Archive for May, 2008
Weekend Video Show: Highway Men
Saturday, May 24th, 2008Will the real America please stand up:
” … and I am still alive — and I’ll be back again:
Step by step the truth is getting out …
Friday, May 23rd, 2008… and it will fall upon the dormant masses like an avalanche of rocks:
Paul B. Farrell from MarketWatch has read Kevin Phillips’ book
“Bad Money: Reckless Finance, Failed Politics & the Crisis of American Capitalism”
and concludes:
“No matter who’s elected president, America will soon see a massive statistical curtain pulled back, exposing a con game of historic proportions. And when that happens, you and I will suffer another ear-splitting global meltdown, bigger than today’s housing-credit crisis, dragging us deep into a recession and bear market for years.”
Backgrounders:
“The Illusions of Hedonics” http://mises.org/story/1873
“What’s Wrong With Economic Growth?” http://mises.org/story/1877
Brazil wants to have a SWF
Friday, May 23rd, 2008May 23 (Bloomberg) — Brazilian Finance Minister Guido Mantega said the plan to create a sovereign wealth fund is nearly done and will be sent to President Luiz Inacio Lula da Silva next week.
“President Lula established that we created the sovereign wealth fund,'’ Mantega told reporters today in Brasilia. “It will be a very important instrument for the country.'’ –
http://www.bloomberg.com/apps/news?pid=20601086&sid=aJBVaMBkPT7U&refer=news
Comment: Playing in the same league as the big boys has always been the Brazilian dream. Brazil has been doing it in soccer for decades. Now, the country is trying to get serious. Although being a tiny net creditor, and that for only a few months after decades of being mired in foreign debt, Brazilian politicians feel that the time has come to join the gang made up so far by Arabian oil states, China and Norway. Brazil wants to have a sovereign wealth fund, although its foreign assets are only a tiny bit higher than its foreign debt. It may well be that with the Brazilian sovereign wealth fund the old story of Brazilian wealth will be repeated again: accidentally won and accidentally lost. Why not just pay back the old debt? Nay, the Brazilian authorities want to play with real money, and go out investing some $200 billion. But what will happen when the price of the foreign stocks bought with this money comes crashing down? Then Brazil again will be stuck with a net foreign debt of $ 100 billion or more.
Antony Mueller
It’s the dollar, stupid
Friday, May 23rd, 2008– LONDON (Reuters) - Oil prices at a record high above $135 a barrel are rising due to market sentiment rather than a shortage of supply, Royal Dutch Shell’s chief executive said on Thursday.U.S. crude oil hit an all-time peak on Thursday, climbing to $135.09, lifted by concern about long-term supply and a host of predictions of further rises from influential investment banks and investors.
“What we say and what we see is there are no physical shortages,” Shell’s Jeroen van der Veer told Reuters television. He runs the world’s second-largest fully publicly traded oil firm by market value.
“There are no tankers waiting in the Middle East, there are no cars waiting at gasoline stations because they are out of stock. This has to do with psychology in the markets and you cannot forecast psychology”. –
http://uk.reuters.com/article/oilRpt/idUKL2232289720080522
Comment: Come on, dear CEO, “psychology” is really the dumbest explanation for rising oil prices that you could give. No, it is not “pyschology”, it’s the US dollar, stupid.
Antony Mueller
Despite all the hype, reality is about to set in
Friday, May 23rd, 2008–
May 23 (Bloomberg) — U.S. stocks fell, extending the market’s biggest weekly retreat since February, on concern a worsening housing recession and rising energy costs will prolong the slump in corporate profits.
Ford Motor Co. declined for a sixth day after the second- biggest U.S. automaker said consumers are buying fewer trucks as fuel prices climb. Nordstrom Inc. led retailers to a six-week low as crude rose. All five homebuilders in the Standard & Poor’s 500 Index slid on a report showing sales of previously owned homes matched an all-time low in April. Goldman Sachs Group Inc. dropped for a ninth day, the longest streak of losses since the company went public in 1999, on concern brokerage earnings will be hurt by further writedowns on mortgage-related assets. –
http://bloomberg.com/apps/news?pid=20601087&sid=ae_.XHHDOszg&refer=home
Comment: My guess is that markets will linger on during the summer period until they plunge in fall, either from exhaustion or by shock.
Antony Mueller
More shortages in the land of plenty
Friday, May 23rd, 2008May 23 (Bloomberg) — A day’s drive west of Venezuela’s Orinoco Belt, where the largest liquid deposit of oil in the Western Hemisphere helped deliver $13.9 billion for social programs last year, security guard Efrain Rengifo waits in a queue outside a government-run grocery.
The line spills out of the concrete-block Super Mercal in Barinas, capital of a beef-producing region in the home state of President Hugo Chavez. The avowed socialist is trying to redistribute the country’s wealth, blunt U.S. influence and rid capitalism of what he calls its “anti-values.'’ Socialism is Christ; capitalism is Judas, Chavez says.
http://bloomberg.com/apps/news?pid=20601109&sid=a6qMqmU1dCeM&refer=home
Price inflation in emerging countries
Thursday, May 22nd, 2008
Return of the monster
Thursday, May 22nd, 2008The Economist writes: “RONALD REAGAN once described inflation as being “as violent as a mugger, as frightening as an armed robber and as deadly as a hit-man”. Until recently, central bankers thought that this thug had been locked up for life. Thanks to sound monetary policies, inflation worldwide had stayed low in recent years. But the mugger is back on the prowl.
Even though America is close to recession and growth in other developed economies has slowed, inflation is rising. Jean-Claude Trichet, president of the European Central Bank, this week gave warning about the mistakes of the 1970s, when inflation was let loose at huge cost to growth. His words were aimed at rich-country central banks, but policymakers in emerging economies are the ones who should most take heed. In countries such as China, India, Indonesia and Saudi Arabia even the often dodgy official statistics show prices have risen by 8-10% over the past year; in Russia the rate is over 14%; in Argentina the true figure is 23% and in Venezuela it is 29%. If you measure the numbers correctly, two-thirds of the world’s population will probably suffer double-digit rates of inflation this summer. –
http://www.economist.com/displayStory.cfm?source=hptextfeature&story_id=11409414
Comment: I’m tired of saying that we told you so.
Antony Mueller
No longer fooled
Thursday, May 22nd, 2008– May 22 (Bloomberg) — Pacific Investment Management Co.’s Bill Gross said the U.S. underestimates inflation through the methodology used to track consumer prices, making some emerging economies better real growth investment candidates.
Changes in the way the Bureau of Labor Statistics measures prices over the past 25 years have led to the understating of inflation by at least 1 percent, Gross, co-chief investment officer of Newport Beach, California-based Pimco, said in a commentary on the company’s Web site today. The Federal Reserve’s focus on “core'’ instead of “headline'’ inflation has also helped understate the increase in prices, Gross said. –
http://www.bloomberg.com/apps/news?pid=20601087&sid=aKrj06nAn.0c&refer=home
Comment: We’ve talked about that again and again. Finally, the truth seems to trickle in. Yet there is one correction appropriate in the Gross’ statement: add a “at least” before one percentage point.
Antony Mueller