From The New York Times…
“It doesn’t matter how much Hank Paulson gives us,” said an influential senior official at a big bank that received money from the government, “no one is going to lend a nickel until the economy turns.” The official added: “Who are we going to lend money to?” before repeating an old saw about banking: “Only people who don’t need it.”
A cash grain farm in the cornbelt sold recently for an eyebrow-raising price just shy of $9000 an acre. It sold for farmland, not industrial development. I suppose that shouldn’t be surprising when USA Today reports that yachts over 80 feet long are still selling at all time high levels despite these disastrous financial times. But I can’t see how corn and soybeans will pay for such high-priced land. The grain markets are way down from summer. Demand for grain from developing countries is down. At least five ethanol plants that were supposed to turn corn into fuel have declared bankruptcy. Fertilizer, seed, and fuel costs are still historically high— fertilizer is selling for as much as a thousand dollars a ton. Some farmers have already bought their seed and fertilizer supplies for next year, thinking that these costs would continue to rise along with grain prices. What if grain prices stay down? We could be looking at a possibility of what one farmer I talk to a lot calls “instant bankruptcy.”
It’s not easy, being an airline. Thanks to high fuel costs, United lost $252 million in the third quarter, on an operating basis. On the other hand, United was hedged. And as a result of those hedges, United ended up losing, um, $779 million. As a result, United stock rose by 9% today, to $13.75 a share.
From in the Pipeline (on Triazadienyl Fluoride)….
Now this is a fine substance. Also known in the older literature as fluorine azide, you make it by combining two other things that have already made my “Things I Won’t Work With” list. Just allow fluorine (ay!) to react with neat hydrazoic acid (yikes), and behold!
Well, what you’re most likely to behold is a fuming crater, unless you’re quite careful indeed. Both of those starting materials deserve serious respect, since they’re able to remove you from this plane of existence with alacrity, and their reaction product is nothing to putz around with, either.
The rest of the post details how they made the stuff without getting killed. I imagine that nobody got bored in the process.
These reports from Londonstani on the Darfur conflict are interesting. They don’t focus on atrocities like most other reports. Instead they focus on the combatants. They won’t change how you look at the conflict, but there are some interesting tidbits to be found in these reports.
Here is part one (don’t worry, they are all short). Here is part two. And here is part three.
“Bloom County” had five times the edge of the work I do now. In 1986 I had a cockroach scream, “Reagan sucks!” in print size that took up the entire cartoon box. Nobody blinked — 1,000 newspapers, quiet as a mouse. Now I draw a woman wearing a Muslim scarf, and the frantic publisher of the Washington Post Co. is on the phone at 9 p.m. telling me — I am not making this up — to adjust my character’s hair so she doesn’t look too unkempt.
Fear doesn’t so much rule the wood pulp news industry. More like pee-on-themselves existential terror.
This week’s poem of the week is Rich Mullen’s song Creed. In an ironical way, it goes along nicely with this week’s essay.
This week’s rant of the week is The Persistent Myth of Pre-Taliban Anarchy
This week’s essay of the week is the pomocons, Freddie, and god.
The Dutch government says it will invest 10 billion euros ($13.4 billion) in banking and insurance company ING Groep NV to boost its capital position.
Finance Minister Wouter Bos says the move was necessary to calm “market expectations” even though the bank was “healthy.”
Bos said at a news conference Sunday the government’s stake would be around 8.5 percent of the company, but the investment is temporary. The government will name two members to ING’s supervisory board.
ING said separately it will cancel dividends for the year and the company is reviewing executive pay.
As a result of this security, TIPS have traditionally offered a pretty low yield. But recently that yield has been rising; the 20-year issue was this week offering 3%. As a contrast, the index-linked gilt (a similar security issued by the British government) with a 2035 maturity was offering a yield of just 1.5%. Three percent is better than the yield on offer from most money-market funds, and it will rise with inflation.
And then latter on in the same article…
Nevertheless, lower inflation seems fully reflected in prices, to say the least. One measure of value is the break-even inflation rate, which is the rate of annual price rises above which the investor makes more from TIPS than from conventional Treasury bonds. Mark Capleton, a strategist at Royal Bank of Scotland, says the break-even inflation rate is zero over the next five years and just 1% over the next ten. It would be a remarkable period of history for such a low rate to be achieved. Indeed, the temptation for governments round the world in the face of the credit crisis will be to inflate the problem away.
Just to make it perfectly clear, the only way you would make more money buying a conventional Treasury bond over TIPS (which is the same as a treasury bond except it is indexed for inflation) is if inflation stays below zero over the next 5 years and below 1% over the next 10. If inflation stays at 0% or above for the next 5 years or above 1% for the next 10, you will make more money buying TIPS. With those kinds of odds, why in the world would you ever buy a conventional Treasury bond.
To me, this is proof that the treasury market has gone insane. I can imagine that inflation rates might reach reach zero for one year. But 5 years? I think you will see solders on the streets handing out free dollar bills before you see that happen. I don’t have much confidence in the powers that be, but I have confidence that the can create inflation if they really set their mind to it.