En el interín recordemos como salió el mundo de la debacle financiera.
FELIZ 2009
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miércoles, diciembre 31
UN AÑO PARA EL OLVIDO
Termino el 2008. Una año para el olvido a nivel de inversión. Igual nada indica que el 2009 sea más fácil.
En el interín recordemos como salió el mundo de la debacle financiera.
FELIZ 2009
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En el interín recordemos como salió el mundo de la debacle financiera.
FELIZ 2009
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lunes, diciembre 15
¿DOLAR o EURO?
El mundo esta movido, y se sigue buscando el refugio de los ahorros. En el interín sigue la pregunta, ¿Dólar o Euro?
Desde Julio del corriente año el dólar ha recuperado terreno fuertemente. Para algunos se viene una corrección de dicha moneda, mientras que para otros terminó la corrección de la suba del Euro.
Veamos algunos punto para confundirnos más.....
El costo de los Treasury a 3 meses ya tienen una tasa negativa. Hoy el inversor prefiere tener sus fondos a tasa negativa, que invertir en cualquier otro activo. Esto obviamente debería desalentar la inversión en el "green-back".
También podemos ver en los siguientes charts como el dólar Index, o el dólar vs. el Euro, han cortado la media diaria de 50 días.
Del lado de enfrente se mencionan tres amenazas sobre el Euro:
1. La crisis ha generado que sea más difícil para las economías emergentes de europa llegar a cumplir con las reglas para poder ingresar a la comunidad, y también para aquellas que hoy están dentro para mantenerse. Esta reconfiguración de la comunidad puede llegar a tener un impacto sobre el Euro, que si bien es difícil de cuantificar, hay que contemplarlo.
2. Todavía hay bancos europeos expuestos a los efectos de la crisis, especialmente los austríacos que han tenido una fuerte exposición en los mercados emergentes.
Esta incertidumbre financiera tendrá impactos monetarios que impactarán obviamente sobre le Euro.
3. La recesión europea es otra de las amenazas que impactarán sobre el Euro.
Como vemos no es fácil establecer cual moneda será la ganadora. El dólar tiene la ventaja de haber sido siempre la moneda utilizado como reserva de valor. Aunque por otro lado China estaría más reacia para seguir aumentando su tenencia en dicha moneda.
Ante la duda, no descartemos al oro como reserva de valor.
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Desde Julio del corriente año el dólar ha recuperado terreno fuertemente. Para algunos se viene una corrección de dicha moneda, mientras que para otros terminó la corrección de la suba del Euro.
Veamos algunos punto para confundirnos más.....
El costo de los Treasury a 3 meses ya tienen una tasa negativa. Hoy el inversor prefiere tener sus fondos a tasa negativa, que invertir en cualquier otro activo. Esto obviamente debería desalentar la inversión en el "green-back".
También podemos ver en los siguientes charts como el dólar Index, o el dólar vs. el Euro, han cortado la media diaria de 50 días.
Del lado de enfrente se mencionan tres amenazas sobre el Euro:
1. La crisis ha generado que sea más difícil para las economías emergentes de europa llegar a cumplir con las reglas para poder ingresar a la comunidad, y también para aquellas que hoy están dentro para mantenerse. Esta reconfiguración de la comunidad puede llegar a tener un impacto sobre el Euro, que si bien es difícil de cuantificar, hay que contemplarlo.
2. Todavía hay bancos europeos expuestos a los efectos de la crisis, especialmente los austríacos que han tenido una fuerte exposición en los mercados emergentes.
Esta incertidumbre financiera tendrá impactos monetarios que impactarán obviamente sobre le Euro.
3. La recesión europea es otra de las amenazas que impactarán sobre el Euro.
Como vemos no es fácil establecer cual moneda será la ganadora. El dólar tiene la ventaja de haber sido siempre la moneda utilizado como reserva de valor. Aunque por otro lado China estaría más reacia para seguir aumentando su tenencia en dicha moneda.
Ante la duda, no descartemos al oro como reserva de valor.
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domingo, diciembre 7
EL RIESGO CREDITICO EN EL MUNDO
A través del costo del Credit Default Swap (CDS) de cada país, el costo anual de asegurar USD10.000- de deuda durante 5 años, nos muestra como está el riesgo crediticio en cada país.
Lamentablemente en este ranking estamos primeros......
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Lamentablemente en este ranking estamos primeros......
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lunes, noviembre 24
VOLATIL COMO NUNCA
La gente de The Bespoke Investment presenta el siguiente chart donde se puede visualizar lo volátil del mercado americano.
Tomando los últimos 50 días la variación absoluta del S&P500 ha sido cercana al 4%. O sea que el mercado ha subido o bajado diariamente el 4%. Esto lleva a que estemos en el record histórico en cuanto a volatilidad, y obviamente con mayor número de días en baja.
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Tomando los últimos 50 días la variación absoluta del S&P500 ha sido cercana al 4%. O sea que el mercado ha subido o bajado diariamente el 4%. Esto lleva a que estemos en el record histórico en cuanto a volatilidad, y obviamente con mayor número de días en baja.
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domingo, noviembre 23
¿DONDE ESTARÁ EL PISO DEL MERCADO AMERICANO?
Cada día en que vuelve a caer la bolsa americano, y vemos los nuevos precios alcanzados nos da la impresión que estamos cerca del piso, ya que más bajo parece que no pueden ir. Sin embargo al día siguiendo nos volvemos a hacer la misma pregunta.
Hurgando por internet encontré estos tres gráficos para ver donde estamos parados en esta crisis, en comparación con otros, y ver si a través de los mismos me puedo contestar la pregunta inicial.
El primero muestra la caída de la bolsa americana desde los máximos, durante las crisis más importantes de USA.
El segundo muestra la evolución del Nikkei 225 durante el primer año del bear market iniciado en 1989, y que dio origen a una larga deflación de su economía, y el similar camino que viene mostrando el DJIA.
Finalmente incluyo un gráfico de la evolución del Nikkei 225, para que veamos como siguió evolucionando.
No he encontrado respuesta a mi duda, pero todo parece indicarnos que el piso todavía no esté cerca.
Veamos lo gráficos a continuación:
Para ampliar haga click sobre cada gráfico.
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Hurgando por internet encontré estos tres gráficos para ver donde estamos parados en esta crisis, en comparación con otros, y ver si a través de los mismos me puedo contestar la pregunta inicial.
El primero muestra la caída de la bolsa americana desde los máximos, durante las crisis más importantes de USA.
El segundo muestra la evolución del Nikkei 225 durante el primer año del bear market iniciado en 1989, y que dio origen a una larga deflación de su economía, y el similar camino que viene mostrando el DJIA.
Finalmente incluyo un gráfico de la evolución del Nikkei 225, para que veamos como siguió evolucionando.
No he encontrado respuesta a mi duda, pero todo parece indicarnos que el piso todavía no esté cerca.
Veamos lo gráficos a continuación:
Para ampliar haga click sobre cada gráfico.
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jueves, noviembre 6
CREDIT DEFAULT SWAP: VALORES
A continuación incluyo un chart con los valores de los Credit Default Swap de entidades financieras americanas, según The Bespoke Investment Group.
El precio indica el costo anual por asegurar bonos por USD 10.000 por cinco años.
Interesante ver como el mercado esta priciando el riesgo de dichas entidades.
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El precio indica el costo anual por asegurar bonos por USD 10.000 por cinco años.
Interesante ver como el mercado esta priciando el riesgo de dichas entidades.
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ESTADO DE LOS COMMODITIES
Una visión de los commodities según The Bespoke Investment Group. La zona verde representa dos desvios estándares por encima y por debajo del moving average de 50 días (para los charts clickear en SEGUIR LEYENDO).
Todos se encuentran muy cerca de la zona de sobrevendidos, a pesar de que la recesión que ya estaría afectando a gran parte del mundo indicaría que se deberían mantener en dicha zona.
Por otra parte, si bien es cierto que los máximos en sus cotizaciones fueron alcanzados por una onda especulativa, la demanda real creció. Con lo cual llegamos a la gran pregunta de donde estará el nuevo precio de equilibrio.
Según uno de los gurús de los commodities estamos en un ciclo alcista, y esto es solo una correción.
Veremos.
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Todos se encuentran muy cerca de la zona de sobrevendidos, a pesar de que la recesión que ya estaría afectando a gran parte del mundo indicaría que se deberían mantener en dicha zona.
Por otra parte, si bien es cierto que los máximos en sus cotizaciones fueron alcanzados por una onda especulativa, la demanda real creció. Con lo cual llegamos a la gran pregunta de donde estará el nuevo precio de equilibrio.
Según uno de los gurús de los commodities estamos en un ciclo alcista, y esto es solo una correción.
Veremos.
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miércoles, noviembre 5
ONE MONTH TREASURY NOTE YIELD
Los Treasury Notes (TN) a un mes rinden casi cero (0.09%). ¿Que significado puede tener esto?
1. que es más barato guardar los ahorros en TN, que en una caja de seguridad?
2. que las tasa americanas van a subir?
3. miedo a un default americano?
4. estar líquido?
5. otros?
6. ................
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1. que es más barato guardar los ahorros en TN, que en una caja de seguridad?
2. que las tasa americanas van a subir?
3. miedo a un default americano?
4. estar líquido?
5. otros?
6. ................
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viernes, octubre 24
EL MERCADO DE CAMBIOS MUNDIAL
En las últimas semanas hemos visto recuperar fuerte al dólar. Más allá que las medidas de salvataje tomadas por el Tesoro americano debería jugar en contra de dicha moneda, encontre una explicación razonable de porque no sucedió así, en el newsletter diario The Daily Pfennig, y extraje la parte relevante de la explicación:
"The story is the same as we have seen over the past few months. Institutional investors and hedge funds are having to pay down some of the loans which they have taken out over the past few years. These investors had been rolling over loans in the lower yielding currencies of the yen, franc, and dollar in order to pick up the 'carry' between these low interest loans and their higher yielding investments. Now, due to the credit crunch, the banks are not renewing these loans, and the institutional investors have to sell investments and buy back the yen, franc, and dollar in order to pay off the banks. In addition to the flow of funds to pay off these bank loans, investors are also having to purchase dollars to make up for the losses which they are incurring on US$ based mortgage investments and credit default swaps."
"A question we hear a lot these days is when will this stop? That question is very difficult to answer, as hedge funds are mostly unregulated so there is no good data on just how much leverage there is. Making it even more difficult, the credit default swaps do not trade on an 'exchange' so it is almost impossible to try and gauge just how much of these swaps are outstanding. For those of you who are new to the Pfennig, credit default swaps are agreements which were entered into by institutions which guaranteed holders of certain mortgage backed investments against the risk of default. They are basically insurance policies on mortgage backed investments. These swaps are contracts between two parties, and are not cleared on a common exchange. As mortgage backed securities have plummeted, holders of the credit default swaps have started collecting. The vast majority of these derivative contracts are issued in US$, so when holders collect, the issuers have to pay off in US$, and sometimes have to sell investments in other currencies to raise the US$."
"But I digress, back to just how long this will last. No one knows. As long as the losses keep mounting on Wall Street, and volatility continues, investors will continue to have to buy dollars. I know this isn't helpful to readers who want someone to tell them right when the bottom is, but anyone who tells you they can predict these markets is delusional. I can only tell you that at some point the deleveraging will be complete, and the markets will start trading back on fundamentals. The fundamentals are not good for the US$, as we continue to increase debt and widen our deficits."
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miércoles, octubre 22
LOS SOPORTES DEL MERCADO
La baja de la última hora en el mercado americano del día de hoy (22/10) no terminó en sus mínimos. Testeo el soporte y aguanto. ¿Hasta cuando?
DOWJONES
SP500
NASDAQ
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DOWJONES
SP500
NASDAQ
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FIBONACCI, EL PETRÓLEO, Y LA OPEC
Del siguiente gráfico del Petróleo de Bespoke Investment podemos apreciar los distintos niveles de retroceso de Fibonacci desde el mínimo de USD 16.7 hasta el máximo de USD 147,27 alcanzado a mediados de año.
Como vemos ya supero los primeros límites (38.2% y 50%), encontrandosé actualmente sobre la línea de resistencia del 61.8% a un valor de USD 66.58. La próxima se encuentra en USD 47.52.
A pesar de la crisis, debajo de USD 70 parece oportunidad de compra. Recordemos que el Viernes se junta de emergencia la OPEC en Viena, y su intención es estabilizar el precio del barril entre USD70/90 via el recorte de la producción de sus miembros.
Veremos.
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Como vemos ya supero los primeros límites (38.2% y 50%), encontrandosé actualmente sobre la línea de resistencia del 61.8% a un valor de USD 66.58. La próxima se encuentra en USD 47.52.
A pesar de la crisis, debajo de USD 70 parece oportunidad de compra. Recordemos que el Viernes se junta de emergencia la OPEC en Viena, y su intención es estabilizar el precio del barril entre USD70/90 via el recorte de la producción de sus miembros.
Veremos.
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domingo, octubre 12
¡QUE SEMANA! (2008 vs 1987)
A continuación pueden ver un comparativo de la performance de las acciones del Dow durante la última semana, y la semana del crash del ´87, que extraje de The Bespoke Investment.
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lunes, septiembre 29
¿BLACK MONDAY, O RECIEN EMPIEZA?
Analizando las caídas historicas del SP500, como dice un periodista de radio: "Lo peor está por venir".......
Biggest S&P 500 Declines
As it currently stands, the decline of 7.8% in the S&P 500 ranks 15th in terms of one-day losses going back to 1927. Below we highlight the 20 largest daily drops in the index sorted by decline and date. As shown, today is set to be the biggest drop since October 26th, 1987.
Update: the final tally for the day has the S&P 500 down 8.79%, making it the biggest decline since Black Monday in 1987.
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NO TODO CAE
One Stock Up
One. Just one stock in the S&P 500 was up today. And guess which one it was? Campbell Soup (CPB). Talk about a bomb shelter stock!
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viernes, septiembre 19
DEMASIADA INTERVENCION EN USA
Que hubieran opinado los inversores extranjeros si la argentina prohibía las ventas cortas. Nos hubieran dicho anticapilistas como mínimo.
Ahora Uk y USA lo hicieron. Esto es muy grave para los mercados. El prohibir las ventas cortas no va mejorar la situación del sistema financiero americano.
Tampoco concuerdo con la "estatización" de los malos créditos hipotecarios. Todo esto frenará el impacto de la crisis en los mercados, pero creo que dañará seriamente la confianza sobre el "capitalismo" americano.
El tiempo dirá.
A continuación adjunto un artículo, uno de los tantos, que han salido a criticar la actuación de la Fed, la Sec, y el Tesoro.
The Socialists Killed The Short Sellers
There was a perverse honor in being a short-seller. It was an honor among thieves, but the group usually made lots of money by taking significant risks.
Short-selling was based on one of the foundations of capitalism. Making money betting on disaster is just as much a part of the economy as taking the optimist's side.
Banning short-selling in financial stocks, which both the US and UK have done, will halt the activities of the so-called naked shorters. These firms short shares without borrowing them from other firms. They are required to do that borrowing because it is the basis of their risk. If the stock they borrowed goes up, they have to pay the difference of what the original owner would have made.
Killing short-selling buries naked shorting. It also demolishes the entire market for legitimate gambles that a stock will go down. It subverts one of the most important checks and balances of equities trading.
The regulators feel that poisoning part of the system is the only way to save the whole market. No one will ever know if that is true. Free marketers such as George Soros felt that the whole bloody mess should be sorted out on its own and that the government should simply stand by and watch the world burn. Soros and his ilk were voted down and banned from the property.
Short-selling was always a dirty business, and now the government has decided that it is no business at all.
Financial stocks will rise on the news that the system for betting against them has been crushed. In the process of the shares going higher. there will be very little left to tether them to the earth.
Exuberance will have its day, but it may be that when the next set of banking and brokerage quarterly losses are announced there will be another round of crashing share prices. The shorts will not have been permitted to do their jobs.
Douglas A. McIntyre
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martes, septiembre 16
11000 SOPORTE DEL DOW?
El Dow ha retrocedido un 50% de la suba del 10/2/08 al 10/7/08, que en términos de Fibonacci, debería ser un fuerte soporte. ¿Será 11000 el número mágico para un rebote, o irá a buscar 10000 (61.8% de retroceso)?
En base a lo que estaba sucediendo en el post cierre (18:00hs BA) con AIG (el Tesoro americano está analizando la internvención de la misma), mañana abriría por debajo de los 11000.
Veremos. Por las dudas prendamos una vela.
PD (23:00hs): parece que la vela tuvo su efecto. La Fed estaría rescatando a AIG. Veremos mañana.
A continuación el chart extraido de un post de The Bespoke Investment.
Clickear en el mismo para agrandar
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En base a lo que estaba sucediendo en el post cierre (18:00hs BA) con AIG (el Tesoro americano está analizando la internvención de la misma), mañana abriría por debajo de los 11000.
Veremos. Por las dudas prendamos una vela.
PD (23:00hs): parece que la vela tuvo su efecto. La Fed estaría rescatando a AIG. Veremos mañana.
A continuación el chart extraido de un post de The Bespoke Investment.
Clickear en el mismo para agrandar
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lunes, septiembre 15
Dow plunges 504! Here's what's next ...
De la newsletter MONEY and MARKETS extraje el siguiente párrafo:
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Here's What's Happening and
What We See Coming Next ...
The financial failures you've seen so far are just the tip of the iceberg ...
- Lehman Brothers is merely the first to fail. Expect more in the weeks ahead, possibly starting with those that have the smallest capital cushion.
- Bank of America is making a horrendous mistake. It's already bogged down with its earlier purchase of Countrywide Financial, a classic pig in the poke. Now, on top of that bad move, it's taking on all the debts and risks of Merrill Lynch.
- AIG, the biggest insurance firm in the country, is desperately trying to shore up its balance sheet after suffering $18.5 billion in losses over the past three quarters. It's planning to dump assets, raise capital, and asking the Federal Reserve for a $40 billion bridge loan. Don't be surprised if AIG is taken over by insurance regulators in the days ahead. And don't be shocked if more insurance company failures follow.
- Look out for bigger financial troubles in the banking industry, including not only the names that are in the news, like Washington Mutual and Wachovia, but also at Citicorp, HSBC ... and yes ... Bank of America.
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jueves, septiembre 11
UNA EXPLICACIÓN SOBRE LA CRISIS SUBPRIME
Encontré este video que explica claramente lo que pasó con la crisis de las hipotecas subprime en USA.
Espero que lo disfruten.
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Espero que lo disfruten.
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miércoles, septiembre 10
UNA MIRADA A LAS BOLSAS DEL MUNDO
Esta nota de The Bespoke Investment, nos muestra una rápida imagen de como evolucionaron las principales bolsas del mundo.
Si nos basamos en los gráficos hay algunas bolsas que están para comprar, pero solo en el corto, ya que la volatilidad global parece que va a seguir.
Equity markets across the world have been reeling lately, and our trading range charts for indices of 22 countries highlight the carnage. Countries to recently take big hits include Brazil, Canada, South Africa, and of course, Russia. Any time the price moves below the green shading, it is trading more than 2 standard deviations below its 50-day moving average. Below the green shading is considered extreme oversold territory, and prices don't typically stay that oversold for extended periods of time. The one positive chart might be India's Sensex index that has moved back above its 50-day moving average recently and formed a short-term uptrend.
The Bespoke Investment Group
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Si nos basamos en los gráficos hay algunas bolsas que están para comprar, pero solo en el corto, ya que la volatilidad global parece que va a seguir.
Equity markets across the world have been reeling lately, and our trading range charts for indices of 22 countries highlight the carnage. Countries to recently take big hits include Brazil, Canada, South Africa, and of course, Russia. Any time the price moves below the green shading, it is trading more than 2 standard deviations below its 50-day moving average. Below the green shading is considered extreme oversold territory, and prices don't typically stay that oversold for extended periods of time. The one positive chart might be India's Sensex index that has moved back above its 50-day moving average recently and formed a short-term uptrend.
The Bespoke Investment Group
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viernes, agosto 22
LA CRISIS AMERICANA YA TIENE SU FILM
Ayer se estreno en U.S.A. el film I.O.U.S.A. Un documental sobre la situación fiscal americana, y que les los está llevando derecho a la peor crisis de su historia.
Se estima que tiene una necesidad financiera de USD 53 trillions basicamente por el sistema de salud Medicare, y el sistema de seguridad social. Además la deuda nacional es de USD 9,6 trillions, la cual crece USD 1,86 billions por día.
Las perspectivas son muy negras, y la verdad que con este escenario el dolar parece caro contra el resto de las monedas. Además el sistema financiero no goza de buena salud.
Por todo esto se sigue viendo al oro como una inversión seguro por los próximos años (5?, 10?, quien sabe).
A continuación el trailer de dicho film.
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jueves, agosto 14
US DOLLAR INDEX: FUERTE SIGNO DE SOBRECOMPRA
From the Bespoke Investment Group
Dollar Up Ten Days in a Row
Since our post on the Dollar breakout last week, the currency has continued its trek higher. It is currently trading well into overbought territory, however, and is also up ten days in a row for just the fifth time since we have daily pricing going back to 1971. The last ten-day winning streak for the currency was all the way back in May 1990. The currency has gone up eleven days in a row just twice, and it has never been up twelve days in a row. While we expect the uptrend to continue for the Dollar, it can't go up every day.
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Dollar Up Ten Days in a Row
Since our post on the Dollar breakout last week, the currency has continued its trek higher. It is currently trading well into overbought territory, however, and is also up ten days in a row for just the fifth time since we have daily pricing going back to 1971. The last ten-day winning streak for the currency was all the way back in May 1990. The currency has gone up eleven days in a row just twice, and it has never been up twelve days in a row. While we expect the uptrend to continue for the Dollar, it can't go up every day.
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lunes, agosto 11
RALLY DEL DOLAR O SOLO CORRECCIÓN
El dólar ha tenido una fuerte suba en la última semana.
Cuando uno analiza las causantes de dicha recuperación no las podrá encontrar en una mejora de la economía. El deficit sigue creciendo, el problema financiero esta lejos de solucionarse, no ha dejado de emitir dolares, y tampoco tienen pensado subir la tasa.
Es cierto que ya se empiezan a notar fuertes sintomas de deterioro en la economía europea, pero según un artículo publicado en GoldMoney.com, que pueden leer a continuación, la verdad habría que buscarla en la intervención realizada por los bancos centrales. A eso hay que sumarle el efecto de quienes estaban vendidos en dólares que tuvieron que salir a cubrir posiciones.
Ante esto la pregunta es ¿cuanto aguantará esta intervención? ¿Hay que olvidarse de un dólar debil? ¿O tomamos esto como una correción y una oportunidad de venta del greenback?
Con un Euro debajo de los 150, y el oro debajo de 900 la respuesta parece resuelta.
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Cuando uno analiza las causantes de dicha recuperación no las podrá encontrar en una mejora de la economía. El deficit sigue creciendo, el problema financiero esta lejos de solucionarse, no ha dejado de emitir dolares, y tampoco tienen pensado subir la tasa.
Es cierto que ya se empiezan a notar fuertes sintomas de deterioro en la economía europea, pero según un artículo publicado en GoldMoney.com, que pueden leer a continuación, la verdad habría que buscarla en la intervención realizada por los bancos centrales. A eso hay que sumarle el efecto de quienes estaban vendidos en dólares que tuvieron que salir a cubrir posiciones.
Ante esto la pregunta es ¿cuanto aguantará esta intervención? ¿Hay que olvidarse de un dólar debil? ¿O tomamos esto como una correción y una oportunidad de venta del greenback?
Con un Euro debajo de los 150, y el oro debajo de 900 la respuesta parece resuelta.
Mystery Solved
by James Turk - Founder of GoldMoney
On July 15th the US Dollar Index closed at 71.87, the lowest close since reaching its record low in April. This index was in the process of breaking down, and in fact it had actually fallen out of its uptrend channel.
However, rather than continue lower and fall off the edge of the cliff, the Dollar Index suddenly and mysteriously reversed course. It has now risen on 12 of the 17 trading days since reaching that low, and closed today at 74.55, a 5-month high. What caused this index to suddenly pull back from the brink and then reverse course to shoot higher over the past three weeks?
The Federal Reserve did not suddenly contract the amount of dollars in circulation. Its latest H.6 report shows that both M1 and M2 expanded in recent weeks, so there was no shortage of supply.
The Federal Reserve did not raise interest rates during this period. Consequently, inflation adjusted interest rates remain negative. In other words, the annual inflation rate is higher than the amount of interest one can earn on a 1-year dollar deposit, which is highly inflationary and a major disincentive to holding dollars.
There has not been any news exceptionally favorable to the dollar. In fact, the banking problems in the United States continue to mount, while the federal government's deficit continues to soar out of control. On July 28th Reuters reported that "The Bush administration on Monday plans to project the U.S. budget deficit will soar to a new record...because of the slowing economy and an economic stimulus plan approved this year."
So what happened to cause the dollar to rally over the past three weeks? In a word, intervention. Central banks have propped up the dollar, and here's the proof.
When central banks intervene in the currency markets, they exchange their currency for dollars. Central banks then use the dollars they acquire to buy US government debt instruments so that they can earn interest on their money. The debt instruments central banks acquire are held in custody for them at the Federal Reserve, which reports this amount weekly.
On July 16, 2008 (the closest date of the weekly reports to the July 15th low in the Dollar Index), the Federal Reserve reported holding $2,349 billion of US government paper in custody for central banks. In its report released today, this amount had grown over the past three weeks to $2,401 billion, a 38.4% annual rate of growth. To put this phenomenally high growth rate into perspective, for the twelve months ending this past July 16th, assets in the Federal Reserve's custody account grew by 17.3%, which is less than one-half the growth rate experienced over the past three weeks.
So central banks were accumulating dollars over the past three weeks at a rate far above what one would expect as a result of the US trade deficit. The logical conclusion is that they were intervening in currency markets. They were buying dollars for the purpose of propping it up, to keep the dollar from falling off the edge of the cliff and doing so ignited a short covering rally, which is not too difficult to do given the leverage employed in the markets these days by hedge funds and others. So central banks pushed in one direction and funds and traders then stepped on board. In other words, central banks ignited the fuse of a bear market rally.
With this intervention, central banks have bought some time. But alas, they have not fixed the problem. Central bank intervention does not make the dollar "as good as gold", the description that once accurately described the dollar.
In the final analysis, it is fundamental factors that determine the course of markets and the process of price discovery that results from them. Central bank intervention - like fiat currency itself - is ephemeral. In contrast, gold lasts throughout the ages. So what would you rather own? A sick dollar that it requires central bank intervention to prop it up? Or gold?
SEGUIR LEYENDO...
jueves, agosto 7
NAVIGATING TOWARDS A GLOBAL RECESSION?
Recomiendo esta nota de RGE Monitor, a la vez que les recomiendo que vean dicha página.
Nouriel Roubini's Global EconoMonitor
RGE Monitor - Navigating Towards a Global Recession?| Aug 7, 2008
A few weeks back we surveyed a group of countries navigating towards (or through) recession. The list included the U.S., Canada, Spain, Ireland, Italy, the UK, the Baltics and New Zealand.
Now the growth engine of the EMU, Germany, is faltering, together with France. And a recession might be in the works for Japan as well. This essentially leaves us with a fully fledged G7 recession in the making.
After a long period of disinflation in the 1980s and 1990s, the rise of G7 inflation poses a dilemma for central bankers who must also grapple with credit crunch and risks of recession. The balance of risks is likely to keep G7 central banks from tightening aggressively, with some staying on hold for the rest of 2008. Others, like Australia and more so New Zealand, who have the luxury of high interest rates to start cutting from will likely loosen policy to stave off recession.
Last week we asked whether the U.S. economy is in recession or not. An official answer to this question is not likely to come anytime soon, but recent reports GDP and employment in particular are not auspicious.
U.S. inflation in its various manifestations PCE deflator, CPI, PPI, import inflation, inflation expectations - is at decade(s) highs and stands outside the Fed's comfort zone. As much of this inflation is driven by a weak dollar and external demand for commodities, rate hikes in the U.S. alone won't stop global inflation (though it may help). Moreover, the still benign trends in inflation and inflation expectations has left the Fed room to worry more about financial stability and a flagging economy at home. According to the consensus, fading stimulus from tax rebates and ongoing housing and financial crises will push back tightening to yearend or next year, however, a worsening of the growth outlook could even prompt the Fed to cut rates in the second half of the year.
While Canada may avoid a technical recession growth might be barely positive in Q2 after a contraction in Q1- output has been slowing. Buoyant domestic demand, spurred by a sustained terms of trade rise, could also now be fading as Canadian consumers and businesses are feeling the strains. With 75% ofCanada’s exports U.S. bound, it can’t escape aU.S.recession, and its financial links are significant too. Meanwhile housing and labor markets are starting cool. With the disinflationary effect of the Canadian dollar’s strength waning, the Bank of Canada looks to be firmly on hold for now after aggressive easing in H1.
In the UK, despite severe threats of a spike in inflation mostly due to higher food and oil prices, economic activity already shows clear signs of a slowdown. Measures of business and consumer confidence, the deteriorating housing market and the still quite fragile mortgage and credit markets might push the economy into a recession-like environment relatively soon. Surveys on the probability of a recession show an increase in the median forecast from 30% in June to 45% in July?, while many analysts already call for at least one reading of negative growth by the end of the first half of 2009.
UK’s fast-deteriorating inflation outlook has increased speculation of a BoE tightening cycle in the last couple of months. Nonetheless, the BoE will probably hold rates unchanged throughout the year as the economy is set to display much slower growth in the coming quarters. The BoE’s dilemma will most likely persist. So far the spike in CPI (+3.8%) has not affected average earnings, downplaying the case of a wage-price spiral fed by a self-fulfilling cycle of inflationary shocks and worsening expectations.
In the Eurozone economic indicators turned sharply lower after a buoyant Q1 GDP reading that fuelled hopes for a decoupling from the U.S. recession. Whether the ECB 25bp rate hike on July 3rd accelerated the business sentiment downturn or not remains an open question. The fact remains that many analysts now expect a negative Q2 GDP growth reading, and worries about persistently divergent growth paths among EMU members are emerging.
On a country basis, both Germany’s manufacturing and services leading indicators as measured by the PMI Survey point to slow but still expanding activity in July. After a decade of working through its post-reunification housing bust and restoring of corporate balance sheets, Germany finds itself in a relatively balanced macroeconomic position compared to its EMU peers. The combination of falling house prices, high inflation, and higher credit costs is particularly toxic for Spain whose leading indicators are hitting one record low after another. Economic analysts are also starting to sound alarm bells on Spain’s banking sector. Italy is the second laggard in the group of big four EMU countries. The lack of reforms and the continuing loss of competitiveness are clearly taking their toll now. France has seen the sharpest reversal in both consumer and business sentiment in Q2 coinciding with the turning of its housing market.
On the inflation front, headline HICP has been surpassed by its U.S. equivalent ‘s headline CPI. Like in the U.S., core inflation stands outside the ECB's comfort zone. However, unlike the U.S., wage indexation has led to automatic second-round effects, with inflation leading to wage increases in a few Eurozone countries. With a wary eye on a further rise in inflation expectations, the inflation-targeting ECB is the most likely to hike rates among the G7 in the rest of 2008. Some analysts believe one more hike is in store but slowing growth and lower inflation due to base effects in autumn could keep the ECB from that rate hike button.
Is Japan’s longest post-war growth period coming to an end? Most analysts agree Japan is headed for a slowdown, but many expect the world’s second-largest economy to avoid a severe, prolonged slump. There is no doubt that high food and fuel prices are denting domestic consumption, while cooling global demand appears to have stalled Japan’s export growth engine. Nevertheless, Japan’s problems seem relatively minor compared to the U.S. and certain EU countries. It has no house price bubble, its financial sector is basically healthy, and consumer price inflation - while rising - is still under 2.0% yoy.
Japan has only recently exited deflation. So while consumer prices have risen almost 2.0% over the past 12 months and are likely to rise further, core inflation (excluding food and energy) is still barely positive. Consequently, most analysts see little chance of a rate hike for the rest of 2008. As long as wage growth remains sluggish and price gains do not spread to the overall economy, the Bank of Japan is expected to keep the target rate at 0.5%.
What are the implications for the main emerging markets? Between them Brazil, Russia, India and China (the BRICs) contributed about half of global growth in 2007 but they can’t escape a protracted slowing of G7 economies’ nor is their consumption large enough to propel global growth and if they slow, so might global commodity demand growth.
Inflation has been a global threat and it is not different for the BRIC economies. The inflation outlook and the responses to the worsening inflation are nonetheless different among those countries. Russia has the highest inflation figures and the least enforcing response, while Brazil has the lowest inflation figures with the most austere monetary policy response. Even though more than 20 Emerging Market central banks are following an inflation targeting regime as a monetary anchor, nearly every country is facing inflation figures above the center of the established target. The worsening of inflation readings in many cases is encouraging a more hawkish policy especially in cases where central banks are already behind the curve or where credibility needs to be boosted.
Brazil’s economic prospects are still favorable as domestic output growth continues underpinned by high business confidence and high commodity prices. So far Brazilian economic growth is expected to continue unabated in 2008. The pace of the expansion in Brazil is bound to be moderated by persistent inflationary pressures, as disposable incomes start to erode and business confidence is dented by tighter credit conditions. Brazil’s consumer prices increased 0.74% during June, taking the twelve-month inflation rate to 6.1%, with the food and drink category increasing 15%. The Brazilian Central Bank increased interest rates by 75bps to 13% in July and possibly more hikes will come soon to curb inflation.
Inflation is now eating away at Russia’s oil-fuelled consumption growth with the recent data showing flat real wage growth, slowing construction, retail sales and investment suggesting growth will slow in the second half of 2008. Meanwhile Russia’s human and physical capital constraints are real planned infrastructure investment hopes to make up for decades of under investment. Yet, 10 years after its financial crisis, Russia is in a much sounder financial position, having amassed $500 billion in foreign exchange reserves. With growth likely to slow and productivity low, the central bank is reluctant to engage in real monetary tightening, lest it bring a return of the liquidity problems it faced earlier this year or slow growth. Despite raising interest rates four times this year, interest rates remain very negative in real terms, likely contributing to the frothy Moscow office market.
After the stellar 9%-plus growth in 2006-07, India’s 2008 growth forecast has been lowered to 7-8%. In spite of being labeled as a domestic-demand driven economy resilient to global slowdown, the recent investment boom and above-potential growth were buoyed by imports and benign global liquidity conditions. Global financial turmoil and oil price shock have exposed India’s vulnerability to capital outflows and financing of twin deficits, posing the risk of asset market correction and currency depreciation even as domestic demand trends down on high inflation. India’s double-digit inflation running at a 13-year high is led by food shortages, commodity prices and government’s reduction of oil subsidies. But inflation risk is exacerbated by strong domestic demand and liquidity fueled by pre-election fiscal spending, credit growth and incomplete sterilization of capital inflows. Price controls, trade restrictions and ban on futures trading have only angered the private sector. After a series of interest rate hikes, further tightening is constrained by risks to demand slowdown so that only an easing of global commodity prices may be a blessing.
China’s growth has been decelerating for the past four quarters to reach just over 10% in Q2. While private consumption is now contributing a bit more to growth (though investment is still the biggest driver) and incomes are on the rise, inventory pileups could indicate overcapacity in some sectors. Exports to Europe, which marked double digit growth last year are now falling, manufacturing output seems to be contracting and exporters are complaining of higher labor and input costs. With a focus on growth, and headline inflation stabilized, the Chinese government is shifting away from its ‘tight’ monetary policy some lending curbs have been lifted and RMB appreciation has already stalled. See “Chinese Economic Outlook: China's Triple Threat of Slowing Growth, Inflation and Falling Asset Markets” and Rachel Ziemba’s “Is China Suffering an Olympic Shock?”
SEGUIR LEYENDO...
Nouriel Roubini's Global EconoMonitor
RGE Monitor - Navigating Towards a Global Recession?| Aug 7, 2008
A few weeks back we surveyed a group of countries navigating towards (or through) recession. The list included the U.S., Canada, Spain, Ireland, Italy, the UK, the Baltics and New Zealand.
Now the growth engine of the EMU, Germany, is faltering, together with France. And a recession might be in the works for Japan as well. This essentially leaves us with a fully fledged G7 recession in the making.
After a long period of disinflation in the 1980s and 1990s, the rise of G7 inflation poses a dilemma for central bankers who must also grapple with credit crunch and risks of recession. The balance of risks is likely to keep G7 central banks from tightening aggressively, with some staying on hold for the rest of 2008. Others, like Australia and more so New Zealand, who have the luxury of high interest rates to start cutting from will likely loosen policy to stave off recession.
Last week we asked whether the U.S. economy is in recession or not. An official answer to this question is not likely to come anytime soon, but recent reports GDP and employment in particular are not auspicious.
U.S. inflation in its various manifestations PCE deflator, CPI, PPI, import inflation, inflation expectations - is at decade(s) highs and stands outside the Fed's comfort zone. As much of this inflation is driven by a weak dollar and external demand for commodities, rate hikes in the U.S. alone won't stop global inflation (though it may help). Moreover, the still benign trends in inflation and inflation expectations has left the Fed room to worry more about financial stability and a flagging economy at home. According to the consensus, fading stimulus from tax rebates and ongoing housing and financial crises will push back tightening to yearend or next year, however, a worsening of the growth outlook could even prompt the Fed to cut rates in the second half of the year.
While Canada may avoid a technical recession growth might be barely positive in Q2 after a contraction in Q1- output has been slowing. Buoyant domestic demand, spurred by a sustained terms of trade rise, could also now be fading as Canadian consumers and businesses are feeling the strains. With 75% ofCanada’s exports U.S. bound, it can’t escape aU.S.recession, and its financial links are significant too. Meanwhile housing and labor markets are starting cool. With the disinflationary effect of the Canadian dollar’s strength waning, the Bank of Canada looks to be firmly on hold for now after aggressive easing in H1.
In the UK, despite severe threats of a spike in inflation mostly due to higher food and oil prices, economic activity already shows clear signs of a slowdown. Measures of business and consumer confidence, the deteriorating housing market and the still quite fragile mortgage and credit markets might push the economy into a recession-like environment relatively soon. Surveys on the probability of a recession show an increase in the median forecast from 30% in June to 45% in July?, while many analysts already call for at least one reading of negative growth by the end of the first half of 2009.
UK’s fast-deteriorating inflation outlook has increased speculation of a BoE tightening cycle in the last couple of months. Nonetheless, the BoE will probably hold rates unchanged throughout the year as the economy is set to display much slower growth in the coming quarters. The BoE’s dilemma will most likely persist. So far the spike in CPI (+3.8%) has not affected average earnings, downplaying the case of a wage-price spiral fed by a self-fulfilling cycle of inflationary shocks and worsening expectations.
In the Eurozone economic indicators turned sharply lower after a buoyant Q1 GDP reading that fuelled hopes for a decoupling from the U.S. recession. Whether the ECB 25bp rate hike on July 3rd accelerated the business sentiment downturn or not remains an open question. The fact remains that many analysts now expect a negative Q2 GDP growth reading, and worries about persistently divergent growth paths among EMU members are emerging.
On a country basis, both Germany’s manufacturing and services leading indicators as measured by the PMI Survey point to slow but still expanding activity in July. After a decade of working through its post-reunification housing bust and restoring of corporate balance sheets, Germany finds itself in a relatively balanced macroeconomic position compared to its EMU peers. The combination of falling house prices, high inflation, and higher credit costs is particularly toxic for Spain whose leading indicators are hitting one record low after another. Economic analysts are also starting to sound alarm bells on Spain’s banking sector. Italy is the second laggard in the group of big four EMU countries. The lack of reforms and the continuing loss of competitiveness are clearly taking their toll now. France has seen the sharpest reversal in both consumer and business sentiment in Q2 coinciding with the turning of its housing market.
On the inflation front, headline HICP has been surpassed by its U.S. equivalent ‘s headline CPI. Like in the U.S., core inflation stands outside the ECB's comfort zone. However, unlike the U.S., wage indexation has led to automatic second-round effects, with inflation leading to wage increases in a few Eurozone countries. With a wary eye on a further rise in inflation expectations, the inflation-targeting ECB is the most likely to hike rates among the G7 in the rest of 2008. Some analysts believe one more hike is in store but slowing growth and lower inflation due to base effects in autumn could keep the ECB from that rate hike button.
Is Japan’s longest post-war growth period coming to an end? Most analysts agree Japan is headed for a slowdown, but many expect the world’s second-largest economy to avoid a severe, prolonged slump. There is no doubt that high food and fuel prices are denting domestic consumption, while cooling global demand appears to have stalled Japan’s export growth engine. Nevertheless, Japan’s problems seem relatively minor compared to the U.S. and certain EU countries. It has no house price bubble, its financial sector is basically healthy, and consumer price inflation - while rising - is still under 2.0% yoy.
Japan has only recently exited deflation. So while consumer prices have risen almost 2.0% over the past 12 months and are likely to rise further, core inflation (excluding food and energy) is still barely positive. Consequently, most analysts see little chance of a rate hike for the rest of 2008. As long as wage growth remains sluggish and price gains do not spread to the overall economy, the Bank of Japan is expected to keep the target rate at 0.5%.
What are the implications for the main emerging markets? Between them Brazil, Russia, India and China (the BRICs) contributed about half of global growth in 2007 but they can’t escape a protracted slowing of G7 economies’ nor is their consumption large enough to propel global growth and if they slow, so might global commodity demand growth.
Inflation has been a global threat and it is not different for the BRIC economies. The inflation outlook and the responses to the worsening inflation are nonetheless different among those countries. Russia has the highest inflation figures and the least enforcing response, while Brazil has the lowest inflation figures with the most austere monetary policy response. Even though more than 20 Emerging Market central banks are following an inflation targeting regime as a monetary anchor, nearly every country is facing inflation figures above the center of the established target. The worsening of inflation readings in many cases is encouraging a more hawkish policy especially in cases where central banks are already behind the curve or where credibility needs to be boosted.
Brazil’s economic prospects are still favorable as domestic output growth continues underpinned by high business confidence and high commodity prices. So far Brazilian economic growth is expected to continue unabated in 2008. The pace of the expansion in Brazil is bound to be moderated by persistent inflationary pressures, as disposable incomes start to erode and business confidence is dented by tighter credit conditions. Brazil’s consumer prices increased 0.74% during June, taking the twelve-month inflation rate to 6.1%, with the food and drink category increasing 15%. The Brazilian Central Bank increased interest rates by 75bps to 13% in July and possibly more hikes will come soon to curb inflation.
Inflation is now eating away at Russia’s oil-fuelled consumption growth with the recent data showing flat real wage growth, slowing construction, retail sales and investment suggesting growth will slow in the second half of 2008. Meanwhile Russia’s human and physical capital constraints are real planned infrastructure investment hopes to make up for decades of under investment. Yet, 10 years after its financial crisis, Russia is in a much sounder financial position, having amassed $500 billion in foreign exchange reserves. With growth likely to slow and productivity low, the central bank is reluctant to engage in real monetary tightening, lest it bring a return of the liquidity problems it faced earlier this year or slow growth. Despite raising interest rates four times this year, interest rates remain very negative in real terms, likely contributing to the frothy Moscow office market.
After the stellar 9%-plus growth in 2006-07, India’s 2008 growth forecast has been lowered to 7-8%. In spite of being labeled as a domestic-demand driven economy resilient to global slowdown, the recent investment boom and above-potential growth were buoyed by imports and benign global liquidity conditions. Global financial turmoil and oil price shock have exposed India’s vulnerability to capital outflows and financing of twin deficits, posing the risk of asset market correction and currency depreciation even as domestic demand trends down on high inflation. India’s double-digit inflation running at a 13-year high is led by food shortages, commodity prices and government’s reduction of oil subsidies. But inflation risk is exacerbated by strong domestic demand and liquidity fueled by pre-election fiscal spending, credit growth and incomplete sterilization of capital inflows. Price controls, trade restrictions and ban on futures trading have only angered the private sector. After a series of interest rate hikes, further tightening is constrained by risks to demand slowdown so that only an easing of global commodity prices may be a blessing.
China’s growth has been decelerating for the past four quarters to reach just over 10% in Q2. While private consumption is now contributing a bit more to growth (though investment is still the biggest driver) and incomes are on the rise, inventory pileups could indicate overcapacity in some sectors. Exports to Europe, which marked double digit growth last year are now falling, manufacturing output seems to be contracting and exporters are complaining of higher labor and input costs. With a focus on growth, and headline inflation stabilized, the Chinese government is shifting away from its ‘tight’ monetary policy some lending curbs have been lifted and RMB appreciation has already stalled. See “Chinese Economic Outlook: China's Triple Threat of Slowing Growth, Inflation and Falling Asset Markets” and Rachel Ziemba’s “Is China Suffering an Olympic Shock?”
SEGUIR LEYENDO...
miércoles, agosto 6
VERY MODEST GOOD NEWS by Dr. Marc Faber
Adjunto esta nota que salió en The Daily Reckoning.
VERY MODEST GOOD NEWS by Dr. Marc Faber
I can see some – albeit very modest – improvement for the US stock market. For one, it appears that the slowdown and problems in other economies, such as the UK (a disaster waiting to happen), Italy, Spain, and Ireland, are even greater than in the US. Also, since numerous emerging stock markets have underperformed the US this year, some money is likely to be repatriated from countries such as India and China, where stock markets are down approximately 40% year-to-date. We should also consider that, as Joachim Fels noted, “Fifty of the 190 or so countries in the world now have inflation running at double-digit rates. Almost all of these are EM economies.” In my opinion, some emerging economies – contrary to expectations – could therefore be hit even harder than the US. So, the good news here is that the “bad news” is even worse in some other countries than in the US (though this may be hard to believe).
The media and some market commentators who were “bullish” until late June have noticed recently that we are in a bear market, because the major indices are down roughly 20% from their peak. This is a remarkable achievement in the annals of forecasting and market timing! How many stocks had to drop by between 50% and 99% before the media and some “bulls” who have continued to talk about another upward wave in stock prices being just around the corner, which would supposedly lift the indices to new highs, finally accepted that we are now in a bear market? Don’t forget that when stock market indices made new highs seven months ago, the media and most advisers were exuberantly optimistic – although most stocks were then already in downtrends. Moreover, sentiment figures (bulls versus bears) among individual investors and investment advisers are now heavily tilted towards the bearish side. Whenever sentiment has been this negative in the past, the odds favoured at least a short term rally. Still, I need to warn our readers that since sentiment remained so extremely optimistic between 2003 and 2007 while the stock market rose, it is possible that sentiment will remain extremely negative for a long time while the market continues to decline.
The third improvement I have noticed is that, from a technical point of view, the market has become “quite” (though not extremely) oversold. But again, I need to warn here that the market would now be oversold in the context of a bull market – not in the context of a bear market, during which the oversold condition could last for a very long time. I suppose that Ambac was already oversold at US$70, and where is the stock now? Moreover, at major turning points, markets can quickly reach oversold or overbought conditions and then work out these conditions without large corrections. Let me explain.
In the summer of 1982, US equities had become extremely depressed; they were no higher than in 1964, and were down in real terms by more than 70% from their 1966 “real” high. The Dow bottomed out at 769 on August 9 and, if I recall correctly, the stock market took off on August 18. By September 22, the Dow had reached 951 (up more than 20% from the August low). The two most overbought conditions I have seen up to that time had occurred at the end of August 1982, and then again on September 22. But, thereafter, the market continued to rise: to 1296 in November 1983, to 2746 at the August 1987 peak, and to the recent high of 14,198 on October 12, 2007.
So, I wish to stress that overbought and oversold conditions must always be put in the context of both the primary trend – up or down – and the phase of the bull or bear market in which they show up. Overbought conditions at the beginning of an uptrend, and oversold conditions at the beginning of a downtrend, are meaningless from a longer-term perspective! If we are indeed in a bear market, which is my view – and has been since the summer of 2007, the current oversold position is relevant only from a very short-term point of view.
The fourth improvement I see is that some previously strong stocks and groups such as US Steel (X), Cleveland-Cliffs (CLF), IBM, and the oil sector, as well as the Nasdaq and some of its leaders such as Research in Motion (RIMM), Apple (AAPL), etc, are beginning to turn down. For the market leaders to collapse is an important precondition for a major low. But again, we need to understand that it will take much longer, and far lower prices, before the very strong stocks and sectors (mostly energy-related and materials) that have so far defied the bear market in financial stocks reach a major low.
Since I fully expect the financial crisis to spread into the real economy, I would sell those sectors and stocks that have so far defied the weakness in financial stocks. Another potentially good piece of news is that the current expansionary monetary policies make the stronger companies in an industry relatively stronger than their weaker competitors, which would then be reflected in strongly diverging stock performances. The weak company stocks could decline so much as to make them, at some point, attractive merger and acquisitions candidates for the financially stronger companies. Industry consolidation would in this scenario accelerate and lead to stronger pricing power (and inflation).
The last potentially good bit of news is that oil and other commodity prices may have reached an intermediate top. Should oil prices decline by, say, 20% to 40%, this fact will certainly be broadcasted by the media – as well as by ignorant cheerleaders and people who still don’t regard commodities as an asset class – as great news for the stock market! A relief rally would likely follow. But wait a minute: why would oil prices and other commodities decline meaningfully? Because of a lack of affordability and a weak economy around the world – not just in the US! This would lead to declining demand for raw materials and likely lower prices. (Supplies are unlikely to increase significantly, but they could be cut as a result of war, civil strife, or concerted action by the producers.) However, a weak economy or economic contraction around the world would be unlikely to be favourable for equities and corporate profits.
I need to make one more comment with respect to oil prices and commodities. It is not a strong US dollar that will lead to declining oil prices, as some commentators argue. What will bring about lower oil prices is a collapse of consumer spending in the US and elsewhere in the world. If US consumption collapses, the US trade and current account deficit will be halved and will lead to a drying up of global liquidity. I have discussed this relationship many times in the past and have clearly shown the relationship between the growth rate in Foreign Official US Dollar Reserves and the US dollar. Declining US consumption will be positive for the US dollar and will certainly bring down commodity prices because of lower demand (at least temporarily). But if you really think that such an outcome will be good for stocks, then dream on!
Finally, since the bull market in commodities began, there has been a body of people who have maintained that commodities are not an asset class. Some have even gone as far as to compare gold to washing machines. But consider the following: my dogs and my books are an asset for me, but maybe not to someone else. My dogs protect my house and my books. My books give me pleasure and – so I hope – some modest knowledge. But my dogs would be a liability to someone else if he lived in a secure condo building. (If there is such a thing as a secure condo building!) Also, my books would be useless to an illiterate person, since he would not be in a position to read them. A high-calibre mathematician is likely to be an asset for James Simons of Renaissance fame, but a huge liability in a rescue mission on Mount Everest. Water may be a huge asset if you are lost in the middle of the desert, but it is not an asset when you are standing in the rain without an umbrella and waiting for a date to arrive. So, the first point to understand is that anything can be an asset for somebody at some time, and not an asset for somebody else at some other time. Normally, cigarettes are not considered to be an asset, but in prisoners’ camps during wars, in wartime in general, and in times of hyperinflation, they are an asset – in fact, they replace cash banknotes.
Now, if someone defines an asset class as something that provides a cash flow, commodities may by this definition not be an asset. However, what if asset markets such as equities, bonds, and cash (T-bills) provide a negative return in real terms (inflation adjusted)? The moment when money loses its purchasing power because real interest rates are negative, and because we need to deal with people like Mr. Bernanke, assets such as raw land, commodities, art and collectibles do become a store of value and, therefore, represent a desirable asset class. All I wish to say is that the term “asset class” is extremely difficult to define, and that at different times and in different situations certain things and certain skills become an asset, whereas on other occasions they are useless. But one thing all my readers should clearly understand: when the last ship leaves the port as the enemy approaches, the captain of that ship will accept one kilogram of gold from you to buy your passage. I doubt that he will accept CDOs, derivative contracts, bonds or, for that matter, stock certificates of Fannie Mae or Freddie Mac. (Maybe by then the captain won’t even accept US dollars, because their value could decline precipitously during the voyage.) I may add that, in the financial sector, the last ship may be about to leave.
In sum, I believe that in the next few years the returns from equities will be disappointing (short-term rallies aside), which could cause other asset classes (especially industrial commodities) also to come under pressure. When I look around, I find it hard to identify any asset that is particularly attractive at this point. Therefore, in the absence of anything that promises far superior returns, I am still happy to accumulate physical gold. In democracies, where the leadership is afraid to ask for sacrifices from its citizens and with money printers at central banks, gold would seem to be the only sound currency.
Regards,
Dr. Marc Faber
for The Daily Reckoning
Editor’s Note: Dr. Marc Faber is the editor of The Gloom, Boom and Doom Report and author of Tomorrow’s Gold , one of the best investment books on the market.
SEGUIR LEYENDO...
VERY MODEST GOOD NEWS by Dr. Marc Faber
I can see some – albeit very modest – improvement for the US stock market. For one, it appears that the slowdown and problems in other economies, such as the UK (a disaster waiting to happen), Italy, Spain, and Ireland, are even greater than in the US. Also, since numerous emerging stock markets have underperformed the US this year, some money is likely to be repatriated from countries such as India and China, where stock markets are down approximately 40% year-to-date. We should also consider that, as Joachim Fels noted, “Fifty of the 190 or so countries in the world now have inflation running at double-digit rates. Almost all of these are EM economies.” In my opinion, some emerging economies – contrary to expectations – could therefore be hit even harder than the US. So, the good news here is that the “bad news” is even worse in some other countries than in the US (though this may be hard to believe).
The media and some market commentators who were “bullish” until late June have noticed recently that we are in a bear market, because the major indices are down roughly 20% from their peak. This is a remarkable achievement in the annals of forecasting and market timing! How many stocks had to drop by between 50% and 99% before the media and some “bulls” who have continued to talk about another upward wave in stock prices being just around the corner, which would supposedly lift the indices to new highs, finally accepted that we are now in a bear market? Don’t forget that when stock market indices made new highs seven months ago, the media and most advisers were exuberantly optimistic – although most stocks were then already in downtrends. Moreover, sentiment figures (bulls versus bears) among individual investors and investment advisers are now heavily tilted towards the bearish side. Whenever sentiment has been this negative in the past, the odds favoured at least a short term rally. Still, I need to warn our readers that since sentiment remained so extremely optimistic between 2003 and 2007 while the stock market rose, it is possible that sentiment will remain extremely negative for a long time while the market continues to decline.
The third improvement I have noticed is that, from a technical point of view, the market has become “quite” (though not extremely) oversold. But again, I need to warn here that the market would now be oversold in the context of a bull market – not in the context of a bear market, during which the oversold condition could last for a very long time. I suppose that Ambac was already oversold at US$70, and where is the stock now? Moreover, at major turning points, markets can quickly reach oversold or overbought conditions and then work out these conditions without large corrections. Let me explain.
In the summer of 1982, US equities had become extremely depressed; they were no higher than in 1964, and were down in real terms by more than 70% from their 1966 “real” high. The Dow bottomed out at 769 on August 9 and, if I recall correctly, the stock market took off on August 18. By September 22, the Dow had reached 951 (up more than 20% from the August low). The two most overbought conditions I have seen up to that time had occurred at the end of August 1982, and then again on September 22. But, thereafter, the market continued to rise: to 1296 in November 1983, to 2746 at the August 1987 peak, and to the recent high of 14,198 on October 12, 2007.
So, I wish to stress that overbought and oversold conditions must always be put in the context of both the primary trend – up or down – and the phase of the bull or bear market in which they show up. Overbought conditions at the beginning of an uptrend, and oversold conditions at the beginning of a downtrend, are meaningless from a longer-term perspective! If we are indeed in a bear market, which is my view – and has been since the summer of 2007, the current oversold position is relevant only from a very short-term point of view.
The fourth improvement I see is that some previously strong stocks and groups such as US Steel (X), Cleveland-Cliffs (CLF), IBM, and the oil sector, as well as the Nasdaq and some of its leaders such as Research in Motion (RIMM), Apple (AAPL), etc, are beginning to turn down. For the market leaders to collapse is an important precondition for a major low. But again, we need to understand that it will take much longer, and far lower prices, before the very strong stocks and sectors (mostly energy-related and materials) that have so far defied the bear market in financial stocks reach a major low.
Since I fully expect the financial crisis to spread into the real economy, I would sell those sectors and stocks that have so far defied the weakness in financial stocks. Another potentially good piece of news is that the current expansionary monetary policies make the stronger companies in an industry relatively stronger than their weaker competitors, which would then be reflected in strongly diverging stock performances. The weak company stocks could decline so much as to make them, at some point, attractive merger and acquisitions candidates for the financially stronger companies. Industry consolidation would in this scenario accelerate and lead to stronger pricing power (and inflation).
The last potentially good bit of news is that oil and other commodity prices may have reached an intermediate top. Should oil prices decline by, say, 20% to 40%, this fact will certainly be broadcasted by the media – as well as by ignorant cheerleaders and people who still don’t regard commodities as an asset class – as great news for the stock market! A relief rally would likely follow. But wait a minute: why would oil prices and other commodities decline meaningfully? Because of a lack of affordability and a weak economy around the world – not just in the US! This would lead to declining demand for raw materials and likely lower prices. (Supplies are unlikely to increase significantly, but they could be cut as a result of war, civil strife, or concerted action by the producers.) However, a weak economy or economic contraction around the world would be unlikely to be favourable for equities and corporate profits.
I need to make one more comment with respect to oil prices and commodities. It is not a strong US dollar that will lead to declining oil prices, as some commentators argue. What will bring about lower oil prices is a collapse of consumer spending in the US and elsewhere in the world. If US consumption collapses, the US trade and current account deficit will be halved and will lead to a drying up of global liquidity. I have discussed this relationship many times in the past and have clearly shown the relationship between the growth rate in Foreign Official US Dollar Reserves and the US dollar. Declining US consumption will be positive for the US dollar and will certainly bring down commodity prices because of lower demand (at least temporarily). But if you really think that such an outcome will be good for stocks, then dream on!
Finally, since the bull market in commodities began, there has been a body of people who have maintained that commodities are not an asset class. Some have even gone as far as to compare gold to washing machines. But consider the following: my dogs and my books are an asset for me, but maybe not to someone else. My dogs protect my house and my books. My books give me pleasure and – so I hope – some modest knowledge. But my dogs would be a liability to someone else if he lived in a secure condo building. (If there is such a thing as a secure condo building!) Also, my books would be useless to an illiterate person, since he would not be in a position to read them. A high-calibre mathematician is likely to be an asset for James Simons of Renaissance fame, but a huge liability in a rescue mission on Mount Everest. Water may be a huge asset if you are lost in the middle of the desert, but it is not an asset when you are standing in the rain without an umbrella and waiting for a date to arrive. So, the first point to understand is that anything can be an asset for somebody at some time, and not an asset for somebody else at some other time. Normally, cigarettes are not considered to be an asset, but in prisoners’ camps during wars, in wartime in general, and in times of hyperinflation, they are an asset – in fact, they replace cash banknotes.
Now, if someone defines an asset class as something that provides a cash flow, commodities may by this definition not be an asset. However, what if asset markets such as equities, bonds, and cash (T-bills) provide a negative return in real terms (inflation adjusted)? The moment when money loses its purchasing power because real interest rates are negative, and because we need to deal with people like Mr. Bernanke, assets such as raw land, commodities, art and collectibles do become a store of value and, therefore, represent a desirable asset class. All I wish to say is that the term “asset class” is extremely difficult to define, and that at different times and in different situations certain things and certain skills become an asset, whereas on other occasions they are useless. But one thing all my readers should clearly understand: when the last ship leaves the port as the enemy approaches, the captain of that ship will accept one kilogram of gold from you to buy your passage. I doubt that he will accept CDOs, derivative contracts, bonds or, for that matter, stock certificates of Fannie Mae or Freddie Mac. (Maybe by then the captain won’t even accept US dollars, because their value could decline precipitously during the voyage.) I may add that, in the financial sector, the last ship may be about to leave.
In sum, I believe that in the next few years the returns from equities will be disappointing (short-term rallies aside), which could cause other asset classes (especially industrial commodities) also to come under pressure. When I look around, I find it hard to identify any asset that is particularly attractive at this point. Therefore, in the absence of anything that promises far superior returns, I am still happy to accumulate physical gold. In democracies, where the leadership is afraid to ask for sacrifices from its citizens and with money printers at central banks, gold would seem to be the only sound currency.
Regards,
Dr. Marc Faber
for The Daily Reckoning
Editor’s Note: Dr. Marc Faber is the editor of The Gloom, Boom and Doom Report and author of Tomorrow’s Gold , one of the best investment books on the market.
SEGUIR LEYENDO...
sábado, agosto 2
CLUB DE INVERSORES
Me encuentro pronto a lanzar un Club de Inversores. Mi idea es ofrecer a sus miembros distintos proyectos de inversión los cuales considere interesantes para invertir. Y además, como dicen los americanos: “put your Money were your Mouth is”, que no es otra cosa que ofrecer inversiones donde yo haya invertido, o lo tenga pensado hacer.
Hay muchos profesionales que no tienen relación con el mundo de las inversiones, y que además no cuentan con el tiempo suficiente como para adentrarse en el mismo. Pretendo facilitarles el camino.
Cuando uno trabaja, además de generar los ingresos para vivir, intenta ir ahorrando para poder retirarse tranquilo en el futuro, sin depender de la magra jubilación. Hoy es muy difícil lograr esto por los vaivenes de nuestra economía, pero mucho más difícil se hace si uno no sabe como hacerlo, o si no lo planifica.
Es poco lo que se sabe de una buena planificación financiera, y cuando se tiene contacto con la misma, generalmente ya han transcurrieron muchos años donde seguramente habremos dejado pasar oportunidades de inversión. Y en el mundo de las inversiones el tiempo es oro (y no es una frase hecha).
Para entenderlo veamos como funciona el esquema básico de las inversiones: la capitalización.
Del excelente libro A Random Walk Down Wall Street de Burton Malkiel recordé un comentario sobre si fue o no un buen negocio para los indios que le vendieron, según se cuenta, la isla de Manhattan a los blancos por u$ 24 en 1626. Obviamente se pensaba que los indios fueron una vez más estafados, pero si los mismos hubieran invertido ese monto a una tasa promedio, digamos del 6% anual, hoy tendrían mas de u$ 100.000 millones (cien trillions de los americanos). Creo que hoy podrían recomprar con ese dinero gran parte de Manhattan con sus mejoras incluidas.
Hay también un cuento relacionado con el invento del ajedrez. Según se cuenta un rey aburrido pidió a sus súbditos que inventaran un juego. A quien inventase el mejor juego el rey le otorgaría lo que quisiesen.
Así es que un día un poblador se apareció con un juego, luego llamado ajedrez, que fascinó al rey. Cumpliendo su promesa el rey le dijo al poblador que pidiese su premio.
El poblador le pidió su premio en granos de arroz. Para ello pidió que en la primera casilla pusieran un grano. En la segunda el doble de la primera. En la tercera el doble de la segunda, y así sucesivamente hasta completar los 64 casilleros. Obviamente no había granos suficientes en todo el reino para cumplir con semejante pedido. Acá finaliza el cuento ya que hay dos versiones sobre el final. Algunos dicen que el rey sintió que se le estaba tomando el pelo, y mando a cortarle la cabeza al pobre poblador. Otras que cumplió con su palabra.
Ahora bien, a donde quiero llegar con estos ejemplos. A la importancia del tiempo en un plan de inversiones a largo plazo. Si uno inicia su plan de inversiones a los 25 años con u$ 1.000, y los invierte a una tasa, digamos del 4% hasta que se retira a los 65 años podrá juntar unos u$ 4.800. Si la tasa fuese del 6% juntaría u$ 10.286.
Ahora supongamos que en ambos casos se agregan u$ 1.000 cada año tendríamos u$ 99.827 y u$ 165.048
Podemos seguir jugando con los números pero ya podemos sacar algunas conclusiones:
- cuanto antes se empiece con un plan de inversión, mayor será el resultado final
- a veces no tenemos que buscar la inversión salvadora, sino elaborar una cartera que nos permita tener un retorno constante
- tener la conducta de incorporar fondos a la cartera de inversión todos los años ayuda al plan de inversiones
Hoy día en argentina cuesta mucho decidir donde invertir los ahorros que uno pueda tener. La historia económica del país nos ha dado demasiados ejemplos de los riesgos que implica invertir en activos financieros locales: bonos, acciones, plazos fijos, etc. Desde los defaults, devaluaciones, y confiscación de depósitos, la tarea de buscar inversiones dentro del país se ha tornado mucho más difícil. Por eso es que surgieron mucho las inversiones inmobiliarias y las agropecuarias tratando de escapar a los efectos negativos que generan los distintos gobierno de turno. Pero siempre la mano del estado nos persigue y no nos deja invertir en paz (retenciones móviles). Por eso hay que seguir buscando.
Por lo pronto no garantizo el santo grial, ya que no existe la inversión sin riesgo. Solo hay que evaluar muy bien la relación riesgo/beneficio antes de tomar una decisión.
También es importante fijar el horizonte de nuestra inversión, y en este punto quiero hacer un alto. Prefiero buscar inversiones de mediano, que las de corto plazo. Estas últimas no las descarto, pero requieren de un esfuerzo “full time”. Soy conciente que en la argentina pensar en el mediano plazo parece ridículo, pero así y todo hay que ser paciente si se quiere hacer buenos negocios.
Otro concepto que considero interesante es que la plata debe trabajar para uno, y no uno para la plata. Por eso dejar los ahorros en el colchón, y después matarse trabajando es un error. Haciendo un manejo racional de los ahorros uno podría disfrutar más de la vida, que al fin y al cabo es nuestro activo más preciado.
Finalmente quiero comentar en forma sencilla cuales son los criterios básicos que utilizo en la selección de proyectos de inversión.
Primero me enfoco en el management que llevará adelante el proyecto; que conocimientos tienen, experiencia, y seriedad.
Segundo analizo el plan de negocios; cual es el producto o servicio que se va a ofrecer, cual es el mercado target, que retornos esperan, etc.
Y finalmente profundizo en todos el marco legal de la transacción; contratos, responsabilidades y obligaciones, etc.
Como es imposible saber de todo antes de invertir, me cubro en estos 3 aspectos que considero fundamentales, ya que al final del día hay que correr riesgos para ganar. Solo hay que ser conciente de los riegos que se decide correr, y cual es la ganancia estimada que recibiremos a cambio.
Próximamente les informaré sobre el primer proyecto que estoy analizando. Y no dejen de consultarme si les interesa esta propuesta.
SEGUIR LEYENDO...
Hay muchos profesionales que no tienen relación con el mundo de las inversiones, y que además no cuentan con el tiempo suficiente como para adentrarse en el mismo. Pretendo facilitarles el camino.
Cuando uno trabaja, además de generar los ingresos para vivir, intenta ir ahorrando para poder retirarse tranquilo en el futuro, sin depender de la magra jubilación. Hoy es muy difícil lograr esto por los vaivenes de nuestra economía, pero mucho más difícil se hace si uno no sabe como hacerlo, o si no lo planifica.
Es poco lo que se sabe de una buena planificación financiera, y cuando se tiene contacto con la misma, generalmente ya han transcurrieron muchos años donde seguramente habremos dejado pasar oportunidades de inversión. Y en el mundo de las inversiones el tiempo es oro (y no es una frase hecha).
Para entenderlo veamos como funciona el esquema básico de las inversiones: la capitalización.
Del excelente libro A Random Walk Down Wall Street de Burton Malkiel recordé un comentario sobre si fue o no un buen negocio para los indios que le vendieron, según se cuenta, la isla de Manhattan a los blancos por u$ 24 en 1626. Obviamente se pensaba que los indios fueron una vez más estafados, pero si los mismos hubieran invertido ese monto a una tasa promedio, digamos del 6% anual, hoy tendrían mas de u$ 100.000 millones (cien trillions de los americanos). Creo que hoy podrían recomprar con ese dinero gran parte de Manhattan con sus mejoras incluidas.
Hay también un cuento relacionado con el invento del ajedrez. Según se cuenta un rey aburrido pidió a sus súbditos que inventaran un juego. A quien inventase el mejor juego el rey le otorgaría lo que quisiesen.
Así es que un día un poblador se apareció con un juego, luego llamado ajedrez, que fascinó al rey. Cumpliendo su promesa el rey le dijo al poblador que pidiese su premio.
El poblador le pidió su premio en granos de arroz. Para ello pidió que en la primera casilla pusieran un grano. En la segunda el doble de la primera. En la tercera el doble de la segunda, y así sucesivamente hasta completar los 64 casilleros. Obviamente no había granos suficientes en todo el reino para cumplir con semejante pedido. Acá finaliza el cuento ya que hay dos versiones sobre el final. Algunos dicen que el rey sintió que se le estaba tomando el pelo, y mando a cortarle la cabeza al pobre poblador. Otras que cumplió con su palabra.
Ahora bien, a donde quiero llegar con estos ejemplos. A la importancia del tiempo en un plan de inversiones a largo plazo. Si uno inicia su plan de inversiones a los 25 años con u$ 1.000, y los invierte a una tasa, digamos del 4% hasta que se retira a los 65 años podrá juntar unos u$ 4.800. Si la tasa fuese del 6% juntaría u$ 10.286.
Ahora supongamos que en ambos casos se agregan u$ 1.000 cada año tendríamos u$ 99.827 y u$ 165.048
Podemos seguir jugando con los números pero ya podemos sacar algunas conclusiones:
- cuanto antes se empiece con un plan de inversión, mayor será el resultado final
- a veces no tenemos que buscar la inversión salvadora, sino elaborar una cartera que nos permita tener un retorno constante
- tener la conducta de incorporar fondos a la cartera de inversión todos los años ayuda al plan de inversiones
Hoy día en argentina cuesta mucho decidir donde invertir los ahorros que uno pueda tener. La historia económica del país nos ha dado demasiados ejemplos de los riesgos que implica invertir en activos financieros locales: bonos, acciones, plazos fijos, etc. Desde los defaults, devaluaciones, y confiscación de depósitos, la tarea de buscar inversiones dentro del país se ha tornado mucho más difícil. Por eso es que surgieron mucho las inversiones inmobiliarias y las agropecuarias tratando de escapar a los efectos negativos que generan los distintos gobierno de turno. Pero siempre la mano del estado nos persigue y no nos deja invertir en paz (retenciones móviles). Por eso hay que seguir buscando.
Por lo pronto no garantizo el santo grial, ya que no existe la inversión sin riesgo. Solo hay que evaluar muy bien la relación riesgo/beneficio antes de tomar una decisión.
También es importante fijar el horizonte de nuestra inversión, y en este punto quiero hacer un alto. Prefiero buscar inversiones de mediano, que las de corto plazo. Estas últimas no las descarto, pero requieren de un esfuerzo “full time”. Soy conciente que en la argentina pensar en el mediano plazo parece ridículo, pero así y todo hay que ser paciente si se quiere hacer buenos negocios.
Otro concepto que considero interesante es que la plata debe trabajar para uno, y no uno para la plata. Por eso dejar los ahorros en el colchón, y después matarse trabajando es un error. Haciendo un manejo racional de los ahorros uno podría disfrutar más de la vida, que al fin y al cabo es nuestro activo más preciado.
Finalmente quiero comentar en forma sencilla cuales son los criterios básicos que utilizo en la selección de proyectos de inversión.
Primero me enfoco en el management que llevará adelante el proyecto; que conocimientos tienen, experiencia, y seriedad.
Segundo analizo el plan de negocios; cual es el producto o servicio que se va a ofrecer, cual es el mercado target, que retornos esperan, etc.
Y finalmente profundizo en todos el marco legal de la transacción; contratos, responsabilidades y obligaciones, etc.
Como es imposible saber de todo antes de invertir, me cubro en estos 3 aspectos que considero fundamentales, ya que al final del día hay que correr riesgos para ganar. Solo hay que ser conciente de los riegos que se decide correr, y cual es la ganancia estimada que recibiremos a cambio.
Próximamente les informaré sobre el primer proyecto que estoy analizando. Y no dejen de consultarme si les interesa esta propuesta.
SEGUIR LEYENDO...
martes, julio 22
CORRELACIÓN ENTRE DISTINTOS ACTIVOS
Adjunto esta nota de The Bespoke Investment sobre la correlación existente entre distintos activos.
Chart: (clickeé sobre el mismo para ampliar)
SEGUIR LEYENDO...
Asset Class Correlations
Today's Wall Street Journal had an interesting article about asset class correlations. With that in mind, below we highlight (click here for PDF) a correlation matrix of various asset classes including the S&P 500 sectors, oil, gold, the dollar, the yen, emerging markets, the 10-year note and the FTSE 100. The first matrix highlights the correlation between the daily percent changes of asset classes since the S&P 500 peaked on October 9th, 2007. Each column (vertical) is color coded from green to red based on highest to lowest correlations.
The second matrix highlights the correlations between the same asset classes, only from a much longer time horizon (1990-present). Then, in the bottom chart, we highlight the difference between the short-term and long-term correlations to see where differences arise. Correlations that have increased since the bear market began in 10/07 are shaded in light green, while correlations that have decreased are shaded in light red. In each column, the biggest increase and decrease in correlation is highlighted in dark green or red. As shown, correlations have generally increased among sectors, while stocks have become less correlated with oil, gold and Treasuries. Correlations between stocks and the yen have increased the most in the short-term compared to their long-term correlations. To view the matrices in PDF form, please click here. It's definitely an interesting data set to analyze and it's better to let the info speak for itself.
Chart: (clickeé sobre el mismo para ampliar)
SEGUIR LEYENDO...
viernes, julio 18
HAS OIL FINALLY TOPPED OUT?
Comparto con Uds. esta nota sobre el petróleo que publico el miércoles The Daily Reckoning.
Has oil finally topped out?
Yesterday, the price fell another $4 – to $136. Still, of course, not far from its all-time high. But sliding...
“Oil is a bubble ready to pop,” say some analysts. “No, oil is merely responding to supply and demand,” say others.
What’s the real story?
As usual, you can count on us, here at The Daily Reckoning , to give it to you -- straight, unvarnished and unmitigated.
Trouble is, the real world always has a bend to it. Everything has a lacquer on it. And mitigations are everywhere.
In the oil market, we see both a bubble...and a useful commodity responding to economic forces. If you want to see a “pure bubble,” you have to look at something like the tulip mania in Holland or the Mississippi affair in France or the dot.com debacle in New York. These were “pure” bubbles because neither tulips, nor shares in the Mississippi company, nor dot.coms had any real economic value. Their prices were based 100% on speculation – not supply and demand. And since there was no “there there,” as Virginia Woolf might say, there was nothing left when the speculation disappeared. Their prices could go to zero, in other words.
Will the price of oil go to zero? No...not a chance. If the oil market is in a bubble, at least it is a bubble mitigated by three very important circumstances: 1) oil is perhaps the world’s most useful commodity, 2) more and more people want the stuff, 3) it is priced mostly in dollars whose value, in terms of everything else, is going down.
Normally, we can set aside the first two circumstances. Everyone knows oil is useful. Everyone knows the Chinese, the Indians and all the other foreigners are becoming addicted to it – just as Americans have been addicted for the last 50 years. These circumstances come as no surprise to anyone...and markets can sort them out. They were obvious in the oil market two years ago...they are obvious now.
Of course, even if they are obvious doesn’t mean investors have noticed. And in today’s oil market, it looks as if investors are suddenly waking up to something they should have seen a long time ago. But we suspect that the real surprise to most investors is the third circumstance. During the last 15 years – a period known as the Great Moderation – it was inflation that seemed to be taking a long nap. The band was playing loud music. Free drinks were passed around. Everyone was there – except inflation. Maybe it was out of town, some wondered. Or, maybe it was dead. Whatever happened to it, inflation was not around.
But, then the old party pooper showed up – and people began looking for their hats and saying goodbye to each other.
“US consumer prices up most in 26 years,” was yesterday’s most telling headline. Even the Wall Street Journal announced a price increase – to $2 an issue.
If you’re an oil sheik whose only asset is $100 billion worth of oil under the desert sand, you pay attention. The dollar has lost about 25% of its purchasing power – depending on how you measure it – in the last 5 years. If inflation rates just stay the same, the poor oil sheik stands to lose more than $25 billion by 2013. If he doesn’t think he’s getting a fair deal at today’s oil price, he’s likely to put a little crimp in the oil pipeline – reducing production until the price increases.
On the other hand, if the price of oil goes up enough, he’s likely to think that he should get it while the gettin’s good. Then, he would increase production – driving down the oil price.
Our guess is that the oil market has probably over-reacted to circumstances. When investors realized how much demand was increasing...they bid up prices. And when they realized how much inflation was increasing...they bid up prices further. And when speculators saw prices rising so much, they bid them up even further.
Now, oil is probably ready for a correction. Ten years ago, an ounce of gold would buy about 10 barrels of oil. Today, it buys only about 7. As is the case with oil, gold has responded to the increase in inflation rates. As to everything else, it is probably indifferent. So, if we were just adjusting the oil price to inflation, it should probably sell for about $95 a barrel.
As to the forces of supply and demand – Mr. Market would know better than we do. But Mr. Market, for all his sage experience, has a tendency to over-react. He probably over-reacted to growing, worldwide demand. Now, growth rates are declining throughout the world; he will probably over-react to that too.
So, where will the price of oil go? We wish we could tell you. It might very well sink below $100. But it will never sink as low as a busted dot.com or a crushed tulip bulb.
Even if the price of oil does drop, the U.S. has gotten the message: the time to find what will power the ‘car of the future’ is now.
SEGUIR LEYENDO...
Has oil finally topped out?
Yesterday, the price fell another $4 – to $136. Still, of course, not far from its all-time high. But sliding...
“Oil is a bubble ready to pop,” say some analysts. “No, oil is merely responding to supply and demand,” say others.
What’s the real story?
As usual, you can count on us, here at The Daily Reckoning , to give it to you -- straight, unvarnished and unmitigated.
Trouble is, the real world always has a bend to it. Everything has a lacquer on it. And mitigations are everywhere.
In the oil market, we see both a bubble...and a useful commodity responding to economic forces. If you want to see a “pure bubble,” you have to look at something like the tulip mania in Holland or the Mississippi affair in France or the dot.com debacle in New York. These were “pure” bubbles because neither tulips, nor shares in the Mississippi company, nor dot.coms had any real economic value. Their prices were based 100% on speculation – not supply and demand. And since there was no “there there,” as Virginia Woolf might say, there was nothing left when the speculation disappeared. Their prices could go to zero, in other words.
Will the price of oil go to zero? No...not a chance. If the oil market is in a bubble, at least it is a bubble mitigated by three very important circumstances: 1) oil is perhaps the world’s most useful commodity, 2) more and more people want the stuff, 3) it is priced mostly in dollars whose value, in terms of everything else, is going down.
Normally, we can set aside the first two circumstances. Everyone knows oil is useful. Everyone knows the Chinese, the Indians and all the other foreigners are becoming addicted to it – just as Americans have been addicted for the last 50 years. These circumstances come as no surprise to anyone...and markets can sort them out. They were obvious in the oil market two years ago...they are obvious now.
Of course, even if they are obvious doesn’t mean investors have noticed. And in today’s oil market, it looks as if investors are suddenly waking up to something they should have seen a long time ago. But we suspect that the real surprise to most investors is the third circumstance. During the last 15 years – a period known as the Great Moderation – it was inflation that seemed to be taking a long nap. The band was playing loud music. Free drinks were passed around. Everyone was there – except inflation. Maybe it was out of town, some wondered. Or, maybe it was dead. Whatever happened to it, inflation was not around.
But, then the old party pooper showed up – and people began looking for their hats and saying goodbye to each other.
“US consumer prices up most in 26 years,” was yesterday’s most telling headline. Even the Wall Street Journal announced a price increase – to $2 an issue.
If you’re an oil sheik whose only asset is $100 billion worth of oil under the desert sand, you pay attention. The dollar has lost about 25% of its purchasing power – depending on how you measure it – in the last 5 years. If inflation rates just stay the same, the poor oil sheik stands to lose more than $25 billion by 2013. If he doesn’t think he’s getting a fair deal at today’s oil price, he’s likely to put a little crimp in the oil pipeline – reducing production until the price increases.
On the other hand, if the price of oil goes up enough, he’s likely to think that he should get it while the gettin’s good. Then, he would increase production – driving down the oil price.
Our guess is that the oil market has probably over-reacted to circumstances. When investors realized how much demand was increasing...they bid up prices. And when they realized how much inflation was increasing...they bid up prices further. And when speculators saw prices rising so much, they bid them up even further.
Now, oil is probably ready for a correction. Ten years ago, an ounce of gold would buy about 10 barrels of oil. Today, it buys only about 7. As is the case with oil, gold has responded to the increase in inflation rates. As to everything else, it is probably indifferent. So, if we were just adjusting the oil price to inflation, it should probably sell for about $95 a barrel.
As to the forces of supply and demand – Mr. Market would know better than we do. But Mr. Market, for all his sage experience, has a tendency to over-react. He probably over-reacted to growing, worldwide demand. Now, growth rates are declining throughout the world; he will probably over-react to that too.
So, where will the price of oil go? We wish we could tell you. It might very well sink below $100. But it will never sink as low as a busted dot.com or a crushed tulip bulb.
Even if the price of oil does drop, the U.S. has gotten the message: the time to find what will power the ‘car of the future’ is now.
SEGUIR LEYENDO...
martes, julio 8
TANDEM: ACCIONES VS COMMODITIES
Les paso un extracto de la newsletter sobre inversiones del Dr. Steve Sjuggerud (*), quien compara la evolución de las acciones y los commodities a largo de los años.
One generation gets enamored with an investment idea, and it soars beyond reason. Then it busts, and the next generation gives up on it forever. You can see it in the table from a few years ago: Triple-digit profits one generation, losses the next:
This one simple table would have made you rich...
If you'd have sold your stocks and bought commodities at the end of 1999, you'd have made bigger profits than anyone you know this decade.
Commodities are up by triple digits since the end of 1999, and stocks are down in that time. The scary thought is... if the pattern holds, we could see stocks underperform until as late as 2016.
(*) is the founder and editor of one of the largest financial newsletters in the world, True Wealth SEGUIR LEYENDO...
One generation gets enamored with an investment idea, and it soars beyond reason. Then it busts, and the next generation gives up on it forever. You can see it in the table from a few years ago: Triple-digit profits one generation, losses the next:
This one simple table would have made you rich...
If you'd have sold your stocks and bought commodities at the end of 1999, you'd have made bigger profits than anyone you know this decade.
Commodities are up by triple digits since the end of 1999, and stocks are down in that time. The scary thought is... if the pattern holds, we could see stocks underperform until as late as 2016.
(*) is the founder and editor of one of the largest financial newsletters in the world, True Wealth SEGUIR LEYENDO...
miércoles, julio 2
LOS TIEMPOS DE MAD MAX ESTAN CERCA?
Todos recordarán la trilogía de Mad Max, con Mel Gibson, donde la gasolina era el bien más preciado. Según el siguiente artículo, dramático por cierto, hacia allá vamos.
Oil Crisis Worsening! What's Next ...
by Sean Brodrick
I've been pounding the table about an energy crisis for quite some time. As a loyal reader of my Money and Markets column, you might think I've been proven right by gasoline soaring over $4 a gallon in 32 states and oil hitting new record highs.
But most of what I've been talking about is simply the long-term supply/demand squeeze that will transform our oil-addicted civilization in the future.
It appears, however, that the future is happening now. My fundamental and technical indicators are ALL sounding alarm bells.
Today, I'm going to give you an uncensored, no-holds-barred look at the consequences of the energy crisis. First, let's talk about why Peak Oil poses such an extreme economic threat to both Wall Street and Main Street.
The Short-Term Energy Crisis in America!
If oil reaches $200 a barrel, forget $4-per-gallon gasoline. Think $6.64, according to a Rice University analysis of the link between prices of crude and gasoline. And they're optimists in the bunch of experts who study Peak Oil.
What I'm telling you to prepare yourself for is a short-term spike in oil prices where gasoline becomes unavailable. As in, you'll want to buy it, but it won't be available at any price ... or any price you can afford.
You see, the world's producers are pumping flat-out. Saudi Arabia just promised to raise production a little bit, but that reduces their spare capacity to almost nothing. There is no margin of error ... no room for something to go wrong.
But something always goes wrong!
What will spark the kind of gasoline crisis I'm talking about? Take your pick of potential disasters. Here are just the top three ...
#1) U.S. Edging Closer to War with Iran
Last week, the Jerusalem Post reported that former U.S. ambassador to the U.N. John Bolton said that Israel is likely to attack Iran in the time between the November presidential election in the U.S. and the inauguration of the new president. Mr. Bolton also said that he does not believe the U.S. will participate in the attack. Israel may attack because Iran will not give up its nuclear development program.
However, in the U.S., CBS News reported that the Israelis are trying hard to get the Bush Administration to mount an attack on Iran's nuclear facilities. And the U.S. Congress is debating a resolution that slaps new economic sanctions on Iran, proposes a blockade, and seems to open the door for military action. Ron Paul, the courageous U.S. Representative who has long stood up against the Iraq War, calls the new bill "a virtual war resolution."
Do you think the Iranians are sitting on their thumbs, waiting for something to happen? Hardly. According to another Israeli news service, Iran has aimed its Shahab-3B ballistic missiles into launch positions, targeted squarely at Israel ... including Israel's nuclear reactor in the Negev city of Dimona.
What's more, Iran says that if it's attacked, its Revolutionary Guards would mount attacks on shipping in the vital Strait of Hormuz oil route. Two-fifths of all globally-traded oil passes through the Strait of Hormuz. And it's not hard to figure that oil facilities in Saudi Arabia could also be targeted.
If it comes to a new war in the Persian Gulf, don't expect $200 per barrel oil. Expect $400 per barrel oil ... $500 per barrel oil ... maybe higher.
#2) Monster Hurricanes in the Gulf of Mexico
Hurricanes Katrina and Rita proved that the Gulf of Mexico is America's soft underbelly, vulnerable to a devastating punch from Mother Nature during hurricane season.
When a global weather pattern called La Niña is strong, hurricanes are also more powerful than normal. Well, batten down the hatches, because a strong La Niña is expected to last through the summer, delivering worse-than-average storm activity THIS season.
The National Oceanic and Atmospheric Administration (NOAA) predicted above-normal hurricane activity in its Atlantic Hurricane Season Outlook. NOAA projects 12 to 16 named storms will form within the Atlantic Basin, including 6 to 9 hurricanes, of which 2 to 5 will be intense during the upcoming hurricane season.
And that could be a lowball estimate. The average number of Category 4 and Category 5 hurricanes worldwide has nearly doubled over the past 35 years.
Now here's the bad news: The Gulf of Mexico is home to 20% of the natural gas and 30% of the oil produced in the U.S. and 40% of America's refining capacity.
If that refining capacity gets taken out by a massive hurricane, forget $4 a gallon gasoline ... $5 a gallon gasoline ... heck, we might be looking at $6 a gallon gasoline or higher, very quickly. And the higher we go, and the longer we stay higher, the more "normal" otherwise outrageous gasoline prices become.
And refineries are already playing with fire as it is ...
#3) Refiners and Retailers See Profit Margins Squeezed
With the rising cost of oil, America's refiners are taking a gamble by keeping low inventories of crude and lowering their refinery utilization rates at the same time. According to the Energy Information Administration, gasoline stockpiles fell by 153,000 barrels to 208.8 million barrels in the most recent week.
Refinery utilization, which normally hovers in the 95% range at this time of year, is currently at just 88.6%. In fact, it's at the lowest level for early summer in 15 years.
If refinery inputs are at 15.4 million barrels per day (mainly crude oil), a one-percent change in yield is a 154,000 barrel-per-day (4.7 million gallons) change in product volume. U.S. consumption of gasoline is around 388.6 million gallons/day. So those few percentage points mean a real difference in supply ... which means higher prices.
Meanwhile, demand for motor gasoline over the past four weeks declined by an average of 9.3 million barrels per day — down 2.1% from the same time a year ago, and down 5% from its peak of 21.3 million barrels a day on January 4, the EIA reported.
This lessening of demand is the excuse the refiners use for the low run rates. Since American consumers are using less gasoline, they say they need to process less. But less supply drives up prices, so consumers use less gasoline — it's a vicious circle.
While rising input costs have squeezed refinery margins mercilessly, gasoline retailers — gas stations — are also seeing profit margins tighten to the vanishing point.
In 2007, the average markup of gas sold at the pump was 14.3 cents per gallon over what the owner paid, according to data from the National Association of Convenience Stores, the trade group for the stores that run more than 80% of the country's gas stations.
The profit, or net margin after all expenses have been figured in, has now shrunk to a measly 1.5 cents a gallon!
Now, with the price of gasoline rising, charges for credit card transactions are rising as well, and many gas station owners are making no money at all. That's why Exxon, the most profitable company in the history of the world, announced in June that it is selling the 2,200 gas stations it owns.
Will it find buyers for those gas stations? If not, we can expect gas stations to close. And we may see gas stations across America close anyway, as station owners gets squeezed out of existence.
Some rural areas are served by only a few gas stations ... as they start to go out of business, it may become very difficult for some Americans to buy gasoline. And that will lead us to a whole new problem ...
Prepare for Hoarding and a Recession-Turned-Depression
Why hoard? Well, when the price of gas rises 10 cents in a week, as it did in my neighborhood, it starts to make economic sense to hoard gas. Say you run a lawn service that uses 500 gallons of gasoline a week. If you buy next week's allotment ahead of time, you can save $50 a week.
And if refinery utilization is so low that gasoline stations simply run out — or a massive hurricane takes out refinery capacity — then you'll see hoarding kick into overdrive. This will only deplete stockpiles that are already near historic lows, making the whole situation much worse. Eventually, we may get to the point where you are unable to buy gas.
I'm talking about actual gasoline shortages ... massive unemployment and foreclosures ... evicted families living in tent cities and cars they can't afford to drive ... maybe, if things get really bad, food shortages and food and fuel riots.
At $7 gasoline, those making less than $25,000 a year will see gasoline expenditures go from 7% of their income to 20%. For some people, it simply won't be worth it to drive to work.
Factor in the airlines parking planes, delivery trucks no longer running, fishing fleets staying in port, and car manufacturers going out of business.
Wait a minute — car makers going out of business?! Yep, GM is on deathwatch now, and it's not getting better. In fact, according to a leaked report from J.D. Power and Associates, the June seasonally adjusted annual sales rate will plunge to 12.5 million vehicles, down from 16.3 million last June.
Add it all up, and America has the ingredients for a major economic collapse.
And Yet Oil Demand Is Still Skyrocketing Globally!
Will reducing U.S. demand cause oil prices to plummet? No, because demand in emerging markets is accelerating, and even if the global economy slows, that won't stop them. Much of China's growth is fueled by internal spending now. They may not like it if Americans are out of work, but they'll carry on.
Just think: How bothered were you by the collapse of the Soviet Union? A major superpower hit the skids in 1985 and imploded in 1991. Did that adversely affect your life in any meaningful way? I'm not saying a severe recession in America won't affect China ... just not as much as we might think.
This year, emerging markets are overtaking the U.S. in consumption of oil for the first time, and it won't be long before they consume more than the entire developed world.
At the same time, internal demand is rising in major oil producers and exporters. Over the last three years, oil consumption among OPEC members has grown by more than 5% a year. Hence, their exports go down and prices go up.
So while America's car sales may be hitting the skids, 6.6 million to 10 million new cars, trucks and vans will hit the roads in China this year. India will probably grow at an even faster pace, percentage-wise. Bottom line: They'll use every barrel of oil we don't.
And the Rising Price of Oil Could Even Lead to Severe Food Shortages
American agriculture directly accounts for 17% of our energy use, or the equivalent of 400 gallons of oil consumed by every man, woman and child per year, according to the most recent statistics I could find.
If the cost of fuel gets too high, farmers won't plant. If truckers run out of fuel, they won't deliver food to supermarkets. If enough of this happens often enough, people won't just sit there and take it. They will lash out.
Now, what would you say the odds are of this happening in a year when we are on the brink of war with Iran ... when meteorologists say this hurricane season should be worse than normal ... and when refineries are keeping historically low levels of inventories? I'd say better than average.
And the sad thing is, I've just barely scratched the surface of what could go wrong this year. I'd say America is in real trouble.
How to Protect Yourself — And Your Family
Laying in a month's supply of food might not be a bad thing to do for the next year. But you can also protect yourself financially.
Take, for example, the United States Oil Fund ETF (USO): This fund is designed to track light sweet crude, plus or minus 10%. It's not perfect, partly due to the fact that the fund has an expense ratio of 0.50. Still, that's pretty good, and it's an easy way to get direct exposure to rising oil prices.
In a recent one-year period, the S&P 500 fell by 12.6%. Crude oil rose 94.7%. And the USO rose by an astounding 110.3%. That's the kind of investment you may want to consider in this market.
___________________________________________________________________________________
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.
SEGUIR LEYENDO...
Oil Crisis Worsening! What's Next ...
by Sean Brodrick
I've been pounding the table about an energy crisis for quite some time. As a loyal reader of my Money and Markets column, you might think I've been proven right by gasoline soaring over $4 a gallon in 32 states and oil hitting new record highs.
But most of what I've been talking about is simply the long-term supply/demand squeeze that will transform our oil-addicted civilization in the future.
It appears, however, that the future is happening now. My fundamental and technical indicators are ALL sounding alarm bells.
Today, I'm going to give you an uncensored, no-holds-barred look at the consequences of the energy crisis. First, let's talk about why Peak Oil poses such an extreme economic threat to both Wall Street and Main Street.
The Short-Term Energy Crisis in America!
If oil reaches $200 a barrel, forget $4-per-gallon gasoline. Think $6.64, according to a Rice University analysis of the link between prices of crude and gasoline. And they're optimists in the bunch of experts who study Peak Oil.
What I'm telling you to prepare yourself for is a short-term spike in oil prices where gasoline becomes unavailable. As in, you'll want to buy it, but it won't be available at any price ... or any price you can afford.
You see, the world's producers are pumping flat-out. Saudi Arabia just promised to raise production a little bit, but that reduces their spare capacity to almost nothing. There is no margin of error ... no room for something to go wrong.
But something always goes wrong!
What will spark the kind of gasoline crisis I'm talking about? Take your pick of potential disasters. Here are just the top three ...
#1) U.S. Edging Closer to War with Iran
Last week, the Jerusalem Post reported that former U.S. ambassador to the U.N. John Bolton said that Israel is likely to attack Iran in the time between the November presidential election in the U.S. and the inauguration of the new president. Mr. Bolton also said that he does not believe the U.S. will participate in the attack. Israel may attack because Iran will not give up its nuclear development program.
However, in the U.S., CBS News reported that the Israelis are trying hard to get the Bush Administration to mount an attack on Iran's nuclear facilities. And the U.S. Congress is debating a resolution that slaps new economic sanctions on Iran, proposes a blockade, and seems to open the door for military action. Ron Paul, the courageous U.S. Representative who has long stood up against the Iraq War, calls the new bill "a virtual war resolution."
Do you think the Iranians are sitting on their thumbs, waiting for something to happen? Hardly. According to another Israeli news service, Iran has aimed its Shahab-3B ballistic missiles into launch positions, targeted squarely at Israel ... including Israel's nuclear reactor in the Negev city of Dimona.
What's more, Iran says that if it's attacked, its Revolutionary Guards would mount attacks on shipping in the vital Strait of Hormuz oil route. Two-fifths of all globally-traded oil passes through the Strait of Hormuz. And it's not hard to figure that oil facilities in Saudi Arabia could also be targeted.
If it comes to a new war in the Persian Gulf, don't expect $200 per barrel oil. Expect $400 per barrel oil ... $500 per barrel oil ... maybe higher.
#2) Monster Hurricanes in the Gulf of Mexico
Hurricanes Katrina and Rita proved that the Gulf of Mexico is America's soft underbelly, vulnerable to a devastating punch from Mother Nature during hurricane season.
When a global weather pattern called La Niña is strong, hurricanes are also more powerful than normal. Well, batten down the hatches, because a strong La Niña is expected to last through the summer, delivering worse-than-average storm activity THIS season.
The National Oceanic and Atmospheric Administration (NOAA) predicted above-normal hurricane activity in its Atlantic Hurricane Season Outlook. NOAA projects 12 to 16 named storms will form within the Atlantic Basin, including 6 to 9 hurricanes, of which 2 to 5 will be intense during the upcoming hurricane season.
And that could be a lowball estimate. The average number of Category 4 and Category 5 hurricanes worldwide has nearly doubled over the past 35 years.
Now here's the bad news: The Gulf of Mexico is home to 20% of the natural gas and 30% of the oil produced in the U.S. and 40% of America's refining capacity.
If that refining capacity gets taken out by a massive hurricane, forget $4 a gallon gasoline ... $5 a gallon gasoline ... heck, we might be looking at $6 a gallon gasoline or higher, very quickly. And the higher we go, and the longer we stay higher, the more "normal" otherwise outrageous gasoline prices become.
And refineries are already playing with fire as it is ...
#3) Refiners and Retailers See Profit Margins Squeezed
With the rising cost of oil, America's refiners are taking a gamble by keeping low inventories of crude and lowering their refinery utilization rates at the same time. According to the Energy Information Administration, gasoline stockpiles fell by 153,000 barrels to 208.8 million barrels in the most recent week.
Refinery utilization, which normally hovers in the 95% range at this time of year, is currently at just 88.6%. In fact, it's at the lowest level for early summer in 15 years.
If refinery inputs are at 15.4 million barrels per day (mainly crude oil), a one-percent change in yield is a 154,000 barrel-per-day (4.7 million gallons) change in product volume. U.S. consumption of gasoline is around 388.6 million gallons/day. So those few percentage points mean a real difference in supply ... which means higher prices.
Meanwhile, demand for motor gasoline over the past four weeks declined by an average of 9.3 million barrels per day — down 2.1% from the same time a year ago, and down 5% from its peak of 21.3 million barrels a day on January 4, the EIA reported.
This lessening of demand is the excuse the refiners use for the low run rates. Since American consumers are using less gasoline, they say they need to process less. But less supply drives up prices, so consumers use less gasoline — it's a vicious circle.
While rising input costs have squeezed refinery margins mercilessly, gasoline retailers — gas stations — are also seeing profit margins tighten to the vanishing point.
In 2007, the average markup of gas sold at the pump was 14.3 cents per gallon over what the owner paid, according to data from the National Association of Convenience Stores, the trade group for the stores that run more than 80% of the country's gas stations.
The profit, or net margin after all expenses have been figured in, has now shrunk to a measly 1.5 cents a gallon!
Now, with the price of gasoline rising, charges for credit card transactions are rising as well, and many gas station owners are making no money at all. That's why Exxon, the most profitable company in the history of the world, announced in June that it is selling the 2,200 gas stations it owns.
Will it find buyers for those gas stations? If not, we can expect gas stations to close. And we may see gas stations across America close anyway, as station owners gets squeezed out of existence.
Some rural areas are served by only a few gas stations ... as they start to go out of business, it may become very difficult for some Americans to buy gasoline. And that will lead us to a whole new problem ...
Prepare for Hoarding and a Recession-Turned-Depression
Why hoard? Well, when the price of gas rises 10 cents in a week, as it did in my neighborhood, it starts to make economic sense to hoard gas. Say you run a lawn service that uses 500 gallons of gasoline a week. If you buy next week's allotment ahead of time, you can save $50 a week.
And if refinery utilization is so low that gasoline stations simply run out — or a massive hurricane takes out refinery capacity — then you'll see hoarding kick into overdrive. This will only deplete stockpiles that are already near historic lows, making the whole situation much worse. Eventually, we may get to the point where you are unable to buy gas.
I'm talking about actual gasoline shortages ... massive unemployment and foreclosures ... evicted families living in tent cities and cars they can't afford to drive ... maybe, if things get really bad, food shortages and food and fuel riots.
At $7 gasoline, those making less than $25,000 a year will see gasoline expenditures go from 7% of their income to 20%. For some people, it simply won't be worth it to drive to work.
Factor in the airlines parking planes, delivery trucks no longer running, fishing fleets staying in port, and car manufacturers going out of business.
Wait a minute — car makers going out of business?! Yep, GM is on deathwatch now, and it's not getting better. In fact, according to a leaked report from J.D. Power and Associates, the June seasonally adjusted annual sales rate will plunge to 12.5 million vehicles, down from 16.3 million last June.
Add it all up, and America has the ingredients for a major economic collapse.
And Yet Oil Demand Is Still Skyrocketing Globally!
Will reducing U.S. demand cause oil prices to plummet? No, because demand in emerging markets is accelerating, and even if the global economy slows, that won't stop them. Much of China's growth is fueled by internal spending now. They may not like it if Americans are out of work, but they'll carry on.
Just think: How bothered were you by the collapse of the Soviet Union? A major superpower hit the skids in 1985 and imploded in 1991. Did that adversely affect your life in any meaningful way? I'm not saying a severe recession in America won't affect China ... just not as much as we might think.
This year, emerging markets are overtaking the U.S. in consumption of oil for the first time, and it won't be long before they consume more than the entire developed world.
At the same time, internal demand is rising in major oil producers and exporters. Over the last three years, oil consumption among OPEC members has grown by more than 5% a year. Hence, their exports go down and prices go up.
So while America's car sales may be hitting the skids, 6.6 million to 10 million new cars, trucks and vans will hit the roads in China this year. India will probably grow at an even faster pace, percentage-wise. Bottom line: They'll use every barrel of oil we don't.
And the Rising Price of Oil Could Even Lead to Severe Food Shortages
American agriculture directly accounts for 17% of our energy use, or the equivalent of 400 gallons of oil consumed by every man, woman and child per year, according to the most recent statistics I could find.
If the cost of fuel gets too high, farmers won't plant. If truckers run out of fuel, they won't deliver food to supermarkets. If enough of this happens often enough, people won't just sit there and take it. They will lash out.
Now, what would you say the odds are of this happening in a year when we are on the brink of war with Iran ... when meteorologists say this hurricane season should be worse than normal ... and when refineries are keeping historically low levels of inventories? I'd say better than average.
And the sad thing is, I've just barely scratched the surface of what could go wrong this year. I'd say America is in real trouble.
How to Protect Yourself — And Your Family
Laying in a month's supply of food might not be a bad thing to do for the next year. But you can also protect yourself financially.
Take, for example, the United States Oil Fund ETF (USO): This fund is designed to track light sweet crude, plus or minus 10%. It's not perfect, partly due to the fact that the fund has an expense ratio of 0.50. Still, that's pretty good, and it's an easy way to get direct exposure to rising oil prices.
In a recent one-year period, the S&P 500 fell by 12.6%. Crude oil rose 94.7%. And the USO rose by an astounding 110.3%. That's the kind of investment you may want to consider in this market.
___________________________________________________________________________________
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.
SEGUIR LEYENDO...
USA: PESIMISMO O REALISMO
Pesimista o realista esta nota de The Daily Reckoning? Uds. dirán.
The Limited Shelf Life of Dollar Fruit
London, England
Wednesday, July 2, 2008
Today, we’ll keep it short and sweet.
The Dow managed only a piddling 32-point rise yesterday; still no recovery from last week’s big losses.
Oil rose another $1.30 – to close over $141. Gold jumped $16; it will now cost you $944 to buy an ounce.
“Caught between a fragile economy and banking system and rising inflation,” writes James Saft, “Bernanke and other Fed policy makers seem to have arrived on a strategy of jawboning the dollar higher and inflation lower.
“But talk is only effective if your audience judges that you have the means and willingness to follow through.”
Based on the last few days’ trading results, Team Bernanke might as well have kept their mouths shut. Gold and oil are acting as though they expect higher rates of inflation, not lower rates. And the dollar loses value daily – though it still has not collapsed completely.
The last part of that phrase might be worth a thought or two. The dollar has fallen against other major currencies. Against the euro, for example, it is worth barely half what it was at its high, which was reached shortly after the euro was launched 10 years ago. Against gold, it is worth only about a third of what it was worth 10 years ago. And against oil...the loss has been even greater – it’s down about 80%.
Yet, the dollar still hasn’t “collapsed.”
To give you an idea of what a collapse looks like, we look out the window. The English housing market seemed to defy the California trendsetters. As U.S. houses fell in value, U.K. prices stubbornly held up.
“It’s a small island,” explained the analysts. “We have a lot of immigration from overseas,” they went on. “We like owning our own houses,” was the verdict. Said a woman in the office when we enquired: “Housing always goes up in Britain.”
It goes up until it goes down. Now, it is going down, say the London papers. And the house builders are collapsing. Comes news this morning that the U.K.’s largest house-builder, Taylor Wimpey, was cut in half yesterday after it failed to raise the money it was looking for. This morning, the shares are still falling.
Another English builder has already collapsed. Its shares are selling for less than one times trailing earnings.
You want to see collapse? Just look at what has happened to Wall Street this year. In the last 6 months, Citigroup has lost 43% of its value. Merrill Lynch is down 40%. And Lehman Bros. has fallen 68%. The Wall Street Journal says banking stocks are beginning to look like the dotcoms in 2000. The big question is whether these are just temporary corrections – caused by panic over subprime losses and a credit crunch. Or whether it is a case of another dotcom-style bubble popping; if so, the Wall Street firms have further to fall and will not recover for many, many years.
But, back to the dollar.
In the vaults of various central banks around the world lies $4.8 trillion worth of foreign currency reserves – the fruit of selling oil and widgets, mainly to U.S. consumers. And like oranges or papayas...these dollars have a limited shelf life.
We have not been invited to peek into these vaults, but we have no doubt what we would find: huge stacks of green money, with the faces of dead U.S. presidents on the notes. Americans have been the world’s biggest spenders of the last 20 years. Naturally, it is their money that makes up the bulk of those foreign currency reserves. It is their money, too, that now poses the biggest problem – not only for the people who shipped it overseas, but also for those who have it in their vaults.
By our very rough calculation the total of these reserves will hit $5 trillion before the end of this calendar year. Then, we will be talking about real money. But that is the trouble; we are not really talking about real money at all, are we?
We should have said: $5 trillion is a lot of money; too bad it isn’t real. These are dollars, remember, the faith-based currency. The same dollars that have lost approximately 97% of their value over the last hundred years...and, according to the statisticians on the government payroll...now loses value at about 4% per year.
If we take the government’s number goons at their word, and presume that the entire $5 trillion were invested in 91-day U.S. Treasury bills, currently yielding 1.63%, the holders of all this dough are losing about $120 billion per year. The fruit is starting to smell a little rich, in other words.
But it could be a lot worse. If the euro, gold, oil, or commodities rise sharply, foreign dollar holders will feel like chumps. A few may give up on the dollar and dump it on the world market in large quantities. This could cause a sudden drop in the value of the greenback...leading other holders to rush for the exits. The dollar’s collapse would bring down the whole post-’71 monetary system...and pitch the world into a much more serious problem.
Already, many dollar holders are getting itchy. Many are looking to lighten up their loads. Some are trading dollars for food...
(“Hoarding nations drive food costs ever higher,” says the New York Times .)
A few have helped recapitalize the banks. And Abu Dhabi just traded $900 million for the Empire State Building. Only about $4.7 trillion left to go.
By comparison, the entire world’s stock of gold – above ground – is only worth about $4.2 trillion.
*** What the candidates will never tell you...
As we keep saying, democracy is fine, as long as you don’t take it seriously. The candidates for the White House job are eager to show voters that they are patriotic, religious and right-thinking men. What they don’t want to do is trouble the voters with real problems.
What kind of problems?
In our view, there are three major challenges facing the United States.
1) The country is going broke.
2) The military is out of control.
3) Standards of living are falling.
What? You haven’t heard the Democrats mention these things? How about the Republicans? Nope...?
As to the first, the country is going into a recession with its finances in the worst shape ever. In fact, if you believe Eli Broad, founder of Kaufman & Broad, the big building firm, this is the worst period in U.S. economic life since World War II. In his entire life, he says he’s never seen anything like it. And he’s 75 years old.
But here, we’re not talking about the economy itself. We do that every day. Here we’re referring to public finances.
Typically, in a recession, the government tries to “lean into the wind” to counterbalance the effect of an economic slowdown. Business stops investing so much. Consumers stop spending so much. The government – according to classic Keynesian economics – tries to take up the slack by spending more.
But where does it get the money? The feds already have a deficit of about $500 billion. And a “financing gap” of $57 trillion. In the coming recession, predicts Bill Gross of the PIMCO fund, the federal deficit will go to $1 trillion. Obama will likely be the next president. He’ll be tagged with the first TRILLION DOLLAR DEFICIT. But what can he do?
Obama says he’s going to cut spending. But every economist in the nation is going to tell him not to do it – not during a recession. It will only make the recession worse, they’ll say. Instead, they’ll urge him to spend more money. They’ll remind him that the Japanese used fiscal stimulus on a massive scale – equal to 10% of GDP – and it still wasn’t enough to light a fire under their economy. A similar fiscal stimulant in the United States would mean a deficit of $1.7 trillion!
Our old friend John Mauldin is sure we will “muddle through” somehow. “We always do,” he says. And it’s true; we muddle through most things. But a man does not muddle through a hanging; nor does an economy muddle through when its government goes broke.
More on these major problems tomorrow... SEGUIR LEYENDO...
The Limited Shelf Life of Dollar Fruit
London, England
Wednesday, July 2, 2008
Today, we’ll keep it short and sweet.
The Dow managed only a piddling 32-point rise yesterday; still no recovery from last week’s big losses.
Oil rose another $1.30 – to close over $141. Gold jumped $16; it will now cost you $944 to buy an ounce.
“Caught between a fragile economy and banking system and rising inflation,” writes James Saft, “Bernanke and other Fed policy makers seem to have arrived on a strategy of jawboning the dollar higher and inflation lower.
“But talk is only effective if your audience judges that you have the means and willingness to follow through.”
Based on the last few days’ trading results, Team Bernanke might as well have kept their mouths shut. Gold and oil are acting as though they expect higher rates of inflation, not lower rates. And the dollar loses value daily – though it still has not collapsed completely.
The last part of that phrase might be worth a thought or two. The dollar has fallen against other major currencies. Against the euro, for example, it is worth barely half what it was at its high, which was reached shortly after the euro was launched 10 years ago. Against gold, it is worth only about a third of what it was worth 10 years ago. And against oil...the loss has been even greater – it’s down about 80%.
Yet, the dollar still hasn’t “collapsed.”
To give you an idea of what a collapse looks like, we look out the window. The English housing market seemed to defy the California trendsetters. As U.S. houses fell in value, U.K. prices stubbornly held up.
“It’s a small island,” explained the analysts. “We have a lot of immigration from overseas,” they went on. “We like owning our own houses,” was the verdict. Said a woman in the office when we enquired: “Housing always goes up in Britain.”
It goes up until it goes down. Now, it is going down, say the London papers. And the house builders are collapsing. Comes news this morning that the U.K.’s largest house-builder, Taylor Wimpey, was cut in half yesterday after it failed to raise the money it was looking for. This morning, the shares are still falling.
Another English builder has already collapsed. Its shares are selling for less than one times trailing earnings.
You want to see collapse? Just look at what has happened to Wall Street this year. In the last 6 months, Citigroup has lost 43% of its value. Merrill Lynch is down 40%. And Lehman Bros. has fallen 68%. The Wall Street Journal says banking stocks are beginning to look like the dotcoms in 2000. The big question is whether these are just temporary corrections – caused by panic over subprime losses and a credit crunch. Or whether it is a case of another dotcom-style bubble popping; if so, the Wall Street firms have further to fall and will not recover for many, many years.
But, back to the dollar.
In the vaults of various central banks around the world lies $4.8 trillion worth of foreign currency reserves – the fruit of selling oil and widgets, mainly to U.S. consumers. And like oranges or papayas...these dollars have a limited shelf life.
We have not been invited to peek into these vaults, but we have no doubt what we would find: huge stacks of green money, with the faces of dead U.S. presidents on the notes. Americans have been the world’s biggest spenders of the last 20 years. Naturally, it is their money that makes up the bulk of those foreign currency reserves. It is their money, too, that now poses the biggest problem – not only for the people who shipped it overseas, but also for those who have it in their vaults.
By our very rough calculation the total of these reserves will hit $5 trillion before the end of this calendar year. Then, we will be talking about real money. But that is the trouble; we are not really talking about real money at all, are we?
We should have said: $5 trillion is a lot of money; too bad it isn’t real. These are dollars, remember, the faith-based currency. The same dollars that have lost approximately 97% of their value over the last hundred years...and, according to the statisticians on the government payroll...now loses value at about 4% per year.
If we take the government’s number goons at their word, and presume that the entire $5 trillion were invested in 91-day U.S. Treasury bills, currently yielding 1.63%, the holders of all this dough are losing about $120 billion per year. The fruit is starting to smell a little rich, in other words.
But it could be a lot worse. If the euro, gold, oil, or commodities rise sharply, foreign dollar holders will feel like chumps. A few may give up on the dollar and dump it on the world market in large quantities. This could cause a sudden drop in the value of the greenback...leading other holders to rush for the exits. The dollar’s collapse would bring down the whole post-’71 monetary system...and pitch the world into a much more serious problem.
Already, many dollar holders are getting itchy. Many are looking to lighten up their loads. Some are trading dollars for food...
(“Hoarding nations drive food costs ever higher,” says the New York Times .)
A few have helped recapitalize the banks. And Abu Dhabi just traded $900 million for the Empire State Building. Only about $4.7 trillion left to go.
By comparison, the entire world’s stock of gold – above ground – is only worth about $4.2 trillion.
*** What the candidates will never tell you...
As we keep saying, democracy is fine, as long as you don’t take it seriously. The candidates for the White House job are eager to show voters that they are patriotic, religious and right-thinking men. What they don’t want to do is trouble the voters with real problems.
What kind of problems?
In our view, there are three major challenges facing the United States.
1) The country is going broke.
2) The military is out of control.
3) Standards of living are falling.
What? You haven’t heard the Democrats mention these things? How about the Republicans? Nope...?
As to the first, the country is going into a recession with its finances in the worst shape ever. In fact, if you believe Eli Broad, founder of Kaufman & Broad, the big building firm, this is the worst period in U.S. economic life since World War II. In his entire life, he says he’s never seen anything like it. And he’s 75 years old.
But here, we’re not talking about the economy itself. We do that every day. Here we’re referring to public finances.
Typically, in a recession, the government tries to “lean into the wind” to counterbalance the effect of an economic slowdown. Business stops investing so much. Consumers stop spending so much. The government – according to classic Keynesian economics – tries to take up the slack by spending more.
But where does it get the money? The feds already have a deficit of about $500 billion. And a “financing gap” of $57 trillion. In the coming recession, predicts Bill Gross of the PIMCO fund, the federal deficit will go to $1 trillion. Obama will likely be the next president. He’ll be tagged with the first TRILLION DOLLAR DEFICIT. But what can he do?
Obama says he’s going to cut spending. But every economist in the nation is going to tell him not to do it – not during a recession. It will only make the recession worse, they’ll say. Instead, they’ll urge him to spend more money. They’ll remind him that the Japanese used fiscal stimulus on a massive scale – equal to 10% of GDP – and it still wasn’t enough to light a fire under their economy. A similar fiscal stimulant in the United States would mean a deficit of $1.7 trillion!
Our old friend John Mauldin is sure we will “muddle through” somehow. “We always do,” he says. And it’s true; we muddle through most things. But a man does not muddle through a hanging; nor does an economy muddle through when its government goes broke.
More on these major problems tomorrow... SEGUIR LEYENDO...
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