http://www.nytimes.com/2008/02/27/business/27gas.html?_r=1&ex=1361768400&en=8a2b6290700f2783&ei=5088&partner=rssnyt&emc=rss&oref=slogin(http://)
(http://graphics8.nytimes.com/images/2008/02/27/business/27gas-600a.jpg)
Quote
Gasoline prices, which for months lagged behind the big run-up in the price of oil, are suddenly rising quickly, with some experts saying they could approach $4 a gallon by spring. Diesel is hitting new records daily, and oil settled at a record high of $100.88 a barrel on Tuesday.
The increases could not come at a worse time for the economy. With growth slowing, energy increases that were once easily absorbed by consumers are now more likely to act as a drag on household budgets, leaving people with less money to spend elsewhere. These costs could worsen the nation’s economic woes, piling a fresh energy shock on top of the turmoil in credit and housing.
“The effect of high oil prices today could be the difference between having a recession and not having a recession,†said Kenneth S. Rogoff, a Harvard economist.
The depth of the nation’s economic problems became clearer Tuesday with the release of figures showing that prices at the producer level rose 1 percent in January from December, driven in large measure by energy costs. Compared with a year ago, prices were up 7.4 percent, the worst producer price inflation in the United States since 1981.
Other new figures showed that home prices around the country are falling at an accelerating pace, suggesting no end is in sight for the housing slump.
Don't worry, we'll have a billion dollar BRT system fully operational and up and running in 17 years. Just hold on, help is on the way.
nope...time to buy commodities & make $$ off the situation
The problem is the falling dollar. Um, I don't think Nature has produced anything that has fallen faster then our greenback. Oh wait, Bush's ratings. haha
Quote from: stephendare on February 27, 2008, 02:22:38 PM
Quotenope...time to buy commodities & make $$ off the situation
no shit, driven.
gold and commodities.
wheat futures are brilliant in fact.
myself? a fan of cotton. only so much farming acreage and corn, soybeans and wheat have pushed out cotton over the last few years. but the global population and industrial booms in china & india call for more of it - over 1.6 billion living in hot, humid conditions (they aren't wearing wool or polyester). and that is all that needs to be said.
ps - don't panic, get a bike.
I have a bike. I bought it at the Goodwill Store for $17.00. It's a Schwinn. I put a basket on it for $14.00 but, I use it to ride across the street to work. I'm a huge fan of the Goodwill. Gosh, I'm going "Freegan". Oprah did a show on it today.
Is it time to panic? When the president doesn't read the newspaper... probably.
QuoteWhen taking the question about the $4 milestone, Bush told the reporter, "That's interesting. I hadn't heard that."
http://money.cnn.com/2008/02/28/news/economy/bush_energy_policy/index.htm
Quote from: Lunican on February 28, 2008, 03:53:15 PM
Is it time to panic? When the president doesn't read the newspaper... probably.
QuoteWhen taking the question about the $4 milestone, Bush told the reporter, "That's interesting. I hadn't heard that."
http://money.cnn.com/2008/02/28/news/economy/bush_energy_policy/index.htm
Why would it be helpful to read the newspaper when you receive all necessary information via divine intervention.
I agree with the bike and the commodities suggestions. Unfortunately, this type of situation only affects the mid to lower class. The rich will move to Europe before the dollar is impacted anymore, and they'll continue to throw money into their gas-guzzling Hummers. You'll be able to differentiate those that only imitated the rich from the actual rich very soon. The wannabes will be the ones riding the top of the line carbon fiber race bikes and claiming they're riding for their health while their Range Rovers sit in the drive, lol.
I want one of these:
www.smartusa.com
Range Rovers don't sit in driveways. They fall apart in driveways, on the interstate, in the park...just about anywhere you can take a Range Rover--they fall apart. This I know all to well.
Oil goes over 101 a barrel today and its not news worthy. Maybe we need 150 a barrel, a new president who will take over Iraq for oil and get us a return on the 80 billion we spend in Iraq every 6 months. :P
This is being partially driven by market speculation in commodities much like the net stock bubble and the real estate bubble. All of these clowns buying gold, for example, as if it were a real investment, like stock in an actual company, drive up the price. If you look at other commodities which are less commonly traded, there prices are not up nearly as much in percentage terms. The dollar being weak right now is a problem but I believe that the feds should and might intervene to put an end to the currency speculation. The same sort of speculative fever has driven the dollar down. The fundamentals for the US economy long term are very strong so the dollar cannot stay down for long. And, there is no shortage of the commodities in question so the run up in prices is simply not sustainable. So, the dollar will be back and the commodity prices will also come crashing down to earth before too long too.
Perhaps it is not so much the price of commodities rising as the value of the dollar falling, thus each devalued dollar is buying less of that particular commodity, whose value is remaining more constant from the standpoint of other currencies (i.e. the Euro, which is also "rising in cost" relative to the dollar?
Quote from: Midway on March 07, 2008, 01:43:46 PM
Perhaps it is not so much the price of commodities rising as the value of the dollar falling, thus each devalued dollar is buying less of that particular commodity, whose value is remaining more constant from the standpoint of other currencies (i.e. the Euro, which is also "rising in cost" relative to the dollar?
Exactly. There is an inverse relationship. This, together with the speculators, is driving commodity prices higher.
Quote from: stephendare on March 07, 2008, 12:34:59 PM
River, I wish anyone else shared your optimism.
No one whose finances depend on things working out for the next five years seems to have any.
Try, for one, Jack Welch, the legendary former CEO of GE. Here is a link to an interview (scroll down a little to find it): http://www.kudlowsmoneypolitics.blogspot.com/
Actually, I will post the transcript of Welch's appearance on CNBC's Kudlow and Co from Kudlow's website:
QuoteKudlow: Jack Welch, welcome back to the show, sir. We love seeing you as always. Did Senator Obama listen [to the advice you gave him on CNBC back in January] from what you now know?
Welch: He’s the smoothest guy in town, I’ll tell you. He put me under the table, and didn’t listen to a word I said.
Kudlow: That’s right. Didn’t listen to a word you said. And that’s where I want to pick up on this. Now let me ask you, first up, Warren Buffett was on the network yesterday or the day before. He thinks we’re in recession. Do you?
Welch: Well he said we’re in a practical recession. We’re certainly in a slowdown. But if I had to bet a dollar or two, I’d bet we’ll have a positive GDP in the first quarter, and the second quarter. But it’s certainly is a slowdown of enormous proportions from what we were experiencing.
Kudlow: Alright, I like your optimism very much, as always. So let me ask you, you’ve seen a lot more of Hill-Bama, as I’ve taken to calling them. Senator Clinton, Senator Obama on the campaign trail, particularly in Ohio, bashing trade, bashing businesses, bashing wealthy people, talking about income inequality. As you look at this, you’ve seen a lot of elections, you’ve been through a lot of election cycles. What’s your read here? What should people be thinking about?
Welch: Larry, you know everyone’s talking about why the market’s tanking, the slowdown, and everything else. I think the market’s also tanking on the fact that there’s an enormous Democratic surge in voting. They’re outvoting the Republicans in every primary that’s out there. And there’s a great enthusiasm for change away from the Bush administration. And I think people, the market, is usually ahead of things, are seeing some of these crazy proposals that are out there from these people. We’d be the only country in the developed world that’s raising taxes, not lowering taxes. And there’s a whole series of programs here. And Larry, we haven’t even talked about yet, the first thing they’ll do is pass that damn [Employee] Free Choice Act. And if you want to see jobs escape, in a country where [American workers] don’t have a secret ballot for voting, you’ll see it happen here.
Kudlow: Well that’s not the only one. Look, that’s an interesting theme [about] the union influence. This is the first time in quite some while. When Bill Clinton ran he kind of dissed the unions. He was never beholden to them. But Senator Obama and Senator Clinton, we’re seeing in Ohio, but we’ve seen it before, they’re very much in tune with the unions. Now, one of the union proposals is to set wages not on supply and demand, but on some social theories. And this kind of equal pay, comparable wages, I mean what would this do to large corporations? What would this do to companies in America?
Welch: It’ll kill small business. It’ll kill everybody. I mean, it’s just bad for us Larry. Now hopefully, in the Democratic primary, as they’re pushed to the left, the rhetoric will in fact overwhelm what they will do. And they’ll get back more towards a more centrist policy later on. You know, when you talk about the great Clinton years, we always hear [that], one of the reasons the Clinton years were so good is -â€" look at ’92-’94, they weren’t so good â€" [but] they became better when we had a strong Democratic president, with a charismatic personality, who dealt well with a Republican congress that Newt Gingrich led, that Dick Armey who’ll be on [Kudlow & Company] tonight, led. That was a team that worked together to get more moderate policies all through the ‘90s.
Kudlow: So basically, you’re suggesting the stock market is beginning to discount a Democratic victory. And you believe that the Democratic Party has shifted to the left. It’s essentially a union agenda on taxes, on the card check on unionization, on equal pay, on other things. On trade for example, stopping trade. That’s part of the union issue. You’re saying the stock market is already discounting some bad times, presumably in 2009. Is that basically where you’re coming from on this?
Welch: I’m not an expert on this, but I’d certainly be suspicious of that theory. I think it is in fact a real possibility.
Kudlow: And you think that’s more important than the organic issues we’re seeing â€" the credit problems, the recent rise of inflation, the slowdown, the slump in the dollar, and things of that sort. Corporate profits are soft. You think those organic issues are just part of the story, that the political issue is really becoming a big overhang?
Welch: Larry, corporate profits outside of the financial sector aren’t that bad. And of course credit is a real problem. Let’s not kid ourselves. I mean, credit has really dried up. So we’ve got to go through this process. But one of the things we have going for us now is information is so prevalent. Every cable channel, the Internet. So the responses to this slowdown have been immeasurably faster. And in fact, I think if we have a “small r’ â€" but I don’t think we will â€" if we have this slowdown we’ll be out of it faster than we ever would have been with all the stimulus and other things that are going on.
Kudlow: Just one last one Jack, before we bring in Mr. Shrum and Mr. Armey. And I hope you’ll stay with us for awhile. In a recent speech Hillary Clinton says, we’ll take on the oil companies and harness their record profits. We’ll take on the credit card companies. We’ll take on the insurance companies. We’ll go after the drug companies. We’ll take on Wall Street. Mr. Obama has said a number of times he wants to regulate corporate profit margins. What do you make of that? I haven’t heard anything like that Jack, in I don’t know, I don’t think I’ve ever heard anything like that in my professional lifetime.
Welch: You know I haven’t, and I’m older than you are. I have not heard it either. I think it [goes] back to the early days of Franklin Roosevelt, I think. That’s the last time we heard some of that stuff. Prewar. That’s why I think Larry, a real component of this Wall Street slowdown, aside from credit and the slowdown in the market, is this concern about this next election and going to these policies. These polices are really anti-business.
http://www.kudlowsmoneypolitics.blogspot.com/
RG:
What does Jack Welch have to worry about? He still has a GE jet at his Beck and call for the remainder of his life, healthcare for life, use of GE facilities for life, all taxes paid for on those perks by GE etc, etc, etc, which, taken from actuarial tables, is not a very broad time horizon.
So, if the Earth were going to be decimated by an asteroid in 20 years, he probably would not care at all, unless it interfered with his GE deal or caused problems at his Turks and Cacos Islands vacation home.
He can afford to be bullish, and if he can sell that bullish(it)ness to everyone else, that will work greatly to his advantage, because it will prop up the value of his assets. He is pumping up his own stock, in essence. If he were a broker that would be illegal.
As for speculators driving up the prices of commodities, It is generally accepted that the stronger effect is coming from dollar devaluation, and that is of much greater concern than speculation, which is pure capitalism, which if I am not mistaken, you are the #1 cheerleader of on this forum.
So, for you to paint speculators with a pejorative brush is kind of strange, given the parameters of your views on free markets and capitalism. .
Quote
Banks face "systemic margin call," $325 billion hit: JPM
By Walden Siew
NEW YORK (Reuters) - Wall Street banks are facing a "systemic margin call" that may deplete banks of $325 billion of capital due to deteriorating subprime U.S. mortgages, JPMorgan Chase & Co (JPM.N: Quote, Profile, Research), said in a report late on Friday.
JPMorgan, which sent a default notice to Thornburg Mortgage Inc. (TMA.N: Quote, Profile, Research) after the lender missed a $28 million margin call, said more default notices and margin calls were likely. The Carlyle Group's mortgage fund also failed to meet $37 million in margin calls this week.
"A systemic credit crunch is underway, driven primarily by bank writedowns for subprime mortgages," according to the report co-authored by analyst Christopher Flanagan. "We would characterize this situation as a systemic margin call."
The credit crisis that began about a year ago will likely intensify after Friday's weak February U.S. employment report "that most definitely signals recession," JPMorgan said.
Indeed, corporate bond spreads widened to a new record on Friday, surpassing levels seen in October 2002 during a boom in bankruptcies following the dot-com crash. U.S. employers cut payrolls in February for a second consecutive month, slashing 63,000 jobs, the biggest monthly job decline in nearly five years, the U.S. Labor Department reported on Friday.
"The weak February employment report points to an economy in recession," JPMorgan said.
The JPMorgan report included a revised bleaker forecast for subprime-related home prices. The bank now sees prices falling 30 percent, from its prior 25 percent forecast. Those prices have declined 14 percent since mid-2006, JPMorgan said.
The U.S. jobs results also came after the Federal Reserve expanded the amount of its short-term auctions to $100 billion in total in the central bank's latest effort to ease credit concerns. Ongoing concerns about bond insurers, known as monolines, and their effort to save their top ratings also are weighing on market sentiment.
(Editing by Eric Beech)
Quote from: RiversideGator on March 07, 2008, 12:19:31 PM
so the dollar cannot stay down for long. And, there is no shortage of the commodities in question so the run up in prices is simply not sustainable. So, the dollar will be back and the commodity prices will also come crashing down to earth before too long too.
2 men disagree with you...one is the most famous investor in the world (and now the #1 richest man in the world) and the other is the most famous commodities-investor in the world and has invested in commodities for over the last 20 years and knows that commodities run in decade-long cycles. the two men are Warren Buffet and Jim Rogers.
Buffet said last week that he has bet against the dollar over the last 5 years (which btw, have been fairly corporate & economically sound for the U.S. - albeit, on the back of a real estate bubble) and it has been good to him and plans to do the same for the next 5 years. His words:
"And we--as long as we force-feed a couple of billion dollars a day to the rest of the world--they take it whether they like it or not, because we buy goods--buy two billion a day more than we well goods to the rest of the world, the dollar's going to get weaker over time. And the government can talk about how it's in our interest to have a strong dollar, but we're not following policies that lead to that, and it's just a consequence and it'll just continue to be. If you do the same thing over and over again, you're going to get the same result... and we are doing the same thing now that we were doing two, three, five years ago, and the dollar will weaken in an irregular basis, in my view, for some time to come. "
Rogers says we are currently in the 4th or 5th year of the commodity boom. Short-term, yes, the commodity technicals have disconnected from the fundamentals and that is why we are seeing a temporary (last 4 days) correction. But long-term, thanks to India & China, commodities should be a good spot for the next 3-4 years (exempting no global depression and institutional money doesn't just completely flood that market making it irrational).
Buffet also said his rug company and brick company are not doing so good with the housing market tanking. The Oracle of Omaha hedged his bets turning his back on the greenback. Continued good call Warren. Who didn’t see that one; however, this next one is far more interesting.
Dubai International Capital decided not to invest more money in Citi. What does this mean? Well, in 2002 Dubai invested billions in Citi allowing Citi-Mortgage to lend billions in the subprime lending market.
Wallstreet is now saying Citi might not make it. Citi needs $40B they were hoping to get from Dubai.
Would bricks and carpet be commodities? Bet $50 Warren holds onto those business while the dollar falls to the floor making his bricks and carpet less expensive on the world market. He's a smart guy.
What's the JTA saying? Are they seeing an increase in ridership?
Quote from: Driven1 on March 09, 2008, 02:41:13 PM
Quote from: RiversideGator on March 07, 2008, 12:19:31 PM
so the dollar cannot stay down for long. And, there is no shortage of the commodities in question so the run up in prices is simply not sustainable. So, the dollar will be back and the commodity prices will also come crashing down to earth before too long too.
2 men disagree with you...one is the most famous investor in the world (and now the #1 richest man in the world) and the other is the most famous commodities-investor in the world and has invested in commodities for over the last 20 years and knows that commodities run in decade-long cycles. the two men are Warren Buffet and Jim Rogers.
Buffet said last week that he has bet against the dollar over the last 5 years (which btw, have been fairly corporate & economically sound for the U.S. - albeit, on the back of a real estate bubble) and it has been good to him and plans to do the same for the next 5 years. His words:
"And we--as long as we force-feed a couple of billion dollars a day to the rest of the world--they take it whether they like it or not, because we buy goods--buy two billion a day more than we well goods to the rest of the world, the dollar's going to get weaker over time. And the government can talk about how it's in our interest to have a strong dollar, but we're not following policies that lead to that, and it's just a consequence and it'll just continue to be. If you do the same thing over and over again, you're going to get the same result... and we are doing the same thing now that we were doing two, three, five years ago, and the dollar will weaken in an irregular basis, in my view, for some time to come. "
Rogers says we are currently in the 4th or 5th year of the commodity boom. Short-term, yes, the commodity technicals have disconnected from the fundamentals and that is why we are seeing a temporary (last 4 days) correction. But long-term, thanks to India & China, commodities should be a good spot for the next 3-4 years (exempting no global depression and institutional money doesn't just completely flood that market making it irrational).
1) Buffet: Obviously he is a business genius but he may be wrong about the future. His dollar position has been correct but this can be quickly turned around by action in Washington. Basically, I think the feds need to intervene to prop up the dollar which will have the effect of hammering the speculators who are long on commodities and short on the dollar and will also encourage a shift of money into more productive investments like business. I suspect a President McCain will act to strengthen the dollar if he follows the advice of many of his supporters like Steve Forbes.
2) Rogers: He loves China so much he moved there. Obviously, if you start from an absurdly low level like China (to get off on a tangent), you will have stellar growth for a good while once you get your act together. The question is how much China has its act together. Their economy was revised downward lately having been previously exaggerated in size and they have some serious problems internally. Basically they are the current sweatshop for the world. We will see how they will play out but I bet Rogers will be back in the States before they surpass the US. Dont bet against the United States long term. As for commodities, part of their rise is global demand has increased which is fed by the rise of the Chinese and Indian economies.
QuoteBanks face "systemic margin call," $325 billion hit: JPM
Midway, another local company (headquartered out of Austrailia) announced on Monday that it will be shutting it's doors here and are expecting a "large margin call" to take place here soon...one they will not be able to fulfill.
I've been running through scenarios in my head and I got stumped when I got to this piece. What happens when the borrowers (companies in this case) can not meet their margin calls? If they can't pay back the difference and the market value of their collateral doesn't increase, then what? I mean, in the case of a gambler and a bookie, the bookie just starts sawing off some limbs until you can beg or steal enough cash to satisfy him, but what happens here??
Simple. They default on their obligations, file for bankruptcy and liquidate their existing assets, if any.
Quote from: RiversideGator on March 07, 2008, 12:19:31 PM
This is being partially driven by market speculation in commodities much like the net stock bubble and the real estate bubble. All of these clowns buying gold, for example, as if it were a real investment, like stock in an actual company, drive up the price. If you look at other commodities which are less commonly traded, there prices are not up nearly as much in percentage terms. The dollar being weak right now is a problem but I believe that the feds should and might intervene to put an end to the currency speculation. The same sort of speculative fever has driven the dollar down. The fundamentals for the US economy long term are very strong so the dollar cannot stay down for long. And, there is no shortage of the commodities in question so the run up in prices is simply not sustainable. So, the dollar will be back and the commodity prices will also come crashing down to earth before too long too.
Boy, I sure hope you are right. I am basing my entire investment strategy on your financial advice.
Quote
CENTRAL BANKERS PULL OUT ALL THE STOPS
This morning the Fed announced yet another new program to provide liquidity to failing markets. The program is called the Term Securities Lending Facility (TSLF).
The Federal Reserve announced today an expansion of its securities lending program. Under this new Term Securities Lending Facility (TSLF), the Federal Reserve will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (rather than overnight, as in the existing program) by a pledge of other securities, including federal agency debt, federal agency residential-mortgage-backed securities (MBS), and non-agency AAA/Aaa-rated private-label residential MBS. The TSLF is intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally. As is the case with the current securities lending program, securities will be made available through an auction process. Auctions will be held on a weekly basis, beginning on March 27, 2008. The Federal Reserve will consult with primary dealers on technical design features of the TSLF.
In addition, the Federal Open Market Committee has authorized increases in its existing temporary reciprocal currency arrangements (swap lines) with the European Central Bank (ECB) and the Swiss National Bank (SNB). These arrangements will now provide dollars in amounts of up to $30 billion and $6 billion to the ECB and the SNB, respectively, representing increases of $10 billion and $2 billion. The FOMC extended the term of these swap lines through September 30, 2008.
Information on the actions that will be taken by other central banks is available at the following websites:
* Bank of Canada
* Bank of England
* European Central Bank
Pulling Out All The Stops
Minyan Peter offered this opinion today on Minyanville.
Two quick observations this morning regarding the Fed announcement: First, as I write the headline on Marketwatch reads "The Fed Pulling Out All The Stops." While the short covering rally will suggest euphoria, I can not emphasize enough how much the regulators have raised the stakes this morning. As any church organist will tell you, you can't make the sound any louder once you "pull out all the stops."
Second, and just as important, the line-up of regulatory participants in this morning's actions spanned the globe - from the ECB to the Bank of England to the Bank of Canada to the Bank of Japan: an unprecedented step. By my count these central banks, along with the Fed, manage the monetary policy for economies representing almost 90% of global GDP. Anyone still harboring the notion of "decoupling" may want to reflect on the implications of today's actions.
Running Out Of Bullets
Minyanville's Mr. Practical chimed in with these comments.
The Fed is taking this step to avoid complete financial collapse. That much is becoming evident very quickly. They are using up their bullets much more quickly than they want to, thus confirming the severity of the state of the financial system, something Minyanville has been pointing out for some time.
Their last bullet comes when they directly lend to some major institution in a big way to avoid its collapse.
As far as this move, it does nothing to solve the solvency issue. The Fed is just saying we will take that risk for the market. That is very similar to nationalization. The irony is that the Fed continues to address the situation as if it is a dislocation from fundamentals (or they continue to hope that people view it that way. In actuality this is exactly what should be happening to these credits: the market should destroy them.
The government will never give up trying to forestall the inevitable, but that does not mean they have the power to do so. Stay the course: It is still early in this unwind with more flawed logic from the government to come.
Mr. P.
My only comment is to say this new program will have as much success as the others, which is to say little to none. This is not a liquidity problem but a solvency problem. For all practical purposes the game is up but the Fed does not know it yet.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
yeah, the latest $200b gift is just a brilliant idea...further deflate the dollar, pushing the price of everything up and use public dollars to purchase practically worthless mortgages...and be sure to give that $200 billion to the banks who screwed up in the first place. excellent plan.
oh, btw...your house is still worth 60% what you paid for it 2 years ago - but don't worry, the bank that you borrowed the money from will be OK thanks to the benevolence of our gov't.
So is that a problem?
Quote from: Midway on March 12, 2008, 09:19:11 AM
Boy, I sure hope you are right. I am basing my entire investment strategy on your financial advice.
Did I mention that my favorite thing about you, Midway, is your smartass comments. ;)
BTW, I am investing in real estate right now. I think it best to be a contrarian on these things. Someone quoted Buffet before. Here is another gem from the Oracle of Omaha:
Quote"I will tell you how to become rich. Close the doors. Be fearful when others are greedy.
Be greedy when others are fearful."
- Warren Buffett lecturing to a group of students at Columbia U. He was 21 years old.
http://home.rose.net/~sea/quotes.htm
Also, I believe that Buffett is coming in and will be cleaning up soon when this debt panic reaches a bottom. When he starts moving big time, you will know it is all over.
Thank you. I have a million of them.
As regards real estate, you are correct, but the market has not bottomed yet so you are a little early.
Regarding the commodity and currency "investors", here is another Buffettism:
Quote"If you're an investor, you're looking on what the asset is going to do, if you're a
speculator, you're commonly focusing on what the price of the object is going to do, and
that's not our game."
- Warren Buffett, 1997 Berkshire Hathaway Annual Meeting
Quote from: Midway on March 12, 2008, 01:02:53 PM
Thank you. I have a million of them.
As regards real estate, you are correct, but the market has not bottomed yet so you are a little early.
I buy multi-family properties and hold them, so market timing is not crucial. The downcycles slow me down of course but I am not a flipper. If you look around right now there are some incredible multi-family opportunities particularly in the Riverside/Avondale area where I live.
Quote from: Midway on March 12, 2008, 09:14:20 AM
Simple. They default on their obligations, file for bankruptcy and liquidate their existing assets, if any.
And if they can't liquidate?? I'm in the business and there are only a handful of companies willing to purchase mortgage pools. No one is biting because they can't get the loans to perform.
Then they default 100%, and the obligations are worthless.
Quote from: RiversideGator on March 12, 2008, 01:06:26 PM
I buy multi-family properties and hold them, so market timing is not crucial. The downcycles slow me down of course but I am not a flipper. If you look around right now there are some incredible multi-family opportunities particularly in the Riverside/Avondale area where I live.
The problem with that is the downward pressure on rents now are such that sometimes the cost of ownership exceeds the rental income, and if the asset continues to depreciate you can find yourself upside down on the investment.
Quote from: Midway on March 12, 2008, 12:38:39 PM
So is that a problem?
mitway...are you SERIOUS? do YOU think it is a good use of public (taxpayer/YOUR) dollars to invest in mortgage-backed securities, where the mortgages backing them are so stinky that the banks can't sell them to anyone, ANYWHERE??? so stinky that many of them don't even have a market price because THERE ISN'T A MARKET FOR THEM!?!
? I don't advocate any of those things and did not say so in any of my posts.
You must have misunderstood something.
That was a facetious comment. I guess a joke explained is not funny.
Quote from: Midway on March 12, 2008, 01:22:26 PM
Quote from: RiversideGator on March 12, 2008, 01:06:26 PM
I buy multi-family properties and hold them, so market timing is not crucial. The downcycles slow me down of course but I am not a flipper. If you look around right now there are some incredible multi-family opportunities particularly in the Riverside/Avondale area where I live.
The problem with that is the downward pressure on rents now are such that sometimes the cost of ownership exceeds the rental income, and if the asset continues to depreciate you can find yourself upside down on the investment.
Rents are only down on the large apartments as they are now in competition with the small homes now on the market which are owned by "investors" who were attempting to flip but got caught when the market downturn hit and are now renting them because they cannot sell. The 1 and 2 bedroom apartments are renting for more than they were in 2006 and 2007 in my experience.
As for values, I didnt buy at the top of the market and I have always made fairly substantial downpayments, so I am not even close to being underwater. This is, again, not a problem for the long term investor. I bought my first property in 2000 and have never sold a property. I may sell down the road in several years, but probably to do a 1031 exchange to trade up to something larger. We'll see. I try to take the long view always.
My feeling is that there is a lot more room for this to get much worse, and all at once when their house of cards begins to collapse.
Quote- James Saft is a Reuters columnist. The opinions expressed are his own --
By James Saft
LONDON (Reuters) - Should we be more worried about the new crisis coming to a head in the financial system or that the United States is self-evidently in recession? Sadly, we don't have to choose.
Banks, starved of capital, are calling in their debts, turning clients, notably hedge funds, into forced sellers, as large swathes of the financial markets are caught in a vicious cycle of margin calls, fire sales and further price falls.
The Federal Reserve has tried to break the cycle, again, by offering another $200 billion to banks, on easier terms and for longer, but confidence in their ability to succeed has fallen.
Meanwhile, back in the real world, consumers and company managers have gotten the message and are firing each other as, respectively, providers of goods and services and wage earning employees.
Last week's U.S. payrolls data was grim indeed and the retail and consumption figures are little more encouraging. "The Fed's efforts to isolate the effects of the financial crunch from the real economy have clearly failed," said Lena Komileva, economist at brokerage Tullett Prebon in London.
"We are now seeing the materialization of this new relationship between the financial and real economy where both are now in crisis."
In essence, the negative feedback loop the Federal Reserve fears, with banking and the economy pushing one another downhill, is taking hold.
Payrolls in February fell by 63,000, falling for the second straight month and by the most in nearly five years.
At the same time, banks have become even more unwilling to take risks with their capital. They are asking borrowers to post more collateral against loans, even when those loans are being used to finance investment in supposedly safe instruments like U.S. Treasuries or mortgage bonds backed by Fannie Mae (FNM.N: Quote, Profile, Research) or Freddie Mac (FRE.N: Quote, Profile, Research).
This is forcing some to sell, driving down prices further, a process that risks blowups of leveraged borrowers. It will also certainly mean higher borrowing rates for already shell-shocked homeowners.
While it is impossible to know how deep the recession will be, it is reasonable to expect that investors, having seen the strength of the downward momentum, will try to front run it, betting on further erosion in house values, in mortgage and credit card debt and in the value of the banks themselves.
This is a very difficult set of circumstances for the central banks to fight, and indeed there is reason to believe that their actions are having less impact as the crisis grinds on. A note from Goldman Sachs on Monday saying that they thought it possible that the Fed would do an emergency inter-meeting cut supported asset markets, but not nearly as much as such a suggestion would have only weeks ago.
1929 AND ALL THAT
And while arguably some prices for corporate debt and mortgages are now at levels that imply a depression, much less a recession, there is no good reason to expect those prices to improve in the near term, even if you believe that 1929 is not at hand.
Jan Loeys, head of global market strategy at JP Morgan Chase in London, argues that prices now being paid for a range of assets are more a reflection of the liquidity crisis among banks than of the fundamental prospects for the economy.
"The recession needs to be more like a depression in order to justify current prices," he said.
But while cash deposit rates in the UK and Europe are still high, and while investors still don't know where the financial market bodies are buried or what the shape of the recession will be, a recovery is unlikely.
"You have fundamental uncertainty, as a result no one is willing to put any money down until they can gauge the contours of this contraction," Loeys said.
It may be going too far to argue that we are facing a recession that will be worse for asset prices than every other one in living memory bar the depression.
But some of the challenges facing markets and the economy as a result of the great debt unwinding are sobering. Friedman, Billings, Ramsey estimates that the current $11 trillion in U.S. mortgage debt is backed by $590 billion in capital, or about 19 parts debt to one part equity. They believe that is unsustainable and the ratio will end up around 6:1, as either banks attract about another $1 trillion of permanent capital or housing assets fall correspondingly.
The banks will get some of the $1 trillion, but not most, meaning that mortgage debt and housing has a lot further to fall. The impact of that on the economy, and the impact of the economic downturn that will result on the banks is, in a word, scary.
-- At the time of publication James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund --
(Editing by Ruth Pitchford)
To use a familiar expression, looks like the perfect storm. I think a reliance on historical data for future projections may be unwise in this circumstance, because the world is so fundamentally changed. But hey, maybe I'm wrong.
"Any opinions expressed here are solely my own and should not be construed as financial advice which should only be obtained from your licensed professional broker" There, I feel better now. Ha Ha thats pretty funny. Your broker will churn your account for you and generate trading commissions for himself while he loses all of your money.
Quote from: RiversideGator on March 12, 2008, 01:04:28 PM
Regarding the commodity and currency "investors", here is another Buffettism:
Quote"If you're an investor, you're looking on what the asset is going to do, if you're a
speculator, you're commonly focusing on what the price of the object is going to do, and
that's not our game."
- Warren Buffett, 1997 Berkshire Hathaway Annual Meeting
Since you are a big Oracle of Omaha fan, there was a 3 hour interview with him on CNBC which I am sure they will rerun into the year 2035.
one word:
"Ultrashort ETF's"
I think things are not as bad as people think and that this is more a function of banks not trusting one another and a lack of transparency in the debt markets. Basically, they are all assuming that the debt has no value when the truth is most of it will ultimately be repaid. The trouble is the accounting rules require that they count such debt as huge losses even though it is an accounting fiction and they then have to liquidate to satisfy banking regulations which makes said debt worth even less. Perhaps regulations could be temporarily changed to allow for a loosening of standards to prevent banks from having to liquidate debt. I read a long piece about this, but suffice it to say that there are things that can be done to fix it and there are highly talented people working on solutions. Every time there is a downturn of any time, some people claim it is 1929 all over again and they have been wrong for 79 years. I personally never believe the permabears because pessimism is a way of life for them and pessimists are generally losers. But who knows - even a broken clock is right twice a day. ;)
Quote from: Midway on March 12, 2008, 04:27:00 PM
one word:
"Ultrashort ETF's"
Actually that is 2 words.
Quote from: Midway on March 12, 2008, 04:27:00 PM
one word:
"Ultrashort ETF's"
yep :) an addict since early January 2008
Quote from: RiversideGator on March 12, 2008, 05:21:32 PM
I think things are not as bad as people think and that this is more a function of banks not trusting one another and a lack of transparency in the debt markets. Basically, they are all assuming that the debt has no value when the truth is most of it will ultimately be repaid. The trouble is the accounting rules require that they count such debt as huge losses even though it is an accounting fiction and they then have to liquidate to satisfy banking regulations which makes said debt worth even less. Perhaps regulations could be temporarily changed to allow for a loosening of standards to prevent banks from having to liquidate debt.
River...you are correct. I just read a WSJ article the other day though that said the alternative to "mark to market" was much worse (we experienced it earlier this decade). It is sad reality that "accounting fiction" is the best there is, but I think it is. But u are right - it is leading to forced liquidations domino-style. We differ on crystal ball projections though - I think we have at least 6-9 more months of write-downs and margin calls. And the housing market has at least 21 more months before levelling out (only to have a couple good years and then 5-7 "flat returning" years following that - if it is like every other capital market out there).
I am glad to see shorting has become all the rage. This probably means that a turnaround must be close. ;)
I ran across Diesel today for $3.95. Whatever environmental change the government forced on us the earth isn't worth it. Well not to a man whose business run Diesel trucks.
QuoteEditorial
Through Bush-Colored Glasses
Published: March 16, 2008
President Bush admitted on Friday that times are tough. So much for the straight talk.
Mr. Bush went on to paint a false picture of the economy. He dismissed virtually every proposal Congress is working on to alleviate the mortgage crisis, sticking to his administration’s inadequate ideas. And despite the rush of serious problems â€" frozen credit markets, millions of impending mortgage defaults, solvency issues at banks, a plunging dollar â€" he said that a major source of uncertainty today is whether his tax cuts, scheduled to expire in 2010, would be extended.
This was too far afield of reality to be dismissed as simple cheerleading. It points to the pressing need for a coherent plan to steer through what some economists are now predicting could be a severe downturn. Mr. Bush’s denial of the economic truth underscores the need for Congress to push forward with solutions to the mortgage crisis â€" especially bankruptcy reform to help defaulting homeowners. Lawmakers also must prepare to execute, in case it is needed, a government rescue of people whose homes are now worth less than they borrowed to buy them.
Mr. Bush said he was optimistic because the economy’s “foundation is solid†as measured by employment, wages, productivity, exports and the federal deficit. He was wrong on every count. On some, he has been wrong for quite a while.
Mr. Bush boasted about 52 consecutive months of job growth during his presidency. What matters is the magnitude of growth, not ticks on a calendar. The economic expansion under Mr. Bush â€" which it is safe to assume is now over â€" produced job growth of 4.2 percent. That is the worst performance over a business cycle since the government started keeping track in 1945.
Mr. Bush also talked approvingly of the recent unemployment rate of 4.8 percent. A low rate is good news when it indicates a robust job market. The unemployment rate ticked down last month because hundreds of thousands of people dropped out of the work force altogether. Worse, long-term unemployment, of six months or more, hit 17.5 percent. We’d expect that in the depths of a recession. It is unprecedented at the onset of one.
Mr. Bush was wrong to say wages are rising. On Friday morning, the day he spoke, the government reported that wages failed to outpace inflation in February, for the fifth straight month. Productivity growth has also weakened markedly in the past two years, a harbinger of a lower overall standard of living for Americans.
Exports have surged of late, but largely on the back of a falling dollar. The weaker dollar makes American exports cheaper, but it also pushes up oil prices. Potentially far more serious, a weakening dollar also reduces the Federal Reserve’s flexibility to steady the economy.
Finally, Mr. Bush’s focus on the size of the federal budget deficit ignores that annual government borrowing comes on top of existing debt. Publicly held federal debt will be up by a stunning 76 percent by the end of his presidency. Paying back the money means less to spend on everything else for a very long time.
The fiscal stimulus passed by Congress, and touted by Mr. Bush on Friday, could juice growth for a quarter or two later this year. But the economy’s fundamental weaknesses indicate that Americans are ill-prepared for hard times. That makes the need for clear-eyed policies all the more urgent. We need them from the president, Congress and the contenders for the White House.
http://www.nytimes.com/pages/opinion/index.html
Please write or call your Senators and Representatives and insist that they take one positive step that will actually have a positive effect on the energy crisis we are facing.
QuoteAlaska's Real Bridge
By INVESTOR'S BUSINESS DAILY | Posted Friday, March 14, 2008 4:20 PM PT
Energy: With oil now $111 a barrel, Alaska's senators are trying again to persuade Congress to let their state's massive untapped resources help bring prices down. How high do these prices have to go?
It'll be a long, hot summer across America with pump prices expected to hit $4 a gallon. It's no longer doom talk; it's real.
"Americans are getting fed up with astronomical oil prices being imposed by unstable foreign governments," said Sen. Ted Stevens, "and the problem is getting worse every day."
He and fellow Republican Sen. Lisa Murkowski are sponsoring a bill to drill for new oil in the Arctic National Wildlife Refuge.
Within just an 8% sliver of ANWR, some 10.4 billion barrels of oil may be recoverable, enough to beef up supply and cut prices. Stevens says he's been trying for 25 years to get such a bill passed, as 75% of Alaskans want. But he's always been thwarted by environmental lobbyists and errant fellow senators â€" including even John McCain â€" who busybody Alaskan affairs to everyone's detriment.
This time Alaska's two senators are trying to sweeten the deal by setting the trigger point for ANWR drilling at $125 a barrel over five days and dedicating royalties to aid alternative energy.
But the straightforward story right now is that our economy needs oil. Recession looms in part because businesses are being squeezed by high energy prices. Consumer spending is falling. OPEC isn't budging on production. And prices are going through the roof.
Congress, the Energy Department, presidential candidates and even President Bush talk a good game about "alternative energies" such as ethanol, solar power, batteries and switchgrass. It's nice sentiment, but it won't solve our energy problem anytime soon.
A recent study by Cambridge Energy Research Associates found that alternative energy will at best supply 16% of global electric and transport needs â€" by 2030.
In reality, drilling ANWR is critical, as the two senators urge. "We almost passed it in 2001," Stevens said. "Some said that if we had acted then, we would have had (the oil) to market right now."
Yes, getting oil into production would take time. But Murkowski thinks the very act of passing the bill would damp price speculation. Said Stevens: "There is so much oil out there. It would be a win-win-win across the board in terms of the economy."
No doubt Stevens and Murkowski are also eyeing the 200,000 jobs that ANWR drilling would bring, as well as the $138 billion in taxes and royalties it would generate for government coffers. But most important for now is the fact that it would help ease prices and spray out recession like Raid on roaches.
You might want to look into "peak oil". You may discover that this is not such a good solution after all.
We're already "destroying the Earth", which I think 85% of Global Warming claims are bullshit anyways, why not go for Alaska. :D
law #1 no noncommercial diesel usage. however, i do think that market forces will take care of this.
Quote from: gatorback on March 16, 2008, 01:58:19 PM
law #1 no noncommercial diesel usage. however, i do think that market forces will take care of this.
How would this help?
It is more difficult to make gasoline than diesel fuel. If the refineries stopped making gasoline, they could have a higher yield of diesel fuel from a lower grade crude.
And what about the millions of people who use #2 oil (AKA Diesel, the same distillate without the additives) to heat their homes?
The price of oil is not so much going up as the value of the dollar is falling. While the price of oil is quoted in dollars, it is not firmly fixed to the dollar. It is just like buying Euros, they are also more expensive for the same reason. The Arabs are not stupid, they want the same relative value for their oil. They also know that the value of the dollar is dropping like a rock, so they up the price of their oil. If you were to look at the value of the Euro against a gallon of oil, the price would be more stable because most every time the Arabs raise the price of oil, it is usually in response to the value of the dollar declining, which concurrently raises the value of the Euro (against the dollar, at least).
Quotethe 'shortage', and 'increased barrel costs' are bullshit anyways.
I agree. But the "bullshit" won't change until we instill some confidence in our domestic markets by increasing our leverage with our own supplies.
QuoteA point rarely noted in discussions of the Brazilian biofuel program
is that, along with ethanol, oil self-suffi ciency has been a long-term goal
of the Brazilian government. After the crisis with PROALCOOL during
the late 1980s, the Brazilian government, through PETROBRAS, has put
much more emphasis on increasing oil production. Based on its excellent
performance on offshore exploration, PETROBRAS increased oil
production by an average of 9 percent per year since 1980, in the range of
1.8 million barrels per day. In 2006, Brazil achieved self-suffi ciency in oil
and expects to export an estimated 500,000 bpd by 2010.
If ethanol were truly key in displacing oil imports, the Brazilian
ethanol program also shows that biofuels should not be considered a
panacea for the world’s energy challenges.
http://cei.org/pdf/5774.pdf
Looks like some folks "get it".
Quotewe don't need to destroy alaska in order to solve those problems.
Alaska will not be destroyed.
QuoteJust a few good arrests and a couple of laws.
Yes, I would like to see a few Congressmen and some environmentalists arrested. And I would like to see the laws and/or regulations rescinded that are interfering with the free market in the domestic energy supplies sector.
Looks like the hedge funds are now starting to come in and pick up some bargains:
QuoteSubprime Eyed by Blackstone, Goldman for Contrarian Hedge Funds
By Bradley Keoun and Tom Cahill
Enlarge Image/Details
March 19 (Bloomberg) -- Hedge fund manager Steve Moyer joined 4,000 realtors and bargain hunters at a five-hour Southern California housing auction in February. As the tuxedoed barker peddled foreclosed homes for hundreds of thousands of dollars below their previous sale prices, Moyer took notes -- research that may help him make money from the biggest housing collapse in 26 years.
Moyer, who helps oversee $7 billion at Tennenbaum Capital Partners LLC, is part of the rush of more than 70 hedge funds -- including those run by Blackstone Group LP and Goldman Sachs Group Inc. -- to snap up distressed mortgages and securities from banks battered by the subprime meltdown.
``The risk is getting in too soon, before all the losses are flushed out,'' says Moyer of Santa Monica, California-based Tennenbaum, which is considering investments in securities linked to the housing market. ``It's really just hard to call the bottom.''
Hedge funds are taking this gamble as the slate of money- making strategies shrinks and profits vanish. Their returns fell 0.5 percent in the first two months of 2008, according to Hedge Fund Research Inc.'s composite index. Managers who specialize in stocks were among the hardest hit as equities markets worldwide tumbled on concern the U.S. economy might be in a recession.
In 2007, the funds gained 10 percent on average, almost double the performance of the Standard & Poor's 500 Index.
``Every couple of years, we go through a cleansing where we flush out some of the weaker hands,'' says Marc Freed, managing director at Lyster Watson Management, an investment advisory firm in New York that specializes in hedge funds and oversees about $2.5 billion. ``This may be one of those years.''
Goldman, PIMCO
Hedge funds have raised at least $20 billion to take advantage of the housing recession. Goldman Sachs, whose $10 billion Global Alpha fund fell about 40 percent last year, created two distressed-debt pools with a combined $4.5 billion in assets. Pacific Investment Management Co., manager of the world's biggest bond fund, has raised $3 billion.
http://www.bloomberg.com/apps/news?pid=20601109&sid=aydq9W8nb3UQ&refer=home
BTW, peak oil, while it is a grand conspiracy theory and urban legend, is absolute bunk.
Quote from: Midway on March 16, 2008, 02:49:10 PM
Quote from: gatorback on March 16, 2008, 01:58:19 PM
law #1 no noncommercial diesel usage. however, i do think that market forces will take care of this.
How would this help?
Desiel used to cost less then gas if you ever remember. Now desiel cost more. Did desiel just all of a sudden just cost more to make? No. Is it to many people chasing to little fuel? Yes.
Get ride of some consumers of deisel and the price will come down. It's call ECO101. This is so studied that it has it's own curve. Price v Demand. Look into it.
Quote from: RiversideGator on March 19, 2008, 04:05:24 PM
BTW, peak oil, while it is a grand conspiracy theory and urban legend, is absolute bunk.
Yes, everything that you disagree with is a "grand conspiracy". the issues of climate change, energy prices, and peak oil are extraordinarily complex issues that make great Fox news and Rush Limbaugh talking points. Unfortunately, those talking points are almost universally incorrect by virtue of the talkers complete lack of knowledge on those subjects. However, they are emotionally persuasive.
Anyhow, I will now stay on topic, because I know how you hate it when I don't---the Fed to the rescue, cuts the prime .75% yesterday, and the market is up 400 points!!! Hurrah!!! The markets are saved!!! Long live the Fed!!!
Uh oh, it only lasted one day, the market closes 300 points down today. Oh heck, Joe investor is still down 10% for the year. But don't worry, everything is cyclical, the market will come roaring back soon, so keep buying those stocks.
At this pace the Fed will soon be paying banks to borrow money, as there is not too far down left to go in the prime rate. Then what happens when they run out of those bullets?
This is just as bad an idea as Nixon era price controls. Artificially manipulate the markets as pressure builds, then when there are no more alternatives or involute fixes, all hell breaks loose all at once.
Quote from: gatorback on March 19, 2008, 06:27:33 PM
Quote from: Midway on March 16, 2008, 02:49:10 PM
Quote from: gatorback on March 16, 2008, 01:58:19 PM
law #1 no noncommercial diesel usage. however, i do think that market forces will take care of this.
How would this help?
Desiel used to cost less then gas if you ever remember. Now desiel cost more. Did desiel just all of a sudden just cost more to make? No. Is it to many people chasing to little fuel? Yes.
Get ride of some consumers of deisel and the price will come down. It's call ECO101. This is so studied that it has it's own curve. Price v Demand. Look into it.
No, I think that you are completely wrong on this one. Petroleum pricing is much more complex than that.
Not to nitpick, but maybe if you shop for Diesel fuel, which can be found everywhere, instead of Deisel fuel which seems to be very rare, you might find that it will cost less because it is more readily available. Sometimes asking for the wrong product winds up being more expensive.
An old article, but nonetheless prescient.
QuoteThe Death of American Manufacturing
December 15, 2005 | From theTrumpet.com
America’s middle class rose on the back of massive industrial output during the 20th century. But this engine of prosperity is being hammered, and the economy is hurting as a result. By Robert Morley
For the past 50 years, American manufacturing has dominated the globe. It turned the tide in World War ii, and hastened the defeat of Nazi Germany; it subsequently helped rebuild Europe and Japan; and it enabled the United States to outlast the Soviet empire in a Cold War. Concurrently, it met all the material needs of the American people.
During this time period, many American icons were born. Companies like General Motors, Ford, Boeing, Maytag and Levi Strauss became household names. American manufacturing became synonymous with quality and ingenuity.
On the back of this industrial output, rose America’s middle class. High-paying manufacturing jobs in turn helped spur a robust and growing economy that had little dependence on foreign nations for manufactured goods and armaments.
However, manufacturing, as a share of the economy, has been plummeting. In 1965, manufacturing accounted for 53 percent of the economy. By 1988 it only accounted for 39 percent of the economy, and in 2004, it accounted for just 9 percent. In fact, economists are warning that the U.S. is facing the “gutting, hollowing out and closing down of American manufacturing forever†(Benson’s Economic & Market Trends, Feb. 27, 2004).
The loss of the manufacturing industry manifests itself most clearly in job losses. During the 1970s, approximately 25 percent of American workers were in manufacturing (Economist, October 1). From 1990 to present, manufacturing jobs have decreased every single year; since 1996, they have plummeted by almost one fifth.
Most recently, manufacturing job losses, and the “hollowing†out of American manufacturing, have been evidenced in the auto industry.
On November 21, as has been well-publicized, General Motors Corporation (GM) announced plans to cut 30,000 jobs and close nine manufacturing plants across North America. But Ford, another American icon, has been slashing jobs too. This past year Ford announced its most recent plan, which called for 7,500 job cuts in 2006. These cuts were on top of the 20,000 layoffs that were announced just four years ago (Wall Street Journal, December 2).
Egan-Jones Rating Co, an independent firm, is predicting that “This is the beginning of the end of the U.S. auto industry as most people have come to know it†(TheStreet.com, May 5).
However, the auto industry is just one example of the overall decline in American industrial might over the past couple of decades. Other U.S. manufacturing giants are failing too; in fact, the U.S. has lost 3 million manufacturing jobs overall since 1998 alone (Seattle Times, April 17).
In 2003, industrial giant Bethlehem Steel folded causing thousands of employees and retirees to lose their pensions (Wards Auto World, November 1). Any Pittsburg resident will be able to tell you how unprofitable the steel industry has been over the last couple of decades. According to the 2004 “Economic Report of the President,†between 1950 and 2000 the U.S. lost more than 491,000 jobs from the primary metals industry alone, and most of those since 1980. Then, from 2000 to 2003, an additional 149,000 jobs were lost.
In 2004, Levi Strauss closed the last of its more than 60 American factories. “It was like a death in the family,†says Emma Rice, of Morrilton, Arkansas, who worked for Levi Strauss for 32 years (Times, London, Jan. 10, 2004). Unfortunately, the former Levi-employed majority of Morrilton tell the same tale as those from thousands of towns across America that have also experienced the loss of manufacturing jobs.
But why is this happening?
Manufacturing loss is occurring because of globalization and outsourcing. At the dawn of globalization, the elimination of trade barriers opened up access to foreign markets for American manufacturersâ€"in return for building factories abroad. In due course, more and more manufacturers set up shop overseas, producing goods to be sold to Americans.
Over time, outsourcing makes Americans poorer, because America’s wealth and technology are being transferred to other nations.
“Historically, manufacturing, exporting, and direct investment produced prosperity through income creation†(Daily Reckoning, April 4, 2003). The wealth of America was created when the profits from domestic manufacturing were diverted into investment in buildings, machinery and technological change. But now outsourcing is providing that income to foreigners.
America may gain access to cheaper products through outsourcing, but it also comes with attendant problems, including a downward pressure on wages. “In the U.S. last year, average employee compensation (pay and benefits) actually fell for the first time in 14 years†(ibid., August 5). Laid-off manufacturers are switching into lower paying jobs in the service industry (Seattle Times, op. cit.). Before, where they made on average $51,000 annually, they now make $16,000 in leisure and hospitality, or $33,000 in health care, or $39,000 in construction (ibid.).
If America does not manufacture and sell goods, then money only leaves the country. The U.S. now imports twice as much as it exports. This has resulted in a trade deficit that has become an unprecedented $800 billion on an annualized basis (Newsweek, December 2). Unfortunately, this trend is showing no signs of abating. In actuality, U.S. exports are declining versus imports right across the board. Even the agricultural trade was in a deficit this past year, for the first time in living memory (ibid.).
Every time an American manufacturer closes and then reopens elsewhere, the foreign country gains American technology. Not having to spend resources developing technology, foreigners can focus on improving it or beating it.
What does this mean for Americans? Does the decline in manufacturing mean an end of the American dream?
First, America as a whole will eventually become poorer, so be prepared to downgrade your standard of living. As progressively more manufacturers move abroad, the flow of money out of the country will exceed the benefits of cheap imports. At some point, America’s trade deficit will overwhelm us. If this trend continues, eventually Americans will not be producing enough to pay for the standard of living post-World War ii America has become used to.
Second, if you are not among the rich, and you rely on a job, be prepared to be faced with job-security issues. In plain language, if you are working in the manufacturing industry, expect wage growth to be poor and expect to be confronted with having your job “outsourced.â€
What’s more, by building factories overseas, manufacturers are sowing the seeds of their own long-term destruction by slowly reducing the wealth of Americans, who are their primary customers.
Be warned and remember the old adage, “as GM goes, so goes the nation.â€
LOL you are funny n wrong on so many levels. If the truckers didn't have to compete with jim bob and daisey for diesil then the price would come down. On a related note, if cities did Not use deesle then the price would come down.
look dude a fact is a fact from where I come from. Billi widay, Dddemand is why one cost more then anuthur.
Ok, you are advocating the simple EC101 price model. I do not agree with you on that. Especially since the demand created by "Jim Bob" with his Diesel powered 4 X 4 F-350 monster outfit is probably negligible as compared with demand for similar product by the following, in ADDITION to demand from truckers:
1. Armed Forces in the form of jet fuel, motor fuel heating oil, stationary turbine fuel, etc,etc,etc.
2. Airlines, in the form of jet fuel and motor fuel.
3. Railroads in the form of Diesel locomotive fuel.
4. Home heating oil in the form of #2 oil.
5. Chemical feedstocks in the form of kerosene.
6. Municipalities in the form of motor fuel and heating oil.
I am sure that you will find that "Jim Bob's" overall contribution to diesel fuel consumption is a negligible percentage of the total overall consumption.
But, then again, maybe I'm wrong. maybe all of the above have figured out some other liquid fuel source.
BTW, looks like you are losing consciousness. Shall we call 911?
Quote from: gatorback on March 19, 2008, 07:03:21 PM
look dude a fact is a fact from where I come from. Billi widay, Dddemand is why one cost more then anuthur.
Hey, Dude, what is a fact and where do you come from?
No no no. After katrina we switch to refinining more gas. Given capacity did not increase ....it hasn't for 30 years ... There is a what??? as proof by the price, a shortage of fuel oil.
so the all are competing for what kind of fuel? Out law the noncommerial use and how many of those competitors are gone from "my" demand curve?
all in good fun...free market forces will resolve this b-bob will NOT be drinking and driving her 4x4 quad cab twin turbo dueley to just get some smokes trust me
Will b-bob and daisey take here ford truck with a fifth wheel and the 4 horses to Ga for the show? Yes they will because its what my family does.
Wow! 4 posts to my 2.
By the law of averages, that makes you right.
Have you been reading "You might be a redneck if..." ??
I feel I'm talking to my kid. Yes look at my screen name yes univ of Florida yes 4x4 yes to gold horse shoe men's solitare ring yes to it all. You got a problem with that?
Why would I have a problem with that? I just wanted to know if you are authentic.
Just asking. You know I am right about the demand side.
You may be right about demand pushing up the price of whatever the heck you call that stuff you buy as fuel for your turbo F-350 4X4 duely with gooseneck horse trailer, but that portion of the demand that represents non commercial usage is negligible, therefore invalidating your original point.
Mitway: I was taught as a child about a fuzzy guy, called Market Will Bear. basically, fuel prices, including diesel are set at a level which maximises oil company profits. NOTE that this is not necessarily the same as maximising gas STATION profits, which are actually very slim.
You see Mid. being the player that you are, you will pay what the market will bear. You will not bear what the market wiill not bear...you admit that like 3 posts ago (See ECO101 above). The Real Deal here Midway, is in the hands of the oil company and you are are Not the hero here. What's in it for you? Higher prices. W h y? Cuz they can get it . >>> . < Period. Sorry .M. We are all feeling it.
The solution to this is simple. Simply make development of alternate fuels illegal. Make the sale or trade of alternative fuels illegal. Possession should get you 30 days in the County lock up. Then help all of the Latin American Countries plant sugar cane, corn etc... Now build the office towers in Colombia and let the Colombians distribute the stuff, under the new free trade acts. The comical part of this is, the price would tumble. You'd be able to buy any amout of fuel down at the corner or at your local high school or college. For the unemployed, more opportunities would come about in getting Homeland security and police to lock up as many of the dealers as they could catch. There'd be enough fines to pay off the national debit 3x over. We'd be floating in fuel again, and the mid-East would be out of our lives. Gotta love my Colombian's!
Ocklawaha
You cannot dismiss the coal fire plant we have on the north side--that's a low sulfur coal fire plant byt the way...if the mass transit system in jax just used that there'd be no dependency on OPAC.
Quote from: stephendare on March 20, 2008, 01:48:26 PM
http://www.youtube.com/v/6BiVP1JVCGU
Yeah. That is representative of the US economy. ::)
How about the people sitting around in those homeless camps go buy a paper and look through the help wanted ads. Jobs are plentiful.
Typical of you to fall for anti-American BBC agitprop, Stephen.
BTW, still waiting for my apology from you.
Oh lord y'all stop. I know we can disagree, but there is no need to get personal, grow up. ::)
Here's one for the boys -- the Americans.
While not uncommon at Bush's old home, more protesters call for war crimes on "your" boy Stephen? lol
Quote from: stephendare on March 20, 2008, 03:49:12 PM
who is 'my' boy?
The only guy Ive liked over the past 8 years has been Al Gore.
Just as have most conservatives. :D
Quote from: stephendare on March 20, 2008, 03:49:12 PM
who is 'my' boy?
The only guy Ive liked over the past 8 years has been Al Gore.
So you've flip flopped on Obama? This is all I seem to do lately. If Billary doesn't get the nomination then I guess I flip flop to Obama? No. No.
So you want to be a flipper flopper. Okay.
http://www.youtube.com/v/ToQbeBC_fOI
the only way to drive prices down is for the goverment to promote no drive days(enviormental days)
and if the goverment encourage people to sell there stocks in oil compaines..the prices will fall as a resulte..of decreased stock value will drive prices back to 2.50
ok back to focus on this thread would anybody considering buying a car not get the Smart car? Sis drove one the other day and said it's lovely
Sure, smart cars are great for sisters the world over, but I don't see too many guys picking one of those things up and sporting it around town. Once the car manufacturers create something with some masculine style and some descent horsepower then we'll likely see a huge shift towards "green" cars. Until then, the women can have all the smart cars they want. :)
Don't kid yourself. Dean and Dale , my sister's next door neighbors and whose car she drove are both male.
Ok, maybe I was just speaking for myself. :)
Quote:
As gasoline nears $4 a gallon, Congress has questions about Big Oil's big profits
H. JOSEF HEBERT
Associated Press Writer
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
WASHINGTON â€" Big Oil is once again being called on the carpet. Senior executives of the five largest U.S. oil companies were to appear before a congressional committee Tuesday where they were likely to find frustrated lawmakers in no mood for small talk.
www.jacksonville.com from the AP
What a travesty. The very people who are playing a great part in the energy crisis by their interference in the supply market are preparing to project their guilt on their favorite whipping posts. The same people who deny refinery building or support the environmental legal hounds who oppose it and deny the energy companies the ability to explore and drill in the area's where domestic supplies exist are ready to take to their thrones and cast aspertions.
Maybe it's time for the people and the oil companies to call the Congressional royalty to the table and have them explain themselves. Set up a stage to question them from and have them sit in a chair below looking up and answer to the people. Have them explain their "solutions" and the time table for them to provide relief to the economy and the people. Ask them to explain the exact "processes" that are going to save us from ourselves and the greedy oil companies. Ask them what the plans are when a disaster occurs with one of the major supplying countries and a truly major crisis happens.
I guess the real question is will people "think" about this problem or just buy into this Congressional dog and pony show?
Why all the panic ??? I just moved from The Netherlands, we pay $9 a gallon (1.55 Euro per liter) It will be a great incentive for new technologies, public transportation and will stop the urban sprawl.
Welcome to Jacksonville and the United States. Just curious, but why did you leave Holland and why did you choose Jacksonville as a place to settle?
Thank you.
My work brought me here to Jax for the next 2 years.
My wife and I enjoy the beach, river and weather!
With your girl at the helm of the house Stephen, I don't doubt it. Your gonna love paying $7.00 a gallon for soy milk too a la her new farm bil. ;)
Dont think we will be seeing $6 per gallon this summer. BTW, have you looked at commodities today?
Gold down $33.70 per ounce or 3.66% and oil down .13% just today.
http://www.bloomberg.com/index.html?Intro=intro3
RG: awe. Wall Street pulls back as oil spikes. Well, you were right for < 12 hours at least.
btw...i think this is just a minor commodities correction...i would not be short gold now. the economy is not recovering anytime soon. i think bernanke had it right today: that the economy will not recover until housing does. the SHORTEST projections of that happening is late 08, early 09...personally, i think it will be sometime in "09 that we see a bottoming there.
ps - one more prediction: oil won't go below $95 again this year.
Just because you are an investor for a living doesn't mean you know what your talking about. I know a guy who once sat next to Charles Schwab on a bus in Istanbul. Him, I would trust. You, not so much.
Jokes aside, I think that the eco-movement must be loving this oil spike. It should really help the alternative fuel movement. Are there any good alt-energy company's worth looking at Driven?
i agree with you actually DTP...it is a fact...the BEST analysts on Wall Street are right only 55% of the time...that mean you would probably do better in the markets doing the OPPOSITE of what the average advisor tells you to do ;)
It's also the best reason and time for JAX to push for mass transit, i.e. commuter rail!
Quote from: reednavy on April 02, 2008, 11:25:52 PM
It's also the best reason and time for JAX to push for mass transit, i.e. commuter rail!
Darn right! Also, probably the death knell for BRT with diesel fuel at record highs.
I wouldnt be suprised at all. That can only be devistating to many people, economically. It will force many to greatly reduce their traveling, and energy consumption.
Spring is here and it did not make it to 4.00 /gallon , at least in most places in Florida, but it does not miss it very far at all. At 6.00 /gallon, I cannot fathom how monumentally it will impact people.
At this point my number one issue for my business is how to reduce gas costs and the inflation of suppliers dealing with gas costs.
Office coffee service, food, snack and beverage vending throughout Northeast Florida. The business is divided into routes and route balancing to keep the amount of work on each driver equal used to be our primary objective in setting up routes. Now are number one indicator is number of miles for each truck. Both and more are a factor but Diesel fuel costs are now king.
I think fuel costs play a bigger part of the economy than the mortgage and credit crisis. The fuel and other commodities inflation causes inflation across the board. My customers have been very understanding about price increases but they all have less employees, customers, or visitors at their businesses. Even if they keep all of their employees they seem to give them less hours so I sell less even if I do not lose any accounts.
(The bill collectors I service business's are booming!)
Quote from: Driven1 on April 02, 2008, 10:06:23 PM
btw...i think this is just a minor commodities correction...i would not be short gold now. the economy is not recovering anytime soon.
ps - one more prediction: oil won't go below $95 again this year.
gold ETF 'iau' (which is composed of gold buillion) is up 5.7% since April 1st closing price.
no need to panic.....unless you need to panic biofuel is your answer. I worked at BK and let me tell you, there's enough oil from frying fries to fuel you for a long time. I'm looking into the conversion.
You have to buy a diesel first.
Henny Penny the sky is falling, or rather oil is over $114 a barrel. Mark said prices went up 10 cents over night. I never notice, I've got no cash for gas.
Very soon we will see those prices around town. It is already $3.55 (regular) at the shell downtown.
(http://bp2.blogger.com/_otfwl2zc6Qc/SAIQzaCFAjI/AAAAAAAAEOY/Em8npY_TWpA/s1600/cartoon.jpg)
???
Commodity Bubble to soon burst?
QuoteCommodities Bubble Will Burst Soon
Tuesday, April 08, 2008
Knight Kiplinger
Knight Kiplinger, editor-in-chief of The Kiplinger Letter, says that commodities prices have been driven up in a speculative mania, and what goes up must come down.
Another bubble will burst soon. But this time, it’s all for the better.
Commodities are unsustainably highâ€"way out of whack with supply/demand dynamics. And the day of reckoning isn’t far off. The froth in oilâ€"about one-quarter of its current $105-a-barrel price on the futures market. Copper is a good 35% above logical levels; platinum, 30%; tin, 50%; nickel, 25%; zinc, 20%, and corn, 15%-20%.
What’s behind the commodity bubble? Mainly investors chasing high returns. They’re pouring cash into commodity futures, because other choices seem less attractive. The Standard & Poor’s 500 lost 10% in the first quarter, its worst quarterly performance since 2002. Interest rates keep falling, and the dollar is hitting record lows. And no one can guess when home prices might hit bottom and rebound.
Commodity gains add to herd behavior. With every price spike, more investors jump in, afraid they’ll miss the score of a lifetime. Hedge funds and other big investors do most of the speculating. But more little guys are also getting in on the act by buying exchange traded funds. ETFs trim the risk some by diversifying, are easy to get into and out of and have a much lower admission price.
Our best estimate is that the balloon will deflate by midsummer. A number of factors could do it in: A cut in worldwide commodity demand, big stock market gains, a more stable dollar, or tame inflation signals. Prices will drop by about 30% if all these factors come into play at once, but declines will be smaller and gradual if signals are mixed.
Oil will slide to $85 a barrel, with a smaller reduction at the pump, because risk is still a factor. In any case, the bottom isn’t going to fall out of the commodities market. Supplies are tight, and demand for many products will remain high, particularly with growth in China and elsewhere.
One glaring exception to the commodity bubble: natural gas. Industrial, heating, and other demand is sure to remain strong, and prices, currently around $9 per million British thermal units, may top $10 per MM Btu next winter. Natural gas supplies are roughly adequate for normal weather, but harsh conditions are likely to cause real stress. Fading quickly: Hopes that liquefied natural gas (LNG) will increase supplies. LNG is going to Asian and European buyers, who are outbidding US ones.
The bubble’s pop will be good for businesses and for other regular buyers of commodities. So, put off major purchases if you can. The pain will be limited to big speculators and small investors who failed to diversifyâ€"plus producers who’ll lose outsize profits.
http://www.moneyshow.com/msc/investors/article.asp?aid=GURU-14449&iid=GURU&scode=008542
my prognostications on commodities...
I would say Oil is due for a major correction...at least back down to $95/barrel levels (a 20% decrease). I could also agree with platinum, nickel and zinc. Corn - nope...not until the biofuel policy goes achanging. Wheat - nope...not until the food riots stop and the biofuel (see corn) policies change. I would 100% completely agree with the natural gass boom going to continue...though, I doubt that their is as much money to be made in LNG. Fertilizers - nope - gonna continue through 2008 at least.
Btw...I have found to look more to Barrons than Kiplingers for the best info. IMO, Kiplingers is kind of like "Money" magazine or "SmartMoney" - just a tad better.
Quote from: Midway on April 21, 2008, 06:45:01 PM
Quote from: RiversideGator on April 21, 2008, 05:36:10 PM
(Empty post)
RG, I agree 100% with you on this!
That's strange. I see what you mean now. At my office, I could see the cartoon I posted. At home, it is not visible. Oh well...
Stephen haven't you heard 130 is the new 120?
I'm totally for high oil prices people need to consume less oil. On a side note, my family owns land with oil on it.
I admit to NOT understanding a lot of what the brokers are saying. Fun and games this is NOT. We're discussing the size of the property and the depth they think the oil is by how deep they think it goes figuring in the curve of the earth and then some volume of oil we have. We wouldn't have to dig. They would drill and they might not even drill on our property. They could drill miles away but what's under our land is still ours. And from what we've seen of oil futures the booty is getting bigger. As far as the forumla they are telling us I DON"T KNOW. Does anybody know a good mineral rights attorney? What if we don't agree to the numbers they've come up with? Can we force them not to drill 2 blocks over? When I think about it, I realize I have no clue. It's really complicated. IT'S REALLY NOT FUNNY. :-\ Of course, there might not be any oil there they say. "We should take the offer."
Nice jump today.
Its a exciting new world ahead of us.
Obama will push that gas price to unbelieveable amounts, unemployment will rise, prices on all things will rise, except real estate, which will tank for the next decade.
Then a war with Iran.
Its all so exciting!!!!!!!!!!
yup. i think the smart money will step in at around 3:45...let's see what they buy.
Sounds like its time to invest in rail.
Quote from: thelakelander on June 06, 2008, 02:40:44 PM
Sounds like its time to invest in rail.
the time was 6 months ago...
CSX has gone from $43 to $68 in the last 6 months.
(http://chart.finance.yahoo.com/c/6m/c/csx)
PS - I think CSX will continue to do well though.
but, of course, that is nothing compared to POT (my fav stock)... gone from $130 to $220 in last 6 mos...
(http://chart.finance.yahoo.com/c/6m/p/pot)