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This
fall, as the economy goes into Crapper Round Two, that's when
the next "terrorism" event seems likely to be rolled out to do
yet another bait and switch. Want in my pool of which
country we'll invade next on false pretenses? No fair
handicapping based on oil reserves now...
One
of us has to be horribly out of touch with reality. Since
I'm a self described nutjob, I'll just pretend it's me...but you
know the truth. But, it's just between us.
"T" Time?
Homeland Security boss Michael Chertoff is warning that "European
terrorists are trying to enter US". Say, he's not
talking about the British, German, and Swiss bankers, is he?
Pampered Hampered
in the Hamptons
I
don't mean to pick on folks who live in the Hamptons, but
headlines like this one make it all too easy: "In
Hamptons, Slump means less Glitz Per Gala". Shade of
the French aristocracy, pass me some cake, would yah?
Oil has just posted its biggest weekly decline ever,
headlines inform us. Which, we must add, is because it had
never been so high before. Couple with the roll over
of commodity accounts to next deliveries, and it's less reason
for partying and more for sober reflection. A time to ask
questions like "Why did I think I needed an SUV with brush
guards on it a big city? What was I thinking?"
Got
to admire how the democorps are selling the idea that they might
actually do something other than keep warring to keep the
corpgov economy rolling. I', still waiting for Nancy
Pelosi to make good on here promises....and speaking of which,
this is a rich headline for you:
Of
course, this has all been facilitated by sending the
MainStreamMedia to the spayed and neutered school of
journalism....
---
snip and save section ---
Coping:
Super Dupers
This
morning started off with a 5 AM conversation as Elaine wondered
"How can people be so stupid? First we end usury laws in
the 1980's to protect 'those poor banks', and now, 30-odd
years later, we are getting pitched "cash-backed credit cards."
I
had to admit she had a fine point: Our societal conditioning to
accept the use of 'plastic' is so deeply engrained that there
are people who are so foolish as to pay cash to use plastic!
It's
just amazing, when you think about it, how the bankster-leeches
have pulled the wool over on this. Consider where they
make money: First, they get cash from hard-pressed
Americans for the card plus the processing and setup fees (which
go into their pockets). Then, as the card is used, they
screw merchants over for anywhere up to 3 1/2 - 4% discounts.
Yeah, that's right: Bank card companies/banksters chare
merchants a discount off the face value of your purchase
in order to cover 'processing fees'. But wait, even here,
we find businesses are being charged a monthly fee, gateway
fees, and a transaction fee - all on top of the discount.
Then, when the consumer is done with the card, there's the
little matter of the 'leftover money' because the card never
comes out right. I haven't used one of these idiotic ways
to pay, so I don't know for sure, but would bet dollars to
donuts that cheekiness extends to having a monthly charge
for the pleasure of using a card.
WASF: Are we the only ones left who get just enough cash from
the bank each month so we don't use credit cards? OK, I
will grant you that the cash-backed credit card may come through
the laundry better than a couple of $20's. But, do you
think they offer more security if you're held up than cash?
LOL, it's been years since anyone asked to see the
signature on my (one) credit card.
By
this point, the coffee was starting to make noise and I was
becoming outraged and infuriated at the stupidity of the
American public, which was paid for by the financial
institutions that are out to screw us all. Remember who
got kicked out of the temple in your Bible studies?
But
it was all fine with E. She was already on to her next
ponder of the morning.
"Do
you think most people see the irony in the phrase Super
Dooper, I mean like duper?"
Quickly I poured by two cup measuring cup full of coffee and
headed out for the office. Traffic was a bit backed up on
the porch as both cats were demanding pets and complaining about
the lousy mousing conditions with the bright moon last night.
I
vowed to myself to put up a link to the phrase 'super
dooper' when I finally got through the cat traffic...so
60 feet later, arriving in the office I wrote down this note so
I wouldn't forget. Thinking about the spelling difference
between 'dooper' and 'duper' and the cash-backed 'credit' card
scam had gotten the adrenalin running and prevented low blood
pressure, once again.
If
you're trying to cut back on your family food budget, this
video, and the accompanying ones will introduce you to the whole
subject area of 'cooking when you're down and out'.
The Poorman's Meal is reminiscent of many meals as a kid.
It's
the little things, when it comes to cooking when you can barely
get by, that really make the difference. I remember what a
treat Hungarian Goulash was when there was a can of corn thrown
in...Yum!. Or my grandmother's vegetable stew, which was
a few carrots, an onion or two, a head of cabbage sliced up, a
can or three of the cheapest stewed tomatoes available (or fresh
in season) and then small meatballs - usually 3-4 per person.
Sopped up with bread (home baked) to get the last drops, it was
probably a lot more nourishing than 99.9% of the prepared foods
today.
All
of which has me anxious to set up the sun oven today and make up
from of this fine genre of comfort food. It's inexpensive,
incredibly healthy, and simple.
---
I
forget which one of his books where he talks about it, but the
late Louis L' Amour had a fine description of the lifestyle and
this kind of scrounge and simmer cooking in one of his books
that described his time 'on the beach' in the San Pedro/Long
Beach area in the Depression as a merchant seaman looking for
work.
L'
Amour also describes the value of books ,well. He used to
read to other sailors in the fo'c'sle (forecastle)
of whatever ship he was on - carrying around his list of books
to read, and crossing them off one at a time as he read them.
In a long ago interview he told me that he figured out early on
that in order to be a good writer, he needed to read as much as
he could, so even while he was knocking about, he was reading
everything he could get his hands on, especially the classics.
Many
were small pocket books, hardly bigger than those little dime
store spiral-bound you can put in your shirt pocket, perhaps 2
1/2 inches by 3 1/2 inches in size; such was the cost of
printing, and those were days when money saved, was money that
could be used to put food on the table.
My
advancing age shows, though; the 'dime stores' of our youth are
you 'dollar stores' of today; no doubt shortly the 5 & 10 won't
refer to coins, but rather fiat/paper dollars.
Nevertheless, that was also a time when the 'classics' were read
by lot's of folks - and it's the historical basis of things like
Random House's "Everyman's
Library' series, which was a larger series,
5" by
9" and in small 8-point type in the early editions.
And,
as I mention frequently, using
the
time monk's speed text reading software and a trip to the
Project Gutenberg online archive, and you could wolf down the
classics at a 3-a-week clip, if you could do without the
sillyvision for that long.
The
Gutenberg Top 100 ebook download list is here - when wolfed
down with the Vortex speed reader, things like
the Adventures of
Sherlock Holmes are ever so good as movies because the
theater of the mind is far more compelling than even the best of
HDTV. But, you need to learn that one for yourself, I
figure.
Just as pilots go through
checklists (pre-flight, take-off, and landing), it's useful at times
to step back a ways and survey all the major areas of life we can
think of to see what can be improved upon. We'll organize it
this way: Ure's 'seven major support systems of life [food,
shelter, transportation, communication, energy, environment, and
finance]. We'll do a quick scan of the headlines to get a
sense of 'current status' of that life-supporting system, update the
3-month to 3-year outlook, and then list different ways of coping
with the range of possible outcomes at a personal level. Along
the way, we'll set some 'trigger levels' for further action as the
likelihood of a particular outcome changes...
UrbanSurvival has a very interesting business model - one that
depends on growth. This business model is a lot like
capitalism in that growth is required, but of course we won't
ever get to cutting down the rainforests. So even if you don't
subscribe to our premium newsletter at
www.peoplenomics.com, please tell everyone you know about
this site. The more this site grows, the more time and
content will show up on the free site...
Click here to send 'em an invite... Thank you!
"Live on $10,000"
Updated
There's now a single-page website devoted to my little ebook
"How to Live on $10,000 a year (or less) at
www.liveontenthousand.com. Yep - still possible.
I also took a bit of additional material that was pertinent from
recent issues of Peoplenomics and included them. The whole
thing runs about 65 pages, but it gives you a vision of how to
not only live on the aforementioned dollar amount, but also how
to migrate up the economic foodchain if you make a little more
than that and do some active savings...
Click here for the page with more details on it.
Odd
hints about the future often come from our friends the time
monks over at
www.halfpasthuman.com, and occasionally the hints are
interesting enough when they 'pick up a scent' of a change in
the future, that it bears sharing publicly.
That's the case today as they've sent along this "OK for regular
humans" extract from their predictive linguistics report coming
this weekend for their subscribers:
Recent crop circles appearing in
England are showing repeated Mayan symbology in a very 'in
your face' manner. Further 2/two new crop circles appeared
on July 15th of this year each with a bit of special
noteworthy nuance.
The first shows the planetary positions for the solstice on
December 21, 2012 which provides for yet again more
impetus for the 2012 meme. Further, as these are now
encoding Mayan symbology, we are yet again referred back to
the Mayan Long Count and its rapidly approaching
ending...less than a archetypical "handful" of years now.
The
other crop circle to show up on July 15th, a seeming
hodpodge of triangular elements connected in odd ways,
is in fact a Fuller projection style of map. As you will
note from the images
both at the Fuller site, and the crop circle (last
picture on the Earthfiles page), the triangular bits are all
joined together to form a near sphere with accurate
relationships without the distortions of the more common
Mercator and other styles of flattening out the sphere into
a 2/d projection. This new crop circle map shows a sphere,
presuming a planet, *but* if it is a projection of earth,
then it is an earth greatly changed....or we are wrong,
either about the planet represented, or the whole idea of it
being a map. But if we are correct.....then yet again, at a
deeper level, more of the "theme of the meme" showing up, or
rather, down...in the wheat.
You'll have to scroll down at the Earthfiles page to see the
'mess of triangles' crop circle, and then click over to the
Buckminster Fuller site to see that the 'mess of triangles crop
circle' is an iteration of a Fuller Dymaxion Projection map of
the earth:
Our
hats off to the time monks for serving up this curious insight.
And another piece of pie for chief time monk Cliff. Such
are the joys of design patterns...
Open
Interesting
As
my friend/consigliore explained in yesterday's column, there are
some problems in finance which are much more efficiently
approached if you take a 'top down' rather than 'bottom up'
approach.
Obviously, if you could get the 'spot on' view of how things
were going to work out in the future, you'd be able to make more
money than most, simply because you'd have your bets placed on
the right side of the table. Thus, a 'right-brain' view
can be more accurate than the 'left-brain/quant' view of things.
While quantative and analysis is fine for a lot of things,
in terms of projecting yesterday's performance of a security or
commodity off into the future, it's usually a ton of work and
the odds of getting the 'big picture' outcome right is often
only slightly improved. While I enjoy
Elliott Wave study,
Dynamic Gann Angles,
Fibonacci sequences, and the like, using them to project the
economic conditions of America 6-months from now is a real
stretch of math and the imagination.
What's really most important to curious George is not the
Gann Angle, Elliott count, or any of the technical analysis
views individually, but rather, their collective impact on
the world as a group of data that drive investor
expectations.
What many people don't spend much time on (probably because it's
real work) is rather than using the traditional TA methods,
there is plenty of readily available data which, once
considered, will give you the absolute truth of what people
expect conditions to be like at some point down the road a
ways.
Consider, if you will (he said, putting on this best
Rod Serling
voice), the strange case of open interest in oil contracts for
late this year. Forget about all the headlines - let's
just look at the twilight zone of oil as reflected by the open
interest in oil call opens for the December expiration.
To
get these, I called my commodities broker JB and asked him to
read out Deece's (hip trader talk for December options) so I
could throw them into Excel and see whatzzup:
There was an oil interest yesterday of 32,712 $200
oil calls when we looked versus only 30,824 at $100.
The
key takeaway I got from the exercise was that the market doesn't
seem to have made up its mind one way or the other about future
oil prices. However, if I squint just so, I can almost make out
two camps; imagine one as a normal distribution between about
$75 and $139, while another 'camp' would be a normal
distribution between 139 and 250.
Once we get to the attack on Iran (late September to early
October?) we'll watch this and update it, in order to see the
high-end prices expand and push up toward $300-$500, which is
where I was thinking about buying a few cheap calls anyway -
which is how I got started on this charting exercise in the
first place.
Oh,
and as a progress check on what?
The Bankster's
Coup d’état
Oh,
sure, there are a few people left who can read the Constitution,
but the bankster's corpgov coup would just as soon there
weren't, I'm sure. Take for example Devvy Kidd who writes
this week of the "Freddie
and Fannie Unconstitutional Bail Out Using What?"
You're not supposed to figure out at a) the answer is your
income taxes and b) that by a single stroke, this
increases America's potential liabilities --doubling them.
All
of which ought to be wildly bullish for gold, silver, and
anything that's a hard asset, but maybe there's enough fluoride
in the water, or enough Prozac being passed around to keep
folks from 'getting it'.
Bail Out Shell
Game
While it's nice that
Barney Franks wants to tie any bail out of Freddie and Fannie to
the U.S. Debt ceiling, we've all learned out lesson from
recent economic past that lots of accountants have largely gone
crooked with off balance sheet accounting. Was he sleeping
during Enron? The off-books stuff in the world is probably
as large as the on-books accounting, especial if you throw in
the narco money, non?
Is the Low In?
Jury's out, but Robin Landry has gotten his longs out of the
market yesterday. "We made some money, we take some profits..."
And a friend down at 125 Broad St. in Manhattan (not in the
daycare center there, LOL) sent a note about the number of lows
this week:
"According to the WSJ, new lows
on the NYSE reached 1304 (new all-time record). Never before
in history have so many securities hit a new low on the same
day.
This is even more impressive
compared to recent readings because the number of securities
traded on the NYSE has been shrinking, not growing. There
are around 3250 issues traded on the NYSE, down from around
3500 a couple of years ago, and lower than anytime since
1996. More than 40% of all issues hit a new low yesterday.
That's a remarkable feat that has been matched or exceeded
only three other days since 1962 - August 22, 1966...July
28, 1969...October 19, 1987 (I remember that day very well).
"
Futures were lower when I looked this morning, question is how
far down next?
Market's Rocked
No,
I mean literallyrocked as in stoned in Pakistan. Which is a little
different definition than stoned in the Hamptons, leastwise so
far...
Here's
Optimism
OK, sure, I sometimes get a little cynical about world and money
events. But, I still have to paint myself a screaming
optimist compared with Bob Chapman's International Forecaster
post this week: "A
Complete and Systemic Breakdown".
So,
along comes the
headline in Al Jazeera "Ignoring a war in northern Iraq?"
Hmmm...could this be the new sales pitch for a war with Iran?
The neocons will almost predictably seize on this to rail
against Iran and demand punishment, which really gets down to
oil access, but we shall see. Wonder if they're the guys
with the $49.50 oil calls, huh?
A
few readers asked me to explain why I wasn't buying the
whle global warming mantra. Reason is simple: Carbon
Credits doesn't fix dick. It just let's lazy-leeches and corpgov
start up a new craps game.
In
response to a recent reference I made to urban heat islands
being responsible for data skew, a reader wrote challenging:
"George, if global warming is real, how do you explain all the
ice melting in the Arctic, then?"
I
just sit back and ask simple farmer-like questions like this
one: "Looking only at the person's background, who would
you trust? A democorp peddling a carbon credit scheme or
someone like Robert Felix
who just does research?" If you have to think about it,
you need to take some cynic pills or get off those
doggie-downers..
A
couple of readers have questioned whether some mortgage
companies are really skipping right to foreclosure and passing
up the renegotiation steps. Mostly, I expect that
renegotiation continues, but there were some emails like this
one:
?Comment on the immediate foreclosure procedures-my
brother-in-law was late with 1 payment on his house and he
just received a foreclosure notice (I'm not sure who has his
mortgage)-how insane is that?"
Sanity is not required in today's business world, sorry.
That was a different time before the banker's corpgov coup.
Think FFO's past and FFO's future.
Never Be Homeless
Plan
Ah...email a from smart reader:
Given this rosy-looking rally
that has occurred in the stock market yesterday and today, I
can't help remembering a while back you predicted we would
see a nice rally this summer before the big crash-n-burn in
the Fall. Maybe you're a modest guy, but I'm surprised you
didn't point out that this is playing through exactly like
you said it would. (Aw, shucks, gosh...-g)
On the clip-n-tips note, here's
an idea for those who don't have thousands of dollars lying
around to buy retreat property, or don't own a homestead. My
husband and I are lifelong renters, so in preparing for
TEOTWAWKI (and the probability we will both be jobless by
next year) we bought a 19 1/2 foot travel trailer. It was in
pretty bad shape so we picked it up for $800. My husband,
Troy, is a gifted fix-or-build-anything type of guy. He
remodeled the inside like new, mostly with materials he had
pack-ratted around the place. The new fixtures, plumbing,
flooring, etc. we did have to buy altogether ran us around
$700. We obtained a free brand-new propane generator which
Troy retrofitted to the trailer, and I bought a portable,
compact solar panel for $130. Now, we have a nice little
camp trailer in good times and a relocatable "paid for" home
in bad times. Not bad for an investment of around $1,700 and
will assure that no matter what, we will never be homeless!
Like we need one more kind of fraud, huh? If you put in
more than your tank should hold, odds are that the laws of
physics haven't been transmuted by the LHC experiments at CERN -
you've just been ripped off - so go report the SOB's and don't
whine - take action!
Email of the Week
This one is a dandy:
"Hi George:
Oh, there it is again: The
conspiracy theory for everything that the common people
can't explain.
1. Gold was depressed. Sure, by
dumb central bankers that forgot to sell at 880 in Jan 80
and then started lending their gold at 1% to much smarter
hedge fund dudes that borrowed for nothing and sold it in
the market to invest it in leveraged stuff that went up.
Bureaucrats as far as the eye can see.
2. The PPT trades at nite. Hmmm,
they are much too fearful that they get caught and some
underling will talk. So they don't do it. The markets move
extremely logically if we cut out the day to day noise.
3.The FED/Gov can do anything
about this crisis. Ha, they might try little tricks like
announcing cuts on option days and aid during option week
and take announcements right to 6:00PM on Sunday on futures
open to make the futs people panic. They didn't. Mkt moved
no higher than were it was on Fri afternoon when the rumor
of GSE fed funding came out and was trickily denied at 4:15
which aroused my suspicion since the FED NEVER denies
rumors. So a little opportunistic setup of the mkt. Did it
work? No, new lows on Monday...
4.Take out your chart and look
at fed action since aug. . Morning action was from GS
handbook, surprise the market and save the option writers
(that is was WS does and makes money of it 80% of the times.
When they get caught, they call Hank. Opportunist, yes
that's how the world works and has worked for millenia. So
Ben provides the correction or "new high" why, the market
had not finished its move in time AND price. October cut..
near the top. But arent we supposed to go up when rates go
down? No, the Fed has the data and when they cut they are
scared and they ONLY cut when they are scared. Dec. cut...oh
well, the correction was finished market drops. (see prior
sentence). Jan "surprise cut", panic on Soc Gen trader, well
the market had just finished wave III within 2(!!!) Dow
points...They panic when everyone panics they are part of
the universe as you and I. (If they would be smart, they
would work for Goldman. Then wave 5 (down) . It missed by 5
spx point. Reason : BSC panic cut again..(market move was
complete at this point) and that was the only reason it went
up. Not the fed. May, next cut...reg meeting...Market goes
down into the wave to 7,300. Oh, I thought they were in
control, what now? 2% rates and the market drops! How so?
Well, its the market that calls the shots, not Uncle Ben or
any dude that does Hanky panky with it. Or attempts to. And
now? Well let's point those fingers at those short sellers.
The evil ones! Say what? If a co has value and is
underpriced there are ample fundamental analysts that figure
that one out. Its their job. Obviously they saw no value,
even though the evil ones depressed the prices...How come
one asks. Well, its Mr. Market doing its game not the short
seller. Indeed the short sellers provide buffers cause they
are smart and when the masses sell, they take back their
short and hence support the market, uh uh. But to fig. that
one out, the pols would have to have something between their
ears other than a blabbing mouth. So what happens? A "short
squeeze of epic proportions...or maybe some people saw
value, at least for the moment, as they did in Aug, Nov, Jan
and March...oh well, turned out to be wrong.. I recall
telling you weeks ago: George, watch out for that 5.8% move
so far, (at the time) we have replicated 1929...Well here it
was and Hank & Ben now think they have Mr. Market by the
balls. They DON'T. You will see that shortly.
5. Finger pointing. Well, we
have identified one evil already the short sellers. Not W's
double war were a trillion has been spend on fluff and
enrichment of TX friends (sorry George) but ideally it will
be some foreigner's fault. Arabs that don't give away their
crude for worthless dollars, Chinese, who "underprice" their
currency to fund our lifestyle (and their eco in the
process) or perhaps a bigmouth potentate in Iran, who tries
to appeal to his own people with hate speeches, for the same
reason our venerable leader is at war with the "Muslims"
that want to attack our "lifestyle"..Is he referring to the
standard of living that has not moved one iota in real terms
since the 70's, while Nintendo finance (make believe)
siphoned off the world savings to fund their mansions in
Malibu, Palm Beach and Greenwich, CT??? Or to make in one
year that the common HARD working American would make in
400!!! years? FDR gave it and W takes it in a matter of 8
years. The result will be indenture again, and people have
to rent rather than own and chase the "everyone can get
rich" mantra for another generation only to see his savings
wiped out again! But people get the govt they deserve! If
they are too stupid and ignorant to realize whats happening,
they don't deserve more. Maybe there should be an
intelligence test a) for a politician before becoming a
candidate, b) for the voter before being allowed to vote.
That certainly could change things! You can see how stupid
they are, cause if one were to look one would notice stoxx
always perform better under democrats, and democrats create
more jobs...More jobs more taxes more consumption more
profit...they just dont get it. look at 1992-00 (I try to
keep politics out but jsut argue on eco basis)...the facts
are evident. ....
But I can see a scenario shortly
when all that's going to stop. This time, people will not
sit docilely in Grand Central (NYC) in their pinstriped to
read the job ads. There are 300 million guns out there and
they will be used. (For the record: I have none)...and the
natl guard will be at war...and things may get horribly out
of control...That's when PTB and MacMansion owners will be
"hanging from the trees" perhaps literally. Not that is MY
way of dealing with things, I just have that "vision thing"
as Bush (1) used to refer to. Unfortunately, his son seems
to have nothing of that. But then maybe why he was put there
by the Neocons (Schulz) so that they could play their games
that were crossed by the Clinton election...
Hard times ahead. but it makes
no diff. whether I say that or not whether Ben & Hank try to
counter steer. IT WON'T WORK.
See ya @ 7,300, perhaps earlier
than most of us thought. And more speedy and a diff. zick
zag as I described before. Maybe the "zack" today will be
the "zack" of tomorrow, no more no less. Election day comes
to mind.
Well, the futures are down, but I prefer to think of it as only
the futures on the market, not the future of the Country....
So
JB sends me this email and it says "Cougar picture! I'm
thinking cool...kinda like our deer pictures at the ranch,
maybe? I mean here's up near Prescott Aridzona now, so
maybe they have wildlife up there...
Nope!
So,
if you get an email from a commodities broker touting "picture
of cougar..." the WWF kind may not be what's inside...
Thursday July 17, 2008
The Bad News
That's Common Sense
It's
time for me to put on the serious journalist hat and share a few
things that have come across my desk in the past day or so,
because this is the "Stop the Presses!" kind of news which
should be on the front page of every paper in America, yet which
the MainStreamMedia hasn't been explaining except is scattered
pieces, because the Big Picture would scare everyone to death
and collapse the economy for sure. It may anyway, but at
least we have 80-days until then to get ready for it.
---
The
first item involves some common sense about housing
prices and the current mortgage mess, sent along by my colleague
Stephen Swain, who as both a tax attorney and CPA (and
personal
consigliori) has nevertheless managed to continue to view
things in a common sense way.
Swaim, who I've exchanged notes on the economy with since the
mid-1990's on the old Longwaves discussion group hosted by the
University of Colorado, explains that we may be able to
accurately estimate how bad the mortgage and foreclosure
unwinding will be by looking at historical variations of the
income to home price ratio.
Sounds complicated, but it's not. Back when I bought a
house in 1973/74, the new home I wanted was going for $43,950.
My income was carefully inspected because the requirement back
then was that the home could not exceed 2.5 times my annual
income. Because I was making about $28,000 a year at
the time, it was no problem.
Back
to the point, Swain did some work in 2000, as he explained in
this email I've been given permission to share parts of...
"...that showed how housing purchase prices as a ratio of
people's income dramatically took off after the tech
meltdown in 2000. If you will recall at the time I said at
the time that the "Bubble" mindset would move to Real Estate
and become a MUCH bigger bubble ... and voila it did. The
Ratio of housing prices to income skyrocketed way above
trend line to the 4.5x area from about 3.0x in 2000.
My old experience with that
ratio (which I looked at all the way back when I did my
original work in 78/79) was that the typical long term ratio
of about 2.5 seemed to match up well to people's ability (in
mass) to be able to service their mortgages over the long
term.
At least here in the Mid West
where we got regular recessions individual markets would run
into problems during the next recession if the ratio had
somehow been able to climb up to the 2.8x level. (at the 2.5
level people seemed to mostly be able to scrape enough
together to survive even most job loss situations without
loosing their houses in mass).
Even 3.0x then was on the
riskier side of the proper safe leverage ratio and meant
that most buyers would be thinly capitalized if hard times
hit. 4.5x was/is an unbelievable amount of leverage ...
particularly if one is on any sort of ARM where the payments
can up UP in ANY WAY (including the loss of builder buy
downs) (as I recall ONLY Hawaii was up in that stratospheric
realm back then ... and they had a very high foreclosure
problem, though of course they always had new people from
the mainland coming out who brought funds to buy with).
Another thought to keep in mind
is that at 4.5x vs. 2.5x one's real estate tax burden is in
most states going to add another huge additional monthly
charge ... equivalent to a large additional interest rate
kicker on the loan compared to a house bought with a 2.5x
ratio.
I made a post yesterday that
included that chart as I made some other points, principally
about the Dollar and US Govt debt issuing.
The chart indicated that IF
housing prices held steady here it would take 9 years for
the trend line to come up far enough so that the ratio would
drop back to the 3x income level (which is still high imo).
I of course do NOT expect housing prices to hold steady for
that long ... but for an actual decline to occur.
IF that decline occurs during
the length of time that my study of traditional bubble
collapses indicate taken place then one should expect
OVERALL about a 30%-35% decline in housing prices from my
1/1/06 top date to my projected 1/1/10 bottom date JUST TO
GET BACK TO THE TREND LINE of 3x income levels."
What
does all this mean? Simply that if you had a household
income of $100,000 in 2000 and bought a home for $450,000, the
bottom of this periodic housing decline won't likely be over
until we revert to historical norms which would be an income to
house ratio of 2.5 to 2.8 times.
In
other words, when your house (or the national average) gets down
to that $250,000 top $280,000 level, then the bottom will
likely be in -- assuming we have no overshoot to the
downside, which is quite likely.
How
come no one in the MSM is putting this out? Namely that
the bottom is at least a year (or longer) out and a much larger
decline is at hand? Back to Swaim's email, he explains
that everyone is focused on 'bottom up' accounting and
reporting...which in turn is...
... because of the wacky accounting rules now in place there
is NO WAY one can rely upon a bottoms up analysis of the
financial firms that are out there. The fact that
Citi alone has MORE THAN 7000 off balance sheet entities
(ala Enron accounting) and is now admitting that "some" of
them are creating liabilities for Citi itself indicates
there are serious undisclosed problems that exist not just
for Citi, but across the entire banking and financial world
(7,000 VIEs and more than 100 QSPEs entities for CITI alone
PER their deputy controller in a letter to FASB in June
2008)
Because one can NOT do any valid
bottoms up analysis of the problem one can ONLY get a handle
on it by doing a TOP DOWN analysis. Try to get a handle on
the problem from an overall perspective ... then try to
figure out who are the weakest players or those who used the
most creative accounting and then assign out - via back of
the envelope analysis - where you think those losses are
sitting.
For me doing that kind of
analysis of Enron actually got me pretty close to an
accurate handle on where they stood (my recollection is that
my numbers showed that on an operations and trading basis
they were losing about $800 million a MONTH near the end
except for their California energy deals where they
receiving somewhat more than that - not very far off from
what their final numbers were shown to be after their
collapse after all the accounting gimmicks were removed -
btw I made my calculations many months before their
collapse, I think some of them though not all are in the the
University of Colorado LW site archives so you can verify
how close I was with my analysis)
Anyway ... don't mean to scare
you, but things ARE matching up exactly to my projects from
many years ago.
Now, as I projected the Govt is
bailing out this or that thinly or undercapitalized entity
TAKING ON BOTH THE LOSSES AND RISK itself (very Kenyesian in
it's actions ... and exactly what I projected would happen),
until they are also so loaded up with losses and risk that
foreign buyers of US debt will start to look askance at the
US Government as a place to put their ADDITIONAL money.
(remember we need $2 Billion in NEW foreign money PER DAY
just to keep the current game going, and that is withOUT
adding in the additional risks/losses that the Government is
now assuming willy-nilly.
BIG ENTITY collapses are now in
store for THIS next wave of the collapse (well they would
collapse without government bailouts ... so I still call
those collapses). Fannie and Freddie are just the first (and
maybe the biggest) of several to come over the fall/winter.
This wave has now begun in earnest (about 3 weeks before I
expected), and will have multiple scary events occur over
the fall/winter.
It is in what I project the
FINAL wave down, next summer to fall 09/winter 10 that the
US government itself will have it's economic viability
questioned.
Amazingly, while the Hank and Ben Show has been urging
more powers for the government (and the banker-owned banks that
make up the "Federal" reserve system), there comes word of
"Black Monday 2008" (which seems to fit the July 8
linguistic release period to a tee):
"I know this because the nonprofit I work for is a sort of
hub that helps people understand their options and take
steps to avoid foreclosure. That means that I’m in regular
communication with, among other people, brokers and lawyers
who are trying to help people who have problems with their
mortgages and need to negotiate with their mortgage
companies; as well as individuals who are trying to work
things out themselves."
See
a design pattern yet? Because the economy moves at glacial
speed, a conspiracy theorist's view of things might go something
like this as I'll synthesize for you a number of concepts
floating around the 'net into a semi-coherent viewpoint:
"When it became clear that the final upswing in Grand Super
Cycle economics from the first Depression lows of the 1930's
was complete with the Dow topping out in early 2000 at
11,723, which would be 14,677.58 on an inflation adjusted
basis today, then Fed Chairman Alan Greenspan engineered the
Housing bubble to get the country part way across the
financial abyss.
This was helped, in no small measure by a terrorist
(arguably false flag operation [FFO])
which was used to spin the country into a couple of wars
that neither Congress nor the American people would have
stood for under normal conditions. The housing bubble
and the increase in war spending combined to get the country
part way through the horrific economic workout that
accompanies Great Depressions.
The resulting WOT has kept Americans distracted from the
underlying issues of a declining standard of living and has
provided an avenue for high government spending levels in a
modern analog to the Civilian Conservation Corps of the
1930's as well as the Works Progress Administration.
With a major decline to new economic lows on the horizon for
this fall, it is almost a sure better that another FFO
will occur in order to keep the population under control and
following 'the script' which is to usurp as much of the
saved wealth of the Baby Boom generation as possible and
continue to concentration of wealth into the hands of 'the
elite'.
Concurrently, the next FFO would also be engineered in such
a way as to provide huge government employment projects
which Americans will embrace. That they will have to
do so because of foreclosures and theft of their wealth will
be blame-shifted and the country remain intact and the
existing power structure in place."
Scary? Outlandish? Well...Unfortunately, not only do
the 'top down' facts seem to fit this scenario pretty well, but
the linguistics work over at
www.halfpasthuman.com
paints the massive mess (crap storm) coming in the late
September to January '09 period as a 30% military, 30% economic,
30% terra entity event. Till we get to the Mid December
quake, of course.
And
in the meantime, the odds of a large-scale power outage in what
remains of summer are still quite high and my money is that it
will happen in Region 10 (Washington, Oregon, Idaho, Montana)
where we're hearing rumbles of increased power security now.
---
Against this background, we regret what's ahead, but the world
is an amazingly complex system such that a continuation of the
Cold War "thinking the unthinkable" makes sense, if one is fully
committed to continuing the existing power structures as the
'best there is' in which case the people behind all this, will
no doubt wrap things up in a flag and demand we all salute it,
impervious to the actual words of the Constitution which are
supposed to protect "We the People" from the overarching
intrusion of Government turned corporate Nanny State.
The
Corpgov folks would no doubt argue 'It has to be done" as we
will likely bear witness to over the coming year. So we'll
just hang out in rural America with field glasses, popcorn and
beer, thanks. Ya'll have fun.
----
It's not like all reporters are guilty of innumeracy, and
not all are blind to the road ahead.
"As for week or two, as usual Matt is right on target.
Between seven and fourteen days of supply is the exactly the
normal planning figure given for the vast majority of all US
cities, given a cessation in the supply lines. Welcome to
the dark side of just in time. That light you see up ahead
in the tunnel isn't a train - it's an old guy huddled around
a burn barrel under the overpass...roasting his dog..."
"This is a crash warning. The retrace was a bit lame but we
did see at least enough to qualify as some relief and a
release of the pinned down atmosphere. The target for this
week is somewhere in the SPX 1260-1275 area. The higher
targets for this rally period like up to SPX 1330 seem off
the table and in reality THAT IS NOT GOOD. If a retrace does
not get enough lift it is like an airplane taking off with
too much weight and although it can get off the ground it
cannot get high enough to clear the trees at the end of the
runway. You catch my drift here?"
More at his web site for his subscribers, but the rally has
likely fulfilled Robin Landry's short-term move to the upside
that his indicators were anticipating last Friday.
---
Now, the really, really, really bad stuff: (Like the first
part of this morning's report hasn't put you into a fugue,
right?)
"African
civil society warns of looming low intensity war in Zimbabwe"
yet we don't hear about the low intensity war on the Mexican
border daily? Robert Mugabe has something international
banksters want, not so the scrublands in our Southwest?
Or, do yoiu think there's an agenda going here, huh?
Ban Cutlery!
The
folks who don't believe in the Second Amendment and want to ban
guns for all, (so only criminals can have guns) will no doubt
flock to this story: "Majority
of knife crime confined to major cities".
That does it; register all your cutlery! I can here it
now: A concealed permit to carry of pocket knife.
FMTT (an old Special Forces phrase ending "... me to tears...").
"Nepal
parties to elect first president" You mean "parties to
elect first president" like get a keg of bear and some
CD's and call friends over, ...that kind of parties?
Hmmm...either I'm not reading this right, or I've got to get
some Nepalese friends in my circle. Way more rational way
to pick a president than Florida, huh?
---
snip and save department ---
Coping:
Fighting Off
'Things'
I've
been having one hell of an internal struggle this week trying
not to run out and spend a bunch of FRN's (federal reserve
notes) on an RV. As I have expected for years, as the
second Depression unfolds in here, we ought to see the price of
'things' that people can live without dropping like a
free-falling safe. And they have; oh boy have they.
Just
as a 'fer instance' there's a 32 foot Winnebago on the local
Craig's List that can be had for under $6,000. Elaine
points out it is nearly 20-years old, but the upside is that it
has newer tires, new front brakes, under 45,000 original miles
and a dependable Chevy 454 power plant. Not to mention a
2-year old NorCold reefer and some other things. And did I
mention the 4 kW generator which could be a second/third/fourth
backup for the house?
A
call to the 'princess of insurance' didn't help. Oh, we
can get youi full coverage on that - stated value - for around
$238 a year." Oh-oh, no ducking out there.
In
the end (which was two glasses of wine later) I concluded that
because the 'bottom' of the economic nightmare we're going
through is probably not even close yet, and because the RV only
gets 8.5 MPG, I would do much better by deploying capital in
other ways: adding square footage to the house, putting in a
guest cabin with it's own heating/cooling/ and septic system -
which I figure we can do for under $10,000 for a modest 300 SF
cabin, or thereabouts.
My
point is that when economic times are bad - and getting worse -
there are lots of 'bargains' likely to appear and it helps to
have a long-range strategic plan for your life to use as a
general guideline.
I
haven't written up such a plan yet, but the process is fairly
straight-forward and I will likely put it on Peoplenomics for
subscribers to follow if they wish. But, the long and
short of it is that all strategic planning involves a core
'vision' of what you want 1,2,3,5, and 10-years out.
For
me, that would be the whole of the property fenced and
cross-fenced and running goats on it because they actually
improve land by munching down underbrush. Done right, it's
like getting free lawnmowers that can be sold off if necessary.
It would be nice to have a couple of guest cabins. These
could either be rented or used to form a self-organizing
collective of hard working friends should times get tough, or
they could be used as 'guest houses' when friends/business
colleagues/relatives come to visit.
Try,
though I did, to make the RV fit ("It could be a guest house and
storage unit!") the two glasses of Pisano convinced me that no,
a 20-year old RV is not likely to maintain the same value as a
well-equipped micro-house with it's own septic which could be
split off from the rest of the property, rented, and so forth.
The
thing to share is that one of these days, I'm going to run into
a 'toy' that I won't be able to resist - maybe the 'right' cheap
911, the perfect xyz shop tool, another newer RV, a sailboat -
something is bound to come along.
According to the 'vision' behind the personal strategic plan,
however, the thing is should be shopping for more than anything
would be property at the bottom, which we could use as rentals,
in order to accrue a modest positive cash flow and giving better
value than most landlords, in order to have some income
when Social Security fails, along with a good assortment
of retirement plans.
It's
not nearly as much fun to contemplate as a 'ground tour of
America' in an RV, but that's the what happens when you set out
a vision and metrics to measure progress in that direction.
It's
hard to say no to such deals though, even though we could be
years from the bottom of this economic mess.
Sounds Like Las
Vegas, But....
Pappy used to like going to Reno, Tahoe, and Las Vegas because
he had a "system" thatr he used. It was really pretty
simple, too. He'd fill up his left pocket with dollar
coins, then he'd plan the slots on a 'random walk' basis, taking
coins from the left pocket (later bucket) and once played,
putting any winnings into the right pocket.
Once the left pocket was ouit of coins, he'd walk out of the
casino. Sometimes he'd be several hundred dollars ahead,
but mostly he left with many fewer coins. "They love
system players, because most systems don't work," he explained
to me. Made sense 40 years ago and it makes as much sense
today.
Still, for those inclined to try and beat the markets, we have
plenty of investment systems to choose from, including
this one sent in by a reader:
"George,
Bill Murphy and his team at
www.LeMetroPoleCafe.com have quoted you a few
times in their financial analysis, published daily at the
market close. I start the trading day with you, and finish
with them, and the period in between can go from ridiculous
to absurd. Like today. After I saw your comments on the CPI
report and then saw the market take off to the Moon, I
decided to come up with a trade indicator for when the PPT
kicks in their rocket fuel. I call it the Shampoo indicator
for reasons described below.
The Trade Trigger is actually
signaled in the pre-market time period, where like today
(and Monday) there was a 12+ point boost in the S&P 500
Futures e-mini contract (ES U8) about an hour before the CPI
report was released. That's the old PPT trick to boost the
markets prior to a disastrous news release or market open,
such that when the market reacts and plunges on the
announcement we wind up back about where we started. Then
the Jawboners in the LameStream Media flood the airwaves
with "what's the big deal" message and sell the idea that
everything is just fine. Stepfordville meets Groundhog Day.
Monday's boosting was to reset the stage on any possible
reaction to the weekend events involving the bailout of
IndyMac and Fannie Mae and Freddie Mac.
Well, much to my surprise Bill M
published my Sham-poo indicator, which hopefully brought a
smile to a few very frustrated traders such as myself. Hard
to digest why 100% of my Gold stock portfolio was bleeding
on the worst inflation numbers in decades.
Anyway, as the attached graph
shows the Sham-Poo indicator was 4 for 4 today on trading,
taking a total of 48 points out of the Futures market in 12
point bites. That's $2,400 per contract in round numbers.
That link only works if you belong to LeMetropoleCafe ($199/year
here), but this gets us to the idea of finding the magic 'system'
which will make money on the Street. I've studied a
lot of them, and I will have to ponder this one.
The
best I have come up so far is simply being debt free, betting on
more inflation to come and rolling into hard assets when the
printers send out for another shipment of ink.
A
couple of astute readers asked me since this morning "Hey,
why didn't you mention the FOMC notes coming out today?"
Why would I? I try not to waste your time!
With
the polls showing that there was a 93% probability of the Fed
doing nothing other than rehashing a statement to read - as
best they can cobble something for everyone" it
hardly seems any point.
More
important - as I will present in some comments from long time
long wave student, tax attorney and CPA Steven Swaim -- we are
in the country's present pickle because housing prices
were bubbled by Alan Greenspan to get us across the first part
of the Greater Depression (my paper "skip a Depression?" get to
the idea of how the various Bush wars are the modern analog to
the CCC and WPA of the 1930's without the same legislative
oversight) - which began with the decline of 2001 and
which was masked/blamed on terrorism, but which in truth we
continue to endure even now.
Still, if you want to try and figure out some deeper meaning,
you're welcome to spend hours sorting through this, but just
remember that some advanced linguistics techniques, like SKED
(subject knowledge illuminates domain) don't work because the
statement is not of a single voice - it's many people speaking
in a combinations of tongues. So, lotsa luck, and it won't stop
a single foreclosure or prevent a single layoff.
But,
damn, it sounds learned, huh? Almost gives the
impression they know what they are doing...almost...
"The
Manager of the System Open Market Account reported on recent
developments in foreign exchange markets. There were no
open market operations in foreign currencies for the
System's account in the period since the previous meeting.
The Manager also reported on developments in domestic
financial markets and on System open market operations in
government securities and federal agency obligations during
the period since the previous meeting. By unanimous vote,
the Committee ratified these transactions.
The information reviewed at the
June meeting indicated that economic activity had remained
soft in recent months. Manufacturing activity had
deteriorated, business investment in equipment appeared to
have moved down, and residential construction had continued
its steep descent. Labor market conditions had weakened
further, and consumer sentiment was at historical lows, but
despite these developments, consumer spending appeared
resilient. Core consumer price inflation had been stable
over recent months, but headline inflation had remained
elevated because of further substantial increases in food
and energy prices.
Labor demand continued to weaken
in April and May. Private payroll employment fell at a
slower rate than earlier in the year, but the decline in
jobs was again widespread, with the exception of nonbusiness
services. As a result, aggregate hours of private production
or nonsupervisory workers fell, on average, in April and
May. The unemployment rate jumped from 5.0 percent in April
to 5.5 percent in May and was now about a percentage point
above its level of a year ago. The increase from April to
May was accompanied by a rise in labor force participation,
especially among young people.
Industrial production contracted
in April and May at a slightly faster pace than in the first
quarter. Manufacturing output also fell in April and was
unchanged in May; over the two months, factory production
slowed across a broad range of industries. Production in the
high-tech sector continued to expand but at only a modest
rate. The factory utilization rate edged down further in
April and May to a level below its first-quarter average and
was well below its recent high in the third quarter of 2007.
The growth of real consumer
spending appeared to have picked up moderately from its
sluggish pace in the first quarter. Real outlays on goods
other than motor vehicles increased at a robust pace, on
average, in April and May. However, retail purchases of
motor vehicles fell to a low level. More broadly,
households' financial conditions appeared to have weakened
in recent months. Real disposable personal income had been
rising only slowly since last summer, restrained by the
gradual deterioration in labor market conditions and sharp
increases in food and energy prices. The ratio of household
wealth to income had dropped sharply in the first quarter,
reflecting substantial net declines in broad equity prices
and further depreciation of house prices. Measures of
consumer sentiment fell further in April and May; the May
readings from the Reuters/University of Michigan Surveys of
Consumers and the Conference Board Consumer Confidence
Survey were near their low points reached during the early
1990s.
Activity in the housing sector
remained very weak in April and May. Single-family housing
starts posted further declines, leaving the pace of
construction in this sector down about two-thirds from the
peak in early 2006; starts of multifamily homes were a bit
below their average over the last 10 years. Although
production cuts in the single-family housing sector resulted
in continued reductions of inventories of unsold new homes,
the slow pace of sales left the ratio of unsold new homes to
sales at elevated levels not seen since the early 1980s.
Sales of existing homes remained little changed through
April at a low level. However, the index of pending sales
agreements--an indicator of existing home sales in coming
months--jumped in April to its highest reading in six
months. Conditions in mortgage credit markets remained
tight, particularly for nonprime borrowers and for those
seeking nonconforming mortgages.
In the business sector, real
spending on equipment and software appeared to move down a
bit further in April and May following a slight decrease in
the first quarter. Business outlays on transportation
equipment continued to fall sharply. The data on shipments
and orders of nondefense capital goods through May suggested
that spending on high-tech equipment and software was
expanding sluggishly, while outlays for other equipment
remained weak. The slower pace of capital expenditures
appeared consistent with a general deterioration of business
conditions, including a deceleration of sales, a pessimistic
tone across monthly surveys of business conditions, and
tighter standards and terms on business credit. Real
spending on nonresidential construction continued to rise in
the first quarter, but at a substantially slower rate than
over the previous two years. The architectural billing index
plummeted recently, and vacancy rates for commercial
properties ticked up.
Real nonfarm inventories
excluding motor vehicles rose only slightly in the first
quarter, as firms cut production to keep inventories aligned
with the sluggish pace of sales. The ratio of book-value
inventories to sales (excluding motor vehicles) ticked down
in April and had changed relatively little, on net, since
the middle of 2007. Despite sharply lower sales of motor
vehicles, the modest pace of production allowed inventories
to fall further through May. Production at automakers was
restrained by both weak demand and disruptions caused by
labor disputes.
The U.S. international trade
deficit widened in April, as a jump in imports outweighed a
rise in exports. Most categories of goods imports rebounded
in April from lower levels in March, especially petroleum
products, the prices of which had moved sharply higher.
Imports of non-oil industrial supplies, capital goods, and
automotive products also surged in April, whereas imports of
consumer goods expanded more slowly. The increase in exports
was broad-based, with strong increases in exports of
industrial supplies, capital and consumer goods, and
automotive products.
Economic activity in advanced
foreign economies appeared to have expanded moderately in
the first quarter, but the pace of that activity varied
markedly across economies. In the euro area and Japan,
strong investment contributed to a sharp acceleration in
output. Economic growth in the United Kingdom moderated
because of a slowdown in real estate and business
activities. Falling exports and inventories subtracted from
Canadian output growth. Recent data pointed to broad
softness across the advanced foreign economies in the second
quarter, consistent with a weakening of consumer and
business confidence. Indicators for emerging market
economies pointed to continued solid growth in the first
quarter, albeit at a slower pace than last year among Latin
American economies. In particular, economic activity in
Mexico slowed further in the first quarter, in the wake of
weaker growth in the United States. In contrast, real output
in China and India appeared to have continued expanding at
the rapid rates seen in 2007. Inflation stayed high, on
balance, in all regions, as recent price increases for food
and energy added to global inflationary pressures.
Headline consumer price
inflation in the United States remained elevated in April
and May, mostly because of large increases in food and
energy prices. Excluding these categories, core prices rose
at a relatively subdued rate in these two months. Average
hourly earnings increased in April and May at a slower pace
than in the first quarter, bringing the change over the 12
months ending in May below the pace over the previous 12
months. The employment cost index for hourly compensation
rose moderately in the first quarter and at a similar rate
to recent years.
At its April 29-30 meeting, the
Federal Open Market Committee (FOMC) lowered its target for
the federal funds rate 25 basis points, to 2 percent. In
addition, the Board of Governors approved a decrease of 25
basis points in the discount rate, to 2-1/4 percent. The
Committee's statement noted that recent information
indicated that economic activity remained weak; household
and business spending had been subdued, and labor markets
had softened further. Financial markets remained under
considerable stress, and tight credit conditions and the
deepening housing contraction were likely to weigh on
economic growth over the next few quarters. Although
readings on core inflation had improved somewhat, energy and
other commodity prices had increased, and some indicators of
inflation expectations had risen in recent months. The
Committee expected inflation to moderate in coming quarters,
reflecting a projected leveling-out of energy and other
commodity prices and an easing of pressures on resource
utilization. Still, uncertainty about the inflation outlook
remained high, and the Committee noted that it would be
necessary to continue to monitor inflation developments
closely. The Committee stated that the substantial easing of
monetary policy to date, combined with ongoing measures to
foster market liquidity, should help to promote moderate
growth over time and to mitigate risks to economic activity.
The Committee indicated that it would continue to monitor
economic and financial developments and act as needed to
promote sustainable economic growth and price stability.
The expected path of monetary
policy moved down following the Committee's decision at its
April meeting to reduce the target federal funds rate by 25
basis points. Although the decision had largely been
anticipated by financial markets, investors had assigned
some odds to an unchanged target rate. Subsequently, money
market futures rates rose substantially, on net, as
stronger-than-expected data on spending and on labor markets
along with somewhat improved conditions in financial markets
appeared to impart greater confidence about prospects for
economic activity. Nominal Treasury yields also rose
noticeably, and the Treasury yield curve flattened. Measures
of short-term inflation compensation derived from yields on
inflation-indexed Treasury securities increased over the
intermeeting period, due in part to sharply higher prices
for oil and agricultural commodities. Measures of
longer-term inflation compensation remained around the
middle of their recent elevated range. Some survey measures
of households' expectations of near-term inflation rose
sharply, while survey measures of longer-term expectations
ranged from unchanged to slightly higher.
Conditions eased somewhat in
some U.S. financial markets over the intermeeting period but
nonetheless remained strained. Functioning of short-term
funding markets showed some improvement; spreads in
interbank funding markets generally declined, as did spreads
on lower-rated commercial paper. However, liquidity in the
market for interbank loans at maturities beyond three months
remained thin, and the spreads quoted on those instruments
were little changed. Demand for funds from the Term Auction
Facility remained substantial, but stop-out rates relative
to minimum bid rates declined considerably relative to prior
auctions, likely in response to increased auction sizes.
Depository institutions' use of primary credit borrowing
increased, on balance, over the intermeeting period. Credit
outstanding through the Primary Dealer Credit Facility
declined significantly over the intermeeting period.
Conditions in the market for Treasury repurchase agreements
appeared to improve somewhat, but conditions were still poor
for lower-quality collateral. Supported by sales and
redemptions of Treasury securities from the System Open
Market Account and exchanges under the Term Securities
Lending Facility, yields on overnight Treasury repurchase
agreements were around typical spreads to the effective
federal funds rate during much of the intermeeting period,
but "haircuts" applied by lenders on non-Treasury collateral
remained elevated. Term Securities Lending Facility auctions
held since the April FOMC meeting were generally
undersubscribed.
In longer-term credit markets,
yields on investment- and speculative-grade corporate bonds
had risen significantly since the end of April but by
slightly less than yields on comparable-maturity Treasury
securities, implying a further modest narrowing of credit
spreads. Corporate bond issuance surged in May, as some
nonfinancial firms reduced their reliance on short-term debt
in favor of bond financing. Commercial paper outstanding
declined, and business lending by banks decelerated, partly
reflecting continued low issuance of leveraged loans as well
as tighter credit standards and terms at banks. Over the
intermeeting period, spreads of rates on conforming
residential mortgages over comparable-maturity Treasury
securities remained about flat. Spreads on jumbo mortgages,
however, widened somewhat and credit availability for
jumbo-mortgage borrowers continued to be tight. In the
secondary market, issuance of mortgage-backed securities by
government-sponsored enterprises was strong, but issuance of
securities backed by nonconforming residential mortgages and
commercial mortgages remained low. Broad stock prices were
somewhat volatile but declined modestly, on net, over the
intermeeting period. The surge in oil prices weighed on
equity prices outside of the energy sector, and a more
pessimistic outlook for future earnings in the financial
sector caused stocks of financial institutions to decline
significantly.
Conditions in the money markets
of many major foreign economies remained strained, showing
little improvement since late April despite ongoing
activities of foreign central banks aimed at easing
liquidity pressures in funding markets. Yields on sovereign
debt in the advanced foreign economies moved up
approximately in line with increases in comparable Treasury
yields in the United States. The trade-weighted foreign
exchange value of the dollar against major currencies rose.
M2 rose much more slowly in
April and May than in the first quarter. The deceleration
seemed to reflect primarily an unwinding of heightened
demand for the relative safety and liquidity of money market
mutual funds that had boosted M2 in prior months.
In the forecast prepared for the
meeting, the staff raised its projection for the growth of
real gross domestic product (GDP) for 2008. The available
indicators of spending, particularly those for consumption
and business investment, suggested that economic activity in
the first half of the year had been somewhat firmer than
previously expected. The staff projection prepared for the
meeting pointed to modest expansion in real GDP in the first
half of 2008 followed by a slight slowdown in growth in the
second half, when several factors were likely to restrain
spending, including lower household wealth, slower real
income growth due to sharply higher oil prices, and tight
credit conditions. The pace of economic activity was
projected to pick up in 2009 as those effects waned and
weakness in housing construction abated. Despite this
acceleration, the trajectory of economic growth anticipated
through 2009 implied noticeable slack in resource
utilization.
The staff's projection for price
inflation in core personal consumption expenditures (PCE)
for 2008 as a whole was unchanged; recent readings on core
PCE inflation were better than anticipated and led the staff
to lower its projection for the first half of the year. But
some of the recent improvement was seen as reflecting
transitory factors, and the forecast of core inflation for
the second half of this year and next year was marked up to
incorporate the likely pass-through of the recent jumps in
the prices of energy and other commodities, and the reversal
of these transitory factors. The further large increase in
energy prices also prompted an upward revision of the
forecast of headline PCE inflation in the second half of
2008, and headline inflation was expected to exceed core
inflation by a considerable margin this year. However, in
view of a projected leveling-out of energy prices and the
anticipated slack in resource utilization, headline
inflation was expected to decline considerably in 2009 from
its pace in the second half of 2008, and core inflation was
forecasted to edge lower.
In conjunction with the FOMC
meeting in June, all meeting participants (Federal Reserve
Board members and Reserve Bank presidents) provided
projections for economic growth, the unemployment rate, and
inflation for the years 2008 through 2010. The projections
are described in the Summary of Economic Projections, which
is attached as an addendum to these minutes. A number of
participants noted that, given the recent large adverse
shocks to output and inflation, their projections even late
in the forecast period did not fully reveal their
perceptions of longer-run sustainable rates of economic
growth and unemployment or the measured rates of inflation
that would be consistent with price stability. In this
context, participants discussed several possible refinements
of the Committee's approach to projections that could
provide a clearer indication of participants' views about
these variables and agreed to consider this matter further.
In their discussion of the
economic situation and outlook, FOMC participants noted that
spending in recent months had evidently been less weak than
anticipated, leading participants to revise up their
assessment of economic growth in the first half of 2008.
Nonetheless, most participants judged that the slightly
firmer path of spending did not presage a near-term
strengthening of the expansion. Economic activity would
probably continue to expand slowly over the next several
quarters, restrained by a range of factors, including
strains in financial markets and institutions and the
resulting tightness of credit conditions; ongoing weakness
in the housing sector; and the increases in energy and
agricultural commodity prices. And, although the incoming
data suggested reduced odds that these factors would cause
an appreciable contraction of economic activity in the near
term, participants continued to see significant downside
risks to growth. At the same time, however, the outlook for
inflation had deteriorated. Recent increases in energy and
some other commodity prices would boost inflation sharply in
coming months. A leveling-out of energy prices and continued
slack in resource utilization were expected to lead
inflation to moderate in 2009 and 2010. However,
participants had become more concerned about upside risks to
the inflation outlook--including the possibility that
persistent advances in energy and food prices could spur
increases in long-run inflation expectations.
Although financial market
conditions generally appeared to have improved somewhat over
the intermeeting period, most participants viewed markets as
remaining under considerable stress. Some participants noted
that the availability of the liquidity facilities that the
Federal Reserve had introduced in recent months had probably
bolstered the confidence of investors and lenders and thus
was likely responsible for part of the improvement in market
functioning. Term spreads in interbank funding markets had
declined, but remained elevated by historical standards. The
leveraged loan market had improved somewhat and corporate
bond issuance had been strong. However, the equity prices of
many investment and commercial banks had declined over the
intermeeting period, reflecting increased concern about
asset quality and the outlook for profits. The deteriorating
condition of some financial guarantors and mortgage insurers
contributed to worries about banks. Investors remained chary
of securitized products, such as mortgage credits not
guaranteed by a government-sponsored enterprise or agency. A
number of financial institutions had been successful in
raising new capital, but reportedly on less favorable terms
than before. Participants judged that many financial
institutions would need to continue to recapitalize and
reduce their leverage. Some anticipated that this process
could well be protracted, and that financial intermediation
consequently would be impeded for some time, holding back
growth well into 2009. Overall, financial market conditions,
while better in many respects, appeared to remain fragile,
and participants judged that potential further adverse
financial market developments still posed downside risks to
economic activity.
Recent data pointed to more
resilience in consumer spending in the second quarter than
had been expected. However, most participants thought that
much of the recent strength probably indicated only a more
delayed slowing in consumer spending than had been expected
rather than a more favorable trend. Falling wealth and real
income, tightening credit conditions, rising energy prices,
and sharply declining consumer sentiment were seen as likely
to restrain consumer spending later this year, particularly
after the effects of the fiscal stimulus waned. Lenders were
exhibiting greater caution in extending credit to
households, partly in response to actual and expected
increases in delinquency rates on household credit.
Participants reported that second mortgages, automobile
loans, and home equity lines of credit were becoming harder
to obtain, and some existing home equity lines were being
cut, even for consumers with good credit scores. The
possibilities that the decline in house prices would be more
protracted than previously anticipated, that spillovers from
the decline in housing wealth to consumption could be larger
than expected, and that the household saving rate might rise
more steeply than currently projected were seen as posing
downside risks to consumption spending going forward.
Participants judged that the
outlook for the housing market remained bleak, with falling
prices, slow sales, high inventories of unsold homes, and
further declines in construction activity over coming
months. Although a few participants saw tentative signs that
the housing market might be bottoming out in some parts of
the country, most aggregate indicators of housing activity
pointed to continued weakness. Also, mortgage rates had
increased, and the equity prices of housing-related firms
had fallen over the intermeeting period, after having
stabilized earlier in the year, suggesting renewed pessimism
among investors about prospects for the housing industry.
Rising foreclosures were seen as likely to continue to add
to downward pressure on house prices.
Business spending was expected
to remain sluggish, as tight credit conditions, uncertainty
about economic growth, and the rising costs of
inputs--especially energy and raw materials--appeared to be
making firms quite cautious and inclined to defer capital
expenditures. Businesses had been able to raise a
considerable volume of funds in bond markets of late, and
profits and cash flow were still strong in the nonfinancial
business sector. But some regional banks that had
experienced substantial credit losses were expected to adopt
a significantly more conservative lending posture, further
limiting the availability of credit to small businesses.
Although the available data indicated that spending on
nonresidential construction projects had remained relatively
robust in recent months, participants thought that this
strength might have reflected projects initiated some time
ago, when the economic outlook and credit conditions were
more favorable, and they expected poor business sentiment
and tighter credit to lead commercial construction to soften
later this year and next year. Some anecdotal reports of
recently delayed or canceled new construction projects
supported this view.
Regarding economic activity in
various business sectors, participants reported continued
overall softness in manufacturing, especially in the
housing-related and motor vehicle sectors. Flooding in the
Midwest had disrupted transportation and damaged corn and
soybean crops. However, production in the energy and steel
sectors appeared to be strengthening, and industry contacts
generally reported that demand for exported goods was
buoyant. Labor markets in most regions continued to weaken
gradually. Most participants anticipated persistent slack in
labor markets, with the unemployment rate rising further
through next year, before declining slightly in 2010.
The current account deficit had
narrowed significantly on balance in recent quarters, and
still-solid foreign growth was expected to contribute to a
further narrowing of the real U.S. trade deficit in coming
quarters. However, a few participants commented that this
effect might fade over time, as they expected demand in
foreign economies to slow.
Participants were concerned
about the inflationary consequences of recent increases in
the prices of energy, food, and imports, and they expected
headline inflation to rise in the very near term. However,
core inflation had been stable of late, and participants
anticipated that a leveling-out of energy prices and slack
in labor and product markets would contribute to a
moderation of inflation pressures over time. Reports on the
ability of firms to pass cost increases on to customers were
mixed, but some participants commented that the global
nature of inflationary pressures could make imports more
expensive and give firms greater scope to raise prices. Some
participants noted that wage growth had been quite moderate,
reinforcing a view that longer-term inflation expectations
and labor cost pressures had remained fairly well contained.
However, others commented that wages might accelerate with a
lag only after inflation expectations had moved higher, and
that it would be very costly to subsequently bring those
expectations back down. Participants' views of the recent
evidence on inflation expectations varied. Some noted that
the increase was greatest for short-term survey measures of
households' inflation expectations, which may be influenced
disproportionately by consumers' perceptions of changes in
the prices of food and gasoline; those participants judged
that underlying inflation trends had not risen nearly as
much and anticipated that such survey measures would reverse
their recent increases as headline inflation moderated.
However, others saw the signs of a rise in inflation
expectations as more broad-based and were concerned that
this development could signal an erosion of confidence in
the Committee's commitment to price stability and, absent
effective action by the Committee, could impart greater
momentum to the inflation process. Participants agreed that
the possibilities of greater pass-through of cost increases
into prices, higher long-run inflation expectations feeding
into labor costs and other prices, and further increases in
energy prices all posed upside risks to inflation that had
intensified since the time of the April FOMC meeting.
Some participants noted that
certain measures of the real federal funds rate, especially
those using actual or forecasted headline inflation, were
now negative, and very low by historical standards. In the
view of these participants, the current stance of monetary
policy was providing considerable support to aggregate
demand and, if the negative real federal funds rate was
maintained, it could well lead to higher trend inflation. In
this view, a significant portion of the easing in monetary
policy since last fall was aimed at providing insurance
against the risk of an especially severe weakening in
economic activity and, with downside risks having diminished
somewhat, some firming in policy would be appropriate very
soon, if not at this meeting. However, other participants
observed that the high level of risk spreads and the
restricted availability of credit suggested that overall
financial conditions were not especially accommodative;
indeed, borrowing costs for many households and businesses
were higher than they had been last summer.
In the Committee's discussion of
monetary policy for the intermeeting period, members
generally agreed that the risks to growth had diminished
somewhat since the time of the last FOMC meeting while the
upside risks to inflation had increased. Nonetheless, the
risks to growth remained tilted to the downside. Conditions
in some financial markets had improved, but many financial
institutions continued to experience significant credit
losses and balance sheet pressures, and in these
circumstances credit availability was likely to remain
constrained for some time. At the same time, however, the
near-term outlook for inflation had deteriorated, and the
risks that underlying inflation pressures could prove to be
greater than anticipated appeared to have risen. Members
commented that the continued strong increases in energy and
other commodity prices would prompt a difficult adjustment
process involving both lower growth and higher rates of
inflation in the near term. Members were also concerned
about the heightened potential in current circumstances for
an upward drift in long-run inflation expectations. With
increased upside risks to inflation and inflation
expectations, members believed that the next change in the
stance of policy could well be an increase in the funds
rate; indeed, one member thought that policy should be
firmed at this meeting. However, in the view of most
members, the outlook for both economic activity and price
pressures remained very uncertain, and thus the timing and
magnitude of future policy actions was quite unclear.
Against this backdrop, most members judged that an unchanged
federal funds rate at this meeting represented an
appropriate balancing of the risks to the economic outlook
and was consistent, for now, with a policy path that would
support an eventual decline in both inflation and
unemployment. Nonetheless, members recognized that
circumstances could change quickly and noted that they might
need to respond promptly to incoming information about the
evolution of risks.
At the conclusion of the
discussion, the Committee voted to authorize and direct the
Federal Reserve Bank of New York, until it was instructed
otherwise, to execute transactions in the System Account in
accordance with the following domestic policy directive:
"The Federal Open Market
Committee seeks monetary and financial conditions that will
foster price stability and promote sustainable growth in
output. To further its long-run objectives, the Committee in
the immediate future seeks conditions in reserve markets
consistent with maintaining the federal funds rate at an
average of around 2 percent."
The vote encompassed approval of
the statement below to be released at 2:15 p.m.:
"The Federal Open Market
Committee decided today to keep its target for the federal
funds rate at 2 percent.
Recent information indicates
that overall economic activity continues to expand, partly
reflecting some firming in household spending. However,
labor markets have softened further and financial markets
remain under considerable stress. Tight credit conditions,
the ongoing housing contraction, and the rise in energy
prices are likely to weigh on economic growth over the next
few quarters.
The Committee expects inflation
to moderate later this year and next year. However, in light
of the continued increases in the prices of energy and some
other commodities and the elevated state of some indicators
of inflation expectations, uncertainty about the inflation
outlook remains high.
The substantial easing of
monetary policy to date, combined with ongoing measures to
foster market liquidity, should help to promote moderate
growth over time. Although downside risks to growth remain,
they appear to have diminished somewhat, and the upside
risks to inflation and inflation expectations have
increased. The Committee will continue to monitor economic
and financial developments and will act as needed to promote
sustainable economic growth and price stability."
Votes for this action: Messrs.
Bernanke, Geithner, Kohn, Kroszner, and Mishkin, Ms.
Pianalto, Messrs. Plosser, Stern, and Warsh.
Votes against this action: Mr.
Fisher.
Mr. Fisher dissented because he
preferred an increase in the target federal funds rate at
this meeting. While the financial system was still frail and
downside risks to growth remained, the risk that inflation
would fail to moderate as expected by the Committee had
increased substantially over the intermeeting period.
Relatively strong demand for oil and other commodities
abroad, as well as increased labor and other operating costs
in the emerging economies, was boosting prices of globally
traded goods and services. Mr. Fisher was especially
concerned about behavioral changes among business operators
that appeared to be accommodating inflationary pressures. In
particular, firms increasingly appeared to be planning to
pass through their higher input costs to final goods prices
in order to protect their profit margins. Overall, Mr.
Fisher viewed inflation expectations as becoming less well
anchored. To help restrain inflation expectations and
inflation, Mr. Fisher felt it would be appropriate for the
Committee to tighten the stance of monetary policy.
In a joint session of the
Federal Open Market Committee and the Board of Governors,
meeting participants turned to a consideration of policy
issues regarding investment banks and other primary
securities dealers. Participants discussed the financial
activities and condition of primary dealers as well as the
objectives of, procedures for, and experience to date in
administering the Primary Dealer Credit Facility (PDCF) and
the Term Securities Lending Facility (TSLF). (The PDCF and
the TSLF had been established in March in response to
unusual and exigent conditions in financial markets.) In
view of the continuing significant strains in financial
markets, participants also discussed the possibility of
extending the PDCF and the TSLF past year-end. In addition,
they reviewed progress in negotiations with staff of the
Securities and Exchange Commission regarding a memorandum of
understanding intended to govern arrangements for sharing
information on broker-dealers and for cooperation in the
supervision of primary dealers. Finally, participants
exchanged views on longer-run issues regarding appropriate
arrangements for supervision and regulation of investment
banks and other securities dealers and for the access of
such firms to central bank liquidity, as well as on possible
measures to strengthen financial market functioning and thus
enhance financial stability.
It was agreed that the next
meeting of the Committee would be held on Tuesday, August 5,
2008."
There. The latest "facts" are on the table, although no
one in offishuldumb wants to tell you that we're less than half
way through the present economic malaise, for reasons we'll get
into tomorrow. It's too nice a day to ruin with that kind
of thinking right now. Besides, don't you have work to do
to keep those Productivity numbers up, while your wages aren't
keeping up with either productivity or inflation increases?
14% Annualized !!
-- Screaming
Inflation
Can
it be that inflation numbers are catching up in DC? We
note that the Consumer Price Index just plain sucks, but it's
creeping up toward what all of us know as reality.
Although nowhere near the real-life experience of most folks,
the numbers are up -- plenty:
The Consumer Price Index for
Urban Wage Earners and Clerical Workers (CPI-W) increased
1.1 percent in June, prior to seasonal adjustment. The June
level of 215.223 (1982-84=100) was 5.6 percent higher than
in June 2007.
The Chained Consumer Price Index
for All Urban Consumers (C-CPI-U) increased 0.8 percent in
June on a not seasonally adjusted basis. The June level of
125.582 (December 1999=100) was 4.2 percent higher than in
June 2007. Please note that the indexes for the post-2006
period are subject to revision.
CPI for All Urban Consumers
(CPI-U)
On a seasonally adjusted basis,
the CPI-U advanced 1.1 percent in June, following a 0.6
percent increase in May. The index for energy rose sharply
for the second straight month, increasing 6.6 percent in
June following a 4.4 percent increase in May. The increase
in the energy index accounted for around two-thirds of the
overall increase in the all items index in June. The index
for petroleum-based energy advanced 10.0 percent and the
index for energy services rose 1.5 percent. The food index
rose 0.8 percent in June after rising 0.3 percent in May.
The index for food at home went up 1.0 percent in June, with
indexes for four of the six major grocery store food groups
sharply accelerating. The index for all items less food and
energy increased 0.3 percent in June, following a 0.1
percent rise in April and a 0.2 percent increase in May.
Larger increases in the indexes for shelter and for tobacco
and smoking products and an upturn in the apparel index
contributed to the larger increase.
Even
the Labor Department admits that the compound annual 3-month
rate is 7.9%. Oh, and thanks to gasoline prices, the
annual rate of inflation is transportation? 22.3%
Worse, if you extrapolate the present 1.1% monthly rate, you get
an annual inflation rate of 14%!
Geez, I can hardly wait to see how this is spun into something
positive today.
This
is pretty much what I was expecting though, an increase in
inflation which will be bad for bonds (in the short term) which
should allow me to lock in a decent higher interest rate before
we get to the deflation likely to follow the Fall in the Fall...
Bank Runs and
Bluffing Ben
I
suppose it's not proper to have a frank and open discussion
about bank runs and other prima facie evidence of the arrival of
the Second Great Depression, because people love to hold to
their old views of the world, even when "your own lying eyes"
are sending messages that things have changed.
But,
let's take for example the failure of IndyMac - the second
largest bank failure in US history (arguably, so big because the
reason is the currency has been watered down so much...).
Here we have headlines reporting "Cops
to IndyMac customers: Remain calm or face arrest" Ah,
such reassurances, eh?
---
Then
we found out while watching the coverage of the financial
debacle discussion before the Senate committee yesterday that
the
"SEC to fight short selling of financials". But
there's some confusion over just what that means. First,
the SEC already has rules against naked short-selling, and a
buddy in a Chicago bond house says it's not naked that
they're after, it may be any short selling of financials.
And once we see this, then it's a hop, skip, and a jump to
completely government rigged markets....
Of
course, depending on what the SEC sends out, there could be
lawsuits galore. As you know,
short selling rules changed in July 2007 when regs that had been
around since the Depression were lifted. You know,
couple this with the ending on the ban on banks getting into the
securities business - another practice banned in the 1930's and
you can see a 'design pattern' to why crashes happen. Been
watching for it ever since Saturday banking came back into
practice...
And
.we're by no means out of the woods. Hell, we've just
gotten off the main road and we're on the shoulder of this
thing. The woods are still ahead. Darkly... and
speaking of which...
----
One
reason is something called special purpose vehicles. These
are 'off balance sheet' accounts that are used by many of the
big banking companies. There's a huge story that most
investors are scarcely aware of in how there are trillions - yes
that's right, trillions of dollars including presumably
lots of losses are not being reported because the account
profession has gotten in bed with the bankers and the hedgers to
prevent a clear view of what's really going on.
If
you don't believe it, go read how: "Citigroup's
$1.1 Trillion of Mysterious Assets Shadows Earnings".
Can someone explain to me how 'special purpose funds' can remain
hidden and the SEC sit on its butt looking smug that there's
anything even approaching 'transparency'?
The
SEC doesn't need an uber regulator - they need a book on basic
accounting and call BS on the cozy-accounting people who hide
the sausage offshore.
So
there I was buried in client work Tuesday and Elaine calls me on
the intercom. "One of the committee members asked Ben
Bernanke whether it was true that US dollar had lost 40% of its
value in the last 4 or 5 years. He looked down and said
something about "I thought it was closer to 20%... What was it?"
I
looked it up. Four years ago the dollar and the Euro were
about at parity. Today, the dollar is just about .63 Euro.
20%? Well, maybe if you look at the market basket, yeah,
there's a case there. But against the Euro? Or gold?
Bluffing Ben.
The
chart section at Kitco dutifully reports that four years ago,
gold was running about $405 and today we see it around $970.
On that basis, the dollar has lost over half its purchasing
power against a 5-thousand year benchmark. I guess that's
why I'm not on the Fed board, huh?
Secrets Revealed:
Climate Lies
As
the 'secrets revealed' modelspace continues to 'go vertical'
about the Bushista entity, we read this morning how "White
House buries climate change deaths report". Yup, no
surprise there...
"Look, Up in the
Sky!" Department
We've been looking for an up-tick this summer in UFO sighting
and reports - something that shows up in the SGF (space goat
farts/unknown energies from space) area of
www.halfpasthuman.com's
modelspace which has been growing by leaps and bounds, so we've
been expecting something UFO related to pop up...
This
morning besides the usual waves of sightings in summertime -
likely because people tend to spend more time outside in the
summer than the dead of winter, ergo more people outside looking
up - and along comes this BBC Birmingham story about
Timothy Good's claim that "There
are alien bases on earth."
---
Being open minded about such things, we have two choices to
ponder: One is that Good is dead-to-nuts on and there
are alien bases. Or, he's got them confused with all
the alien behavior inside the Beltway, and (fill in the name
of your own state capitol here).
---
snip and save section ---
Coping:
Shopping Solar Panels
Two
things about solar panels today. The first is that if you
are planning to have solar power to contributed to your home
energy system, I should pass along how to buy panels.
Don't think we've ever talked about this before.
[As
you (may or may not) know, I used to work in DC power
instrumentation in sales, marketing, and occasional design
input. For real - in fact, my name shows up on four US
patents, although only one of them was my 'baby' - all of then
were team work. Anyway, here's the point:]
When you go out to buy either solar panels, or batteries, the
way to do it is 'buy them on a cost-per-watt" basis.
Let
me give you an example. Say you go to your favorite solar
panel provider and have you have a choice of the Evergreen 180
watt panels for $828.80 each, or the Sharp 165 watt panels for
$747.50 each. Which one do you choose?
Answer: The Evergreen 180 watt panel will cost you $4.605
per watt, whereas the Sharp panel will cost you $4.53 per watt.
Still, the choice isn't over yet, because different panels have
different power curves, and so you have to look a little further
and this is where knowledgeable solar panel salespeople can be
very useful.
But
this method will get you into the ballpark. Say you go to
a certain hardware/freight site and you find a 75-watt panel for
$520. You'd plug in your price divided by watts formula
and gasp as youi read that this one pencils out to $6.93 a watt.
There, now you're 'armed and dangerous' in panel shopping.
Just a little research on minimum power output at low light
levels, a few glances at voltage/current curves to make the
close calls when, as in our first two examples, the cost per
watt is within pennies. But to at least get the majority
of the decision-making done, use cost per watt.
---
The
same kind of logic applies to storing energy. If you are
selecting batteries for a small renewable energy system, you can
assign numbers to the purchasing power in exactly the same way.
In
my case, I happen to be designing a small 24-volt system for the
ranch. About 300 watts of charging and a small battery
bank so that we'll either be able to run a water pump at the
(soon to be drilled) well, or I will be able to have some power
tools in the shop regardless of whether the power is on or not.
Now, the cheapest mass energy storage out there at the moment is
6-volt golf cart batteries. For a 24-volt system, you just
hook up four of them in series and you've got a decent battery
bank. To double the capacity - you buy another 4, and so
forth. I won't get into all the wiring tricks unless you
really want to know, but jus6t realize that the idea is to keep
all lead lengths the same otherwise a bank can have issues with
self-discharge and you won't be happy.
But
back to the issue that seems to be falling out this morning: How
do you select among different batteries?
Let's say you can get a marine 8D size gel cel battery for $499
and goplf cart batteries for $75 each. Which one do you
pick?
The
decision point is cost per amp-hour of storage at
the 20-hour rate.
Now, a typical 8D (this is just the size - big honking heavy 12
volt battery) may have 180-225 amp hours opf capacity.
Take a best case: So that pencils to $499/225 = $2.217 per amp
hour.
Now, the golf cart batteries at $70 each are 6 volt cells, and
they store 100 amp hours, as you discover from reading their
spec sheet for the 20-hour rate. Remember, it will take
two of these to get you a 12 volt system. So, two six
volt golf cart batteries is 12 volts and 100 amp-hours, and $140
for the pair.
Math is then $140/100 = $1.40 per amp-hour.
See
how easy this is?
Of
course it is never just a dollars and cost per amp-hour
decision. A gel battery is preferable in some ways for
marine use because they can be flipped over and no drain
electrolyte all over the bilge of your boat. And you
remember from watching WW II submarine movies that sulfuric acid
and seawater releases chlorine gas...so gel cells have some
compelling arguments.
However, in our case, we're not planning to turn the ranch on
its beam ends anytime soon, at least till a crustal shift gets
going ;-) - so liquid cells are fine.
Another aspect of gel cells is that they have higher terminal
voltage under load, especially when you get out to the end of
their discharge curves, and yeah, you can get deeper cycling out
of gels, yada yada, yada. Higher terminal voltage under
load is a nice thing to remember about gel and AGM (absorbed
glass mat) batteries, too.
But
in the end, I will get golf cart batteries because I'm not
trying to buy upscale Florida housing for my amp-hours like some
of mansion on the A1-A south of Palm Beach. Nossir, these
are just working amp-hours for the ranch, and they get cheap
bunkhouse type housing, simple as that. Remind me to
fill out an
I-9 form for them, too, lol./
Quizzer of Oz
An
interesting question out of Australia this morning:
"You’re doing a good job George
but I’m having trouble spreading the gospel.
I had
http://www.urbansurvival.com/week.htm up at a site where you
can advertise stuff and such, and it got removed. When I
enquired, I was told the site is a “framebreaker”. Not being
all that techie-up and all, I’m not too sure what was meant
by that. Smacks of trying to do something it ain’t supposed
to but that’s all I can tell you.
Don’t know if there’s anything
to be done about it, or if anyone else had told you that
before. Thought you might like to know anyway."
Hmmm...don't think I'm using frames on this page - just tables
for layout, so no idea...suggestions from the peanut gallery?
Here's a follow-up question on the Treasury Direct note from
Tuesday:
Dear George: I read your survival site daily if I am able. I
have tongue cancer and some days are not so good. The
majority of my stocks are in gold/silver and a smattering of
energy and base metals. (I also
read Jim Sinclair daily).
I am not asking for investment advice but you have mentioned
several times about moving into T Bills. What is the benefit
of this over PM stocks? I have seen this mess coming since
the yr 2000 and try not to pass by good advice.
First, I am a financial writer, not advice-giver. But,
since you asked, here's the issue.
Suppose we have two economic outcomes possible: Runaway
deflation and runaway inflation. and you want to get to the
'other side' with as much purchasing power intact as you can.
In
runaway inflation, gold and silver (or things that you own and
hold outright) would soar in value as the paper becomes worth
less and it takes more paper to buy things.
Say
you have $10,000 and half is in gold and half in bonds. We
can see a scenario where the gold will double to $10,000 while
the bonds will be cut to as little as zero. That's the
inflation case.
But
now flip it around to deflation. The bonds have the
purchasing power of $10,000 and the gold is could go to zero.
Still, either way, you are covered in that you'd get your money
past the lump in the road with purchasing power intact.
And that's the name of the game.
In
real life, gold's never going to zero, nor is the bond, so
whatever value they have actually means that by holding both,
you may actually build yourself a nice little volatility spread
hedge. Nice thought, huh? Get to the other side of
an economic collapse (or loud belch) with your purchasing power
more or less intact?
Now, on the question of any kind of stock, PM's in particular.
While it's true that Homestake and other mining stocks went up
like crazy from 1929 to the bottom of the Depression (#1, not
this one yet) remember that there's a new kind of systemic risk
that we didn't have back then - which is that most people no
longer hold their own stock certificates.
Not
that I don't trust the Deposit Trust Corporation, I don't
trust anyone to hold any of my assets. Holding
anything in an electronic account works so long as a bunch of
zealots from the sandbox don't come over and lob ugly devices
around our power grid. Don't forget that the linguistic
outlook has regional power outage on the horizon as the year
goes on. No power=no computer=no ATM's = no money = no
food. Got it?
If
you can take delivery of the stock cert's and you are willing to
bet a portion of your wealth on getting a transaction through
New York, then have at it. I don't like that kind of risk.
I'd buy hiking boots, a Bowie knife and a Berkey water filter
first. Motorize a mountain bike, all kinds of things
to do before holding paper. And you can still buy a box of
24 reams I think it is at Office Depot for $40.
This
one fell out of a conversation Elaine and I were having last
night in regards to an interior decorating idea for the house.
It's a morphing of [amped] about the prospect of something and
[energized] by a challenge. Use: "I like that
(recently proposed idea) - get's me ampergized."
Yours to use...just send along a dime every time you use it...
Tuesday July 15, 2008
"Chairs and
Seat Backs to the Upright and Locked Position...
A call from broker /friend Robin Landry about an hour ago put
things into perspective. 'It looks like there's a chance
that we could close below the 10984 level and if that
happens, the market could go into crash mode - remember what I
told you about crashes seem to happen in [Elliott] fifth waves?"
Hmmm...not exactly cheery news, but notable. "On the other
hand, if we can go down, and close successfully with a rally,
then we might get a further extension..." Which made
sense.
So, as we read the testimony of Ben Bernanke to Congress today,
and watch gold push toward $1,000 and silver toward $20, the
question in the back of the mind is "How long can the paper
markets remain airborne?"
The U.S. economy and financial
system have confronted some significant challenges thus far
in 2008. The contraction in housing activity that began in
2006 and the associated deterioration in mortgage markets
that became evident last year have led to sizable losses at
financial institutions and a sharp tightening in overall
credit conditions. The effects of the housing contraction
and of the financial headwinds on spending and economic
activity have been compounded by rapid increases in the
prices of energy and other commodities, which have sapped
household purchasing power even as they have boosted
inflation. Against this backdrop, economic activity has
advanced at a sluggish pace during the first half of this
year, while inflation has remained elevated.
Following a significant
reduction in its policy rate over the second half of 2007,
the Federal Open Market Committee (FOMC) eased policy
considerably further through the spring to counter actual
and expected weakness in economic growth and to mitigate
downside risks to economic activity. In addition, the
Federal Reserve expanded some of the special liquidity
programs that were established last year and implemented
additional facilities to support the functioning of
financial markets and foster financial stability. Although
these policy actions have had positive effects, the economy
continues to face numerous difficulties, including ongoing
strains in financial markets, declining house prices, a
softening labor market, and rising prices of oil, food, and
some other commodities. Let me now turn to a more detailed
discussion of some of these key issues.
Developments in financial
markets and their implications for the macroeconomic outlook
have been a focus of monetary policy makers over the past
year. In the second half of 2007, the deteriorating
performance of subprime mortgages in the United States
triggered turbulence in domestic and international financial
markets as investors became markedly less willing to bear
credit risks of any type. In the first quarter of 2008,
reports of further losses and write-downs at financial
institutions intensified investor concerns and resulted in
further sharp reductions in market liquidity. By March, many
dealers and other institutions, even those that had relied
heavily on short-term secured financing, were facing much
more stringent borrowing conditions.
In mid-March, a major investment
bank, The Bear Stearns Companies, Inc., was pushed to the
brink of failure after suddenly losing access to short-term
financing markets. The Federal Reserve judged that a
disorderly failure of Bear Stearns would pose a serious
threat to overall financial stability and would most likely
have significant adverse implications for the U.S. economy.
After discussions with the Securities and Exchange
Commission and in consultation with the Treasury, we invoked
emergency authorities to provide special financing to
facilitate the acquisition of Bear Stearns by JPMorgan Chase
& Co. In addition, the Federal Reserve used emergency
authorities to establish two new facilities to provide
backstop liquidity to primary dealers, with the goals of
stabilizing financial conditions and increasing the
availability of credit to the broader economy.1 We have also
taken additional steps to address liquidity pressures in the
banking system, including a further easing of the terms for
bank borrowing at the discount window and increases in the
amount of credit made available to banks through the Term
Auction Facility. The FOMC also authorized expansions of its
currency swap arrangements with the European Central Bank
and the Swiss National Bank to facilitate increased dollar
lending by those institutions to banks in their
jurisdictions.
These steps to address liquidity
pressures coupled with monetary easing seem to have been
helpful in mitigating some market strains. During the second
quarter, credit spreads generally narrowed, liquidity
pressures ebbed, and a number of financial institutions
raised new capital. However, as events in recent weeks have
demonstrated, many financial markets and institutions remain
under considerable stress, in part because the outlook for
the economy, and thus for credit quality, remains uncertain.
In recent days, investors became particularly concerned
about the financial condition of the government-sponsored
enterprises (GSEs), Fannie Mae and Freddie Mac. In view of
this development, and given the importance of these firms to
the mortgage market, the Treasury announced a legislative
proposal to bolster their capital, access to liquidity, and
regulatory oversight. As a supplement to the Treasury's
existing authority to lend to the GSEs and as a bridge to
the time when the Congress decides how to proceed on these
matters, the Board of Governors authorized the Federal
Reserve Bank of New York to lend to Fannie Mae and Freddie
Mac, should that become necessary. Any lending would be
collateralized by U.S. government and federal agency
securities. In general, healthy economic growth depends on
well-functioning financial markets. Consequently, helping
the financial markets to return to more normal functioning
will continue to be a top priority of the Federal Reserve.
I turn now to current economic
developments and prospects. The economy has continued to
expand, but at a subdued pace. In the labor market, private
payroll employment has declined this year, falling at an
average pace of 94,000 jobs per month through June.
Employment in the construction and manufacturing sectors has
been particularly hard hit, although employment declines in
a number of other sectors are evident as well. The
unemployment rate has risen and now stands at 5-1/2 percent.
In the housing sector, activity
continues to weaken. Although sales of existing homes have
been about unchanged this year, sales of new homes have
continued to fall, and inventories of unsold new homes
remain high. In response, homebuilders continue to scale
back the pace of housing starts. Home prices are falling,
particularly in regions that experienced the largest price
increases earlier this decade. The declines in home prices
have contributed to the rising tide of foreclosures; by
adding to the stock of vacant homes for sale, these
foreclosures have, in turn, intensified the downward
pressure on home prices in some areas.
Personal consumption
expenditures have advanced at a modest pace so far this
year, generally holding up somewhat better than might have
been expected given the array of forces weighing on
household finances and attitudes. In particular, with the
labor market softening and consumer price inflation
elevated, real earnings have been stagnant so far this year;
declining values of equities and houses have taken their
toll on household balance sheets; credit conditions have
tightened; and indicators of consumer sentiment have fallen
sharply. More positively, the fiscal stimulus package is
providing some timely support to household incomes. Overall,
consumption spending seems likely to be restrained over
coming quarters.
In the business sector, real
outlays for equipment and software were about flat in the
first quarter of the year, and construction of
nonresidential structures slowed appreciably. In the second
quarter, the available data suggest that business fixed
investment appears to have expanded moderately.
Nevertheless, surveys of capital spending plans indicate
that firms remain concerned about the economic and financial
environment, including sharply rising costs of inputs and
indications of tightening credit, and they are likely to be
cautious with spending in the second half of the year.
However, strong export growth continues to be a significant
boon to many U.S. companies.
In conjunction with the June
FOMC meeting, Board members and Reserve Bank presidents
prepared economic projections covering the years 2008
through 2010. On balance, most FOMC participants expected
that, over the remainder of this year, output would expand
at a pace appreciably below its trend rate, primarily
because of continued weakness in housing markets, elevated
energy prices, and tight credit conditions. Growth is
projected to pick up gradually over the next two years as
residential construction bottoms out and begins a slow
recovery and as credit conditions gradually improve.
However, FOMC participants indicated that considerable
uncertainty surrounded their outlook for economic growth and
viewed the risks to their forecasts as skewed to the
downside.
Inflation has remained high,
running at nearly a 3-1/2 percent annual rate over the first
five months of this year as measured by the price index for
personal consumption expenditures. And, with gasoline and
other consumer energy prices rising in recent weeks,
inflation seems likely to move temporarily higher in the
near term.
The elevated level of overall
consumer inflation largely reflects a continued sharp run-up
in the prices of many commodities, especially oil but also
certain crops and metals.2 The spot price of West Texas
intermediate crude oil soared about 60 percent in 2007 and,
thus far this year, has climbed an additional 50 percent or
so. The price of oil currently stands at about five times
its level toward the beginning of this decade. Our best
judgment is that this surge in prices has been driven
predominantly by strong growth in underlying demand and
tight supply conditions in global oil markets. Over the past
several years, the world economy has expanded at its fastest
pace in decades, leading to substantial increases in the
demand for oil. Moreover, growth has been concentrated in
developing and emerging market economies, where energy
consumption has been further stimulated by rapid
industrialization and by government subsidies that hold down
the price of energy faced by ultimate users.
On the supply side, despite
sharp increases in prices, the production of oil has risen
only slightly in the past few years. Much of the subdued
supply response reflects inadequate investment and
production shortfalls in politically volatile regions where
large portions of the world's oil reserves are located.
Additionally, many governments have been tightening their
control over oil resources, impeding foreign investment and
hindering efforts to boost capacity and production. Finally,
sustainable rates of production in some of the more secure
and accessible oil fields, such as those in the North Sea,
have been declining. In view of these factors, estimates of
long-term oil supplies have been marked down in recent
months. Long-dated oil futures prices have risen along with
spot prices, suggesting that market participants also see
oil supply conditions remaining tight for years to come.
The decline in the foreign
exchange value of the dollar has also contributed somewhat
to the increase in oil prices. The precise size of this
effect is difficult to ascertain, as the causal
relationships between oil prices and the dollar are complex
and run in both directions. However, the price of oil has
risen significantly in terms of all major currencies,
suggesting that factors other than the dollar, notably
shifts in the underlying global demand for and supply of
oil, have been the principal drivers of the increase in
prices.
Another concern that has been
raised is that financial speculation has added markedly to
upward pressures on oil prices. Certainly, investor interest
in oil and other commodities has increased substantially of
late. However, if financial speculation were pushing oil
prices above the levels consistent with the fundamentals of
supply and demand, we would expect inventories of crude oil
and petroleum products to increase as supply rose and demand
fell. But in fact, available data on oil inventories show
notable declines over the past year. This is not to say that
useful steps could not be taken to improve the transparency
and functioning of futures markets, only that such steps are
unlikely to substantially affect the prices of oil or other
commodities in the longer term.
Although the inflationary effect
of rising oil and agricultural commodity prices is evident
in the retail prices of energy and food, the extent to which
the high prices of oil and other raw materials have been
passed through to the prices of non-energy, non-food
finished goods and services seems thus far to have been
limited. But with businesses facing persistently higher
input prices, they may attempt to pass through such costs
into prices of final goods and services more aggressively
than they have so far. Moreover, as the foreign exchange
value of the dollar has declined, rises in import prices
have put greater upward pressure on business costs and
consumer prices. In their economic projections for the June
FOMC meeting, monetary policy makers marked up their
forecasts for inflation during 2008 as a whole. FOMC
participants continue to expect inflation to moderate in
2009 and 2010, as slower global growth leads to a cooling of
commodity markets, as pressures on resource utilization
decline, and as longer-term inflation expectations remain
reasonably well anchored. However, in light of the
persistent escalation of commodity prices in recent
quarters, FOMC participants viewed the inflation outlook as
unusually uncertain and cited the possibility that commodity
prices will continue to rise as an important risk to the
inflation forecast. Moreover, the currently high level of
inflation, if sustained, might lead the public to revise up
its expectations for longer-term inflation. If that were to
occur, and those revised expectations were to become
embedded in the domestic wage- and price-setting process, we
could see an unwelcome rise in actual inflation over the
longer term. A critical responsibility of monetary policy
makers is to prevent that process from taking hold.
At present, accurately assessing
and appropriately balancing the risks to the outlook for
growth and inflation is a significant challenge for monetary
policy makers. The possibility of higher energy prices,
tighter credit conditions, and a still-deeper contraction in
housing markets all represent significant downside risks to
the outlook for growth. At the same time, upside risks to
the inflation outlook have intensified lately, as the rising
prices of energy and some other commodities have led to a
sharp pickup in inflation and some measures of inflation
expectations have moved higher. Given the high degree of
uncertainty, monetary policy makers will need to carefully
assess incoming information bearing on the outlook for both
inflation and growth. In light of the increase in upside
inflation risk, we must be particularly alert to any
indications, such as an erosion of longer-term inflation
expectations, that the inflationary impulses from commodity
prices are becoming embedded in the domestic wage- and
price-setting process.
I would like to conclude my
remarks by providing a brief update on some of the Federal
Reserve's actions in the area of consumer protection. At the
time of our report last February, I described the Board's
proposal to adopt comprehensive new regulations to prohibit
unfair or deceptive practices in the mortgage market, using
our authority under the Home Ownership and Equity Protection
Act of 1994. After reviewing the more-than 4,500 comment
letters we received on the proposed rules, the Board
approved the final rules yesterday.
The new rules apply to all types
of mortgage lenders and will establish lending standards
aimed at curbing abuses while preserving responsible
subprime lending and sustainable homeownership. The final
rules prohibit lenders from making higher-priced loans
without due regard for consumers' ability to make the
scheduled payments and require lenders to verify the income
and assets on which they rely when making the credit
decision. Also, for higher-priced loans, lenders now will be
required to establish escrow accounts so that property taxes
and insurance costs will be included in consumers' regular
monthly payments. The final rules also prohibit prepayment
penalties for higher-priced loans in cases in which the
consumer's payment can increase during the first few years
and restrict prepayment penalties on other higher-priced
loans Other measures address the coercion of appraisers,
servicer practices, and other issues. We believe the new
rules will help to restore confidence in the mortgage
market.
In May, working jointly with the
Office of Thrift Supervision and the National Credit Union
Administration, the Board issued proposed rules under the
Federal Trade Commission Act to address unfair or deceptive
practices for credit card accounts and overdraft protection
plans. Credit cards provide a convenient source of credit
for many consumers, but the terms of credit card loans have
become more complex, which has reduced transparency. Our
consumer testing has persuaded us that disclosures alone
cannot solve this problem. Thus, the Board's proposed rules
would require card issuers to alter their practices in ways
that will allow consumers to better understand how their own
decisions and actions will affect their costs. Card issuers
would be prohibited from increasing interest rates
retroactively to cover prior purchases except under very
limited circumstances. For accounts having multiple interest
rates, when consumers seek to pay down their balance by
paying more than the minimum, card issuers would be
prohibited from maximizing interest charges by applying
excess payments to the lowest rate balance first. The
proposed rules dealing with bank overdraft services seek to
give consumers greater control by ensuring that they have
ample opportunity to opt out of automatic payments of
overdrafts. The Board has already received more than 20,000
comment letters in response to the proposed rules.
So we shall see later in the day... got to get my TreasuryDirect
account going now...
A Three-Ring
Financial Circus
Yeah, we'll get to the drill-down into the PPI in a minute, but
there's a more important topic first; A look at what's going
under the Big Top.
"
Ladeees and Gentelmennnn...I preeezent....the Biggest Show On
Earth!......"
(With this, accompanied by a tepid round of applause and the
smell of hay, canvas, and peanuts, the cast of of the circus
runs out and circles Ring #1...)
-----
With
the price of gold moving back toward the $1,000 level, and
silver making a run back toward the $20 level, I have to
reiterate that I am looking at opening up a Treasury Direct
account. But, what may not have sunk in or been obvious
when I first mentioned this is the
second-level motivation for doing so.
---
Let
me back up for a moment and explain: If this is the long
awaited Second Depression that I've been writing about (since
about 1997 on the web and much earlier in discussion groups),
and if indeed the predictive linguistics work of
www.halfpasthuman.com
is anything close to right about the fall, we could easily be in
what would be in monetarist theory a 'crack-up boom' before we
sink into massive global deflation - which would be the outcome
of cannibal capitalism eating its own tail and running out of
things to consume.
---
As
an aside, I look at the recent discussion about
'Who should be
in the G-8?" as symptomatic of the times. It's a bit like
having a club which wants to assess ever more dues ('you go
first on climate change') so rather than have anyone step up in
a leadership role, the attention turns to brining in new
memberships who could be leaned on to the advantage of their
sponsors. The headline G-8 Club needs new members" gets
almost exactly to this idea, while.
And,
of course, with the world's financial markets all every more
intertwined, when the U.S. sneezes, the world gets a cold.
While the harsh reality of the second largest bank failure in
U.S. history may have been glossed over by the StreetCentric MSM
(MainStreamMedia) in the U.S., the fix is not in to the same
degree overseas, and so what we get is "Dollar
at new low as market hit by banking woes" to wake up to.
---
The
real story of the morning, other than the inflation figures out
a few moments ago, and the futures being down more than 100
points earlier, is that you should right now - I mean like
today being angling for a way to get your money safe if need
be.
Fortunately, there's a simple way to do it - if you have any
cash sitting in a bank, which would be setting up a
Treasury Direct account,
so that instead of going down to the local bank and getting in
line with people, you can just log on to the Internet, transfer
your funds into the bosom of the government via
Treasury Direct and
be done with it. That's one line that's likely not to have
many people in it if the bank runs spread.
Now,
obviously, if I can figure this out, so can regulators. So
that's why I will set up (and minimally fund) a
TD account today.
Call me cowardly if youi will, but I don't do lines well.
I try to think ahead of the problem a bit more than that.
Lines are for sheep.
---
We
are also now getting close, so it would seem, to the place in
the linguistics where silver doubles three times' in emotional
values. No, that's not price, that's another
matter. Still, you won't see me unloading either my silver
coin or the gold one any time soon.
Talk
of bank runs is, to a certain extent, self-fulfilling. "Confidence
weakens in U.S. banking sector" reads one headline this
morning. But, as outlined above, a thinking person can
perhaps stay one step ahead of the curve. It's what we
like to do around here.
---
Much
of the day's action in oil price move is a result of the new
lows in the dollar, which is also moving up the price of the
metals. But then I'm sure you already got that one
figured. Judging by response time of the server earlier,
I'd say most of the metals dealers on the net like Kitco (charts
with links above) are swamped.
I
keep a bookmark for www.ino.com
so I can see what the commodities are looking like, including
the metals, when the dealer sites are overloaded.
And
remember how I've told you that even though we may be driving
less, China and India are putting new cars on the road at record
rates and that will keep the price of gasoline high? Well,
more evidence of that today as we read that "China
June auto sales up 15.35 pct yr-on-yr at 836,800 units - assn".
Hmmm...even with smaller engines (and much more lax safety
standards which means light vehicle weights) it probably still
means another million gallons a month (if not more) new demand
coming on line.
---
So,
as the morning gets off to a downside start (if the futures are
any indication) we are hearing the reassurances from the "FDIC
Chair: Deposits in nation's banks are safe."
And in your 401(k)? Ooops...did you miss my comment months
back about 'flee paper assets while you can'?
"Ladeeez and Gentlemennnnn... With this fine performance of the
Big Picture complete, let me now direct your attention over to
Ring #2 and Ring #3 in what we light-heartedly call the
Three Ring Financial Circus...
And in Ring #2:
PPI
"Ladees
and Gentlemennnn! I present in Ring Number Three, the
amazing Produce Price Index!"
If
you take the last two months of increase, 1.4% and 1.8% you get
an annual implied inflation rate of er....near enough to 20%!
If that sounds a little Weimar'ish, not to worry, Washington'll
save us! Riiiiight....
So
how far has the 'terror mania" gone? Well,
the current size of the 'terror watch list' is pegged at
somewhere north of one million names. Your straight
odds of being on the list might seem, based on the population of
the country, to be about one in 300-million. But, of
course, if you did something terrorble (*new word of the
day - use it and pass along a link to this site, please), like
buy a copy of the Anarchist's Cookbook, your odds are probably
much higher. Or, if you used a wrong combination of words
in an email. Or if you said the wrong thing on the
phone to someone and got picked off by
the Echelon
surveillance system.
"Ladees
and Gentlemennnn! That concludes our Big Thee Ring Show
for this morning, but don't forget as you leave to visit the
Side Show...just step this way if you please..."
Dancing Headline
Masters
One
of the reasons for reading the NY Post site every morning is
that they 'give good headline'. This morning's description
of the Microsoft-Yahoo situation "Stealth
Ballmer" was pretty good. It sets a sort of journalistic
benchmark, although I would have only come up with "Anything you
can do Icahn do better..."
"George- I am a union electrician from Texas that just
returned from your beloved home state of Washington. While
there, I was working new construction on a billion dollar
plant that makes solar crystals and silane gas in Moses
Lake, WA., REC Solar. They have developed a new process
where they can make the crystals much faster and more
efficiently. The silane gas is also used in the manufacture
of LCD's. They have also developed a new technology where
they will be able to print solar cells on just about any
surface. That company supplies most of the solar crystals
and silane gas in the world, so they have the corner on the
market, so to speak. They are a Norwegian company, and
traded on the Oslo exchange, I believe. Just thought you
should know..."
Another sends this:
"George: Please hold off purchasing solar panels until AVA
is ready to go later this year-you will be glad you waited.
Thank you, (readername)
http://www.avasolar.com/
"
Quick! Call
Stephen King File
Oh,
oh. The environment crashing is becoming harder and harder
to hide. Check out this one...
"UPDATED MEDIA ADVISORY - NEW
TIME
NOAA and Louisiana Scientists to
Release Gulf of Mexico "Dead Zone" Forecast July 15 at 1
p.m. ET
WHAT: Media teleconference with
scientists from NOAA, Louisiana State University and
Louisiana Universities Marine Consortium to announce the
official Gulf of Mexico "dead zone" forecast that predicts
the size and scope of the hypoxic area.
WHEN: Tuesday July 15, 2008; 1
p.m. ET / 12 noon CT"
If
the headline doesn't make sense to you, click
here. Then get some coffee and wonder "Who was that
guy with the cape and bull horn in the center of the Big Top?
---end snip and save section - and financial world ;-) ---
Monday July 14, 2008
Miracle Monday
Second biggest bank failure in U.S. history Friday? Or,
how about massive troubles with Freddie and Fannie? Something to
worry about? Ha! In case you missed Saturday's
report, I explained what would happen this way:
The way I've got it figured, if we don't get the "surprise"
on Monday with a report that the financial super glue has
been found and it's dried the requisite 10-seconds to hold
things together for another month or three, the market could
easily drop another 500 points. Surprise in the works? (Bear
with us) I'd almost bet on it.
Sure enough, here we are in the pro-open of Monday and the Dow
futures are up over a hundred points and what do we have?
A Fed statement on Sunday:
"Robin Landry noted late Friday that his short-term
indicators have turned positive, and barring another round
of mortgage market meltdown mania, we might now be set up
for a decent rally next week, which could get us into a late
summer bounce several hundred points (or more) higher than
here."
So
quick, put a really surprised/shocked look on your face as the
Dow and the other major indices are set for a big pop this
morning.
If
it holds through the week, I'd be penciling in mid August as a
possibl3e bond entry point for any excess cash laying around the
checking account.
Treasury Direct is easy enough even a George can use it.
Typical reader reaction to all this? A bit cynical,
perhaps?
"George,
Since all of our "money" is nothing more than floating-point
numbers in a computer (far easier to "print" than paper
promises) why hasn't the Fed just waved the wand and made
IndyMac Bank whole? It's not like they'd tell us that they
did it after all - for who is watching them? Mugabe?)."
I
hope you remember the story from a couple of months back where
we reported that the FDIC and Office of Thrift Supervision were
hiring more personnel so they could be ready for expected bank
failures? Well, here's the 'expected bank failures' part
starting to arrive.
Unfounded fear, of course, because around here we're not at all
worried about that because we know the next leg of the
Bear Market will involve either...oh...the credit collapse
or the jobs collapse. A hemlock or cyanide kind of
choice, to be sure.
This Week's #'s
Are
these the potential rain on Wall Street's parade? Not this
week. Instead, we will be focusing on the next round of
major economic data due this week. Tomorrow we get the
Producer Price Index, as well as the Consumer Price Index, both
of which should be tuned just-so to meet Wall Street
expectations.
Meantime, over at Trader Bart's site, we see that the M-3
reconstructed rate of money growth (buried by the Fed under
Greenspan who saw this coming and hid the sausage)
is running
along near 16-17% percent. And at John Williams'
"Shadow Government Statistics" site, please note that a more
realistic method of computing
consumer price inflation
is running about 7 1/2%, which of course isnot
being reported by the mainstream ostrich...I mean
MainStreamMedia.
Our
second Miracle for this Monday is not any one of these
points; rather it's the totality of the picture. Almost
like a ghost on the TV (in the old days) we've got harsh reality
over here, and offset a distance we have the second reality of
Wall Streeters.
George Sits
Corrected
A
couple of people asked recently about what they thought was a
failure of the predictive linguistics for the short emotional
release period about July 8th. I had mentioned the lack of
earthquakes, but a sharp note from the time monks noted that
around July 8 we had a
6.2 in Peru but not mentioned much in the press there was
the
7.6 on July 5th in the Sea of Okhotsk (Siberia) which was a
large one and worrisome too, in that it had a depth of 605.4 km,
which is down at the level where we stay 'glued' to the core.
If things start breaking off down there, the 'orange peel' which
is the crust could go on walkabout, but no worries about
that...yet. Stick around a few years.
Meantime, we don't know about the December quake to come later
this year, whether that will also be 'coast of Americas' south
or north...
And
why? Well, despite the partying on Wall Street over the
government buying up stock of financial losers that are to big
to fail, it looks like
oil
has gone over $147 a barrel, which when you think about it
is why we can safely predict that "If you work in the
defense/death industry, no worries about peace breaking out..."
Kill for peace, anyone?
To
the NY Post for this morning's coverage of the Budweiser/InBev
acquisition. "This
Bud's for EU". That's our kinda writing...
Line Up
Bastille
Day parades and revelry in France. I'd warm up the
Gulfstream and take Elaine, but what with fuel prices and such,
we're trying to be thrifty, thanks. Gotta keep the Daewoo
going...
---snip and save section ---
Coping:
Something for
Pennies
What the heck can you get for a penny these days? Read on...
Dear George ,
My pennies still count . I try
to read your stuff on-line a couple of times a week . It's
always intelligent and gets the ol mental juices flowing .I
just read your July 12 th post about the pennies lost or not
paid attention to while balancing your check book-advice in
the snip and save section .I'm a fellow Texan from west of
Fort Worth and I would like to tell you how I make my
pennies still count .
Our local Wal-Mart super center
a while back decided to cut costs by installing these self
check out lanes . Where instead of paying ten cashiers
minimum wage 'they pay one who is in charge of ten lines .
Now I'll be the first to admit that I at first liked the
empowered feeling of do things for myself , but sometimes it
can be a pain in the rear if items don't scan right or the
weight sensor thinks your bagging items with out scanning
them first .You end up waiting for the one employee in
charge of ten lines to come to your rescue while the little
red light is flashing at your machine -- signaling you're an
idiot that can't even check out at an idiot proof machine.
. On the whole these lines are generally about as fast as if
Wal-Mart was actually paying a cashier to give me a more
personalized shopping experience (which I now prefer over
the whole empowerment thing ) .
Well this is how I make every
single penny count . When ever the situation arises to shop
at Wal-Mart I make sure to take every single ever lovin'
penny ( as well as other hard American currency- nickels ,
dimes and quarters ) in the ashtray of the car along with as
much change from the change jar at the house with me . I
generally end up having to wear a belt to hold up my pants (
I'm talking pounds of pennies if possible ) . When ever I'm
ready to check out I make sure to go through the self-check
out lanes , If people are behind me I try to warn them that
I might take awhile .They always have skeptical looks at
first , seeing only twenty or thirty dollars worth of
merchandise ; but once the pennies and other change come out
, they will roll their eyes and move to a much longer but
faster moving line .
George I tell you it's almost
just like being in Vegas playing the slot machines
especially when you get lucky and the flashing red idiot
light comes on . Wow ! What a blast ! I have really come to
enjoy playing the slots down at the local Wal-Mart . Just
like gambling , it can be very addictive . Usually the one
employee in charge of ten lines will end up coming over to
cheer me on as I feed those pennies that count .
Two
points: First, after whatever is coming this fall, I would
not be surprised to see gas and heating oil up 2-10 times their
current price. So I plan to stock up shortly on everything
I can think of that comes from oil - and before mid September.
Second, that solar panel link is a good idea, but I've been
shopping around for cheap solar panels - I'm willing to throw a
couple ofs thousand into them now - but I can't find any really
good 'deals' - even the build-your own are way spendy now, to
the point where the premade panels are as cheap by the time you
figure your labor cost and time spent.
So,
if anyone has a good source for solar panels send it along!
As the time monks note, we're not that far from fall and if you
don't have self sufficiency dialed in by then, you may not be
able to get there from where we're going.
Once upon a
time, a long while ago, I observed during my quest for 'truth' in
economics, that the powers That Be, the talking heads on the teeve, and
the other information sources that actively engage in the programming of
humans not to think, had conveniently swept several trillions of dollars
that disappeared in the Internet Bubble's bursting (since spring 2000)
under the rug. Surely, it wasn't unnoticed by the thousands of
people who called brokers and said "Where is my money?" "Gone, but
hang in there as you're a long term investor!" was about all they heard
back.
But, the truth
of the matter is that this chart shows what your account would look like
if you have taken a few thousand dollars and invested equal amounts in
the Dow, the S&P 500, and the NASDAQ Composite in the waning days of
1999. It's not a very pretty picture, and it sort of gives away
the other side of the story. You know, the one that no one has an
interest in telling, because it's a truth which shows the amazing
coincidence of the timing of 9/11, the disappearance of naked shorting
evidence and all, along with the impact of The Wars which have managed
to keep the economy out of an earlier depression than the one expected
by me by late 2008.
No, it's not a
perfect replay of 1929, but history doesn't repeat exactly, it
only rhymes. So think of this as the rhymes and the crimes chart:
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