The original plan was for me to fly out of state to my boss’ headquarters and spend as much time as I needed learning the ins and outs of how his home-based department operated so that I can work in tandem with them in my remote location. One of the key items on the agenda Click Here to continue reading.
If you want to know just how ridiculous our agricultural programs are, consider this: for about half a century, we priced milk based on how far the cow was from Eau Claire, Wisconsin. No, I swear, I am not making this up. Apparently, the USDA scientifically determined that Eau Claire was the perfectest place in the entire world to keep cows, and that therefore the farther you were from that fabled city, the harder you must find it to produce milk.
Macro Man put up a post arguing that oil prices had risen to far to fast to be justified by the fundamentals. In response, someone calling themselves Moe Gamble said….
Oil started to go into a trading range on April 23. Saudi Arabia was bringing on 300,000 barrels a day, and the price would have stabilized for a couple of months.
What happened is that we had strikes in the UK and Nigeria that took roughly 380,000 barrels a day out of May supply. To make matters worse, this lack of supply was not spread smoothly through the month. It was bunched up into a couple of weeks, and the effect of those weeks just started to hit. Traders had to pull off shorts and the price zoomed up.
Also, it turned out that Saudi Arabia had lied about when those extra 300,000 barrels a day were coming online. They had announced to the press that production had started the third week of April. Now it looks like the new production really didn’t come online for another 2-3 weeks (if then).
Prices would normally come down in a few weeks as this production started returning to the inventory reports. But you can kiss that good-bye because we have a special situation right now–China and India have been holding off on purchases, and a flood of new demand will be hitting when they get their act together in the next week or two. India: http://timesofindia.indiatimes.com/BPCL_starts_rationing_fuel_supplies/articleshow/3061069.cms. China: http://in.reuters.com/article/asiaCompanyAndMarkets/idINPEK15115620080521.
This has been China’s normal cycle for at least the past year. Foot-dragging then massive buying when the diesel runs out. And now they are burning diesel in power plants to make up for a lack of coal related to the earthquake.
Meanwhile, Russia’s exports are off 3.3% from last year, and existing production has a decline rate somewhere between 4.5% and 8% (and rising).
That started off a back and forth discussion that was very interesting. You should read the whole thread.
One of the overlaps between my old job duties and my new duties is monitoring an effort to improve our service to a key customer. As with a similar initiative about a year ago, I am frustrated with merely noting the problems we are having. I don’t think using extraordinary focus to compensate for systemic Click Here to continue reading.
Freddie Mac issued its quarterly “report” and gave clues as to how to paint lipstick on pigs and actually get away with it. The trick is to put $157 billion (from $32 billion before) over to Level 3, where absolutely no haircut is then reported. Readers may recall that Level 3 essentially allows the reporter to make up their own prices separate from market prices. In the case of Freddie, management has determined that “market prices don’t make any sense”, hence the move. This writer would argue that the quasi-official institutions like the GSE and foreign central banks themselves are creating massively distorted Soviet Union style prices that if anything makes even the market prices that Freddie dismisses too high.
From Macro Man (Click on link for graphs)……
Regular readers will recall that when the Fed cut 50 bps in September, Macro Man opined that the dollar was toast. When BB and co. slashed rates by 75bps when the stock market got Kerviel’ed, it seemed like they were hitting the panic button. And what’s happened since then? Median one year inflation expectations have rocketed from 3.1% to 5.2%. Sadly, Bloomberg doesn’t have historical data for average 12 month inflation expectations; those are now a resounding 7%!!! It seems as if not everyone is living in the Fed’s hedonically and seasonally adjusted, core goods world.
The rise in inflation expectations is all the more remarkable when put into historical context; they are now the highest since February 1982. Now, just because you expect higher inflation and demand higher wages doesn’t mean you’ll get ’em, especially in the context of an incipient recession. But with the balance of probability favouring a Democratic sweep come November, what odds that there emerges a legislative response to the juxtaposition of near-record corporate profits as a % of GDP along with stagnant/negative real wage growth?
From the Daily Rap via Calculated Risk……
The truth is their data is wrong. The market has, obviously, taken the view that the worst of the writedowns are behind us, and if anything it’s now just a macroeconomic problem we face. I think that’s dead wrong. We’re now entering the phase where the macro impacts earnings, but also the stage where real cash losses start to hit the banks (subprime and Alt-A is primarily a mark-to-market issue, but HELOCs are going to be large, outright losses). Once WAMU, WFC, BAC and JPM start to get data through on how rapidly their HELOC portfolios are deteriorating, watch the losses pile up. I’m talking realised losses, not mark-to-market writedowns.”
Courtesy Of Marginal Revolution, I came a across this quote from this essay from Interfluidity…..
If the Fed were to blow through the rest of its current stock of Treasuries, it would have invested more than $2500 for every man, woman, and child in America. Public investment in the financial sector would have exceeded the direct costs to date of the Iraq War by a wide margin. Would that that be enough? If not, how much more? Just how large a risk should taxpayers endure on behalf of companies that arguably deserve to fail, to prevent “collateral damage”? Have we considered other approaches to containing damage, approaches that shift costs and risks towards those who benefited from bad practices, rather onto the shoulders of taxpayers and nominal-dollar wage earners? Does this sort of policy choice belong within the purview of an independent central bank?
In case you have not been keeping track, it has already blown through more then half its stock of Treasuries.
From the AP (Hat Tip, Crunchy Con)……
The Bush administration on Friday urged a federal appeals court to stop meatpackers from testing all their animals for mad cow disease, but a skeptical judge questioned whether the government has that authority.
The government seeks to reverse a lower court ruling that allowed Arkansas City, Kan.-based Creekstone Farms Premium Beef to conduct more comprehensive testing to satisfy demand from overseas customers in Japan and elsewhere.
Less than 1 percent of slaughtered cows are currently tested for the disease under Agriculture Department guidelines. The agency argues that more widespread testing does not guarantee food safety and could result in a false positive that scares consumers.
If you don’t read calculated Risk, here are some stories you missed this week…
Consumer credit increased by $15.3 billion for the month to $2.56 trillion, the biggest monthly rise since November, the Federal Reserve said today in Washington. In February, credit rose by $6.5 billion, previously reported as an increase of $5.2 billion.
Vallejo, California, officials voted to file for bankruptcy because the San Francisco suburb isn’t able pay its bills after costs for police and firefighters soared and the housing market’s slide cut into tax revenue.
Pretty soon people are going to be complaining about how the rating agencies rated municipal debt.
From the Wall Street Journal…..
Fannie Mae announced plans to shore up its capital after recording a loss of $2.19 billion for the first quarter and warning that losses stemming from mortgage defaults are likely to be even worse next year.
The government-sponsored provider of funds for home mortgages expects to raise about $6 billion through the sale of common and preferred shares. Regulators have been prodding Fannie and its main rival, Freddie Mac, to bolster their capital to provide more protection against the growing costs of mortgage defaults.
The latest plan comes on top of $7 billion Fannie raised in December …
They are going to need a government bail out before long.
The Pentagon’s $1 Trillion Problem will not tell you anything you don’t already know. But every now and again it is good to be reminded just how dysfunctional the government is.
I spent a considerable portion of the week angry, and in fact woke up angry Monday morning after dreaming about workplace injustices. I don’t care to revisit the details, but, like Western pioneers marking bad water, I will give a brief notice on these ill fortunes. Perhaps when some history has accumulated around these events Click Here to continue reading.