This is such a big deal for small business. All of our costs have a delivery/oil component. Also, i have already seen some relief in my customers as that huge cost of filling the car has started to come down.
The Russians have to come up with a way to replace the lost revenue from oil. I wonder if they can push up the price of their other big commodity, gold? Fun times!
Right now we're focused on financial institutions, regulated financial institutions,'' Paulson said in an interview with Bloomberg Television, when asked whether hedge funds might also be eligible.The program right now is for banks and thrifts.
Hope the pain was long enough to convince Detroit to really kill the gas guzzlers. The last thing they, or the environment for that matter, need is the Ford Excursion 2.0
If oil is down 50% from the $140 a barrel and $4 per gallon gas we were paying a couple months ago, why is gas only down 25% to $3 a gallon? Where is my $2 per gallon gas?
OPEC Brings Forward Meeting to Oct. 24 as Oil Slides (Update1)
By Fred Pals
Oct. 16 (Bloomberg) -- OPEC, the producer of 40 percent of the world's oil, brought forward its planned meeting for next month to Oct. 24 after crude prices slid to a 13-month low.
``Following consultations with the President of the OPEC Conference and colleague Ministers, it has been decided to re- schedule the Extraordinary Meeting of the OPEC Conference,'' the group said today in an e-mailed statement.
OPEC lowered its 2009 demand forecast for a second month yesterday as the worst financial crisis since the 1930s threatens to send the global economy into a recession. The 13- member group reduced its forecast for average oil consumption next year by 450,000 barrels a day, or 0.5 percent, to 87.21 million barrels a day.
The Russians have to come up with a way to replace the lost revenue from oil. I wonder if they can push up the price of their other big commodity, gold? Fun times!
Hanging by a thread | Homepage | 10.16.08 - 11:30 am | #
I have a friend who is a crackpot tin foil hat type. He is CONVINCED that oil prices always nose dive when the GOP is behind in elections and that there is a direct causal link between the two.
I generally mock the hell out of him. But lately he's been rather insufferable.
"If oil is down 50% from the $140 a barrel and $4 per gallon gas we were paying a couple months ago, why is gas only down 25% to $3 a gallon? Where is my $2 per gallon gas?"
Production capacity, stockpiles, weak dollar buying Euro gas (we import refined gasoline from Eurozone believe it or not.) Yadda yadda. Plus the eastern refineries are focusing more on home heating fuel right now.
Ministry of Truth writes:
Paulson Says Stock-Buying Aimed at `Regulated' Firms
Bloomberg.com refer=home
U.S. Treasury Secretary Henry Paulson said his plan to inject capital into financial companies is focused on banks and thrifts, indicating unregulated firms such as hedge funds won't initially get government aid.
Like I said, it is the shadow banking system that is under attack; it is the traditional banking system that is being saved.
This is a great time to invest in India. In the short term the oil prices will help their booming economy. In the longer term the Indian people are the smartest and hardest working people on earth. Free from white-oppression, they will become the world's ruling country. America will benefit in the near term because of its trading relationship, but eventually all that money and power will return to India
girlbear writes:
I don't believe lower demand is causing this. Manipulation, as in the stock market is the key word here. Fundamentials have gone by the wayside.
I disagree. The manipulation took place as the shadow banking system grew. But that was fake money based on an unrealistic degree of leverage.
It is that very degree of leverage that is collapsing now. No one can any longer afford to manipulate. Preserve capital or die.
No his current line is that I'm completely a fool for even believeing banks exist anymore. The world is run by an oligarchy of hedge funds that just tell the media that banks still exist and that regulation is real to hide the amount of money they're making off the poor.
He's fun at parties after you give him some shots I must say.
the longer term the Indian people are the smartest and hardest working people on earth. Free from white-oppression, they will become the world's ruling country
Up until last week I was working for an Indian outsourcing company and I agree with this assessment. I don't know what Jimmy Rodgers is thinking that he's choosing China over India.
"He is CONVINCED that oil prices always nose dive when the GOP is behind in elections and that there is a direct causal link between the two."
Two years ago the drop in gasoline had a cause in plain sight. Goldman Sachs changed their energy index in September of 2006 so that firms with hundreds of billions invested all had to dump two thirds of their gasoline futures simultaneously. Gas went 3 --> 2 just in time for the election. Probably saved the GOP 20 seats in the house.
You have to love it. When it's at $140, not an insignificant number of insider experts claimed it wasn't because of dwindling supply, but now that it's falling like a lead weight, it's back to good ol supply and demand again. How convenient. Since we're in the business of Nationalizing now, why not nationalize these Dinosaur Excavators once and for all. At this point, the oil companies are nothing more than corrupt monopolies, so the Chicago Boys really can't claim free trade foul when they become state run.
Jas Jain,
You're smart, and I understand your sarcasm. Just consider the fact that newbies know you are smart too, but don't always see that you are being subtle.
Also, notice that both candidates talked about drilling last night.
World competitors are not stupid - they are lowering the price to eliminate our motivation to explore and produce at home, to stem the interest in investing in renewable and efficient energy, and develop domestic energy efficient transportation solutions. It's a time game to them. They need more time to bleed us dry and for us to transfer more of our wealth to them.
Now we (the US) don't have to change. We (the US) like the path of least resistance.
And the saddest part of it all is we (the US) will fall for it...again.
Hard to tell what is deleveraging and what is real supply and demand. Oil got real wierd last month when the contracts closed. Too much speculation to know were we are going to land.
"The Russians have to come up with a way to replace the lost revenue from oil. I wonder if they can push up the price of their other big commodity, gold? Fun times!"
Another good reason to reduce the need for imported oil -- to pull the rug out from under the authoritarian regimes that rely on high levels of oil revenue to maintain power. And that includes many of our "friends."
Yes, all projects that use anything other than open mining are.. but open mining projects are OK till 40USD. But new investment in these projects if DOA.
_
i dont have the source, or the exact number, but i seem to remember reading somewhere that the oil sands were only profitable for oil > 65
nullpointer | 10.16.08 - 11:44 am | #
Hank Paulson's Mom writes:
where is all of the money going to?
Poof! It's like putting a tube sock in the front of your pants to impress the ladies. When you eventually have to strip down, it doesn't 'go' anywhere. Twas but a mirage.
Not that I've ever leveraged my manhood...that's just what people tell me.
I remember reading somewhere that the break even of a new oil well is around $80 a barrel. Does that mean the oil companies will not want to DRILL BABY DRILL?
World competitors are not stupid - they are lowering the price to eliminate our motivation to explore and produce at home
They may not be stupid but the average American is. Off shore drilling on these sites are a net loss for big oil. They can hold their positions and projected output of these leases on their balance sheets assets. Once they drill, poof, those projected numbers disappear
Organic George writes:
I remember reading somewhere that the break even of a new oil well is around $80 a barrel. Does that mean the oil companies will not want to DRILL BABY DRILL?
Organic George | 10.16.08 - 11:48 am | #
Why pump it up if you can't sell it at a profit? Oil boom is over until economy is back up, think five years or so.
The best way to stimulate the worlds economy is for everyone to invest in massive public construction projects- roads, dams, power plants, electric power distribution etc
Actually, and I mean this in a very positive way, that I discovered to my suprise and happiness that my rapidly-expanding set of Indian co-workers were extremely balanced about work time and play (family) time.
And therefore were fun to be with, as their interests were wide-ranging and their pursuit of play (travel, child rearing, etc) always made conversation worthwhile.
I can't say so much for Americans, sadly, where you talk market or sports.
The moneyed class always tries to tell us white-and-blue collar peons that we are "lazy", and that somebody else (vague pointing in the direction of Asia) is going to "outwork" us.
We fell for it in the '80s about the Japanese (who turned out to certainly spend a lot of hours at work, but were amazingly - and unsuprisingly given the stress - unproductive on an hourly basis), but they aren't going to give up.
Now the very poor in India have no choice, and the enterprenurial ones work their butts off, but that's true of enterprenures regardless of their formative cultural background.
Credit market priced for something close to a depression -- We said on Monday that while the equity market is certainly priced for a recession 85% for a serious recession it is the credit market that is truly priced for
anything remotely close to a depression, no matter how loosely defined: Spreads on junk bonds just hit a surreal 1,538 basis points over Treasuries (up from 1,450 bps on Tuesday), absolutely smashing the prior record of 1,220 bps during the 2002 double-dip economic turndown. And high-grade bonds are now trading at spreads that in the past were consistent with where high-yield used to trade also at an all-time high of 582 basis points.
But what do credit markets know anyway? Inflationists and Scam Lovers are far smarter than the credit markets. I take my cue from the former and ignore the hyper-sensitive and irrational credit markets.
popeye writes:
Like I said, it is the shadow banking system that is under attack; it is the traditional banking system that is being saved.
popeye | 10.16.08 - 11:34 am | #
Again, could anyone construct an "indicator" to show progress in this?
A very rough one?
This would be that deflation thing, as in less money in the system. Much of the money was generated through banking activities of unregulated non-banking institutions, hence our recent liquidity bubble.
The reason that the Fed/Treasury cannot reflate fast enough is because they are two orders of magnitude smaller than the market. They can make big numbers, but they don't have enough touchpoints for instantaneous flow of their infinite supply.
But they'll keep up the injections until they work, after which you'll get an astonishing inflation as they overshoot. That would be a good time to have already bought positions in depressed commodities and equities, and a bad time to own bonds. No idea when it will occur, but unlikely in the next year or two.
Think of the money supply as a lake that suddenly developed a hole. All the water drains out rather quickly and they bring in more and more pipelines to try to keep the level up, but in vain. Eventually the hole gets plugged and the pipelines start filling the lake. This looks great until the lake fills, after which you need to turn off all the pipelines very suddenly. That's impossible so the lake overflows.
At least this will help with inflation and take some pressure off consumer spending
The entire world is now experiencing a massive deflationary shock - except for the Japanese who are no longer shocked, but are still in the grips of deflation (both prices and monetary - take your pick on definition). Lower oil prices are not welcome in that regard...
Without sending excess dollars to the oil exporters above and beyond what they are currently spending/investing on their own economies (and below $80, there are no excess dollars), we lose petro-dollar recycling into the treasury market (and to some extent, SWF investments in US assets) at the same time that the treasury issuance is about to explode.
So, I am not optimistic about the fall in oil. I think it will just cause the long end of the bond curve to rise in a curve steepening move, while the short end collapses further due to deflation.
Don't watch price right now - watch volume - the market has always been dominated by institutional investors. Hedge funds are collapsing, volume will show you when this event begins to wane.
I was told by a Canadian involved in the business was 35-40bbl
Lying or wishful thinking.
Back when I was involved in the early 90's, the Alaska pipeline itself wasn't worth dick if the price was below $20/bbl. In like 1993 dollars. Oh, they'd pull some much lower price out of their a$$ for public consumption, but if you were involved in selling stuff to them that was pretty much the number that told you if they were going to buy anything or not.
Remember they begged Clinton to let them sell it to Asia - another warm moment in patriotism from our Alaskan co-citizens.
If you can get oil in the low 60s, buy all you can afford. It's almost impossible that there won't be some strange geopolitical turmoil following on the economic meltdown.
Iran is not off the front burner by any stretch. When missiles start to fly anywhere in the world, oil will soar.
Even without wars, oil demand is not as elastic or cycle-dependent as you think.
lucifer -- this is not a stimulus problem, this is an overhang of debt during a decrease in incomes due to the fact the absolute debt stopped growing. You could spend your way out of this problem, but it is more than could be borrowed at affordable rates
As for the oil sands: the new developments need that $80 per barrel. It's certainly not positive in the near term, but they at least have the offsetting decline in the CDN dollar for now.
Back around 2001 with all operational costs included, anything above $8 per barrel was pure profit. The 2 incumbent players still have that cushy royalty regime grandfathered in.
Good for Alberta allowing those investment commitments to be made during the boom. This will have a big impact as I foresee many of the new entrants looking to delay their projects to wait for cheaper materials/labour which is what drove the marginal cost up to $80 per barrel from $8 per barrel 8 years ago.
Overall the oil sands are overhyped. They're talking about going from 2mn barrels per day of synthetic crude up to 4mn barrels per day in a decade. They have a big impact in the sense that they require big capital investment and its projected against a small population
Why pump it up if you can't sell it at a profit? Oil boom is over until economy is back up, think five years or so.
Why@ ZIRP | 10.16.08 - 11:52 am | #
Iran is probably very unhappy as oil is all they have. Combine the Israeli desire for them not to have nukes and their desire to keep the oil money coming. Iran needs to in order to keep urder.
Also how much of the economy in the "good states" is due to oil and reopening production.
Those who said last spring that there was a commodity bubble overlaid on a deflationary environment appear to have been correct. However, you might still make a case that there are just extremely steep price/demand curves.
In either case, OPEC loses steam in a hurry in a low-price environment. They have never been able to keep the cats in a herd.
i am having coffee with ayers
and joe plummer
and a hockey mom
we are going out for a six pack after
and we are all going to get bracelets
and then we are going to drill for oil in my bathtub.
re peak oil, Matt Simmons may well have been talking up his own investments, but the geologists I've talked to all believe that Hubbards Curve is a valid descriptor for the behavior of oil fields over time.
Who knows re timing. Arctic melting could start a whole new oil boom, but we use a prodigious amount of the stuff. I'm young enough that it seems plausible that in my lifetime the petroleum driven car will be as obsolete as the whale oil lamp and for similar reasons.
This is fantastic news. The balance of trade smaller outflows will strengthen the dollar and actually lower Treasury borrowing rates as the dollar is again a safe haven.
For some reason my buddies at The Oil Drum don't have a single article on oil prices. Seems only a few months ago near every headline there screamed peak oil.
Again, could anyone construct an "indicator" to show progress in this?
Hedge fund data isn't public, so not really. You could do something with total hedge fund deposits, which is available about quarterly, but that tells you nothing about internal leverage, which is the key element. The secrecy is one of the worst aspects of the shadow banking system - the central banks and regulators don't know what's going on either and so can't act on good information.
my YHOO purchase is doing okay today LOL...yesterday sucx. If microsoft ignores yahoo..the google-yahoo pact will pretty much seal their death in adspace.
"If oil is down 50% from the $140 a barrel and $4 per gallon gas we were paying a couple months ago, why is gas only down 25% to $3 a gallon? Where is my $2 per gallon gas?"
Oil and gasoline are traded on completely separate markets with separate supply/demand curves. Prices may or may not be correlated at a particular time (though obviously correlate in a generally positive manner).
Example: a gasoline refinery explosion in Louisiana knocks out 10% of the US gasoline supply.
What happens? Gas prices go up, but crude oil prices go down, since:
but the geologists I've talked to all believe that Hubbards Curve is a valid descriptor for the behavior of oil fields over time.
That would be Hubbert and no, it turns out it doesn't work that way. The US has domestically extracted more oil than was known to exist since his supposed peak in 1972 and still has as many years of reserve still in the ground today as then.
That would be Hubbert and no, it turns out it doesn't work that way. The US has domestically extracted more oil than was known to exist since his supposed peak in 1972 and still has as many years of reserve still in the ground today as then.
US oil production has fallen every year since Hubbert's US peak in the early 1970s. The fact that "more than expected" was extracted is immaterial.
the geologists I've talked to all believe that Hubbards Curve is a valid descriptor for the behavior of oil fields over time.
It is for individual fields, and has been for a lot of nations as well. But on a world-wide scale, the efforts at curve fitting over at TOD are rather futile. There are just too many variables. And until we're well along on the downslope, prices will be dominated by human factors.
Fair Economist writes:
Again, could anyone construct an "indicator" to show progress in this?
Hedge fund data isn't public, so not really. You could do something with total hedge fund deposits, which is available about quarterly, but that tells you nothing about internal leverage, which is the key element. The secrecy is one of the worst aspects of the shadow banking system - the central banks and regulators don't know what's going on either and so can't act on good information.
I don't have anything to add. I just wanted you to read it again.
As for the oil sands: the new developments need that $80 per barrel.
There is no right number for this. It depends on the type of field (SAGD vs open pit), on whether bitumen is used to help create some of the steam (see the OrCrude process used by Nexen/Opti Canada - opc.to), and hugely on the price of natural gas.
At the same time, lack of financing for massive projects should mean that anyone with a built out facility or far along right now is likely to have less competition once oil prices eventually rebound.
"This is fantastic news. The balance of trade smaller outflows will strengthen the dollar and actually lower Treasury borrowing rates as the dollar is again a safe haven"
Yes there is that small rounding error called $10 trillion plus witha few trillion coming. Are you long the long bond?
Peter-san writes: "Without sending excess dollars to the oil exporters above and beyond what they are currently spending/investing on their own economies (and below $80, there are no excess dollars), we lose petro-dollar recycling into the treasury market (and to some extent, SWF investments in US assets) at the same time that the treasury issuance is about to explode."
Add to that less (American) consumer spending on products from Asia, and you may very well have a "funding problem" for the new US (and European) debt that needs to be issued for the bail-outs. This may not happen short term, but I'd keep my eye on it medium and long term...
Peter-san,
I'm just explaining that the $80 is a legitimate number, but not representative of any current production.
I haven't heard of burning the bitumen for steam yet, I thought anywhere using SAGD was using local natural gas because it remains cheap and they pay no royalties on it since used in production. Bruce power building some nukes is another longer term variable that will affect the cost basis over a project's lifetime.
Areva has been running a lot of ads implying they are building nukes in the oil sands for Total's new project despite not even being close to submitting any kind of proposal. Just thought I would share that weird info
It's not just "peak oil" as in how much is in the ground. That was never the point. The point was the vicious cycle of consumption of the oil that a given oil producer-nation produced, so that with more oil extraction came more prosperity, which fueled growth which fueled consumption, so that ever more an more of the oil in the ground is siphoned off for domestic consumption (non necessarily productive consumption--SUVs). So a net exporter becomes a net importer, even as the raw amount of proven capacity and reserves increases...A little more nuanced peak oil theory than traditional "we're going to run out!". Mexico and Russian are in fact following the curve and so did the USA if consider export verses import.
By Howard Schneider
Washington Post Staff Writer
Thursday, October 16, 2008; 11:40 AM
Swiss authorities moved to stabilize their storied banking system today, agreeing to move $60 billion in troubled assets from the books of financial giant UBS and into a special government-backed fund, in a deal financed at least intially by the U.S. Federal Reserve.
US Recession -- > Commodities Bust (WE ARE HERE) -- > Depression (2009) -- > Deflation -- > Greater Depression.
I realize that CR and some others feel the need to discredit my forecasts, but people would decide who to believe when it comes to economic, housing and inflation forecasts. I have stated that CR is a suburb economic reporter and I have nothing but admiration for his blog and his reporting.
Markets and the economic forces are far more powerful than all the politicians combined. What sort of people put their faith is politicians, including at the Fed, to save the economy from the worst abuses EVER? Some of you know the naswer to that question.
Mixed news on the credit front. Working capital duration working capital is WAY up, above normal even, so credit is finally getting to the market after about a month. But - the A2/P2 spread is still at a depressionary 440 basis points. The market prediction of a depression is becoming robust, now that there's enough credit to say it's not just liquidity artifacts.
But on a world-wide scale, the efforts at curve fitting over at TOD are rather futile
It's possible that the earth is incredibly discontinuous for only oil but it isn't for most other elements.
In either event, it's a moot point with oil over $80 / bbl. We just need to find a way to eliminate Chinese slave labor to keep prices high.
Although nuclear weapons would be effective at keeping prices high, a "neutron virus" could accomplish the same thing but leave Beijing standing and ready for occupation by the Forces of Good.
As I asked my classes, how many gallons are there in a barrel of oil?
Answer - 42
Thus, with oil at $80, the crude oil component of gasoline is $2.00. Then you have to add taxes, refinery costs, distribution, and profit - so you get to $3.00 pretty quickly.
Highland Capital Management LP will close its flagship Highland Crusader Fund and another hedge fund after losses on high-yield, high-risk loans and other types of debt, according to a person with knowledge of the decision.
Highland, whose total assets under management has shrunk to about $33 billion from $40 billion in March, will wind down the Crusader fund and the Highland Credit Strategies Fund over the next three years, said the person, who declined to be named because the decision isn't public. The hedge funds had combined assets of more than $1.5 billion. Highland Shuts Funds Amid `Unprecedented' Disruption (Update3) - Bloomberg.com
Looks good, Jas. You just need to insert the brief bout of strong inflation that will ensue when the Japanese/Chinese/sheikhs dump their Treasuries and sell the resultant dollars, flooding the world and U.S. with a few additional trillion dollars.
With Fed and USG "Printing Money" like NEVER BEFORE how could inflation not skyrocket? Haven't you heard of monetization of debt?
Inflationist can't wait for your answers.
Jas
The inflation hasn't hit the 'real economy' yet. It's all bottled up in big banks who aren't doing the fractional reserve thing yet. Meanwhile, enjoy some easing at the pump.
It's possible that the earth is incredibly discontinuous for only oil but it isn't for most other elements.
Can you expand on this?
And I should have qualified a bit more: the efforts over at TOD at using curve fitting to determine if we are at the "peak" are rather futile. Eventually we'll see an overall curve, but the noise from other factors renders the data useless for short-term analysis.
Ministry of Truth writes:
If I was holding anything long right now I would be selling into this bump. I really feel sorry for those who aimlessly pump money into their 401Ks.
Fidelity Guaranteed Income Fund for the win!
(I'm up 2% this year while everyone else is down 30% or whatever).
Ministry of Truth writes:
If I was holding anything long right now I would be selling into this bump. I really feel sorry for those who aimlessly pump money into their 401Ks.
I dunno, I mean another way to look at it is deferring your taxes forever, since there will be no gains to tax, and you get a lower rate today...o.k. not much of a silver lining...
I was actually more worried about natural gas than gasoline prices. Back in July when gas prices were at $14/ccf I was really worried as to how people were going to pay their heating bills this winter.
You can cut back on driving or use public transit but when its cold outside you've got to have heat. Ditto for those using heating oil. We dodged a major economic bullet this year.
Personally I expect to be investing in oil sometime in the next year. Seems like a pretty solid bet and at some point their wont' be a CRE market to short.
I've already seen a curve that I think is indicative. However, it's certainly possible that certain areas of the earth have far, far greater concentrations of oil than we believe, i.e. anomalous like Saudi Arabia.
If the earth is relatively homogeneous, there's already been plenty enough sampling to establish a good prediction for peak oil.
Well, peak cheap oil.
It's not one of my fears so I don't feel a need for a rigid viewpoint.
However, I've been using the same methodology to do internet sampling for many years so I have a fairly good grasp of the arguments.
The S-curve is a very good tool for making predictions over certain domains, even ones which are unbounded like the internet.
CNBC the only place where you can see the same talking heads condemn politicians for regulation while screaming about lack of oversight while cheering stocks with no discussion of fundamentals 24/7. Why do I torture myself?
I promise not to watch CNBC anymore during this crisis.
They are an EMBARASSMENT. I'll watch Bloomberg from now on when I'm getting ready for work in the AM.
Rick Santelli is the only sane one there. Perhaps Mark Haines too, but neither of them get more than a few minutes of air time anyways. Not worth wasting my time to watch all the "hairdos" & Market Mavens blow hot air.
Ain't gonna happen, not for the US. Funding needs are too great and too much of it is financed overseas. They turn on the spigots like that and the US is exactly one Treasury auction from seizing to function at all.
cnbc is packed with moropns. That idiot farber likes to tell you he went to tufts. yeah so? So Burnett went to williams. All we are learning is that those small liberal arts NE colleges suffered the same inflation as house prices. only months ago burnett was trumpeting her GS expeirence. Is that now oficially a stain? John mAck on CNBC talking about how he cares about the system. This is a guy who was fired from MS then fired from Cs then back to MS with a mandate to expand risk and alternatives. Now he is the the right guy. If ever there wwas a template of the problem he is it.
When one understands that "inflation" is merely the creation of money and credit, one can easily understand that in fact, no, this does not affect "inflation" because they are two different things. A drop in price is only a drop in price, not a decrease of the money supply.
Roubini's analysis has been interesting, but as a person, he appears to be, well, for lack of a better word... odd: Roubini comes unhinged
Terrible writing too, nothing like his stuff at RGE. So he was either (ahem) 1. not quite himself when he wrote those messages, or 2. he has a ghostwriter to clean up his messes.
blackhat writes:
Ministry of Truth writes:
If I was holding anything long right now I would be selling into this bump. I really feel sorry for those who aimlessly pump money into their 401Ks.
I dunno, I mean another way to look at it is deferring your taxes forever, since there will be no gains to tax, and you get a lower rate today...o.k. not much of a silver lining...
I'd agree were it not for one thing. In most 401k's and certainly all IRA's, there is a "close to cash choice". Setting aside the vagaries of the dollar for a moment, I judge it unwise to discourage any form of savings.
I think you and I agree that we face hard times ahead. Cash - in whatever form - will become king. Savings - uninvested savings - will be mighty handy.
Senior FDIC staff from across functional business lines will be available to answer bankers' questions. To participate in today's conference call, bankers should dial 1-888-790-3533 (USA) or 1-312-470-7288 (International) and, when prompted, they should enter the pass code 9172716#.
THE LEHMAN BROTHERS
GUIDE TO EXOTIC CREDIT DERIVATIVES
FYI: There is also a time effect. Through time, senior and mezzanine tranches become safer relative to equity tranches since less time remains during which the subordination can be reduced resulting in principal losses. This causes the equity tranche delta to rise through time while the mezzanine and senior tranche deltas fall to zero. Building intuition about the delta is not trivial. There are many further dependencies to be explored and we intend to describe thesein a forth coming paper.
Higher order risks If properly hedged, the dealer should be insensitive to small spread movements. However, this is not a completely risk-free position for the dealer since there are a number of other risk dimensions that have not been immunised. These include correlation sensitivity, recovery rate sensitivity, time decay and spread gamma. There is also a risk to a sudden default which we call the value-on-default risk (VOD). For this reason, dealers are motivated to do trades that reduce these higher order risks. The goal is to flatten the risk of the correlation book with respect to these higher order risks either by doing the off setting trade or by placing different parts of the capital structure with other buyers of customised tranches.
This relationship is known as the credit tri-angle because it is a relationship between three variables where knowledge of any two is sufficient to calculate the third. It basically states that the spread paid per small time interval exactly compensates the investor for the risk of default per small time interval.
Within this model the interest rate dependency drops out. Given a CDS which has a flat spread curve at 150bp, and assuming a 50% recovery rate, the implied hazard rate is 0.015 divided by 0.5, which implies a 3% hazard rate. The implied one-year survival probability is therefore exp (0.03)=97.04%. For two years it is exp (0.06)=94.18%, and so on.
I'd agree were it not for one thing. In most 401k's and certainly all IRA's, there is a "close to cash choice".
Lots of those "close to cash," "stable," and "guaranteed income" funds seem to have MBS and CDS in their holdings. Not close enough to cash for my tastes, but YMMV.
asl hearts lenin writes:
"Personally I expect to be investing in oil sometime in the next year."
If you'd consider a non-pure play, take a look at the airlines. There you get the recession affecting quarterly results as a hedge.
That's either a great joke, or you are very confident in the airlines you know.
Recession = bad for travel
Credit Crunch = bad for airlines
Oil Volatility = overpaid on hedges
We will see the continuation of airline bankruptcies which were delayed by the 2001 oil price bottom and government bailouts. The barriers to competition have fallen somewhat with new "open skies" agreements and expanded airports
Can we agree on a revised number? I'm thinking about $2 trillion is currently about right. We can adjust every week or so.
asl hearts lenin
Who knows at this point, it seems the cost for both will be ever increasing.
Or are you justifying that the wars are good because they are cheaper and serve their purpose? Just saying.
crispy&cole writes:
popeye - when did you beome a bear again?? After you lost a lot of $$?
I didn't loose a dime. Had you been paying attention, I clearly said what I bought; what I sold and when I sold it. I will hold ABT and DNA for good reason. I sold WMT and TGT at Monday's close.
Crispy, I am a short term player. Can you grasp that concept ?
FFDIC, can you elaborate?
Nanook | 10.16.08 - 12:46 pm | #
Sure. I was born and raised in the Houston area where the economy does better with higher oil prices. The mid 1980s bust is the best example and personally very painful especially 1986 when 'official' unemployment was above 12%.
Lindsay Williams called 50 a barrel oil in June of 08 when it was well over 100 and climbing. He also called for financial calamity in the US. He was dead on. Read the Non Oil Crisis.
The average "new oil discovery" estimated field size has been falling steadily for twenty or thirty years.
That's an indicator that there's been sufficient sampling to extrapolate the overall curve.
Likewise, the drop in oil prices around 2000 to new lows is exactly what was expected at peak oil - maximum flow rate.
Personally, I think the evidence of peak oil is more than adequate and I think that if you erased "oil" from the data and submitted it to a panel for analysis, almost all statisticians would agree.
Where peak oil breaks down is that it's really "peak cheap oil".
There's plenty of oil at $80 / bbl, there's just a lag time and capital costs to develop it.
An example of the S-curve across what many would consider to be an unbounded domain - internet traffic. The reality THERE is that it is bounded but in a manner that's hard to quantify -
By sampling the rate of change, I make decisions about technology trends, if they're worth investing into or not. There's no question that inflection points are often (not always, true) discernable.
Crispy,
LOL, I said things were going up on Monday - I didn't promise anything beyond that. You know what ? I told you when I bought. I told you what I bought. I told you why I bought what I bought. And I told you what and why I sold.
I've learned my lesson. I won't do it again.
I'm only sorry about you're inability to hear, not my inability to speak.
David Rosenberg: Its all about deflation -- The retailing stocks hit a new low yesterday. Ditto for the homebuilders. Funny we havent received any emails recently, as we were two months ago (and a few times before that) as to why we werent becoming more positive on the outlook considering what the early cyclicals were signaling (what they have continuously signaled is this bad rally). The CRB index has collapsed 40% from the high and is down to a three-year high imagine that, three years of commodity price gains completely wiped out. The Baltic Dry Index is down 85% from its 2008 high. Oil has sliced below $75/bbl and is half the peak level of last summer this is being driven by a turndown in global demand as OPEC cut its 2009 demand forecast by 100,000 bpd to growth of 800,000 bpd (to a level of 87.2 mbd). Scrap steel has plunged 40% too. In relative terms, gold is hanging in nicely then again, it really has no industrial use at all.
For born-and-bred dopes Its all about Inflation!
Some of these dopes are still talking about Bernankes Helicopter Drops. Other dopes believe in the myth of Printing Money when all that is happening is more borrowed money by the USG that has the effect of drying up private lending to households and private investments. Who would have thought that Printing Money as NEVER BEFORE would coincide with Commodities Collapse? Not inflationists.
I receive quite a bit of correspondence from the street and some of it is great commentary. One mortgage trader writes on an ad hoc basis and his pieces are always insightful. He is a veteran trader and he always has some wisdom to impart.
He notes that over the last week 30 year mortgage rates have backed up over 100 basis points. They have backed up about 175 basis points over the last 4 weeks moving from 5.25 percent to 7.00 percent.
He makes the salient point that as long as rates remain high there will be no refinancings,foreclosures will continue, and home prices will decline.
In his opinion rates have climbed because the Great Deleveraging has incited another episode of forced selling by banks, hedge funds and insurance companies that need to raise cash.
He expects that the process of deleveraging in concert with increased supply from the Treasury will work to keep rates elevated for quite awhile longer.
There's plenty of oil at $80 / bbl, there's just a lag time and capital costs to develop it.
Well, time, capital, AND energy to develop it. Some of those sources sitting untapped for later will stay that way indefinitely due the law of diminishing horizons. Were natural gas not as plentiful, gulf drilling would not be nearly as feasible right now, for example.
"Well, time, capital, AND energy to develop it. Some of those sources sitting untapped for later will stay that way indefinitely due the law of diminishing horizons."
He expects that the process of deleveraging in concert with increased supply from the Treasury will work to keep rates elevated for quite awhile longer.
And prices will continue to fall. We won't see price reduction and rate reduction happening at the same time.
popeye - I trade short term sometimes, so I respect that, some traders think they are smarter than the market and I learned long ago that no one is (I learned the hard way).
He makes the salient point that as long as rates remain high
We entered a period of risig interest rates in 2003. 2003 to 2007 was a mirage and manipulation to hide that. There's a reason that the number of subprime mortgages rocketed up from 2003 to 2007.
The odds are good that long-term interest rates will continue rising for the next two decades.
The Federal gov't has converted a lot of the debt into short-term bills. They can't afford for rates to rise.
crispy&cole writes:
popeye - I trade short term sometimes, so I respect that, some traders think they are smarter than the market and I learned long ago that no one is (I learned the hard way).
We've attended the same school. I'll presume we both graduated.
Gah! I've got my positions all settled but I'm itching to buy oil. Some of these low commodity prices stink of the sweat of desperate cash generation, rather than real pricing.
I gotta get off this board and do something productive.
It has been long understood that our federal government is going deeper into debt, consistently raising the debt ceiling and demonstrating no fiscal restraint. In recent years, debt ceiling increases have been placed in must pass legislation as a means to guarantee that Republicans as well as Democrats would vote for them when Congress was under Republican control.
We also know our nations negative savings rate reflects the habits of private citizens, showing those habits to be not tremendously different than the habits of the public sector. Yet, the signs of decline are becoming ever more apparent. So apparent, in fact, that it seems unlikely that bailouts or other gimmicks will have even short-term success. More inflation, and creating moral hazard by bailing out egregious offenders, is a recipe for disaster. These activities can seem to provide some short-term relief, but it seems we are now at a significant crisis point, where monetary policy gimmicks dont provide the band-aids they did in the past.
Not only is our nation on the verge of bankruptcy, but so are its people and private institutions. We are now repeatedly hearing about businesses needing to access the credit market to make payroll. This is an unmistakable sign of more dire consequences ahead for the economy. If businesses must borrow just to make payroll, this is evidence of a severe undercapitalization that cannot be sustained, even for the short run.
Couple these facts with items such as the explosion of the payday loan industry and the unmasking of the false sense of economic well-being is nearly complete. These payday loan companies use preferred access to easy credit to inject cash into the hands of the working poor. They are nearly always set up in lower-income neighborhoods. These people, who are struggling to buy food and pay rent, get addicted to the credit drug. Their standard of living is only further depressed by the interest payments on these loans that make them profitable to their providers. Thus, the recipients are left even less capable of paying for items such as food and housing in the long run, without using this credit again and again.
These people are often the very ones being paid by businesses who borrow to make payroll. This is the dark underbelly of the fiat money, borrow-and-spend economy this nation has been building. As the government takes over more and more functions of the economy many see the rise of socialism as an antidote to this failure of capitalism. However, the fact remains that our economy has been increasingly running on debt, not capital. Capitalism does not exist without capital and debt is not, has never been and will never be a form of capital. Only now are we seeing the more dire implications of an economy without capital.
So, I am not optimistic about the fall in oil. I think it will just cause the long end of the bond curve to rise in a curve steepening move, while the short end collapses further due to deflation.
Totally agree as I believe that the next shoe to drop will the biggest bubble of all, the U.S. dollar bond bubble.
These drops in energy prices defer and in fact eliminate a number of projects in development. The resulting oil field production declines will cause much bigger price spikes in the future. The extreme price drops are IMO caused by deleveraging primarily and demand issues only secondarily and will result in an unrealistic new price level in the future which will hatch some very unpleasant news down the line.
Anonymous writes:
If oil is down 50% from the $140 a barrel and $4 per gallon gas we were paying a couple months ago, why is gas only down 25% to $3 a gallon? Where is my $2 per gallon gas?
Anonymous | 10.16.08 - 11:31 am | #
Refiners are taking back some of their lost margin.
Gas prices lag the future price of crude. You will see a significant decline over the next couple of months.
Yeah! $2 gas for Christmas... More money to buy useless crap.
Depends on the timeline we are talking about. O.k. so we agree on deflation, but I also predict overshooting post-deflation into rampant inflation as we climb out of the unemployment hole we are only half way finished digging. When unemployment hits above 15%, the fed will accept inflation.
I always wondered when a fascist government took over why they persecuted/killed the intellectuals. I thought it represented the need to silence the people who really understood the events and would speak out/provide leadership.
Turns out the police/military/low level bureaucrats were taking revenge against the people who should have spoken out and taken action and stopped the fascist government/tragedy from happening.
Tremendous amount of intellect is displayed on this blog. Much insight with no action.
Just one man's opinion.
3 Month Libor - OIS spreads increased, so if oil goes down, and the dollar remains frozen like a deer, isn't this going to be like hitting a brick wall?
LOL. I attended school the first time today: bought some SSO at the open, lost 7% soon after, panicked and sold, then watched SPX turn green. And then red.
A relatively cheap lesson for teaching me not to day trade. Don't have the eyes and don't have the guts.
There's always some chatter about the pope, and a great deal of that chatter shifted to his death when it happened. But a great deal of additional chatter appeared, too. The meme spread easily.
And there's always some chatter about viruses. But in the case of SARS, NOBODY wanted to know about it so there's no net increase in talk about viruses.
Mental impedance. It's fascinating to watch the denial and reactions about some things like the credit cycle or peak oil.
Jas Who would have thought that Printing Money as NEVER BEFORE would coincide with Commodities Collapse?
Wow, not me. So I'll take the "dope" label.
Can you explain the mechanism of deflation with "printing money" again?
I see it happening, but I don't understand it.
"The price has quadrupled in the last six months or so, and in some cases there have been shortages," said A.J. Castelbuono, president of the Associated General Contractors of New York. "That's something that just wasn't anticipated."
Managers at the New York State Thruway Authority - who rely heavily on toll money to pay for construction and maintenance - said this month they're putting off $250 million worth of planned projects.
When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. Were still dancing."
Can you explain the mechanism of deflation with "printing money" again?
I see it happening, but I don't understand it.
born & bred dope, apparently | 10.16.08 - 1:17 pm | #
It's quite simple. Money velocity is practically zero right now.
Debt collapse is currently much much faster than these bail-outs can keep up with. (Supply Inflation)
When I get a 100% increase in my salary there will be a 100% increase in CPI. (Price inflation)
born & bred dope, apparently writes:
Jas
Who would have thought that Printing Money as NEVER BEFORE would coincide with Commodities Collapse?
Printing money in the face of the collapse of "fake money" ..... via the collapse of leverage, is a freebie. Don't get excited just yet cuz there was a ton of fake money.
"Mental impedance. It's fascinating to watch the denial and reactions about some things like the credit cycle or peak oil."
Meh...Or else all the people who needed to know about SARS knew about it. Most people don't even know what it is. Most people don't know how to clean fuel injectors either. Such information is just noise. Like someone saying "Your nablewurffer is flanging". But with a billion Catholics out there, the Pope's death is kinda big news.
Nemo!
Peak Oil = Leveraged Speculatio
It's been a while since any of the clowns have told me not to fight the fed.
Is it time to not fight the fed again yet?
I said that at $140 bbl and I will say it all the way down to $30 bbl
offset by rising 30 year fixed mortgage rates..
Oil is cliff diving down to $67 now
But I ride a bike.
OPEC has scheduled an emergency mtg to discuss production cuts (FT)
This is such a big deal for small business. All of our costs have a delivery/oil component. Also, i have already seen some relief in my customers as that huge cost of filling the car has started to come down.
I suspect that oil is about to overshoot on downside . It'll go back to around 70-80 dollars in a few months
It's never been a better time to buy or sell a Hummer.
12th
I agree, especially since CTL is profitable at any prolonged price above 50 USD/b
crispy&cole writes:
Peak Oil = Leveraged Speculation
crispy&cole | Homepage | 10.16.08 - 11:26 am | #
How low will it go? Is this all 'election' pricing?
Peak Oil = Leveraged Speculation
Don't you know that the Chinese and Indians woke up one day in 2003 and started demanding oil?
The Russians have to come up with a way to replace the lost revenue from oil. I wonder if they can push up the price of their other big commodity, gold? Fun times!
Paulson Says Stock-Buying Aimed at `Regulated' Firms
Paulson Says Stock-Buying Aimed at `Regulated' Firms (Update5) - Bloomberg.com
U.S. Treasury Secretary Henry Paulson said his plan to inject capital into financial companies is focused on banks and thrifts, indicating unregulated firms such as hedge funds won't initially get government aid.
Right now we're focused on financial institutions, regulated financial institutions,'' Paulson said in an interview with Bloomberg Television, when asked whether hedge funds might also be eligible.The program right now is for banks and thrifts.
Carlomagno writes:
OPEC has scheduled an emergency mtg to discuss production cuts (FT)
Yeah that'll go well.
"We promise to cut our production in half in order to stem the losses".
Wink wink. Nudge nudge.
The classic prisoners dilemma.
Hope the pain was long enough to convince Detroit to really kill the gas guzzlers. The last thing they, or the environment for that matter, need is the Ford Excursion 2.0
No one cares about the OPEC. They have to make enough money (price*production)or each country in OPEC will have a revolution.
OPEC has scheduled an emergency mtg to discuss production cuts (FT)
Carlomagno | 10.16.08 - 11:28 am | #
If oil is down 50% from the $140 a barrel and $4 per gallon gas we were paying a couple months ago, why is gas only down 25% to $3 a gallon? Where is my $2 per gallon gas?
THAT'S IT.... THIS IS THE BOTTOM.
no, really.
really.
Aw, come on, guys!
How low will it go? Is this all 'election' pricing?
OhBoy | 10.16.08 - 11:29 am | #
OPEC Brings Forward Meeting to Oct. 24 as Oil Slides (Update3) - Bloomberg.com
OPEC Brings Forward Meeting to Oct. 24 as Oil Slides (Update1)
By Fred Pals
Oct. 16 (Bloomberg) -- OPEC, the producer of 40 percent of the world's oil, brought forward its planned meeting for next month to Oct. 24 after crude prices slid to a 13-month low.
``Following consultations with the President of the OPEC Conference and colleague Ministers, it has been decided to re- schedule the Extraordinary Meeting of the OPEC Conference,'' the group said today in an e-mailed statement.
OPEC lowered its 2009 demand forecast for a second month yesterday as the worst financial crisis since the 1930s threatens to send the global economy into a recession. The 13- member group reduced its forecast for average oil consumption next year by 450,000 barrels a day, or 0.5 percent, to 87.21 million barrels a day.
S&P doesn't want to be left out of the downgrade party:
S&P Warns on $351.7 Billion of Alt-A RMBS
There's an article on Bloomberg quoting that Paulson says hedge funds aren't "initially" eligible for gov't money.
I thought this was a complete impossibility.
Cue drop to 81xx
Like selling nuclear reactors/ weapons to India??
The Russians have to come up with a way to replace the lost revenue from oil. I wonder if they can push up the price of their other big commodity, gold? Fun times!
Hanging by a thread | Homepage | 10.16.08 - 11:30 am | #
I have a friend who is a crackpot tin foil hat type. He is CONVINCED that oil prices always nose dive when the GOP is behind in elections and that there is a direct causal link between the two.
I generally mock the hell out of him. But lately he's been rather insufferable.
Anonymous, refiners were losing money. If oil had stayed at $140, the gas price would have gone up even further
So what was that 250 B downgrade yesterday.. same or different Alt-A
S&P doesn't want to be left out of the downgrade party:
S&P Warns on $351.7 Billion of Alt-A RMBS
Duck Soup.
For OhBoy:
Search - Global Edition - The New York Times
"Could go as low as $50"
"If oil is down 50% from the $140 a barrel and $4 per gallon gas we were paying a couple months ago, why is gas only down 25% to $3 a gallon? Where is my $2 per gallon gas?"
Production capacity, stockpiles, weak dollar buying Euro gas (we import refined gasoline from Eurozone believe it or not.) Yadda yadda. Plus the eastern refineries are focusing more on home heating fuel right now.
Ministry of Truth writes:
Paulson Says Stock-Buying Aimed at `Regulated' Firms
Bloomberg.com refer=home
U.S. Treasury Secretary Henry Paulson said his plan to inject capital into financial companies is focused on banks and thrifts, indicating unregulated firms such as hedge funds won't initially get government aid.
Like I said, it is the shadow banking system that is under attack; it is the traditional banking system that is being saved.
I don't believe lower demand is causing this. Manipulation, as in the stock market is the key word here. Fundamentials have gone by the wayside.
Re-post from last thread
Appears walk-away chatter is escalating:
404 | MiamiHerald.com 728184.html
Paulson is not ruling out capital to hedge funds? Run for the hills!
Dr. Rockso:
Thank you.
DOW down 300 pts
Either way you count it - a ton of buying power that once existed.... is being erased.
--
"The free fall continues. At least this will help with inflation and take some pressure off consumer spending."
CR,
With Fed and USG "Printing Money" like NEVER BEFORE how could inflation not skyrocket? Haven't you heard of monetization of debt?
Inflationist can't wait for your answers.
Jas
windowdog,
does he say "didn't you get the memo?" often?
It appears that Gold is following oil down today?
So what was that 250 B downgrade yesterday.. same or different Alt-A
Well, it's at least $100B different.
I really have no idea.
This is a great time to invest in India. In the short term the oil prices will help their booming economy. In the longer term the Indian people are the smartest and hardest working people on earth. Free from white-oppression, they will become the world's ruling country. America will benefit in the near term because of its trading relationship, but eventually all that money and power will return to India
girlbear writes:
I don't believe lower demand is causing this. Manipulation, as in the stock market is the key word here. Fundamentials have gone by the wayside.
I disagree. The manipulation took place as the shadow banking system grew. But that was fake money based on an unrealistic degree of leverage.
It is that very degree of leverage that is collapsing now. No one can any longer afford to manipulate. Preserve capital or die.
does anyone know? isn't that the real problem.. lack of confidence?
Well, it's at least $100B different.
I really have no idea.
Max | Homepage | 10.16.08 - 11:37 am | #
Either way you count it - a ton of buying power that once existed.... is being erased.
popeye | 10.16.08 - 11:35 am | #
Or is it the willingness to buy that has been erased?
They never had access to those 401K accounts, but they sure provided a reason to live a little since the future was taken care of.
It appears that Gold is following oil down today?
Best time to lock in prices for physical delivery in the COMEX to take advantage of the arbitrage.
--
"Either way you count it - a ton of buying power that once existed.... is being erased."
popeye,
That tell how much you know.
Never heard of Helicopter Drops from Ben Bernanke to keep the "Aggregate Demand" from falling? Haven't you read all-powerful Bernankes papers?
Jas
black dog,
No his current line is that I'm completely a fool for even believeing banks exist anymore. The world is run by an oligarchy of hedge funds that just tell the media that banks still exist and that regulation is real to hide the amount of money they're making off the poor.
He's fun at parties after you give him some shots I must say.
the longer term the Indian people are the smartest and hardest working people on earth. Free from white-oppression, they will become the world's ruling country
Up until last week I was working for an Indian outsourcing company and I agree with this assessment. I don't know what Jimmy Rodgers is thinking that he's choosing China over India.
Pay attention to the call below. This blogger is hot. I do not know he does it, but since he started back in June, he is amazing!
"DOW SP500 Nasdaq 100 bottom october 2008 (second chance"
"11:14AM october 16: with NDX at 1194, we are at the BOTTOM. "
Stock Trading | Forex | Financial Markets: DOW SP500 Nasdaq 100 bottom october 2008 (second chance)
"He is CONVINCED that oil prices always nose dive when the GOP is behind in elections and that there is a direct causal link between the two."
Two years ago the drop in gasoline had a cause in plain sight. Goldman Sachs changed their energy index in September of 2006 so that firms with hundreds of billions invested all had to dump two thirds of their gasoline futures simultaneously. Gas went 3 --> 2 just in time for the election. Probably saved the GOP 20 seats in the house.
GSCI Runs Out Of Gas - JOI News
Nope.. my imposter.. they themselves are their biggest enemies.. nice try though. I do not use such flowery and idealistic language...
satan writes:
This is a great time to invest in India. In the short term the oil prices will help their booming economy.
Can you people not smell Sebastian's double bottom? We did not crack Friday lows... I think we get a violent, orgastic rally up 20%...
And then a Black Christmas crash to Dow 4000.
You have to love it. When it's at $140, not an insignificant number of insider experts claimed it wasn't because of dwindling supply, but now that it's falling like a lead weight, it's back to good ol supply and demand again. How convenient. Since we're in the business of Nationalizing now, why not nationalize these Dinosaur Excavators once and for all. At this point, the oil companies are nothing more than corrupt monopolies, so the Chicago Boys really can't claim free trade foul when they become state run.
does anyone know? isn't that the real problem.. lack of confidence?
It is certainly true that there's a lack of confidence. That's sort of what happens when the fundamentals start crapping out.
Musical interlude
YouTube -
Jas Jain,
You're smart, and I understand your sarcasm. Just consider the fact that newbies know you are smart too, but don't always see that you are being subtle.
satan writes:
This is a great time to invest in India. In the short term the oil prices will help their booming economy.
No wonder he was forced to crawl on the ground and eat dust
The real question is what those prices do for new oil sands projects in canada.
Morgan Stanley's John Mack blaming short sellers for the CDS spreads.
Never heard of Helicopter Drops from Ben Bernanke to keep the "Aggregate Demand" from falling? Haven't you read all-powerful Bernankes papers?
Liquidity trap is the trump card.
This will be very good for Joe the plumber.
lucifer writes:
The real question is what those prices do for new oil sands projects in canada.
Anything below $70bbl and these projects are worthless. Canada look out below
Don't they have mirrors in MS
Morgan Stanley's John Mack blaming short sellers for the CDS spreads.
Luz | 10.16.08 - 11:42 am | #
Canada is in for a big thumping. The oil sands will just be a big clean up mess if oil drops too low.
Stocks down, gold down, silver down, oil down, REITs down...where is all of the money going to?
CDs? Treasuries? Mattresses?
lucifer-
i dont have the source, or the exact number, but i seem to remember reading somewhere that the oil sands were only profitable for oil > 65
Also, notice that both candidates talked about drilling last night.
World competitors are not stupid - they are lowering the price to eliminate our motivation to explore and produce at home, to stem the interest in investing in renewable and efficient energy, and develop domestic energy efficient transportation solutions. It's a time game to them. They need more time to bleed us dry and for us to transfer more of our wealth to them.
Now we (the US) don't have to change. We (the US) like the path of least resistance.
And the saddest part of it all is we (the US) will fall for it...again.
Drill, Baby, Drill!
A little correction- any projects approved after 2007. The older projects are OK till 40 USD/bbl
Anything below $70bbl and these projects are worthless. Canada look out below
crispy&cole | Homepage | 10.16.08 - 11:43 am | #
Hello, Stan's Used Car Lot? Do you still have that Excursion I sold you for pittance last month? I changed my mind.
Free from white-oppression, they will become the world's ruling country.
Have you been to Mumbai? Welcome to the future of America, where people will be literally shitting in the middle of public without an ounce of shame.
Today, we are all Indians.
Anything below $70bbl and these projects are worthless. Canada look out below
crispy&cole
@-3 years ago the number I was told by a Canadian involved in the business was 35-40bbl
Stocks down, gold down, silver down, oil down, REITs down...where is all of the money going to?
Cayman islands?
Like I said, it is the shadow banking system that is under attack; it is the traditional banking system that is being saved.
Lets let the shadow baking system implode in a disorderly fashion just like LEH...
Hard to tell what is deleveraging and what is real supply and demand. Oil got real wierd last month when the contracts closed. Too much speculation to know were we are going to land.
Stocks down, gold down, silver down, oil down, REITs down...where is all of the money going to?
What money? That's the problem.
"The Russians have to come up with a way to replace the lost revenue from oil. I wonder if they can push up the price of their other big commodity, gold? Fun times!"
Another good reason to reduce the need for imported oil -- to pull the rug out from under the authoritarian regimes that rely on high levels of oil revenue to maintain power. And that includes many of our "friends."
Yes, all projects that use anything other than open mining are.. but open mining projects are OK till 40USD. But new investment in these projects if DOA.
_
i dont have the source, or the exact number, but i seem to remember reading somewhere that the oil sands were only profitable for oil > 65
nullpointer | 10.16.08 - 11:44 am | #
Hank Paulson's Mom writes:
where is all of the money going to?
Poof! It's like putting a tube sock in the front of your pants to impress the ladies. When you eventually have to strip down, it doesn't 'go' anywhere. Twas but a mirage.
Not that I've ever leveraged my manhood...that's just what people tell me.
avidtrader writes:
Pay attention to the call below. This blogger is hot. I do not know he does it, but since he started back in June, he is amazing!
--
Please stop flogging that blog. He has been calling bottom as much as CNBC so I doubt this time they are magically right.
I hope Joe the plumber isn't based in Calgary....
Have you been to Mumbai?... where people will be literally shitting in the middle of public without an ounce of shame
Have you been to Vegas lately?
I remember reading somewhere that the break even of a new oil well is around $80 a barrel. Does that mean the oil companies will not want to DRILL BABY DRILL?
Stocks down, gold down, silver down, oil down, REITs down...where is all of the money going to?
When I'm laying dead during the Apocalypse, you will not be able to pry the cash out of my cold, hard hands.
at least TED is "easing" to 4.21.
AK gas pipeline project to nowhere
Indians are their own worst enemies. Same for many other countries.
Tyler Durden writes:
Free from white-oppression, they will become the world's ruling country.
World competitors are not stupid - they are lowering the price to eliminate our motivation to explore and produce at home
They may not be stupid but the average American is. Off shore drilling on these sites are a net loss for big oil. They can hold their positions and projected output of these leases on their balance sheets assets. Once they drill, poof, those projected numbers disappear
You will be one person who loses in the future because you are racist and have grown lazy through years of exploitation like all Canadians
Have you been to Mumbai? Welcome to the future of America, where people will be literally shitting in the middle of public without an ounce of shame.
Today, we are all Indians.
Tyler Durden | 10.16.08 - 11:46 am | #
Indians are their own worst enemies.
Assuming you are an uh'merkin -- oh the irony.
Well, Yes and No.. Some are not economical now, but many other are still OK - 50 USD is the real threshold.
Organic George writes:
I remember reading somewhere that the break even of a new oil well is around $80 a barrel.
Yeah the wave of bankruptcies is going to take a lot of pressure of consumer inflation. It's a great time to be a bum.
Organic George writes:
I remember reading somewhere that the break even of a new oil well is around $80 a barrel. Does that mean the oil companies will not want to DRILL BABY DRILL?
Organic George | 10.16.08 - 11:48 am | #
Why pump it up if you can't sell it at a profit? Oil boom is over until economy is back up, think five years or so.
Stop copying my name, leave me alone already!
lucifer writes:
Indians are their own worst enemies. Same for many other countries.
Man is his own worst enemy. It has nothing to do with being Indian.
The best way to stimulate the worlds economy is for everyone to invest in massive public construction projects- roads, dams, power plants, electric power distribution etc
May have to agree w/that..but
Actually, and I mean this in a very positive way, that I discovered to my suprise and happiness that my rapidly-expanding set of Indian co-workers were extremely balanced about work time and play (family) time.
And therefore were fun to be with, as their interests were wide-ranging and their pursuit of play (travel, child rearing, etc) always made conversation worthwhile.
I can't say so much for Americans, sadly, where you talk market or sports.
The moneyed class always tries to tell us white-and-blue collar peons that we are "lazy", and that somebody else (vague pointing in the direction of Asia) is going to "outwork" us.
We fell for it in the '80s about the Japanese (who turned out to certainly spend a lot of hours at work, but were amazingly - and unsuprisingly given the stress - unproductive on an hourly basis), but they aren't going to give up.
Now the very poor in India have no choice, and the enterprenurial ones work their butts off, but that's true of enterprenures regardless of their formative cultural background.
--
David Rosenberg:
Credit market priced for something close to a depression -- We said on Monday that while the equity market is certainly priced for a recession 85% for a serious recession it is the credit market that is truly priced for
anything remotely close to a depression, no matter how loosely defined: Spreads on junk bonds just hit a surreal 1,538 basis points over Treasuries (up from 1,450 bps on Tuesday), absolutely smashing the prior record of 1,220 bps during the 2002 double-dip economic turndown. And high-grade bonds are now trading at spreads that in the past were consistent with where high-yield used to trade also at an all-time high of 582 basis points.
But what do credit markets know anyway? Inflationists and Scam Lovers are far smarter than the credit markets. I take my cue from the former and ignore the hyper-sensitive and irrational credit markets.
Jas
popeye writes:
Like I said, it is the shadow banking system that is under attack; it is the traditional banking system that is being saved.
popeye | 10.16.08 - 11:34 am | #
Again, could anyone construct an "indicator" to show progress in this?
A very rough one?
Does this mean that we will all get free hummers in addition to our ponies?
THEY'RE SKYING 'EM BABEEEEEE!!
Maria's all wet, I'm sure.
Man is his own worst enemy. It has nothing to do with being Indian.
testify, brother.
This would be that deflation thing, as in less money in the system. Much of the money was generated through banking activities of unregulated non-banking institutions, hence our recent liquidity bubble.
The reason that the Fed/Treasury cannot reflate fast enough is because they are two orders of magnitude smaller than the market. They can make big numbers, but they don't have enough touchpoints for instantaneous flow of their infinite supply.
But they'll keep up the injections until they work, after which you'll get an astonishing inflation as they overshoot. That would be a good time to have already bought positions in depressed commodities and equities, and a bad time to own bonds. No idea when it will occur, but unlikely in the next year or two.
Think of the money supply as a lake that suddenly developed a hole. All the water drains out rather quickly and they bring in more and more pipelines to try to keep the level up, but in vain. Eventually the hole gets plugged and the pipelines start filling the lake. This looks great until the lake fills, after which you need to turn off all the pipelines very suddenly. That's impossible so the lake overflows.
What happened to this blog? Conjure is rolling over in his....
The entire world is now experiencing a massive deflationary shock - except for the Japanese who are no longer shocked, but are still in the grips of deflation (both prices and monetary - take your pick on definition). Lower oil prices are not welcome in that regard...
Without sending excess dollars to the oil exporters above and beyond what they are currently spending/investing on their own economies (and below $80, there are no excess dollars), we lose petro-dollar recycling into the treasury market (and to some extent, SWF investments in US assets) at the same time that the treasury issuance is about to explode.
So, I am not optimistic about the fall in oil. I think it will just cause the long end of the bond curve to rise in a curve steepening move, while the short end collapses further due to deflation.
Don't watch price right now - watch volume - the market has always been dominated by institutional investors. Hedge funds are collapsing, volume will show you when this event begins to wane.
Anyone read "Shantaram", that's a good book. You will be humbled by it.
It's just like a tax cut for the middle class!!!
What kind of economic prospects will await the average Indian in 2009?
Naan!
BADA BOOM!
Did ya hear about the food supply in China next year?
It's going to be a real dog!
BOOYAH!
There will be lot less of our dough available to recycle back into Treasury purchases.
Lying or wishful thinking.
Back when I was involved in the early 90's, the Alaska pipeline itself wasn't worth dick if the price was below $20/bbl. In like 1993 dollars. Oh, they'd pull some much lower price out of their a$$ for public consumption, but if you were involved in selling stuff to them that was pretty much the number that told you if they were going to buy anything or not.
Remember they begged Clinton to let them sell it to Asia - another warm moment in patriotism from our Alaskan co-citizens.
If you can get oil in the low 60s, buy all you can afford. It's almost impossible that there won't be some strange geopolitical turmoil following on the economic meltdown.
Iran is not off the front burner by any stretch. When missiles start to fly anywhere in the world, oil will soar.
Even without wars, oil demand is not as elastic or cycle-dependent as you think.
lucifer -- this is not a stimulus problem, this is an overhang of debt during a decrease in incomes due to the fact the absolute debt stopped growing. You could spend your way out of this problem, but it is more than could be borrowed at affordable rates
As for the oil sands: the new developments need that $80 per barrel. It's certainly not positive in the near term, but they at least have the offsetting decline in the CDN dollar for now.
Back around 2001 with all operational costs included, anything above $8 per barrel was pure profit. The 2 incumbent players still have that cushy royalty regime grandfathered in.
Good for Alberta allowing those investment commitments to be made during the boom. This will have a big impact as I foresee many of the new entrants looking to delay their projects to wait for cheaper materials/labour which is what drove the marginal cost up to $80 per barrel from $8 per barrel 8 years ago.
Overall the oil sands are overhyped. They're talking about going from 2mn barrels per day of synthetic crude up to 4mn barrels per day in a decade. They have a big impact in the sense that they require big capital investment and its projected against a small population
Sure hope so. Rolled the dice on DUG this morning. Good so far!
Why pump it up if you can't sell it at a profit? Oil boom is over until economy is back up, think five years or so.
Why@ ZIRP | 10.16.08 - 11:52 am | #
So....short oil company stocks???
Iran is probably very unhappy as oil is all they have. Combine the Israeli desire for them not to have nukes and their desire to keep the oil money coming. Iran needs to in order to keep urder.
Also how much of the economy in the "good states" is due to oil and reopening production.
--
Sarcasm off. -- Jas
winjr writes:
There will be lot less of our dough available to recycle back into Treasury purchases.
Real dough is on the sidelines now, it's still available. Real dough is not even playing now; it's waiting until volume says the collapse is over.
Those who said last spring that there was a commodity bubble overlaid on a deflationary environment appear to have been correct. However, you might still make a case that there are just extremely steep price/demand curves.
In either case, OPEC loses steam in a hurry in a low-price environment. They have never been able to keep the cats in a herd.
i am having coffee with ayers
and joe plummer
and a hockey mom
we are going out for a six pack after
and we are all going to get bracelets
and then we are going to drill for oil in my bathtub.
As for the oil sands: the new developments need that $80 per barrel.
That's with voluntary Canadian labor. The price can be driven down to $30 / bbl using Chinese slave labor.
re peak oil, Matt Simmons may well have been talking up his own investments, but the geologists I've talked to all believe that Hubbards Curve is a valid descriptor for the behavior of oil fields over time.
Who knows re timing. Arctic melting could start a whole new oil boom, but we use a prodigious amount of the stuff. I'm young enough that it seems plausible that in my lifetime the petroleum driven car will be as obsolete as the whale oil lamp and for similar reasons.
Indians running the world...You have never seen the thriller video then.
YouTube -
a different chris writes:
Lying or wishful thinking.
Trust me, he's right. That would have been the cost as recently as the start of 2006. That number uses a discount rate of something like 12%
I know a man that used to be a lead project manager in oil sands development up to 2003 and I know many people in management there now.
The drop will hit the Alberta economy when the squeeze on materials and labour unwinds.
This is fantastic news. The balance of trade smaller outflows will strengthen the dollar and actually lower Treasury borrowing rates as the dollar is again a safe haven.
For some reason my buddies at The Oil Drum don't have a single article on oil prices. Seems only a few months ago near every headline there screamed peak oil.
--
Iranian Oil Minister: "Oil below $100 is unsuitable both for producers and consumers?"!
Jas
Now is a great time to produce or consume oil.
Again, could anyone construct an "indicator" to show progress in this?
Hedge fund data isn't public, so not really. You could do something with total hedge fund deposits, which is available about quarterly, but that tells you nothing about internal leverage, which is the key element. The secrecy is one of the worst aspects of the shadow banking system - the central banks and regulators don't know what's going on either and so can't act on good information.
Fed's Stern: Downturn could last 12-36 months.
Optimist.
What's the difference between Jeffery Dahmer and an Investment Bank?
At least Dahmer will eat what he slices!
CaCHINKA CHINKa
my YHOO purchase is doing okay today LOL...yesterday sucx. If microsoft ignores yahoo..the google-yahoo pact will pretty much seal their death in adspace.
online ad is still in infancy.
"If oil is down 50% from the $140 a barrel and $4 per gallon gas we were paying a couple months ago, why is gas only down 25% to $3 a gallon? Where is my $2 per gallon gas?"
Oil and gasoline are traded on completely separate markets with separate supply/demand curves. Prices may or may not be correlated at a particular time (though obviously correlate in a generally positive manner).
Example: a gasoline refinery explosion in Louisiana knocks out 10% of the US gasoline supply.
What happens? Gas prices go up, but crude oil prices go down, since:
Gasoline: supply-, demand
Crude: supply, demand-
Low Oil prices are good for shortening the incoming economic downturn, no?
but the geologists I've talked to all believe that Hubbards Curve is a valid descriptor for the behavior of oil fields over time.
That would be Hubbert and no, it turns out it doesn't work that way. The US has domestically extracted more oil than was known to exist since his supposed peak in 1972 and still has as many years of reserve still in the ground today as then.
I wrote the "Oil and gasoline are traded on completely separate market" comment.
It's the money in the bank, not the oil in the tank. Saw this movie before and it didn't end to well.
That would be Hubbert and no, it turns out it doesn't work that way. The US has domestically extracted more oil than was known to exist since his supposed peak in 1972 and still has as many years of reserve still in the ground today as then.
US oil production has fallen every year since Hubbert's US peak in the early 1970s. The fact that "more than expected" was extracted is immaterial.
the geologists I've talked to all believe that Hubbards Curve is a valid descriptor for the behavior of oil fields over time.
It is for individual fields, and has been for a lot of nations as well. But on a world-wide scale, the efforts at curve fitting over at TOD are rather futile. There are just too many variables. And until we're well along on the downslope, prices will be dominated by human factors.
Fair Economist writes:
Again, could anyone construct an "indicator" to show progress in this?
Hedge fund data isn't public, so not really. You could do something with total hedge fund deposits, which is available about quarterly, but that tells you nothing about internal leverage, which is the key element. The secrecy is one of the worst aspects of the shadow banking system - the central banks and regulators don't know what's going on either and so can't act on good information.
I don't have anything to add. I just wanted you to read it again.
General Motors and Ford are SAVED!
Yeee-hawwwwww!!
evilhenrypaulson --- just wanted you to know that I laughed out loud last night at your Obama/Christopher Walken comment
There is no right number for this. It depends on the type of field (SAGD vs open pit), on whether bitumen is used to help create some of the steam (see the OrCrude process used by Nexen/Opti Canada - opc.to), and hugely on the price of natural gas.
At the same time, lack of financing for massive projects should mean that anyone with a built out facility or far along right now is likely to have less competition once oil prices eventually rebound.
rich, I thought you retired, based on your short-the-R2000 bet?
I am a few points away from my retirement point based on my double short-the-S&P 500 bet.
"This is fantastic news. The balance of trade smaller outflows will strengthen the dollar and actually lower Treasury borrowing rates as the dollar is again a safe haven"
Yes there is that small rounding error called $10 trillion plus witha few trillion coming. Are you long the long bond?
That would be Hubbert and no, it turns out it doesn't work that way
Ahhh, yes, it does work that way.
Minor variations in stastical sampling don't translate into the "free marketeer" fantasy of infinite resources.
Wow, DBE is back down to where I bought it the summer of '07 . . . ~$28 . . . looking a bit tempting for a long-term hold.
Peter-san writes: "Without sending excess dollars to the oil exporters above and beyond what they are currently spending/investing on their own economies (and below $80, there are no excess dollars), we lose petro-dollar recycling into the treasury market (and to some extent, SWF investments in US assets) at the same time that the treasury issuance is about to explode."
Add to that less (American) consumer spending on products from Asia, and you may very well have a "funding problem" for the new US (and European) debt that needs to be issued for the bail-outs. This may not happen short term, but I'd keep my eye on it medium and long term...
Peter-san,
I'm just explaining that the $80 is a legitimate number, but not representative of any current production.
I haven't heard of burning the bitumen for steam yet, I thought anywhere using SAGD was using local natural gas because it remains cheap and they pay no royalties on it since used in production. Bruce power building some nukes is another longer term variable that will affect the cost basis over a project's lifetime.
Areva has been running a lot of ads implying they are building nukes in the oil sands for Total's new project despite not even being close to submitting any kind of proposal. Just thought I would share that weird info
Rob Dawg,
It's not just "peak oil" as in how much is in the ground. That was never the point. The point was the vicious cycle of consumption of the oil that a given oil producer-nation produced, so that with more oil extraction came more prosperity, which fueled growth which fueled consumption, so that ever more an more of the oil in the ground is siphoned off for domestic consumption (non necessarily productive consumption--SUVs). So a net exporter becomes a net importer, even as the raw amount of proven capacity and reserves increases...A little more nuanced peak oil theory than traditional "we're going to run out!". Mexico and Russian are in fact following the curve and so did the USA if consider export verses import.
I called it right in the Swiss Banks yesterday.
By Howard Schneider
Washington Post Staff Writer
Thursday, October 16, 2008; 11:40 AM
Swiss authorities moved to stabilize their storied banking system today, agreeing to move $60 billion in troubled assets from the books of financial giant UBS and into a special government-backed fund, in a deal financed at least intially by the U.S. Federal Reserve.
So now the US taxpayers own a Swiss Bank.
Don't you know that the Chinese and Indians woke up one day in 2003 and started demanding oil?
I thought it was all Bush's fault.
and still has as many years of reserve still in the ground today as then.
one thing I've noticed is that the US is perpetually 5 years or so from running through its reserves, when extrapolating for present production rates.
What's the difference between the financial crisis and the Baby Boom?
Only one was caused by impotent Cox!
OH MY!
Headed out to Wall Street protest. One eye up. Don't want to catch a falling bankster.
--
For Newbies
Jas Jain Road Map of a Year Ago:
US Recession -- > Commodities Bust (WE ARE HERE) -- > Depression (2009) -- > Deflation -- > Greater Depression.
I realize that CR and some others feel the need to discredit my forecasts, but people would decide who to believe when it comes to economic, housing and inflation forecasts. I have stated that CR is a suburb economic reporter and I have nothing but admiration for his blog and his reporting.
Markets and the economic forces are far more powerful than all the politicians combined. What sort of people put their faith is politicians, including at the Fed, to save the economy from the worst abuses EVER? Some of you know the naswer to that question.
PLEASE STAY AWAY FROM SPECULATION.
Jas
Mixed news on the credit front. Working capital duration working capital is WAY up, above normal even, so credit is finally getting to the market after about a month. But - the A2/P2 spread is still at a depressionary 440 basis points. The market prediction of a depression is becoming robust, now that there's enough credit to say it's not just liquidity artifacts.
Arrgh, "working capital duration commercial paper"
But on a world-wide scale, the efforts at curve fitting over at TOD are rather futile
It's possible that the earth is incredibly discontinuous for only oil but it isn't for most other elements.
In either event, it's a moot point with oil over $80 / bbl. We just need to find a way to eliminate Chinese slave labor to keep prices high.
Although nuclear weapons would be effective at keeping prices high, a "neutron virus" could accomplish the same thing but leave Beijing standing and ready for occupation by the Forces of Good.
As I asked my classes, how many gallons are there in a barrel of oil?
Answer - 42
Thus, with oil at $80, the crude oil component of gasoline is $2.00. Then you have to add taxes, refinery costs, distribution, and profit - so you get to $3.00 pretty quickly.
People love it when oil gets more affordable. They hate it when houses get more affordable.
It all depends on where you live.
Highland Capital Management LP will close its flagship Highland Crusader Fund and another hedge fund after losses on high-yield, high-risk loans and other types of debt, according to a person with knowledge of the decision.
Highland, whose total assets under management has shrunk to about $33 billion from $40 billion in March, will wind down the Crusader fund and the Highland Credit Strategies Fund over the next three years, said the person, who declined to be named because the decision isn't public. The hedge funds had combined assets of more than $1.5 billion.
Highland Shuts Funds Amid `Unprecedented' Disruption (Update3) - Bloomberg.com
Looks good, Jas. You just need to insert the brief bout of strong inflation that will ensue when the Japanese/Chinese/sheikhs dump their Treasuries and sell the resultant dollars, flooding the world and U.S. with a few additional trillion dollars.
Back in the green!
So now the US taxpayers own a Swiss Bank.
Organic George
Wall St. fumbles and Main St. pays, it is the american way.
With Fed and USG "Printing Money" like NEVER BEFORE how could inflation not skyrocket? Haven't you heard of monetization of debt?
Inflationist can't wait for your answers.
Jas
The inflation hasn't hit the 'real economy' yet. It's all bottled up in big banks who aren't doing the fractional reserve thing yet. Meanwhile, enjoy some easing at the pump.
We's gwynne to 20!
Now it won't cost as much to put gas in the car to drive to the job that I don't have.
As I asked my classes, how many gallons are there in a barrel of oil?
Answer - 42
Thus, with oil at $80, the crude oil component of gasoline is $2.00.
It so doesn't work that way I don't even know where to begin to correct you.
SEC allows change that may delay bank write-downs
An Error has occured | Reuters.com
Fed's Stern-US growth could be weak for years
Fed's Stern-US growth could be weak for years
| Reuters
Hello Tokyo
Dow up 100 pts - 400 point swing in one hr !
Is the spike in the Dow due to the SEC write-down news? gawd.
Rally Rally Rally!
I love monkeys!
If I was holding anything long right now I would be selling into this bump. I really feel sorry for those who aimlessly pump money into their 401Ks.
TED 4.16
12:22 p.m.Downey Savings to close wholesale loan department
It's possible that the earth is incredibly discontinuous for only oil but it isn't for most other elements.
Can you expand on this?
And I should have qualified a bit more: the efforts over at TOD at using curve fitting to determine if we are at the "peak" are rather futile. Eventually we'll see an overall curve, but the noise from other factors renders the data useless for short-term analysis.
Ministry of Truth writes:
If I was holding anything long right now I would be selling into this bump. I really feel sorry for those who aimlessly pump money into their 401Ks.
Fidelity Guaranteed Income Fund for the win!
(I'm up 2% this year while everyone else is down 30% or whatever).
Dow up 100 pts - 400 point swing in one hr !
It's amazing what you can accomplish with trillions of fake $$$$, lots of leverage, daily presidential speeches and Crammer's predictions.
Ministry of Truth writes:
If I was holding anything long right now I would be selling into this bump. I really feel sorry for those who aimlessly pump money into their 401Ks.
I dunno, I mean another way to look at it is deferring your taxes forever, since there will be no gains to tax, and you get a lower rate today...o.k. not much of a silver lining...
Peak oil is about extraction rates (and more recently also export rates) and not about ultimate reserves or total production over time.
I was actually more worried about natural gas than gasoline prices. Back in July when gas prices were at $14/ccf I was really worried as to how people were going to pay their heating bills this winter.
You can cut back on driving or use public transit but when its cold outside you've got to have heat. Ditto for those using heating oil. We dodged a major economic bullet this year.
Roubini just on CNBC, they basically introduced him as a lunatic let him talk for 90 seconds and then said "Thanks bye!" while rolling their eyes.
Peak oil is about extraction rates (and more recently also export rates) and not about ultimate reserves or total production over time.
Yes, if you have a trillion barrel reserve, but you can only get one barrel per day out of it, in what way do you even have a reserve at all?
CNBC just had Nouriel Roubini on. They started by calling him the "Voice Of Doom."
Then the woman anchor asked 1, maybe 2 questions.
The interview lasted less than 2 MINUTES!! I couldn't believe it, and then the guy said, "We're out of time."
They didn't even thank Mr. Roubini, and abruptly cut away.
Fuck Them. I'm done with CNBC.
Rally Monkeys threw in the towel, back to negative territory.
Personally I expect to be investing in oil sometime in the next year. Seems like a pretty solid bet and at some point their wont' be a CRE market to short.
I think it was less than 30 seconds (really), and Peter Schiff got even less time.
CR is a suburb economic reporter
that's appropriate since this is a housing blog
Eventually we'll see an overall curve
I've already seen a curve that I think is indicative. However, it's certainly possible that certain areas of the earth have far, far greater concentrations of oil than we believe, i.e. anomalous like Saudi Arabia.
If the earth is relatively homogeneous, there's already been plenty enough sampling to establish a good prediction for peak oil.
Well, peak cheap oil.
It's not one of my fears so I don't feel a need for a rigid viewpoint.
However, I've been using the same methodology to do internet sampling for many years so I have a fairly good grasp of the arguments.
The S-curve is a very good tool for making predictions over certain domains, even ones which are unbounded like the internet.
I think it was less than 30 seconds (really), and Peter Schiff got even less time.
Just the two of them showing up means CNBC is covering their posterior and worried. Lol.
CNBC the only place where you can see the same talking heads condemn politicians for regulation while screaming about lack of oversight while cheering stocks with no discussion of fundamentals 24/7. Why do I torture myself?
Thank you all for the oil production feedback. I am not a petro-geek, but have asked geologists at a couple of universities about this.
I promise not to watch CNBC anymore during this crisis.
They are an EMBARASSMENT. I'll watch Bloomberg from now on when I'm getting ready for work in the AM.
Rick Santelli is the only sane one there. Perhaps Mark Haines too, but neither of them get more than a few minutes of air time anyways. Not worth wasting my time to watch all the "hairdos" & Market Mavens blow hot air.
Haven't you heard of monetization of debt?
Ain't gonna happen, not for the US. Funding needs are too great and too much of it is financed overseas. They turn on the spigots like that and the US is exactly one Treasury auction from seizing to function at all.
Did you see the Palin plan to cut taxes, reduce the debt, create jobs, and make America special again?
It's called Triganomics.
And it's going to be a real challenge!
BABOOM
cnbc is packed with moropns. That idiot farber likes to tell you he went to tufts. yeah so? So Burnett went to williams. All we are learning is that those small liberal arts NE colleges suffered the same inflation as house prices. only months ago burnett was trumpeting her GS expeirence. Is that now oficially a stain? John mAck on CNBC talking about how he cares about the system. This is a guy who was fired from MS then fired from Cs then back to MS with a mandate to expand risk and alternatives. Now he is the the right guy. If ever there wwas a template of the problem he is it.
"ceasing to function"
Houston, we have a problem... .. .
12:22 p.m.Downey Savings to close wholesale loan department
12:24pm Titanic to re-arrange deck chairs
When one understands that "inflation" is merely the creation of money and credit, one can easily understand that in fact, no, this does not affect "inflation" because they are two different things. A drop in price is only a drop in price, not a decrease of the money supply.
Down Goes Downey!!
Down Goes Downey!!
Roubini's analysis has been interesting, but as a person, he appears to be, well, for lack of a better word... odd:
Roubini comes unhinged
Terrible writing too, nothing like his stuff at RGE. So he was either (ahem) 1. not quite himself when he wrote those messages, or 2. he has a ghostwriter to clean up his messes.
Or I mabye 3. all of the above.
As I asked my classes, how many gallons are there in a barrel of oil?
Answer - 42
Thus, with oil at $80, the crude oil component of gasoline is $2.00.
Your classes have an idiot for a teacher. They should demand their money back.
blackhat writes:
Ministry of Truth writes:
If I was holding anything long right now I would be selling into this bump. I really feel sorry for those who aimlessly pump money into their 401Ks.
I dunno, I mean another way to look at it is deferring your taxes forever, since there will be no gains to tax, and you get a lower rate today...o.k. not much of a silver lining...
I'd agree were it not for one thing. In most 401k's and certainly all IRA's, there is a "close to cash choice". Setting aside the vagaries of the dollar for a moment, I judge it unwise to discourage any form of savings.
I think you and I agree that we face hard times ahead. Cash - in whatever form - will become king. Savings - uninvested savings - will be mighty handy.
Personally I expect to be investing in oil sometime in the next year.
If you'd consider a non-pure play, take a look at the airlines. There you get the recession affecting quarterly results as a hedge.
--
"Wall St. fumbles and Main St. pays, it is the american way."
OhBoy,
Wall Street is full of Crooks.
Main Street is full of born-and-bred American dopes.
"American way" has produced a very bad, almost evil, econo-political system.
Any more explanations needed?
At your service,
Jas BR Jai
For anyone who wants a break from CNBC
FDIC Announces Series of Banker Calls on Its Temporary Liquidity Guarantee Program
FDIC: Press Releases - PR-101-2008 10/16/2008
Senior FDIC staff from across functional business lines will be available to answer bankers' questions. To participate in today's conference call, bankers should dial 1-888-790-3533 (USA) or 1-312-470-7288 (International) and, when prompted, they should enter the pass code 9172716#.
Comrade Scared Shitless writes:
Down Goes Downey!!
Down Goes Downey!!
bahhahahahaha
Whoops, what I just said doesn't make sense. Sorry.
"Any more explanations needed?
At your service,
Jas BR Jain
Jas Jain"
Rosebud.
popeye - when did you beome a bear again?? After you lost a lot of $$?
Jas Jain:
Can't agree with you more. Everyone yells at the 700B bailout but not at the war which will cost trillions when it's over. Some logic.
We lie in the bed we make.
FFDIC, can you elaborate?
OT Bonus Treat:
THE LEHMAN BROTHERS
GUIDE TO EXOTIC CREDIT DERIVATIVES
FYI: There is also a time effect. Through time, senior and mezzanine tranches become safer relative to equity tranches since less time remains during which the subordination can be reduced resulting in principal losses. This causes the equity tranche delta to rise through time while the mezzanine and senior tranche deltas fall to zero. Building intuition about the delta is not trivial. There are many further dependencies to be explored and we intend to describe thesein a forth coming paper.
Higher order risks If properly hedged, the dealer should be insensitive to small spread movements. However, this is not a completely risk-free position for the dealer since there are a number of other risk dimensions that have not been immunised. These include correlation sensitivity, recovery rate sensitivity, time decay and spread gamma. There is also a risk to a sudden default which we call the value-on-default risk (VOD). For this reason, dealers are motivated to do trades that reduce these higher order risks. The goal is to flatten the risk of the correlation book with respect to these higher order risks either by doing the off setting trade or by placing different parts of the capital structure with other buyers of customised tranches.
This relationship is known as the credit tri-angle because it is a relationship between three variables where knowledge of any two is sufficient to calculate the third. It basically states that the spread paid per small time interval exactly compensates the investor for the risk of default per small time interval.
Within this model the interest rate dependency drops out. Given a CDS which has a flat spread curve at 150bp, and assuming a 50% recovery rate, the implied hazard rate is 0.015 divided by 0.5, which implies a 3% hazard rate. The implied one-year survival probability is therefore exp (0.03)=97.04%. For two years it is exp (0.06)=94.18%, and so on.
Is it just me? Is'nt the power lunch crew about the worst. Especially Dennis.
I watch the history ch. with my lunch,
otherwise I'd lose it.
I'd agree were it not for one thing. In most 401k's and certainly all IRA's, there is a "close to cash choice".
Lots of those "close to cash," "stable," and "guaranteed income" funds seem to have MBS and CDS in their holdings. Not close enough to cash for my tastes, but YMMV.
It's funny, but sad, how fast people are to jump on the bandwagon of one ethnic group or another. Nationalism worked out so well for Germany...
asl hearts lenin writes:
"Personally I expect to be investing in oil sometime in the next year."
If you'd consider a non-pure play, take a look at the airlines. There you get the recession affecting quarterly results as a hedge.
That's either a great joke, or you are very confident in the airlines you know.
Recession = bad for travel
Credit Crunch = bad for airlines
Oil Volatility = overpaid on hedges
We will see the continuation of airline bankruptcies which were delayed by the 2001 oil price bottom and government bailouts. The barriers to competition have fallen somewhat with new "open skies" agreements and expanded airports
Can't agree with you more. Everyone yells at the 700B bailout but not at the war which will cost trillions when it's over. Some logic.
Can we agree on a revised number? I'm thinking about $2 trillion is currently about right. We can adjust every week or so.
"I watch the history ch. with my lunch,"
I read CR.
Elvis
That too. I multitask.
Can we agree on a revised number? I'm thinking about $2 trillion is currently about right. We can adjust every week or so.
asl hearts lenin
Who knows at this point, it seems the cost for both will be ever increasing.
Or are you justifying that the wars are good because they are cheaper and serve their purpose? Just saying.
crispy&cole writes:
popeye - when did you beome a bear again?? After you lost a lot of $$?
I didn't loose a dime. Had you been paying attention, I clearly said what I bought; what I sold and when I sold it. I will hold ABT and DNA for good reason. I sold WMT and TGT at Monday's close.
Crispy, I am a short term player. Can you grasp that concept ?
FFDIC, can you elaborate?
Nanook | 10.16.08 - 12:46 pm | #
Sure. I was born and raised in the Houston area where the economy does better with higher oil prices. The mid 1980s bust is the best example and personally very painful especially 1986 when 'official' unemployment was above 12%.
Lindsay Williams called 50 a barrel oil in June of 08 when it was well over 100 and climbing. He also called for financial calamity in the US. He was dead on. Read the Non Oil Crisis.
popeye,
Yes. Cash on hand.
VIX is doing well today - 74.67
"That too. I multitask.
Dummy"
You must have talent. I have trouble stuffing down a sandwich, reading, and belittling Jaswant at the same time. Adding TV watching would destroy me.
LOL! I went back and looked and you said things were going up for a while...
Relax. It's over for now. All will be well in Whoville...for now
It's funny, but sad, how fast people are to jump on the bandwagon of one ethnic group or another.
Unless it's St. Patrick's Day.
Oh, wait, that's falling off the wagon. Sorry.
The average "new oil discovery" estimated field size has been falling steadily for twenty or thirty years.
That's an indicator that there's been sufficient sampling to extrapolate the overall curve.
Likewise, the drop in oil prices around 2000 to new lows is exactly what was expected at peak oil - maximum flow rate.
Personally, I think the evidence of peak oil is more than adequate and I think that if you erased "oil" from the data and submitted it to a panel for analysis, almost all statisticians would agree.
Where peak oil breaks down is that it's really "peak cheap oil".
There's plenty of oil at $80 / bbl, there's just a lag time and capital costs to develop it.
An example of the S-curve across what many would consider to be an unbounded domain - internet traffic. The reality THERE is that it is bounded but in a manner that's hard to quantify -
http://www.realmeme.com/Main/miner/technology/delphi%20pascalDejanews.png
By sampling the rate of change, I make decisions about technology trends, if they're worth investing into or not. There's no question that inflection points are often (not always, true) discernable.
Market tickers very entertaining today.
"Gains erased, losses trimmed, market up, only to be wiped out...again...and again." Rinse, wash, repeat, open mouth, pull trigger...
The most popular game for Icelandic families in 2009?
Go Fish!
OH YEAH
Thank you Kona for that precise explanation of the risk metric associated with loaning money to deadbeats.
Crispy,
LOL, I said things were going up on Monday - I didn't promise anything beyond that. You know what ? I told you when I bought. I told you what I bought. I told you why I bought what I bought. And I told you what and why I sold.
I've learned my lesson. I won't do it again.
I'm only sorry about you're inability to hear, not my inability to speak.
--
FWC: Its all about deflation
David Rosenberg: Its all about deflation -- The retailing stocks hit a new low yesterday. Ditto for the homebuilders. Funny we havent received any emails recently, as we were two months ago (and a few times before that) as to why we werent becoming more positive on the outlook considering what the early cyclicals were signaling (what they have continuously signaled is this bad rally). The CRB index has collapsed 40% from the high and is down to a three-year high imagine that, three years of commodity price gains completely wiped out. The Baltic Dry Index is down 85% from its 2008 high. Oil has sliced below $75/bbl and is half the peak level of last summer this is being driven by a turndown in global demand as OPEC cut its 2009 demand forecast by 100,000 bpd to growth of 800,000 bpd (to a level of 87.2 mbd). Scrap steel has plunged 40% too. In relative terms, gold is hanging in nicely then again, it really has no industrial use at all.
For born-and-bred dopes Its all about Inflation!
Some of these dopes are still talking about Bernankes Helicopter Drops. Other dopes believe in the myth of Printing Money when all that is happening is more borrowed money by the USG that has the effect of drying up private lending to households and private investments. Who would have thought that Printing Money as NEVER BEFORE would coincide with Commodities Collapse? Not inflationists.
Jas
unit472,
No problem.
Try this hint also:
I receive quite a bit of correspondence from the street and some of it is great commentary. One mortgage trader writes on an ad hoc basis and his pieces are always insightful. He is a veteran trader and he always has some wisdom to impart.
He notes that over the last week 30 year mortgage rates have backed up over 100 basis points. They have backed up about 175 basis points over the last 4 weeks moving from 5.25 percent to 7.00 percent.
He makes the salient point that as long as rates remain high there will be no refinancings,foreclosures will continue, and home prices will decline.
In his opinion rates have climbed because the Great Deleveraging has incited another episode of forced selling by banks, hedge funds and insurance companies that need to raise cash.
He expects that the process of deleveraging in concert with increased supply from the Treasury will work to keep rates elevated for quite awhile longer.
[hat tip]
"They turn on the spigots like that and the US is exactly one Treasury auction from seizing to function at all."
Yes they can, they are, and they will keep on and there isn't jack the "rest of the world" can do about it.
"I'm only sorry about you're inability to hear, not my inability to speak.
popeye"
You can hear the words in the comments? Cool. I lack that ability.
FFDIC, any pizza news for this week?
There's plenty of oil at $80 / bbl, there's just a lag time and capital costs to develop it.
Well, time, capital, AND energy to develop it. Some of those sources sitting untapped for later will stay that way indefinitely due the law of diminishing horizons. Were natural gas not as plentiful, gulf drilling would not be nearly as feasible right now, for example.
"Well, time, capital, AND energy to develop it. Some of those sources sitting untapped for later will stay that way indefinitely due the law of diminishing horizons."
Don't you mean diminishing car sizes?
He expects that the process of deleveraging in concert with increased supply from the Treasury will work to keep rates elevated for quite awhile longer.
And prices will continue to fall. We won't see price reduction and rate reduction happening at the same time.
--
"We lie in the bed we make."
OhBoy! You are my type of poster with moral compass of acts and their consequences.
Jas
Crispy,
You are a decided bear. I respect that and even agree. I am a decided profiteer, and I offer no apologies.
Peak Oil, Amero, Tooth fairy. Santa Claus
popeye - I trade short term sometimes, so I respect that, some traders think they are smarter than the market and I learned long ago that no one is (I learned the hard way).
He makes the salient point that as long as rates remain high
We entered a period of risig interest rates in 2003. 2003 to 2007 was a mirage and manipulation to hide that. There's a reason that the number of subprime mortgages rocketed up from 2003 to 2007.
The odds are good that long-term interest rates will continue rising for the next two decades.
The Federal gov't has converted a lot of the debt into short-term bills. They can't afford for rates to rise.
Thus... the Quandry of Today.
I see industry consolidation, plant closings, restructuring, layoffs, early retirements and 3 years of consolidation. Been there done that.
Jas:"all that is happening is more borrowed money by the USG that has the effect of drying up private lending to households and private investments."
WOW! Lightbulb in my head is lit now...thanks Jas!
ahh scooby, it doesn't work like that.
Keep thinking we're the Roman Empire and let me know how that turns out...
China&Russia as a block can pretty much liquidate their USD. Enough trade back and forth to sustain each other along with India.
Not arguing for the decoupling as strongly as I did months ago, but it's still in the mix.
Treasury turns on spigot, gas pours onto the fire, cash is destroyed. That's what is happening world-wide.
A pox of deflation on all houses.
crispy&cole writes:
popeye - I trade short term sometimes, so I respect that, some traders think they are smarter than the market and I learned long ago that no one is (I learned the hard way).
We've attended the same school. I'll presume we both graduated.
Someone get the DOW a sedative. It appears to have ceased directional trade and just become frantic.
The most popular game for Icelandic families in 2009?
Go Fish!
OH YEAH
Currently Smoking
i think the order is
1)OLD MAID,2) GO Fish
NYT on the 3:00 phenomena
It's 3 P.M. on Wall Street. The Hungry Bear Is on the Prowl. - NY Times
long link, halo might break it, sorry
We've attended the same school. I'll presume we both graduated.
popeye | 10.16.08 - 1:06 pm | #
LOL. Yes, I had to take the final twice though.
Jas,
re: It's all about deflation/inflation
We are obviously currently deflating.
Bernanke is convinced that he can pump enough money into the system to keep it functioning. (blowing air into the other side of a collapsing balloon)
Isn't there a possibility that he ends up creating another wild pendulum swing from the great deflation to the great inflation?
FWIW - I don't want extended deflation, but am positioned to weather that storm. It's the hyper inflationary scenario that has me worried.
NAHB out - RECORD LOW...they need a bailout for their survey
Gah! I've got my positions all settled but I'm itching to buy oil. Some of these low commodity prices stink of the sweat of desperate cash generation, rather than real pricing.
I gotta get off this board and do something productive.
So, if oil re-sets to closer to $50, how does that impact the dollar?
Capitalism Without Capital?
by Ron Paul
It has been long understood that our federal government is going deeper into debt, consistently raising the debt ceiling and demonstrating no fiscal restraint. In recent years, debt ceiling increases have been placed in must pass legislation as a means to guarantee that Republicans as well as Democrats would vote for them when Congress was under Republican control.
We also know our nations negative savings rate reflects the habits of private citizens, showing those habits to be not tremendously different than the habits of the public sector. Yet, the signs of decline are becoming ever more apparent. So apparent, in fact, that it seems unlikely that bailouts or other gimmicks will have even short-term success. More inflation, and creating moral hazard by bailing out egregious offenders, is a recipe for disaster. These activities can seem to provide some short-term relief, but it seems we are now at a significant crisis point, where monetary policy gimmicks dont provide the band-aids they did in the past.
Not only is our nation on the verge of bankruptcy, but so are its people and private institutions. We are now repeatedly hearing about businesses needing to access the credit market to make payroll. This is an unmistakable sign of more dire consequences ahead for the economy. If businesses must borrow just to make payroll, this is evidence of a severe undercapitalization that cannot be sustained, even for the short run.
Couple these facts with items such as the explosion of the payday loan industry and the unmasking of the false sense of economic well-being is nearly complete. These payday loan companies use preferred access to easy credit to inject cash into the hands of the working poor. They are nearly always set up in lower-income neighborhoods. These people, who are struggling to buy food and pay rent, get addicted to the credit drug. Their standard of living is only further depressed by the interest payments on these loans that make them profitable to their providers. Thus, the recipients are left even less capable of paying for items such as food and housing in the long run, without using this credit again and again.
These people are often the very ones being paid by businesses who borrow to make payroll. This is the dark underbelly of the fiat money, borrow-and-spend economy this nation has been building. As the government takes over more and more functions of the economy many see the rise of socialism as an antidote to this failure of capitalism. However, the fact remains that our economy has been increasingly running on debt, not capital. Capitalism does not exist without capital and debt is not, has never been and will never be a form of capital. Only now are we seeing the more dire implications of an economy without capital.
So, I am not optimistic about the fall in oil. I think it will just cause the long end of the bond curve to rise in a curve steepening move, while the short end collapses further due to deflation.
Totally agree as I believe that the next shoe to drop will the biggest bubble of all, the U.S. dollar bond bubble.
These drops in energy prices defer and in fact eliminate a number of projects in development. The resulting oil field production declines will cause much bigger price spikes in the future. The extreme price drops are IMO caused by deleveraging primarily and demand issues only secondarily and will result in an unrealistic new price level in the future which will hatch some very unpleasant news down the line.
Anonymous writes:
If oil is down 50% from the $140 a barrel and $4 per gallon gas we were paying a couple months ago, why is gas only down 25% to $3 a gallon? Where is my $2 per gallon gas?
Anonymous | 10.16.08 - 11:31 am | #
Yeah! $2 gas for Christmas... More money to buy useless crap.
Chainsaw,
Depends on the timeline we are talking about. O.k. so we agree on deflation, but I also predict overshooting post-deflation into rampant inflation as we climb out of the unemployment hole we are only half way finished digging. When unemployment hits above 15%, the fed will accept inflation.
I always wondered when a fascist government took over why they persecuted/killed the intellectuals. I thought it represented the need to silence the people who really understood the events and would speak out/provide leadership.
Turns out the police/military/low level bureaucrats were taking revenge against the people who should have spoken out and taken action and stopped the fascist government/tragedy from happening.
Tremendous amount of intellect is displayed on this blog. Much insight with no action.
Just one man's opinion.
CNBC is just upset that GE hit another 520 week low today.
RE,
Bingo! With a shoutout on the problems for petrodollar recycling into treasuries of any term...
3 Month Libor - OIS spreads increased, so if oil goes down, and the dollar remains frozen like a deer, isn't this going to be like hitting a brick wall?
4873rd!
Well hell, no ones using the stuff anymore, and they keep pumping out of the ground like it's going outa style.
I might even start to like my Espedition again.
Nostrovia,
Interesting Times writes:
CNBC is just upset that GE hit another 520 week low today.
still doesn't qualify for the "Dogs of the Dow" does it...
"Tremendous amount of intellect is displayed on this blog."
You must have this site confused with housingpanic.com.
LOL. Yes, I had to take the final twice though.
LOL. I attended school the first time today: bought some SSO at the open, lost 7% soon after, panicked and sold, then watched SPX turn green. And then red.
A relatively cheap lesson for teaching me not to day trade. Don't have the eyes and don't have the guts.
safe_as_apartments writes:
Fed's Stern: Downturn could last 12-36 months.
Optimist.
safe_as_apartments | 10.16.08 - 12:08 pm | #
Beginning when? Now or last Dec/Jan?
One of the amazing things about the Internet is that you can measure mental resistance to new ideas.
Literally measure it.
Here's my textbook example - SARS virus versus the pope's death.
http://www.realmeme.com/Main/theory101/impedance.jsp
The lag time for "peak SARS knowledge" was 45 days while the pope's death only took 5 days.
And you can measure some level of sentiment by subsetting existing bandwidths and measuring difference when the meme hits...
http://www.realmeme.com/Main/theory101/diffraction.jsp
There's always some chatter about the pope, and a great deal of that chatter shifted to his death when it happened. But a great deal of additional chatter appeared, too. The meme spread easily.
And there's always some chatter about viruses. But in the case of SARS, NOBODY wanted to know about it so there's no net increase in talk about viruses.
Mental impedance. It's fascinating to watch the denial and reactions about some things like the credit cycle or peak oil.
Jas
Who would have thought that Printing Money as NEVER BEFORE would coincide with Commodities Collapse?
Wow, not me. So I'll take the "dope" label.
Can you explain the mechanism of deflation with "printing money" again?
I see it happening, but I don't understand it.
Shit, what will this do to asphalt prices? Like oh my God!
I'm confused: Rising Cost of Asphalt a Bump in Road for N.Y
Rising Cost of Asphalt a Bump in Road for N.Y.
"The price has quadrupled in the last six months or so, and in some cases there have been shortages," said A.J. Castelbuono, president of the Associated General Contractors of New York. "That's something that just wasn't anticipated."
Managers at the New York State Thruway Authority - who rely heavily on toll money to pay for construction and maintenance - said this month they're putting off $250 million worth of planned projects.
When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. Were still dancing."
Chuck Prince, Financial Times, July 10 2007
Another industry caught drinking the Kool-Aid.
Can you explain the mechanism of deflation with "printing money" again?
I see it happening, but I don't understand it.
born & bred dope, apparently | 10.16.08 - 1:17 pm | #
It's quite simple. Money velocity is practically zero right now.
Debt collapse is currently much much faster than these bail-outs can keep up with. (Supply Inflation)
When I get a 100% increase in my salary there will be a 100% increase in CPI. (Price inflation)
"Welcome to the future of America, where people will be literally shitting in the middle of public without an ounce of shame."
Baltimore is the future? NOOOO!!!!!
intellect? not me
Blackhat,
so to borrow from Jas' timeline, do you see this happening...
US Recession -- > Commodities Bust -- > Depression (2009) -- > Deflation -- > Greater Depression -- > Reflation -- > Inflation --> The 2nd Weimar Republic
born & bred dope, apparently writes:
Jas
Who would have thought that Printing Money as NEVER BEFORE would coincide with Commodities Collapse?
Printing money in the face of the collapse of "fake money" ..... via the collapse of leverage, is a freebie. Don't get excited just yet cuz there was a ton of fake money.
Broward Horne
"Mental impedance. It's fascinating to watch the denial and reactions about some things like the credit cycle or peak oil."
Meh...Or else all the people who needed to know about SARS knew about it. Most people don't even know what it is. Most people don't know how to clean fuel injectors either. Such information is just noise. Like someone saying "Your nablewurffer is flanging". But with a billion Catholics out there, the Pope's death is kinda big news.
"It's funny, but sad, how fast people are to jump on the bandwagon of one ethnic group or another.
Unless it's St. Patrick's Day."
Or unless it involves a presidency:
Dumb Voters Video
What's the difference between George Bush and Sarah Palin?
Well, one is a cunning runt!
That's all, folks! It's been swell, but the swelling's gone down! I'll be back next week!
Shit yes baby, we can go shopping now!
Consumers pumped as gas drops below $3 a gallon
greatfallstribune.com | Great Falls | Great Falls Tribune
"It's a dollar less a gallon than it was a few weeks ago, and that adds up," said Peck, who lives in Centerville.
Customers reacted similarly on Gore Hill at the Flying J, where the price of a gallon of regular unleaded gas dropped to less than $3 on Tuesday.
"People are saying it's about time the price went down," said Dave Suazo, the store manager.
Gas prices are expected to continue to drop, but that forecast is based on depressing factors, said Denise Harris, spokeswoman for AAA in Montana.
"The economy has slowed, it's not doing well, and demand for gasoline has dropped," Harris said
I predict a deflation bubble
[i] I have stated that CR is a suburb economic reporter...[/i]
We're all Orange County now
CSC, ouch, LMAO
Oh my Glod,wtf!!!!!!
Kona writes:
I predict a deflation bubble
I predict a recognition of deflation reality first. I'm not good a distant time calls.
I'm trying to picture in my mind what a "deflation bubble" looks like...I keep coming up with a used condom...
Gone Fishin:
Tremendous amount of intellect is displayed on this blog. Much insight with no action.
Just one man's opinion.
Answer to this tonight, Fishi
We must have a new thread, cause I just caught up
Why US automakers still have problems...one of our company cars is an 03 Ford Explorer had this diagnosis from the mechanic:
"rear axle with severe whine and driveshaft vibrating entire vehicle"
had to replace rear differential and rings, pinions, bearings for about $1,900. On a five year old vehicle!