Yearly Archives: 2008

Darkness is Coming

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The worst part about winter is the lack of daylight. The cold weather is unpleasant, the leafless trees and heaps of snow become monotonous, but the lack of daylight is what saps the life out of you. To get a good idea of exactly how bad it is, imagine how little daylight there is in the darkest days of December–and now imagine a day in late June with the same amount of daylight. It is a green, warm day in June . . . and the sun doesn’t rise until 7:00 AM and it sets at about 4:00 PM. That picture of summer is . . . dark. The very idea seems to suck the life out of summer. And that is what the darkness does to winter. If December was blazing with all the brilliant light of June, it wouldn’t be nearly half so bad as it is, even if it was still cold and full of snow.

The darkness begins to grow oppressive, at the beginning of November. It is like some critical point has been reached, and some switched is flipped. Life has become . . . lifeless. Worse, at the beginning of November there is about two full months of the darkness growing worse before it even starts to get better. At the beginning of November I sit there and think, “Darkness is coming.” Months and months fighting that soul sucking force–not to be too dramatic of anything.

The oppressive darkness will remain until the end of February, but at least with the turning of the new year there is one ray of hope: The world is starting to grow brighter again. Who cares about celebrating the calendar new year–what I want to celebrate is the change to increasing daylight. That is a thing to party about, especially in the middle of the winter.

In this darkest time of the year, a sunny day feels like nothing more than a fleeting hour of light. You turn around once and it is night again, and you didn’t even have a chance to begin enjoying the daylight. And on a cloudy day it feels like the sun has never risen. That time of the summer when a sunny day seemed to go on without an end is now a distant memory, like a dream. Life has become a daily grind where one plods forward, one foot after the last, head down. Occasionally you look up to see only the dreary landscape around you. For a moment you glance ahead, hoping to catch a glimpse of spring, and then you look down, plodding on again, one day of winter leading to the next.

An end does come, eventually. By March the anticipation growing throughout February is ready to burst forth. Hope is on the air. Everything that felt so dull and depressing before is now full of life and ambition. Everything seemed pointless and uninspiring in those winter months. Now in March ambition and plans abound. Nothing feels impossible, or too far fetched.

Yes, March and April are those months when vigor comes rushing back. Every day is a better day, because every day the sun rises earlier, and sets later. Sunny day leads on to sunny day, and even those cloudy rainy days seem more full of life than the best day in the middle of December.

It’s a great time of year. The only problem is that right now this is the first half of December, so all that is still three months away.

It’s going to be a long winter.

I am bothered by the lack of transparency

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From the Chicago Tribune….

Blagojevich is accused of a wide-ranging criminal conspiracy, including alleged attempts by the governor to try to sell or trade the U.S. Senate seat left vacant by President-elect Barack Obama in exchange for financial benefits for the governor and his wife. Blagojevich also is accused of obtaining campaign contributions in exchange for other official actions.

In my opinion, there are only two things that make this wrong. Number one, the dang guy was going to be selfish and he was going to keep all the money for himself. Number two, the bidding process was not transparent and open to to all comers. Other then that, I think selling it to the highest bidder is a great idea and one that Governor Paterson in New York should give serious thought to.

Look, New York State is short of money. People spends millions of dollars trying to win a senate race in New York state. I say that instead of giving all that money to TV stations to torture us all with ads, they should just put the money straight into the treasury to benefit everyone in the state.

Now some fools might protest that we won’t get the best person for the job this way. But given that Paterson is most likely going to appoint someone with no political experience to Hillary’s vacant spot just because they have a famous last name, I don’t think that argument holds much water.

Proof of Deflation?

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From Bloomberg….

Treasuries rose, pushing rates on the three-month bill negative for the first time, as investors gravitate toward the safety of U.S. government debt amid the worst financial crisis since the Great Depression.

Calculated Risk says…

My guess is the banks are parking the TARP money in short term treasuries – and that has pushed the yield to zero.

If I knew for a fact that this was true, I would be rolling around on the floor laughing. Just think about it, the government borrows a whole lot of money to bail out the banks and what do the banks do? They loan it back to the government.

A lot of people are going to use this as proof that we are in a deflationary spiral. But I would bet dollars to dimes that this is not the case. I expect the price of treasuries to drop as fast the price of oil did.

Think about it. A lot of oil producers are going to have to start selling off their reserves to maintain themselves in the style to which they have become accustomed. Russia has already started to do this. I expect that China will have to slow down on the purchases of treasuries if not halt them completely within the next six months. These factors combined will cause interest rates on treasury bills to shoot up.

Then the fun will really start. But on the bright side, I don’t think people will be worried about deflation anymore.

This is becoming a trend

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From the Telegraph….

Taliban militants launched a second raid in as many days on Nato supplies in Pakistan setting fire to nearly 100 more vehicles destined for coalition forces in Afghanistan.

The latest attack on a container terminal near the northwest city of Peshawar came a day after Taliban militants launched the biggest such raid to date, destroying nearly 200 vehicles in the area.

This time, the attackers set nearly 100 vehicles alight including jeeps and 20 supply trucks after dousing them with petrol, police said.

“It was almost the same type of attack as the one conducted by 200 armed militants” on the previous night, said a police official. “The militants fled from the scene when police arrived.”

Speaking of trends, Pakistan has moved against Lashkar-e-Taiba. From the Guardian…..

Pakistan launched its first major operation against the militant group accused of carrying out the Mumbai attacks, raiding a camp of Lashkar-e-Taiba and capturing a man identified by India as one of the masterminds behind the terrorist strike.

According to local reports, 12 members of the banned group including Zaki-ur-Rehman Lakhvi, accused by Delhi as being one of the planners of the carnage in India’s financial centre, were arrested in Sunday night’s raid in the hills above Muzaffarabad, the capital of Pakistan-controlled Kashmir. A helicopter gunship hovered overhead and gunfire was heard.

Sounds great don’t it? But we have been down this road before. From later on in the article….

In the past, Pakistan has arrested the founder of LeT, Hafiz Saeed, but then quietly let him go weeks later.

Lashkar-e-Taiba has been banned for years now. But that has not stopped it from operating.

Oil Prices Too Low Even For Saudi Arabia

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From CBS….

Saudi Arabia reportedly needs to sell oil for at least $55 dollars a barrel to cover the cost of running the country. Fossil fuels finance 75 percent of the country’s entire domestic spending budget, but oil is selling for below that breakeven price.

This metric is a little misleading. Saudi Arabia needs to sell a certain amount of oil at $55 dollars a barrel to fund their country. I have never seen anyone say what that amount is, but the point is an important one to remember. It is the reason that OPEC has little real pricing power in an economic downturn.

In theory OPEC can raise the price of oil just by cutting production. In fact, Saudi Arabia could do this all by themselves if they wanted to. The problem is that a price rise is not enough solve many oil producers funding problems . To keep from going broke, a lot of oil producing countries (Iran, Venezuela, Russia, among others) need a rise in the price of oil without demand destruction. In the current environment, that is a quite a trick to pull off.

That is why when Iran and others scream for OPEC to cut production they really mean that they want Saudi Arabia to cut production. They have no intention to cut production themselves. The Saudi oil minister Ali Al-Naimi makes this very point later on in the article saying….

“Iran tries to keep the price way up; and Venezuela’s trying to keep the price way up. You don’t consider that oil as a weapon?” Stahl asked.

“If you looked at these countries you just named, every one of them would like to sell every barrel they can,” Al-Naimi commented.

“At as high a price as they can get away with,” Stahl remarked.

“Right,” Al-Naimi said.

As a result of these kinds of games, I don’t see OPEC cuts as being very successful at raising the real price of oil anytime soon no matter what headline cuts they announce. Oh sure, the price might jump up and down some, but I don’t think you will see a sustained rise anytime soon (short of a war occurring).

However, in the long term, the real price of oil is going to rise. Simply put, if Saudi Arabia can’t support itself at the current price, no petro state can support themselves. That means that a lot of petro states are going to go bankrupt in the near future. Iran and Venezuela are in a particularly weak position with Russia and Mexico not far behind. The resulting chaos will drive prices back up. It may even drive them way up.

So enjoy the cheap gas you are going to get for the next year or so. It will not last.