and its government. Over the short term, per capita income growth is not going to keep pace with inflation. How does it handle the tensions and the shock?
US - the best so far, but Congress can make it or break it. The speculative boom was relatively larger in many other countries, and the US preserves high growth potential. I can't see any way in which the US dollar shouldn't strengthen on its own over the next six months, and after that, it will be a matter of whether the next election brings a focus on basics or an excursion into lala land. So far, Pelosi type organic-cafe thinking is predominating. When that ends, the economic pain should begin to lift. It is largely self-inflicted.
The bottom line for the world economy is that it grew a lot, but much of the wealth was shunted into speculative, poorly grounded investments globally, and little attention was paid to the balance of trade and energy needed to sustain world growth. The last few years of massive Asian growth have been largely a chimera based on non-recognition of fundamental input costs. Therefore the focus has to shift back to producing food and energy, in which field the US can do very well indeed.
South America - every non-lunatic country can do pretty well. Unfortunately, lunacy in South America governments is a long and strong tradition with deep cultural roots.
Japan - their own sources seem to feel that they are headed for a recession or near recession due to declining demand and internal inflationary pressures. Japan as a country is extremely sensitive to food and fuel costs, because it just cannot grow enough food to feed its population.
Wednesday, June 11, 2008
Stricken Nearly Blog-Dumb By Awe
PetroChina is selling more bonds to cover their expenses, such as refinery losses. As you'll note from the article, Sinopec is getting hurt worse by the mandate to sell oil below cost. But if you look at PetroChina's last quarterly report, available from their website here, you'll see that oil prices were biting cash flow in the first quarter.
(These reports are fun to read, especially the narratives. How about "Faced with the changes in the operating environment, the Company planned in a scientific manner and responded actively, and realised a continuous development in the principal operations of the Group, stable production and operation, steady increase in the output of major products and further enhancement of the sustainability of the Group. Excluding the impacts resulted from policy factors such as the special levy on domestic crude oil sales and the macro economic controls on the prices of refined products, the efficacy of the Company's operation continues to maintain at a higher level.")
The bottom line is that China will have to raise domestic fuel prices somewhat, and probably will do so this summer. The growth in demand is coming mostly from countries such as China and India, and as prices increase demand growth will be constrained.
The oil moves do not make any sense whatsoever, and I begin to fear that this will end in many broken hedge funds.
Oil rose on the US inventory report, but if you look at stocks of products, they appear to be inline with demand, and the summer peak season isn't peaking very well. The contrast with the previous year's inventory is a bit misleading, because there was an oversupply at the pricing then in effect, which suppressed pricing power. Therefore refineries were going to cut production and buys this year:
(These reports are fun to read, especially the narratives. How about "Faced with the changes in the operating environment, the Company planned in a scientific manner and responded actively, and realised a continuous development in the principal operations of the Group, stable production and operation, steady increase in the output of major products and further enhancement of the sustainability of the Group. Excluding the impacts resulted from policy factors such as the special levy on domestic crude oil sales and the macro economic controls on the prices of refined products, the efficacy of the Company's operation continues to maintain at a higher level.")
The bottom line is that China will have to raise domestic fuel prices somewhat, and probably will do so this summer. The growth in demand is coming mostly from countries such as China and India, and as prices increase demand growth will be constrained.
The oil moves do not make any sense whatsoever, and I begin to fear that this will end in many broken hedge funds.
Oil rose on the US inventory report, but if you look at stocks of products, they appear to be inline with demand, and the summer peak season isn't peaking very well. The contrast with the previous year's inventory is a bit misleading, because there was an oversupply at the pricing then in effect, which suppressed pricing power. Therefore refineries were going to cut production and buys this year:
Petroleum Stocks % Chg fr
(Million Barrels) 06/06/08 05/30/08 06/06/07 Prev Week Yr Ago
------------------------------------------------------------------------------------
Crude Oil (Excluding SPR) (9) 302.2 306.8 349.5 -1.5 -13.5
Total Motor Gasoline 210.1 209.1 203.2 0.5 3.4
Reformulated 2.5 2.1 2.1 19.0 19.0
Conventional 103.1 103.5 112.9 -0.4 -8.7
Blending Components 104.5 103.5 88.1 1.0 18.6
Kerosene-Type Jet Fuel 39.9 39.8 41.4 0.3 -3.6
Distillate Fuel Oil (7) 114.0 111.7 124.6 2.1 -8.5
15 ppm sulfur and Under 71.4 70.0 67.9 2.0 5.2
> 15 ppm to 500 ppm sulfur 18.8 18.6 23.2 1.1 -19.0
> 500 ppm sulfur 23.7 23.1 33.5 2.6 -29.3
Residual Fuel Oil 39.5 38.2 36.5 3.4 8.2
Propane/Propylene 38.5 38.0 37.8 1.3 1.9
Unfinished Oils 86.5 86.8 91.9 -0.3 -5.9
Other Oils (10) 138.1 138.1 145.1 0.0 -4.8
Total Stocks (Excl SPR) (7) 968.7 968.4 1,030.0 0.0 -6.0
Crude Oil in SPR (11) 704.3 704.1 690.3 0.0 2.0
Total Stocks (Incl SPR) (7) 1,672.9 1,672.5 1,720.3 0.0 -2.8
Tuesday, June 10, 2008
Even The Arabs Say Obama's Got A Jewish Problem?
Newsweek pontificates and reassures, but even Arabs are noticing last week's middle-East folly (hat tip The Anchoress, and read the whole post!). Sultan's Notes:
In the meantime, the congressional Democrats need to stop introducing proposals to raise the cost of fuel, or Jesus himself couldn't get elected on the Democratic ticket. This is no longer funny.
The Democratic Party contender’s promises appear to swing from one end of the spectrum to the other depending on the audience he is addressing. He had previously referred to the Cuban embargo as an utter failure and promised to end it; yet when he spoke last year to a Cuban-American audience he promised to maintain it because it is “an important inducement for change”.No kidding. The Church-of- Black-And-Absolutely-Not-Jewish-Jesus is another reason, and the latest about the anti-Semitic postings on his website are truly infuriating a lot of people who aren't Jewish. Really. He didn't put them up, but wouldn't you expect them not to have been tolerated?
The same has also occurred with regards to other issues such as immigration and the decriminalisation of marijuana. However, in the emotional Middle East, it was only when we heard him promise to keep Jerusalem united as capital of the state of Israel forever that we began to realise that he is not greater than the sum of his parts.
Mr Obama later spoke on CNN and backtracked on his unified Jerusalem comments as he once again adjusted his rhetoric to suit the audience he is targeting. Jewish voters have come to realise this about Mr Obama and that is one of the main reasons they are justifiably wary of voting for him.
In the meantime, the congressional Democrats need to stop introducing proposals to raise the cost of fuel, or Jesus himself couldn't get elected on the Democratic ticket. This is no longer funny.
Rupee Weather
At this point, I think the oil craze is a speculative bubble of its own. Demand is clearly impacted by price. I'm guessing that diesel isn't as much, because of the patterns of usage. There probably is a shortage of diesel refinery space, but the last few days on diesel look to be a spec run also.
This cannot structurally continue.
Look at the situation poor India is in:
This cannot structurally continue.
Look at the situation poor India is in:
Rupee is fast approaching the crucial 43 level as the local unit lost nine paise at 42.96/97 against the greenback on Tuesday with demand from oil companies for dollar continuing amid inadequate supply of the US currency and sluggish equity markets.It's a total mess.
...
A dealer with a private bank said with foreign institutional investors continuing to pull out from Indian equity markets, the dollar supply has become inadequate which has further dampened the rupee sentiments.
The capital outflows amounted to more than 4.5 billion dollars so far in the calendar year.
If You're Hot And You've Got A Jet
You could head to Aspen to ski for a few days. Out west it is still snowing in spots, and they are opening up from the 13th through the 15th. You can't go to the water park in Montana, because they shut it down to protect the clients from hypothermia.
If the eastern heat wave and the western cold weather could be averaged, we'd all be having beautiful weather! Except, of course, for the floods in flyover country.
Note: Anthony Watt's got more stories in this post. Personally, I think it is wildly unlikely that anyone in Montana could get hypothermia given their winter weather. But maybe they are worried about Georgian tourists, who can get hypothermia in 60 degree temps.
Not to brag or anything, but it is cooler in so. central GA than on the NE coast. The blueberries were late again.
If the eastern heat wave and the western cold weather could be averaged, we'd all be having beautiful weather! Except, of course, for the floods in flyover country.
Note: Anthony Watt's got more stories in this post. Personally, I think it is wildly unlikely that anyone in Montana could get hypothermia given their winter weather. But maybe they are worried about Georgian tourists, who can get hypothermia in 60 degree temps.
Not to brag or anything, but it is cooler in so. central GA than on the NE coast. The blueberries were late again.
Monday, June 09, 2008
The Really Important Financial News
The Fed is setting up a swaps clearinghouse:
Another article on the mechanism, mostly.
Regulators and 17 banks that handle about 90 percent of the trading in credit-default swaps agreed to changes aimed at easing the risk of a collapse of the $62 trillion market, the Federal Reserve Bank of New York said.Allowing Bear Stearns to default probably would have set off a rolling chain of crashes, and the swaps counterparty risks were a major factor. Fed statement here. One of the major protections would be that the clearinghouse would force institutions to settle up. There have been problems with cross-party trades not being settled.
Morgan Stanley, Deutsche Bank AG and Goldman Sachs Group Inc. are among the banks creating a system to move trades through a clearinghouse that would absorb a failure by one of the market- makers, the New York Fed said today in a statement following a meeting with the firms.
The central counterparty, more automated trading and settlement and other fixes ``will help improve the system's ability to manage the consequence of failure by a major institution, and we expect to make meaningful progress over the next six months,'' New York Fed President Timothy Geithner said in a speech to the Economic Club of New York.
Another article on the mechanism, mostly.
Indian Exchanges
Generally down around 2.7%, but real estate related took a major hit. See article. Last week there was a hefty drop on the fuel price hikes. Article. Tough times.
Saturday, June 07, 2008
Tired, Vagrant Thoughts And Questions
Maybe Hillary Clinton's sole reason for suspending instead of ceding is that technically she can still raise campaign funds? Does anyone know for sure what the law is?
If you believe in omens and synchronicity (which I really don't), do you take it as an omen that Big Brown, rumored to be a sure Triple Crown winner, slumped in last over the finish line? The reason I asked was that this is the first indication I've seen that Ann Althouse has a deep interest in horse racing so I was searching for another explanation for the posting. The jockey's line "He was empty. He didn't have anything left."
If you are a diehard believer in the wisdom of the marketplace, do you believe that it is significant that Intrade is 61-36.3 favoring Obama over McCain? See the index at Intrade, and be prepared for volatility!
Note: It is not a good thing when your opening speech of the general election campaign is so controversial that you have to deny part of it the same day, which Obama did. WaPo does a good job of glossing over this, but the bottom line is that it was a real blunder and an unforced error. It also appeared an acutely political one. I realize that the conventional wisdom is that you have to run for the Democratic nomination on the left and then return to the center for the general election, but Obama seems to be lunging for that center so fast that he is tripping over his own feet a la the three stooges.
On Iran, still from the WaPo article:
He could be a super secret wily genius who is trying to ensure that the Israelis deal with the problem so that he has plausible deniability on this tetchy problem given his earlier statements. He has called Israel a "constant sore", and certainly Iran is one too. Notably, Iran's support for the Lebanese Hezbollah, which recently got control of some key transport decisions and basically got control of Lebanon's government. So such a strategy would probably put Obama in a position in which at least one "constant sore" was severely weakened. It would certainly shuffle the mideast cards.
But if that is true, the man is hardly a dove of peace. Indeed, it is a cynical and brutal strategy if it is a thought-out strategy, and it is also quite reckless.
Or he could just be a glib, thoughtless person with no real concept of what he's doing and the tendency to speak to his audience, weaving an appealing story line a la Wright. If so, I'm scared. It's like loading an AR-15 and handing it to your five year old to play with.
In fact, either way, I'm scared, and I have the very strong feeling that I will be showing up at the polling place in November with a barf bag in my hand. I'm sure it will be a unique experience for the poor voter next to me, as I select McCain and upchuck. Better a senile old geezer who knows caution in war than a reckless fool or megalomaniac.
As a side note to this whole issue, Iran is supposed to have at least 14 tankers full of crude off its coast. The official explanation is that they are waiting for a better price at the refinery. I have some skepticism on that score; they might be worried about having their oilheads bombed and be keeping these as a backup.
The MoM Mood can best be expressed pictorially:
If you believe in omens and synchronicity (which I really don't), do you take it as an omen that Big Brown, rumored to be a sure Triple Crown winner, slumped in last over the finish line? The reason I asked was that this is the first indication I've seen that Ann Althouse has a deep interest in horse racing so I was searching for another explanation for the posting. The jockey's line "He was empty. He didn't have anything left."
If you are a diehard believer in the wisdom of the marketplace, do you believe that it is significant that Intrade is 61-36.3 favoring Obama over McCain? See the index at Intrade, and be prepared for volatility!
Note: It is not a good thing when your opening speech of the general election campaign is so controversial that you have to deny part of it the same day, which Obama did. WaPo does a good job of glossing over this, but the bottom line is that it was a real blunder and an unforced error. It also appeared an acutely political one. I realize that the conventional wisdom is that you have to run for the Democratic nomination on the left and then return to the center for the general election, but Obama seems to be lunging for that center so fast that he is tripping over his own feet a la the three stooges.
On Iran, still from the WaPo article:
In essence, Mr. Obama promises an improved version of the Bush administration's three-year-old strategy of offering, in conjunction with European allies and Russia, economic and political favors to Iran in exchange for an end to its nuclear program and threatening it with sanctions if it refuses. Mr. Obama would have the United States join the Europeans in having direct discussions with Tehran, and perhaps he would agree to bigger incentives. In exchange, he would seek European and U.N. Security Council support for far tougher sanctions than the Bush administration has obtained -- such as a ban on Iranian gasoline imports, which is probably the strongest measure available short of war.Whoa! Whoa! This is hardly an improved version of the Bush strategy, because that is not a step short of war, that is war. Iran has very little in the way of refinery strategy; this is forcing them to the Tojo options - surrender or attack quickly, before you lose the ability to do so. Does Barack Obama understand what the hell he is talking about?
He could be a super secret wily genius who is trying to ensure that the Israelis deal with the problem so that he has plausible deniability on this tetchy problem given his earlier statements. He has called Israel a "constant sore", and certainly Iran is one too. Notably, Iran's support for the Lebanese Hezbollah, which recently got control of some key transport decisions and basically got control of Lebanon's government. So such a strategy would probably put Obama in a position in which at least one "constant sore" was severely weakened. It would certainly shuffle the mideast cards.
But if that is true, the man is hardly a dove of peace. Indeed, it is a cynical and brutal strategy if it is a thought-out strategy, and it is also quite reckless.
Or he could just be a glib, thoughtless person with no real concept of what he's doing and the tendency to speak to his audience, weaving an appealing story line a la Wright. If so, I'm scared. It's like loading an AR-15 and handing it to your five year old to play with.
In fact, either way, I'm scared, and I have the very strong feeling that I will be showing up at the polling place in November with a barf bag in my hand. I'm sure it will be a unique experience for the poor voter next to me, as I select McCain and upchuck. Better a senile old geezer who knows caution in war than a reckless fool or megalomaniac.
As a side note to this whole issue, Iran is supposed to have at least 14 tankers full of crude off its coast. The official explanation is that they are waiting for a better price at the refinery. I have some skepticism on that score; they might be worried about having their oilheads bombed and be keeping these as a backup.
The MoM Mood can best be expressed pictorially:
