This is a particularly crisp and straightforward discussion between money manager Bill Fleckenstein and Dylan Ratigan about central bank actions and commodities inflation. Enjoy!
Read more...The Shanghai Index fell 2.6% overnight. Italian bonds are blowing out. If sustained, this is bigger deal than the stock market swoon across Europe: CAC down 1.45%, FTSE down 1.1%, Dax off .4%. A lot of Libyan shares apparently in Italy and Libyan interests own over 7% of Unicredit, the biggest bank in Italy. Ouch. […]
Read more...By Payam Sharifi, an economics Graduate Student at the University of Missouri-Kansas City
Here in the United States, discussions of our troubled times revolve around any of the following: the housing crisis, the federal debt, unemployment, the fiscal health of particular states, and sometimes even income inequality. Overseas, discussions can include these topics, as well as the plight of the Euro. One issue that I personally feel has gotten the short end of the stick is that of commodity prices, and in particular food and oil. There is a special significance to this issue: its ramifications affect nearly every human being in the world. As seen in prices on the NYMEX and other markets, oil and food prices are beginning to soar again, with the price of WTI futures hitting $90/barrel and Brent crude going over $100/barrel. This issue ought to be discussed again with a renewed interest – but the media and much of the populace at large have simply accepted high food and oil prices as an unavoidable fact of life, without any discussion of the causes of these price rises aside from platitudes. For example, a recent AP report quoted an opinion that gasoline was going to hit $4/$5 a gallon in 2011, but did not mention the possible relevance of speculation in the futures market. It seems that everyday observers (as well as even the financial media) find this issue so complex that they shrink from discussing it. I will now give my opinion on these issues, buttressed by what I have learned from a recent interview with commodities trader Daniel Dicker. His new book “Oil’s Endless Bid” is due out in April.
Read more...Paul Krugman was gracious enough to acknowledge our past differences on the matter of commodities speculation, which was specifically about oil markets. It was the subject of a long running argument conversation between his blog and mine in spring 2008, which I recapped in ECONNED.
In brief, Krugman contended that the skyrocketing oil prices of early 2008 were the result of fundamental factors (and we pointed out that we were puzzled by his stance, since he, unlike the vast majority of Serious Economists, has been willing to call some past bubbles in their making). As he reiterates on his blog today, if the prices exceed the level dictated by supply and demand in the real economy, a standard microeconomic analysis would expect there to be inventory accumulation, aka hoarding.
Read more...It’s remarkable how Masters of the Universe, the new financial elite first identified by Tom Wolfe in 1986, remember nothing and regret nothing. And why should they? Their position remains remarkably secure 25 years later.
We see the “Who us, take responsibility for our actions?” stance in full view courtesy one of their most effective spokesman, Steve Eckhaus, an attorney who has negotiated many big ticket Wall Street compensation contracts. From the Wall Street Journal:
“It was understandable why there was anger,” says Mr. Eckhaus, but “the crisis was not caused by Wall Street fat cats. It was caused by a confluence of economic, political and historical factors.”..
In general, he said his clients are “pure as the driven snow” and doing work that supports the economy and justifies their pay….
“You have to know what the profits are” to know what someone should make, said Mr. Eckhaus, noting Wall Street’s top performers usually gobble up 80% of the bonus pool. “Those who are responsible for profits should share in the profits in a way that rewards them.””
This is the usual “heads I win, tails you lose” logic. The rationale for bulging pay packets is that the producers created it, therefore they deserved their cut. But Eckhaus says any bad events are due only to bad luck. Sorry to tell you, but only narcissists and their agents take credit for good stuff and lay the blame on everyone else. Unfortunately, we breed for that in Corporate America, it happens to be a very effective career strategy in large organizations.
Read more...By Ian Fraser, a financial journalist who blogs at his web site and at qfinance.
Hitching your wagon to flawed or “dozy” metrics is never a particularly good idea. We saw this in the build up to the global financial crisis. RBS’s obsession with earnings growth, whilst paying no attention to return on capital, is just one idiosyncratic example; spurious “credit ratings” of structured products are another, and pervasive. It was financial institutions’ blind faith in flawed metrics, and their penchant for burying risk, through the use of deceptive risk models such as Value At Risk, that, as much as anything else, encouraged a generation of bank CEOs to lead their institutions over a cliff.
Equally flawed metrics are now driving risky, and indeed sometimes even desperate, behavior in the oil and gas sector.
Read more...By Matt Stoller, the former Senior Policy Advisor for Rep. Alan Grayson. His Twitter feed is @matthewstoller
The Federal Open Market Committee releases its transcripts on a five year time lag. Last week, we learned what they were saying in 2005. Dylan Ratigan blogged an interesting catch: Dallas Fed President Richard Fisher expressed his frustration about Chinese imports. Not, of course, that there were too many imports, but that our ports weren’t big enough to allow all the outsourcing American CEOs wanted.
Read more...Fisher is just the latest Fed official to applaud this trend. Here’s the backstory. In the 1970s, there was a lot of inflation. The oligarchs of the time didn’t like this, because it made their portfolios worth less money. So they decided they would clamp down on inflation by no longer allowing wage increases. To get the goods they needed without a high wage work force, they would ship in everything they needed from East Asia and Mexico. The strategy worked. Inflation collapsed. Wages stopped going up. There were no more strikes. Unemployment jumped….But basically this was a way of ensuring that banks and creditors could make a lot of money that would instead go to workers.
Reader Crocodile Chuck highlighted an important post at Houses and Holes, an economics-oriented Australian blog. While Australia is reeling from the immediate impact, the broader impact of 2010-11 weather patterns may have much bigger ramifications for food and energy prices in Australia and abroad.
The post focuses on the possibility, increasingly endorsed by top meteorologists, that the heavy Australian rains are the result of a super La Niña, the last of which was seen in 1973-4,the time of the last severe flooding in Queensland. Super La Niñas are hugely disruptive to agricultural production and can have other nasty knock-on effects (some contend the 1917 La Niña helped spawn the 1918 influenza pandemic).
In this case, the damage of a super La Niña will not only increase food costs at a time when price rises and food scarcity are already a major concern, but will likely extend to energy prices as well. That one-two punch would be particularly devastating to China.
Read more...Yves here. While Quinn has a deliberately (some might say overly) provocative style and I quibble with some of his supporting arguments, his overarching observation, that America is wedded to an economic model past its sell by date, and that model has damaging social and political consequences, is one I believe will resonate with many […]
Read more...This post first appeared on May 9, 2008 The question above may seem foolish. Oil has just passed $124 a barrel despite improvement in the dollar. Commodities prices are moving less in lockstep than before (gold and wheat in particular have backed off significantly from their highs) suggesting that buying is not the result of […]
Read more...Last night, some fresh comments by Obama Administration officials confirmed its cynicism and duplicity in its Ministry of Truth version of health care reform. It’s one thing to suspect Team Obama was playing the public for a fool, quite another to have proof. Today we have more corroboration of Obama Administration double dealing, this on […]
Read more...News is preliminary, no idea yet whether it is a production well or not, but all 13 crew members on the Mariner Energy rig are accounted for. The Journal’s story here (which presumably will be updated); Bloomberg’s here.
Read more...Even in this TARP and Fed supported, “heads I win, tails you lose” of the banking industry, the “you live by the sword, you die by the sword” element has not been entirely removed. Witness the schadenfreude-gratifying distress at JP Morgan’s commodities unit, headed by Blythe Masters (a supersaleswoman who has already gotten a fair […]
Read more...A breaking story at the Washington Post, based on a new analysis of the Deepwater Horizon oil spill, puts the total at 4.9 million barrels: BP’s Macondo well spewed 62,000 barrels of oil a day initially, and as the reservoir gradually depleted itself the flow eased to 53,000 barrels a day until the well was […]
Read more...It looks as if Team Obama has reverted to form. In a repeat of its perfromance post the financial crisis, it appears to believe that no problem cannot be solved by PR, which puts it in league with the perps. Hat tip Glenn Stehle:
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