Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Bullish Shillism: The Larry Kudlow Stock Bubble Fraud
Conspiracy
by Al Martin
(6-20-05) Now we live in Fantasy Land America, Home of
the New Stock Market Bubble. So, as we say at Al
Martin Raw.com, the lies you get for free. The truth
you have to pay for.
Like many others, I have become upset about the
ever increasing amount of Bullish Shillism we are
seeing on CNBC and BBN. Not only does it anger me, but
it angers many in the nation. I can tell by the number
of people that call into my radio shows and comment
about the expansion of Bullish Shillism, particularly
on CNBC, led by Larry "The Dow's Going to 50,000 under
Bushonomics" Kudlow and his erstwhile gang of
never-endingly bullish retail institutional shills.
Last Friday, Larry Kudlow was on his evening
show, the all-American bull market show, wherein Larry
and the gang of shills are now predicting a summer
rally that will take the Dow to 12,500. The S&P
current price earnings will expand to 23.5, he said,
with the future P/E at 27.5. What he is saying is that
price earnings multiples will expand beyond the peak
of the dot-com bubble of March 2000 because that's
what would be required for the Dow to rally to 12,500.
And I was thinking how irresponsible this is --
to tell this to the unwashed and to recommend the new
line, understanding that Bushonomics has drained the
liquidity and savings of the Joe Sixpack 300-share
retail sucker buyer.
Kudlow and Co. are now recommending, for the
first time (and you've never heard this before, and it
shows you how desperate the bullish shills is) that
it's okay to load up and to buy stock on margin. They
are further recommending that consumers, already
carrying record debt levels, further expand debt
levels to buy stock.
This is very irresponsible, and it is dangerous,
particularly since Kudlow is so widely listened to by
the unwashed. And what evidence does he give? The
evidence is that the markets continue to rise despite
growing negative economic fundamentals.
Thus, according to Kudlow, we are in a new
paradigm. Just as the dot-com bubble pushers claimed
that the new Internet paradigm of dramatically reduced
cost could sustain dramatically expanded price
earnings multiples, more than twice the 50-year market
average price earning multiples (we saw anyone that
bought into that concept lost their shirts.), now
there is a new paradigm coming from the White House.
This is exactly where it comes from because Kudlow is
nothing more than an Bushonian shill.
The new paradigm is that stock prices should
move higher because economic fundamentals under the
scourge of Bushonomics continue to deteriorate; that,
somehow, falling industrial production, falling
consumer spending, record debt levels are all good for
stocks.
According to Larry, it's all a function of
interest rates, with the 10-year bond at 4% and
possibly even going to fall, or the yield curve
actually inverting later this year, as the Fed
continues to push up short rates. This proves that
there is no inflation in the pipeline. And it proves
(get this!) that stocks will get ever cheaper to hold
because of falling rates, that the earnings of these
companies will not be negatively impacted any longer
by falling production, falling consumption, falling
retail sales, increasing debt levels; that none of
this makes any difference anymore.
This is the ultimate in specious reasoning. This
is the ultimate in what passes for thinking in Fantasy
Land America. You can see that this is popular because
CNBC's ratings are at all-time highs.
This is a popular concept, and he's hit a nerve
among the Bush supporters, which are still 50% of this
nation, that it is patriotic to go into debt to buy
more stocks and that we need to buy more stocks to
support the market as Bushonomics creates economic
circumstances-i.e., deterioration at the manufacturing
and consumer level-that would normally be harmful to
stocks. But this can be overcome -- falling earnings,
falling retail sales, falling industrial production,
etc., and rising debt levels can all be overcome,
according to Larry, as long as corporations continue
to buy back stock at record levels, which is what they
are doing, and as long as patriotic citizens do their
part by increasing their purchases of shares.
Therefore, what is happening, according to
Larry, is that stock prices can continue to rise even
though earnings may fall because there's less stock
available because stock is being taken out of the
market through buy-backs, and is being salted away
through tighter hands of patriotic citizens buying
that stock.
So, what Larry is saying is that it is a race;
that the corporations can now repurchase and retire
stock-because it is true that corporations have the
highest cash balances ever-that, as long as
corporations continue to repurchase stock and retire
that stock faster than their earnings fall, then
earnings actually rise.
This is the most perverse bullish logic, mixed
in with patriotism. It is dangerous. In fact Larry
Kudlow and Co. should be prosecuted for the commission
of fraud against the people of the nation. Because
that's what they're doing.
When you have Larry Kudlow and a gang of retail
institutional shills, on CNBC every day, who have a
direct financial interest in the markets continuing to
go higher, peddling this wanton nonsense to the
American people, they are effectively conspiring to
defraud the people.
This is the Larry Kudlow Stock Fraud Conspiracy.
And this is the way it should be fostered,
despite the fact that some of their old guard that
they have on CNBC all the time, like Bill Seidman, has
even tried to throw out notes of caution.
When he does so, he is talked down. Here's the
venerable Bill Seidman, who is talked down by Larry
Kudlow every time that Seidman tries to throw out a
note of caution.
According to Kudlow, there is no speculative
bubble in real estate. And, as Kudlow touted the fact
yesterday, the American people know this. Because
Kudlow was touting the National Association of
Realtors report which said that 73% of the American
people did not know, didn't understand what
speculative bubbles in real estate were, and they
didn't believe there was one. And (get this) this is
dangerous and a record number -- that 73% of Americans
believe that home prices will continue to appreciate
at double-digit rates per annum forever. When 73% of
the American people believe that they can continue to
use price appreciation in their homes to rely on for
their own consumer spending via equity loans forever,
this is again a danger sign.
Professional investors are angered by this.
Knowledgeable professional investors are increasingly
angered by what they're seeing on CNBC and BBN.
The average Joe Sixpack investor wouldn't
understand this or realize it, but you will notice
they do not have individual interviews with Warren
Buffet or George Soros anymore, like they used to, or
the renowned short-seller, Bill Fleckenstein.
Note that they do not have those interviews with
professional investors that have made billions. Why?
Because the professional investors keep wanting to
speak the truth on CNBC. That's why they're not
invited on.
You can also note how, even when Warren Buffet,
who has made as much money being short as he has long,
says that something is overvalued or a particular
class of securities or a certain investment vehicle is
overvalued, that even Warren Buffet, who is praised as
the "Oracle of Omaha" on CNBC, will be roundly
criticized on the very same CNBC when he says that
something is overvalued.
In 40 years of observing the markets, I've never
seen an environment like this. This rampant Bullish
Shillism has led to a speculative bubble in the
market, which is being justified through something
that is absurd and ludicrous: that markets can
continue to rise, the price earnings ratios can
continue to expand as manufacturing and retail sales
continue to fall and debt continues to increase and
real wages, ex of inflation, continue to fall.
And yet stocks can continue to rise, not over
the near term, but forever; that, indeed, the
environment we are in constitutes a whole new paradigm
wherein corporate earnings can fall by 10% a year.
This is a quote from last week: Corporate earnings can
fall 10% a year, yet prices of stocks can rise 10% a
year forever.
That's the new paradigm. Because corporations
can continue to take stock off the market, thereby
reversing dilution quicker than will their earnings
fall.
Did he make this up? No. He is not smart enough
to do this. This is coming from somebody in the White
House who has made up this entire line.
Fortunately, to counter this, at least to some
degree, we have seen a record number of public
appearances by the normally reticent Comptroller
General, David Walker, who has now appeared before
some Congressional committee or some other forum once
a week for the last 17 weeks. For a man that usually
doesn't put out much public comment, this is
unprecedented.
Now, any coverage of him, of course, will not be
carried on the mainstream networks but is, at least,
now carried on C-SPAN 1 and 2. You can get copies of
what he says in its entirety on C-SPAN-3, but you
actually have to pay for it. Once again, another
example of what AlMartinRaw.com keeps telling you: The
lies you get for free. The truth you have to pay for.
Bill Seidman attempted, in his last few
appearances, to point out some simple facts. Seidman
looks at the same information that AlMartinRaw.com
does, information put out by the NAR, National
Association of Realtors, the NCCI, National Credit
Counseling Institute; the ABI, the American Bankruptcy
Institute; the OCC, Office of Comptroller of the
Currency; the FHA, the Federal Housing Administration.
What Seidman tries to point out and has been
roundly shouted down, or they quickly go to a
commercial break, is the danger that the speculative
bubble in real estate represents to stock values.
That is something that is under-appreciated. You
will notice how CNBC goes to great lengths to try to
keep the two separate. They try to maintain the line.
Even Larry Kudlow will not say that real estate prices
will go up forever. Even Kudlow says there could be
some contraction but that won't hurt stock prices, but
it is absurd to say that that won't hurt stock prices.
The Federal Reserve pointed out in its study
last Thursday, which Greenspan referred to in his
testimony before the joint economic committee,
although he didn't refer to it in detail and I could
understand why-that the current speculative bubble in
real estate, even if it were to unwind in the same
manner as all other speculative real estate bubbles
have unwound in this nation, wherein there was
experienced, over a 3-year period, an average 17%
decline in median home prices, which is the average
for the unwinding of a speculative bubble and is,
indeed, the decline we saw from the 4th quarter of
1989 to the 2nd quarter of 1991 when the real estate
bubble of the late 80's unwound-even this unwinding,
would, according to the Federal Reserve, lead to 20
million mortgage defaults in the nation.
To put this into comparison: the speculative
bubble of the late 80's, when that unwound from `89 to
`91, there were 3.6 million mortgage defaults.
What the Federal Reserve is now saying is that
there would likely be 20 million mortgage defaults.
Because in the unwinding of the speculative bubble in
property from `89 to `91, the debt-to-equity ratio was
still 37% -- meaning the people had 37% of equity.
Now, the median debt-to-equity ratio of property
in the United States is only 14%, a record low, due to
the $3 trillion that has been taken out of property
equities since 2001 in order to sustain consumer
spending.
What the Fed pointed out is that even an
unwinding of this speculative bubble to the extent of
the historical average would wipe out $2 trillion of
equity of the GSE's: Ginnie Mae, Fannie Mae, Freddie
Mac, more specifically.
How would that happen? Because of the enormous
amount of mortgage defaults, which are going to occur
in an unwinding of the speculative bubble because the
debt-to-equity ratio is so low.
What the Fed is saying is that $2 trillion of
capital would be taken out, would essentially
evaporate within the GSE's. Further, the nation's
commercial banks and mortgage lenders, which are
indirectly guaranteed by the U.S. Treasury through
various pools (FDIC, FSLIC, FSCL and so on), would
potentially be exposed to a $2 trillion hit, if, and
this is only assuming, if this current speculative
bubble in real estate only unwinds to the extent of
the national average of unwinding of speculative
bubbles in property, a la 1989 to 1991.
This is the scenario as opposed to what others
believe, including the Economic Policy Institute and
AlMartinRaw.com. Remember Fed Governor Susan Beis
remarks about a potential 40% loss in the national
median home price average over 5 years when the bubble
begins to unwind. A 40% loss, which is privately
calculated by the General Accounting Office and the
Office of the Comptroller of the Currency and the
Federal Housing Administration. That is what those
three institutions actually believe is going to
happen. A 40% decline over 5 years of the median home
price in the United States would collapse the economy
of the United States, to use Walker's words.
It would be an unprecedented debacle, and the
only remedies are (and, unfortunately Alan Greenspan,
I think, is the impediment) for the General Accounting
Office, the OCC and the FHA to take action now to
begin to pressure the speculative bubble in real
estate by ending the availability of interest-only
mortgages in what they call hot zones, where there is
the greatest depreciation, in regions like California
and Florida.
You know the reason why Alan Greenspan is
against this? According to the Federal Reserve, real
estate hot zones now include 68% of all of the
transacted real estate in the nation. That's how
widespread the speculative bubble has become.
Thus the Fed is in yet another conundrum of its
own creation. The Fed is literally frightened to go
along with the OCC and other government agencies in
imposing regulation that they know would lead to the
collapse of the speculative bubble. Because they don't
want to be blamed for the economic consequences of it.
Everybody knows that whoever it is that pushes
the idea to collapse the speculative bubble by
government action has, not only ended their political
careers, but God knows what would happen to them. What
did the Director of the OCC say -- The OCC has the
power to control this. We want to step up and end
interest-only mortgages and hot zones. We want to
prevent speculators from owning too much real estate.
We want to begin to force recapitalization of
interest-only loans. And we want to stop
over-capitalization of mortgages through mortgage
companies, wherein Dytech will lend you 125% of the
home property value. They want to stop that.
After that, the Director of the OCC said that
she had to ask the FBI for protection because of death
threats she had received. From whom? She didn't know.
But the assumption is that the threat would come
from professional real estate companies and
speculators, most of whom are well-heeled. Everyone
knows in Washington that the speculative bubble has to
end because the longer it is allowed to persist, the
more severe the consequences will be, the more
unmanageable the consequences will be, as it starts to
bleed air.
Therefore a prudent government would act to
begin to force the bubble to bleed air under the
belief that, if government action forces the bubble to
bleed air, then government action could, perhaps,
control the fallout.
That's what any prudent government would hope to
try to do. But as for the Bush Cheney regime, you
listen to John Snow: We don't want to interfere with
the process of capitalism.
If you listen to John Snow, you would think that
everyone who buys a house in the United States is a
'professional real estate speculator that understands
the risk.' That is the administration's line as spoken
by John Snow, that those buying real estate at today's
lofty levels understand the risk and understand that
they may lose all of their money. "We don't want to
interfere with the process of capitalism."
But is it true that all those purchasing
property today, those who are purchasing the $800,000
house that was $300,000 five years ago truly
understand the risk?
Are they professional real estate investors? I
don't think so. And the administration uses this great
guise because they know it's politically popular.
This is the ever popular 'laissez-faire'
argument. Oh, no, we can't interfere with the
capitalist process. We have to let the speculative
real estate bubble shake out for itself. And even John
Snow says. "Yes, people will lose money." Even Snow
says that.
According to Snow, under this argument, the only
people that are going to lose money are professional
real estate speculators and investors who understood
the risk going in. But of course, it is absurd to say
that.
This is the way the market works: the stupid
money loses out always. They do have a point.
The Secretary of Treasury under Roosevelt,
Bernard Baruch used to say-this was based on the
economic theorem that had been developed by Thomas
Malthus. People overlook Malthus. They think of his
population studies, but they forget that Malthus did
extensive market studies as well.
Baruch, in the 1930's and 40's was always famous
for pointing out that in any capital marketplace that
people look at as an investment-stocks, bonds, , land
- 83% of all of the investors must receive a sub-par
return in order for 17% of professional investors to
make a living.
Baruch used to say that 83% of the wannabe
investors, people that just throw money into mutual
funds every month (Of course, 401k's, IRA's didn't
exist.) must believe Of course, Baruch was a
speculator himself. That's what he was famed for.
As Baruch pointed out, 83% of the people wearing
their hats as investors, must always believe the lie
that prices and the value of investments will always
increase over time.
This is the shearing-the-sheep principle. That
was Jesse Livermore's famous expression, the
shearing-the-sheep principle.
The famed speculator Jesse Livermore, who made
all of his fortune by selling short, by the way. He
was the great short-seller, and he accumulated the
greatest fortune ever selling short, as did John D.
Rockefeller. Did you know that 3/4 of all of
Rockefeller's 5 families' wealth was accumulated on
the short side of the market, as was most of the great
dynastic wealth made in the stock market throughout
the 19th and early 20th centuries in the nation?
So Livermore talked about the concept of
shearing the sheep, how he would go into his office on
Number One Wall Street every day-this was in the late
20's-and he would see the people lined up outside to
buy stocks. He had a painting in his office that he
had had commissioned by a friend of his, the renowned
Danish artist Emil Carlson. Carlson's works were worth
a lot of money. He had a painting done by Emil Carlson
which showed the investors dressed up as sheep lined
up in front of Number One Wall, at the corner of
Broad, and money in their hands to buy stocks. It
showed this giant picture of Jesse on the inside
taking their money in his right hand, and in his left
hand he's got orders selling stocks short.
This article ends as abruptly as we believe the
US economy will end...
* AL MARTIN is an independent economic-political
analyst with 25 years of experience as a trader on
NYMEX, CME, CBOT and CFTC. As a former contributor to
the Presidential Council of Economic Advisors, Al
Martin is considered to be a source of independent
analysis for financially sophisticated and market
savvy investors.
After working as a broker on Wall Street, Al Martin
was involved in the so-called "Iran Contra" Affair as
a fundraiser for the Bush Cabal from the covert side
of government aka the US Shadow Government.
His memoir, "The Conspirators: Secrets of an Iran
Contra Insider," (http://www.almartinraw.com) provides
an unprecedented look at the frauds of the Bush Cabal
during the Iran Contra era. His weekly column, "Behind
the Scenes in the Beltway," is published weekly on Al
Martin Raw.com, which also publishes a bimonthly
newsletter called "Whistleblower Gazette."
Al Martin's new website "Insider Intelligence"
(http://www.insiderintelligence.com) will provide a
long term macro-view of world markets and how they are
affected by backroom realpolitik.
Rogue
This story is very significant and important as to relating to the "Big Picture" in the investment markets.
This will be interesting to see how it plays out....can you just imagine the changes ahead for us here in the US if the Chinese currency appreciates "freely" someday to the depreciating US dollar??
Something for all to ponder.....
China's CNOOC offers 18.5 billion dollars for Unocal Thu Jun 23,10:27 AM ET
BEIJING (AFP) - State-run energy firm China National Offshore Oil Corporation (CNOOC) announced a bid to buy US oil major Unocal for 18.5 billion dollars cash, trumping a rival offer by Chevron Corp.
CNOOC said it was proposing a friendly merger, offering 67 dollars a share for the California-based company in a deal that underlines China's drive to secure energy resources overseas to sustain its rapid economic growth.
It tops the cash-and-shares offer Chevron hammered out with Unocal by 1.5 billion dollars using Unocal's June 21 closing share price of 64.85 dollars.
Chevron, the number-two US oil company, received US regulatory approval on June 10 for its bid. Unocal said it would evaluate the CNOOC proposal but reiterated that its earlier recommendation to shareholders to accept the Chevron offer remained in place.
"This friendly, all-cash proposal is a superior offer for Unocal shareholders," said CNOOC chairman and chief executive Fu Chengyu.
"The deal is fully financed, subject to customary closing conditions, and priced in line with market values for comparable businesses."
If successful, it would represent the biggest overseas acquisition in a spate of buying by Chinese mainland companies, dwarfing Lenovo Group's 1.25 billion dollar takeover of IBM's global personal computer business.
However, the bid could face Congressional opposition in the United States on issues ranging from China's trade surplus to US oil security.
Two US Congressman wrote to President George W. Bush ahead of the offer opposing any Chinese takeover of US oil interests as a threat to security.
Fu dismissed the concerns, saying the deal was a strictly commercial transaction.
"This company's business will not have any negative impact on the security interests of the United States," he said in a conference call.
In a statement, CNOOC said the merged group would benefit from the companies' complementary strengths and unlike the Chevron bid, its offer would involve no job losses.
"CNOOC will seek to retain substantially all Unocal employees, including those in the US," it said.
"This is in contrast to the existing Chevron proposal where Chevron has already announced plans to extract hundreds of millions of dollars of cost savings from the merger annually, including from employee layoffs."
The US giant has more than 6,000 employees, with most of its activities in Asia and North America. It has no refining or marketing operations.
CNOOC, China's third-largest oil group, plans to finance the deal with its own cash reserves of more than three billion dollars and bridging loans from Goldman Sachs, JPMorgan and the Industrial and Commercial Bank of China.
It will also use a long-term, subordinated loan provided by its majority shareholder, China National Offshore Oil Corp.
The announcement, widely expected by investors, fits into a larger Chinese strategy of securing access to energy sources overseas to ensure stable supplies for its enterprises and households.
Power outages have become common in China, forcing factories to close, as demand for energy outstrips supplies.
Some analysts have accused CNOOC of acting more out of national interest than shareholder concern but Fu denied this, saying "shareholder value was always the main driver."
"Strategically this a significant deal in terms of synergy for CNOOC if they can get Unocal's Asia-Pacific assets," said Belle Liang, oil analyst at Core Pacific Yamaichi in Hong Kong.
He Jun, senior analyst with Anbound, a government and corporate economic consultant group, said if successful, it would certainly help ease China's power supply crisis.
"Its not a cheap deal, it will raise the companys asset and liability ratio (significantly) but there is something that should count politically, which is to ensure the countrys power supply," he said.
About 70 percent of Unocal's current proved oil and gas reserves are in Asia and the Caspian region, which are strategic for CNOOC.
In the statement, CNOOC said it expects the proposed merger to more than double its oil and gas production and increase its reserves by nearly 80 percent to about four billion barrels of oil equivalent.
The merged group would also have an improved oil and gas balance, with total reserves of approximately 53 percent oil and 47 percent natural gas, it said.
Rogue
This story is very significant and important as to relating to the "Big Picture" in the investment markets.
This will be interesting to see how it plays out....can you just imagine the changes ahead for us here in the US if the Chinese currency appreciates "freely" someday to the depreciating US dollar??
Something for all to ponder.....
China's CNOOC offers 18.5 billion dollars for Unocal Thu Jun 23,10:27 AM ET
BEIJING (AFP) - State-run energy firm China National Offshore Oil Corporation (CNOOC) announced a bid to buy US oil major Unocal for 18.5 billion dollars cash, trumping a rival offer by Chevron Corp.
ADVERTISEMENT
CNOOC said it was proposing a friendly merger, offering 67 dollars a share for the California-based company in a deal that underlines China's drive to secure energy resources overseas to sustain its rapid economic growth.
It tops the cash-and-shares offer Chevron hammered out with Unocal by 1.5 billion dollars using Unocal's June 21 closing share price of 64.85 dollars.
Chevron, the number-two US oil company, received US regulatory approval on June 10 for its bid. Unocal said it would evaluate the CNOOC proposal but reiterated that its earlier recommendation to shareholders to accept the Chevron offer remained in place.
"This friendly, all-cash proposal is a superior offer for Unocal shareholders," said CNOOC chairman and chief executive Fu Chengyu.
"The deal is fully financed, subject to customary closing conditions, and priced in line with market values for comparable businesses."
If successful, it would represent the biggest overseas acquisition in a spate of buying by Chinese mainland companies, dwarfing Lenovo Group's 1.25 billion dollar takeover of IBM's global personal computer business.
However, the bid could face Congressional opposition in the United States on issues ranging from China's trade surplus to US oil security.
Two US Congressman wrote to President George W. Bush ahead of the offer opposing any Chinese takeover of US oil interests as a threat to security.
Fu dismissed the concerns, saying the deal was a strictly commercial transaction.
"This company's business will not have any negative impact on the security interests of the United States," he said in a conference call.
In a statement, CNOOC said the merged group would benefit from the companies' complementary strengths and unlike the Chevron bid, its offer would involve no job losses.
"CNOOC will seek to retain substantially all Unocal employees, including those in the US," it said.
"This is in contrast to the existing Chevron proposal where Chevron has already announced plans to extract hundreds of millions of dollars of cost savings from the merger annually, including from employee layoffs."
The US giant has more than 6,000 employees, with most of its activities in Asia and North America. It has no refining or marketing operations.
CNOOC, China's third-largest oil group, plans to finance the deal with its own cash reserves of more than three billion dollars and bridging loans from Goldman Sachs, JPMorgan and the Industrial and Commercial Bank of China.
It will also use a long-term, subordinated loan provided by its majority shareholder, China National Offshore Oil Corp.
The announcement, widely expected by investors, fits into a larger Chinese strategy of securing access to energy sources overseas to ensure stable supplies for its enterprises and households.
Power outages have become common in China, forcing factories to close, as demand for energy outstrips supplies.
Some analysts have accused CNOOC of acting more out of national interest than shareholder concern but Fu denied this, saying "shareholder value was always the main driver."
"Strategically this a significant deal in terms of synergy for CNOOC if they can get Unocal's Asia-Pacific assets," said Belle Liang, oil analyst at Core Pacific Yamaichi in Hong Kong.
He Jun, senior analyst with Anbound, a government and corporate economic consultant group, said if successful, it would certainly help ease China's power supply crisis.
"Its not a cheap deal, it will raise the companys asset and liability ratio (significantly) but there is something that should count politically, which is to ensure the countrys power supply," he said.
About 70 percent of Unocal's current proved oil and gas reserves are in Asia and the Caspian region, which are strategic for CNOOC.
In the statement, CNOOC said it expects the proposed merger to more than double its oil and gas production and increase its reserves by nearly 80 percent to about four billion barrels of oil equivalent.
The merged group would also have an improved oil and gas balance, with total reserves of approximately 53 percent oil and 47 percent natural gas, it said.
Rogue
When Hathaway discusses gold, the world listens
By: Dorothy Kosich
Posted: '22-JUN-05 06:38' GMT © Mineweb 1997-2004
SAN FRANCISCO--(Mineweb.com) When Tocqueville Asset Management's John Hathaway speaks, analysts, investment funds and a hefty percentage of the gold mining industry listen.
And, in the renowned gold bull's opinion, the most exciting development to take place in the gold market lately "is the implosion of the euro."
In a luncheon address to the San Francisco Gold Forum Tuesday, Hathway declared that the first half of 2005 has been "noteworthy in that two important capital havens have been soundly discredited: (1) multiple categories of speculate debt investments and (2) the euro. The demise of both is still in progress."
As traders have become overwhelmingly bearish on the euro, Hathaway predicted that " a decent rally is most likely around the corner." He noted that gold has risen 10% against the euro since January 1, currently trading at 360 to an ounce of gold. Nevertheless, Hathaway asserted that it was a stretch to "project a complete demise of the euro."
The advance of the price of gold is an indicator of "progressive credit deflation," Hathway explained to an audience of analysts, institutional investors, and mining executives. "Investors come to gold through a process of elimination," he suggested. "It's an odyssey of disappointment in other investment vehicles. It's part and parcel of a recession in credit."
Hathaway asserts that a credit squeeze is in the offing. "Expanding credit spreads, a declining Barron's confidence index, the flight to quality, the Fed's response of liquidity creation all add up to a credit squeeze," he suggested. When credit is harder to obtain gold does better. Hathaway feels "junk credit will be buried in due course by a global slowdown," insisting that, indeed "the economy is headed toward some kind of slowdown." He also speculated that potential candidates for the next economic bubble to burst include hedge funds, China, and the stock market.
Nevertheless, in Hathaway's opinion, "the mother of all bubbles" is the U.S. Treasury market. "Rising nominal interest rates in U.S. Treasuries will inflict severe collateral damages on subsidiary bubbles, including housing. This won't occur until foreign central banks turn their backs on the dollar."
Since the Federal Reserve has no ability to tolerate a recession, Hathaway predicted "they will do a u-turn. They will declare victory. ...At that point, we will see the gold market kick into another gear."
SUPPLY IS TIGHT
"Even though trading houses in New York and Europe seem to find plenty of paper gold to trade in a knee-jerk fashion according to the news of the day," Hathaway insisted that physical gold supply "is extremely, extremely tight." The shorts on the CFTC indicate 757 tonnes of supply or one third of annual gold production, he said. "It's short because Central Banks have oversold their allotment under the Washington Agreement," he added.
To maintain an allocation of 500 tonnes, Central Bank flow is going to drop by 25% over the next three months, Hathaway projected.
"It is short because production is falling. ... I keep hearing stories about the threats to maintaining production at these levels," he warned. "It is short because gold is flying off the shelves from the refineries to the Middle East." Hathaway estimated that the turnaround time for incoming metal at refineries is about four to five days at the most.
"The last reason it is really tight is that the ETF has been a great success" with a market cap of $3.2 billion or 7.5 million ounces of gold, he suggested. "At $30 billion, the ETF would demand more than 80% of the annual production. It's not going to happen overnight, but it will happen."
The big difference between a gold share and the ETF, according to Hathaway, is that a gold share is limited by the investment banker's fee and printing capacity. "Whereas the ETF is limited to the effect that if you create more shares, you have to actually buy more gold to back it," he added.
Hathaway theorized that there are two segments of gold investors including investors like him who are very bullish on gold and "want to get the most octane possible for our clients." But, he added, there are many potential investors in gold (such as university foundations) who are not so aggressive in their outlook and want gold to protect capital.
Meanwhile, investing in gold shares may present risks such as geopolitical, labor disruptions, cost creep and environmental lawsuits, according to Hathaway. However, the biggest risk of all to gold shares, in his opinion, is share dilution. During the last two years, the share count for the entire mining industry rose 33%.
"Does anybody wonder why shares have been dogs," he asked. Hathaway suggested that a dialog take place between mining companies and shareholders. "But we still love you, we still have gold," Hathaway joked to the mining executives in the audience.
"I do not think gold should be a part of your portfolio at all times," he suggested. "There are times when it makes sense and times when it does not make sense. The only thing you really have to know is the difference between the two."
Hathaway declared that he likes that gold is about 3% from its 17-year high that gold achieved last December. "We certainly have a lot of room for people to eliminate alternatives (the financial paper asset kind) and move into gold and that really is the story," he concluded.
Rogue
The re-valuation of the Chinese currency.....I believe this will be the key event that will shake the financial markets(as well as real estate) going forward.
When the Chinese currency becomes freely tradable......all hell may break loose. The status qou will be disrupted. It will be hard to continue lying about "low inflation" as everything around us including most everything sold at Wal-Mart goes up in price. How can we continue to have low interset rates in that environment????
Gold and oil are the "canaries in the coal mine" now and I'm getting nervous. Can they keep interest rates artificially low in the face of obvious inflation all around us??? If you believe they can....continue to speculate in real estate.
If you think they'll lose "control" of interest rates.....the bubble in real estate will certainly break.
They could then blame all the irresponcible lending and the resulting real estate "bust" on those dastardly Chinese!
Rogue
Venezuela and any other country with significant natural resources and an "independant" minded leader must be on that list too! LOL!!!
Welcome to the "New World Odor"!!
Rogue
Lebed.....I wonder if he'll pump Chinese value play YDHCF again someday??? That could be explosive from these ridiculously low levels!
Just waiting...........
Rogue
TVOC....Who said the micro OIL/GAS stocks were done???
Rogue
BUY!!!BUY!!!!BUY!!! TO DA MOON!!!!......
silly real estate "sheeple".
Rogue
OTC.BB Best Bid......I wonder if it has anything to do with the size of your bid or offer as to whether they show up or not??
Rogue
OTCBB "best bid rule" ......doesn't seem to be working at all for me. My bids and offers are not showing up for OTC.BB stocks.
I'm mostly using the old "Freetrade".....now Ameritrade I-Zone.
Rogue
Patience....."waiting for the right pitch" as Buffet has said before. Knowing when to "load the boat".
Learn how to recognize fundamental value when you see it and place a decent sized bet.
I still heartily recommend the easy to read "Reminences of A Stock Operator" for all that have never read it. It is an excellent and entertaining old "trading" book. It will give all investors "things" to think about.
Rogue
Re: "Not holding a stock long enough"......I agree that is hard to do sometimes or more likely most of the time. I would refer most all here to read "Remininces of a Stock Operator" the story of legendary speculater Jese Livermore. He has some great advice and wisdom we could all benefit from.
Sometimes illiquidity has helped me to my benefit.....I couldn't sell my big position I had quietly accumalated if I wanted to. So I had to wait for big demand to develop.....and sometime's "they" sneak the stock up so you cant't even sell it till it IS the top. Funny how that has happenened before.
Once had 100,000 shares of CYD at an average of about .47 cents.......the bulk of it was sold at $4.25-4.50. Good job correct??. I kept a "token" 2,000 shares that I sold later in the year at $17-$22. Before the year was over it had topped out at $37 and change.
Road Map on the Mining Stocks
Kenneth J. Gerbino
Archives
Kenneth J. Gerbino & Company
Jun 10, 2005
http://www.investorshub.com/boards/read_msg.asp?message_id=6637095
Gold and commodities are going higher in this decade. The graph below shows how commodity prices are relatively priced versus the cost of living. Two important things about the chart is that commodity prices the last four years have already risen by 50%, but from a historic perspective the move looks as if it is just beginning a new and prolonged trend. The inflation adjusted price level today is the same as 1932 at the depth of the U.S. depression when commodity prices had collapsed.
Commodity Prices Adjusted for Inflation (Source: Di Tomasso Group/CRB Index)
Scarce resources such as beachfront property or certain metals are a function of Mother Nature, not man. Men can make machines to make millions of widgets and influence the price by overproduction, but certain metals, and other natural things like oil take billions of years to form and are not subject to the laws of oversupply unless these commodities are found in abundance. In the case of metals and natural occurring commodities, the supply is limited.
But populations grow continually over time generally increasing demand. This, plus inflation from money supply increases will add to upward price pressures. The graph above states the obvious, that the commodity decline from the 80's and 90's is over. A prolonged and strong across the board increase in many commodity prices is under way. This will influence inflation rates and move the price of precious metals higher in the years to come. The above graph is your road map.
Inflation Math Made Easy
Using the very simple and accepted classical measurement of what to expect as an inflationary prediction one would turn to money supply increases. Add 10% more money and you should expect 10% increases in prices sooner or later. Technology and higher productivity helps keep prices down, but many goods are consumed and destroyed which limits supply. Eating a donut means the supply of donuts has just gone down. Established interests deny printing money creates inflation but over the long term it is hard to dispute.
From 1971 to 1975 (5 years) the U.S. money supply increased 33.5 % and over the next 5 years (1976-1980) inflation increased by 55%, and gold went to $850. The 5 years from 2000 to 2004 has seen our money supply increase by 30.4% and I don't believe it is hard to imagine at least a future 30% increase in prices over the next 5 years. This would average an inflation rate of 6 % annually with precious metals logically going up at least that much, which would equal a $562 gold price in 5 years. Inflation is also coming to China (money supply up an average 13% for 7 years in a row)- and that will surely have a strong effect on gold demand in the next few years.
With higher inflation, interest rates will then have to go up, bonds will go down, and industrial stocks will have a tough time.
An economist at the Bank of International Settlements informed me a few weeks ago that the global derivative markets are $279 trillion for exchange traded derivatives but there is an additional $220 trillion in over-the-counter trade derivatives. These numbers are large enough to make one a conservative investor especially when one considers that even a 1% default rate in these speculative and leveraged financial instruments would equal almost the entire U.S. money supply.
Ex-Federal Reserve Board Chairman, Paul Volcker's recent Washington Post opinion article was titled; An Economy on Thin Ice. He basically warned the establishment that a "financial crises" was possible if things did not change. Policy makers in every country know what the guy in the street knows. There is no free lunch. If someone does happen to get one, you can bet that somehow someone somewhere will pay for it. Governments globally are run by an elite group of people who are elected on promises. They all know that if you do not keep the people happy, sooner or later you are either voted out or strung up. The solution for the last 20 years for these voted-in officials has been to print money and run up government debts...but do not stop the parade. But now the parade could be running out of steam and the financial repercussions could be severe.
I have never been an alarmist or a doom and gloom person, but bad economics (from too much debt and money printing) is bad economics. When and if things go bad, it will pay to have liquid assets that are no one else's liabilities and regardless of any disruptive economic scenarios will stand up and be there as a store of value. Precious metals are actually the only liquid asset that can claim that position. The U.S., Japanese, Indian and Chinese economies are still positive. However, as we go forward their stock markets will have a tough time as inflation returns and interest rates follow to the upside.
The main concept I think of when buying a mining company is how much "money in the ground" do I own. If Paul Volcker is right, then the value of mining stocks will rise significantly. A good investment premise in this day and age is to own companies that allow you some financial security and insurance, but also give you exposure to growth and future cash flow. Only certain precious metal mining stocks really qualify. I would guess that 9 out of 10 of the mining stocks out there do not qualify therefore stock selection is crucial.
Portfolios should be diversified across at least a dozen mining companies that have the goods in the ground and are well financed or positioned to bring on new production in the years to come. You want growth to look forward to and also plenty of value in the ground to ultimately protect our wealth. Remember risky exploration companies give you none of the above. The high-risk end of mining should only be for a very small part of your portfolio.
Gold mine supply declined 4.9% in 2004 and there was strong jewelry demand (+5.2%) even with gold above $400 most of the year. Because of this steady and increasing demand sector and because there is at least a 5-10,000 tonne short position in gold (bullion banks and mining hedge books), it is most likely that a gold price below $410-415 is very unlikely. If gold were to go to $500- 600 then this short position could be catastrophic for the shorts. Bankruptcies for the bullion banks and professional oblivion would be the fate of anyone remotely responsible. Therefore I expect plenty of short covering on all sell-offs. This is why I feel gold at $400-410 should be a floor price. Any dips below this level most likely will be short-lived.
Please visit our website at www.kengerbino.com for more articles on gold, mining stocks and the economy.
Jun 9, 2005
Kenneth J. Gerbino
Rogue
A reply to my article on China tariffs....
By: sckpak
10 Jun 2005, 12:57 AM EDT
Msg. 45049 of 45060
(This msg. is a reply to 45041 by nonferrous.)
Jump to msg. #
OT: Matthew ... I can hear it now if this bill passes ...
Good afternoon Walmart shoppers. We have some good news and some bad news to share with you today. First the bad news.
Due to the 27.5% tariff that our eleted leaders decided to place on imports from China, we regret to inform you that all products made in China that we sell now will cost you 27.5% more than it did yesterday. We are sorry but you can't expect us to eat this additional cost can you and lower our profit margin?
Now the good news is that even with a 27.5% increase in your costs for our products that are made in China, it will still be cheaper that the American made equivalent - that is if you can even find an American made equivalent. You see, wages in China are about 1/10th those paid for similar labor in the US so even a 27.5% tariff that will increase your end costs will not cause us as a store to discontinue placing made in China items on our shelves. We are committed to providing our customers with the lowest priced goods that we can find.
Now here is the real kicker / good news, guess who benefits from the tariff if not you the consumer or you the laborer in the US - that's right it is good old Uncle Sam. You see the tariff will be paid to the US govt - now they will have even more USD's in which to buy your votes at the next election.
So with all that in mind, enjoy the rest of your afternoon shopping at you local friendly neighborhood Walmart store.
I guess we will show China who is the boss - hope they don't decide to retaliate and stop buying our US Treasuries and God forbid think of selling them.
Rogue
A reply to my article on China tariffs....
By: sckpak
10 Jun 2005, 12:57 AM EDT
Msg. 45049 of 45060
(This msg. is a reply to 45041 by nonferrous.)
Jump to msg. #
OT: Matthew ... I can hear it now if this bill passes ...
Good afternoon Walmart shoppers. We have some good news and some bad news to share with you today. First the bad news.
Due to the 27.5% tariff that our eleted leaders decided to place on imports from China, we regret to inform you that all products made in China that we sell now will cost you 27.5% more than it did yesterday. We are sorry but you can't expect us to eat this additional cost can you and lower our profit margin?
Now the good news is that even with a 27.5% increase in your costs for our products that are made in China, it will still be cheaper that the American made equivalent - that is if you can even find an American made equivalent. You see, wages in China are about 1/10th those paid for similar labor in the US so even a 27.5% tariff that will increase your end costs will not cause us as a store to discontinue placing made in China items on our shelves. We are committed to providing our customers with the lowest priced goods that we can find.
Now here is the real kicker / good news, guess who benefits from the tariff if not you the consumer or you the laborer in the US - that's right it is good old Uncle Sam. You see the tariff will be paid to the US govt - now they will have even more USD's in which to buy your votes at the next election.
So with all that in mind, enjoy the rest of your afternoon shopping at you local friendly neighborhood Walmart store.
I guess we will show China who is the boss - hope they don't decide to retaliate and stop buying our US Treasuries and God forbid think of selling them.
Rogue
Who's the fool that said politics has no relevance to investing??
Thursday June 9, 2:46 PM
Bush expects China to act on currency as Congress steps up pressure.
President George W. Bush said he expected China to implement currency reforms, as support increased in the US Congress for legislation to force Beijing to revalue its yuan or face higher tariffs on Chinese imports.
"I mean, we're getting indications out of the government, for example, that they understand they've got to do something with their currency," Bush told FOX News. "Time will tell."
Meanwhile, a bill to impose a 27.5 percent tariff across the board on Chinese imports if Beijing does not revalue its yuan currency within six months is "gaining support" among lawmakers, said New York Democrat Senator Charles Schumer, who is spearheading the legislation.
"I can tell you that political support for our bill is very large," Schumer said at forum of the Council on Foreign Relations in Washington.
He urged Bush to convene a "summit" on China trade immediately with key administration officials and Congress. The meeting "should figure out where to go next," he said.
Co-author of the controversial bill is Lindsey Graham, a South Carolina Senator from Bush's Republican party.
The bill however is seen as violating World Trade Organization (WTO) rules because it would retaliate against China without authorization from the global trade watchdog.
Yet, it surprisingly won two-thirds support in the Senate in a procedural vote in April, prompting Republican leaders to promise a vote on the bill by the end of next month.
China has been under increasing pressure, particularly from US policy makers, to revalue the yuan, tightly pegged at 8.28 to the US dollar since 1994.
Many US legislators claim the Chinese currency regime is driving American workers out of their jobs on the back of rising imports from China which had widened the US trade deficit with the Asian giant to 160 billion dollars.
With Congress breathing down its neck, the Bush administration has turned up the heat on China over currency reforms. The Treasury Department, for example, appointed last month a special envoy to China.
Schumer said his bill was also gaining ground in the House of Representatives.
Representative Bill Thomas, chairman of the House Ways and Means Committee, said on Tuesday that the House leadership could sponsor legislation aimed at pressing China to obey trade laws if the move would help win passage of the Central American Free Trade Agreement (Cafta).
"It's difficult to vote on any trade agreement without getting any movement on China," Thomas said in a speech to the United States Chamber of Commerce.
"People look at (China) as a fundamental problem," the Republican Representative from California said. That means lawmakers "have to deal with it" in order to move forward on other trade issues, he said.
The US signed the Cafta last year but Congress must ratify the treaty for it to take effect. Republican leaders are struggling to round up votes because many lawmakers from states with textile or sugar industries have indicated they would join Democrats in opposing the accord.
"What Bill Thomas said yesterday was an amazing shot in the arm for our bill, where he basically said that he would open to the House doing something on the China currency situation," Schumer said Wednesday.
"As our bill move through the Senate -- and we have been promised the vote before the August recess -- and the House decides to deal with it, it is my strong view that we will get real progress," he said.
Schumer and Graham said in a opinion piece in the New York Times published Wednesday that "the time had come for actions, not more words."
They said their ultimate goal was not higher tariffs against Chinese imports into the United States but to prod the Chinese to take concrete steps to allow the yuan to float freely.
Under the bill, the Chinese would not have to float their currency immediately, but they should take immediate and concrete steps towards that goal.
Rogue
Who's the fool that said politics has no relevance to investing??
Thursday June 9, 2:46 PM
Bush expects China to act on currency as Congress steps up pressure.
President George W. Bush said he expected China to implement currency reforms, as support increased in the US Congress for legislation to force Beijing to revalue its yuan or face higher tariffs on Chinese imports.
"I mean, we're getting indications out of the government, for example, that they understand they've got to do something with their currency," Bush told FOX News. "Time will tell."
Meanwhile, a bill to impose a 27.5 percent tariff across the board on Chinese imports if Beijing does not revalue its yuan currency within six months is "gaining support" among lawmakers, said New York Democrat Senator Charles Schumer, who is spearheading the legislation.
"I can tell you that political support for our bill is very large," Schumer said at forum of the Council on Foreign Relations in Washington.
He urged Bush to convene a "summit" on China trade immediately with key administration officials and Congress. The meeting "should figure out where to go next," he said.
Co-author of the controversial bill is Lindsey Graham, a South Carolina Senator from Bush's Republican party.
The bill however is seen as violating World Trade Organization (WTO) rules because it would retaliate against China without authorization from the global trade watchdog.
Yet, it surprisingly won two-thirds support in the Senate in a procedural vote in April, prompting Republican leaders to promise a vote on the bill by the end of next month.
China has been under increasing pressure, particularly from US policy makers, to revalue the yuan, tightly pegged at 8.28 to the US dollar since 1994.
Many US legislators claim the Chinese currency regime is driving American workers out of their jobs on the back of rising imports from China which had widened the US trade deficit with the Asian giant to 160 billion dollars.
With Congress breathing down its neck, the Bush administration has turned up the heat on China over currency reforms. The Treasury Department, for example, appointed last month a special envoy to China.
Schumer said his bill was also gaining ground in the House of Representatives.
Representative Bill Thomas, chairman of the House Ways and Means Committee, said on Tuesday that the House leadership could sponsor legislation aimed at pressing China to obey trade laws if the move would help win passage of the Central American Free Trade Agreement (Cafta).
"It's difficult to vote on any trade agreement without getting any movement on China," Thomas said in a speech to the United States Chamber of Commerce.
"People look at (China) as a fundamental problem," the Republican Representative from California said. That means lawmakers "have to deal with it" in order to move forward on other trade issues, he said.
The US signed the Cafta last year but Congress must ratify the treaty for it to take effect. Republican leaders are struggling to round up votes because many lawmakers from states with textile or sugar industries have indicated they would join Democrats in opposing the accord.
"What Bill Thomas said yesterday was an amazing shot in the arm for our bill, where he basically said that he would open to the House doing something on the China currency situation," Schumer said Wednesday.
"As our bill move through the Senate -- and we have been promised the vote before the August recess -- and the House decides to deal with it, it is my strong view that we will get real progress," he said.
Schumer and Graham said in a opinion piece in the New York Times published Wednesday that "the time had come for actions, not more words."
They said their ultimate goal was not higher tariffs against Chinese imports into the United States but to prod the Chinese to take concrete steps to allow the yuan to float freely.
Under the bill, the Chinese would not have to float their currency immediately, but they should take immediate and concrete steps towards that goal.
Rogue
squidkid......."To say planetary alignment, sunspots, protons, electrons etc don't have an effect on us is irrational human nature".
I agree it is foolhardy for us mere humans to believe we know everything there is to know about the universe and how it affects is and our behaviour.
I'm keeping an open mind.....because I'm wise enough to say I'm ignorant.
Rogue
PAII......looks like an interesting company, BUT the huge email spam promotions really scare me off.
My mailbox really gets pump mail for this one approaching it's swing highs. After it's overbought as hell and the sellers overwhelm the buyers.....the pump mail stops and it usually drifts to it's lows again.
Be careful.
Rogue
Sorry ....but I was just offended that you could make that "blanket statement" that "lunar cycles don't mean a thing". I had to respond and disagree.
I traded grain futures regularly for 10 years. My daily charts would always have the lunar cycles put on them by myself. I saw firsthand that you could usually expect swing highs on or near the full moon(usually overbought or near that on the stochastics) and swing lows(oversold or near stochastics) could be expected on or near the new moon. It happened so much that I always had the lunar cycle on my charts and it was a very reliable indicator in the "art" of trading grain futures.
I never used it on other markets....but was told by some old grain pros that it was something you could usually use as a tool in your "swing" grain trading.
28 Day Commodity Trading Cycle
Most important cycle in commodities may be a result of the lunar cycle.
Relate to the 4-week rule i.e., market sets.
4 week highs = Buy.
4 week lows = Sell.
20 trading days in 4-week cycle.
Left and right Translation
Refers to the shifting of cycle peaks to the left or right of the ideal cycle midpoint. E.g., 20 day trading cycle is measured from low to low—peak should occur 10 days into the cycle at halfway point—followed by a 10-day decline—ideals rarely occur. See figure 14.15
Up trend cycle crest shifts to right i.e.= Bullish.
Downtrend cycle crest shifts to left = Bearish.
Seasonal Cycles
Most obvious in agricultural markets but nearly all markets display seasonal patterns.
Rogue
WOW! Potential Florida killer Tsunami wave really does exist!!
Looking on the bright side though......all that new construction on the Florida Coasts would have to be rebuilt after all the killer wave destruction. That would be GREAT for the economy!!!! DESTROY and REBUILD!
Scientists Warn Of Massive
Tidal Wave From
Canary Island Volcano
By Steve Connor
Science Editor
The Independent - London
8-29-1
A wave higher than Nelson's Column and travelling faster than a jet aircraft will devastate the eastern seaboard of America and inundate much of southern Britain, say scientists who have analysed the effects of a future volcanic eruption in the Canary Islands.
A massive slab of rock twice the volume of the Isle of Man would break away from the island of La Palma and smash into the Atlantic Ocean to cause a tsunami - a monster wave - bigger than any recorded, the scientists warned yesterday.
Most of the wave's energy, equivalent to the combined output of America's power stations for six months, would travel westwards to the American coast but enough would be flicked north towards the English Channel to cause catastrophic coastal damage.
A computer model has been designed to show the way the tsunami will build after the volcano, called Cumbre Vieja, erupts on La Palma, at the western end of the Spanish island chain. It describes the almost unimaginable scale of an event that the scientists say could happen at any time within the foreseeable future.
"We're looking at an event that could be decades or a century away - but there will be a degree of warning beforehand," said Simon Day, of the Benfield Greg Hazard Reseach Centre at Univeristy College London.
Most of the rocky western flank of Cumbre Vieja is unstable enough to be dislodged in the next big eruption of the volcano, which is active enough to explode at least once or twice a century. Its last big event was in 1949.
Such a landslide from a future eruption could travel up to 60 kilometres (37 miles) from La Palma's coast, causing the formation and then collapse of a dome of water 900 metres (3,000ft) high and tens of kilometres wide. The bow of this collapsing dome of water would become a giant wave, but also, as the landslide continued to move underwater, a series of crests and troughs would soon generate the "wave train" of the tsunami.
With the leading wave in front and crests pushing it on behind, it would sustain the power for the nine-hour journey to the American east coast.
Tsunami means harbour wave in Japanese and, though the occurrence has nothing to do with the tides, it is often called a tidal wave in English. Throughout history they have caused widespread devastation, with Britain last being affected by one in 1755 when an earthquake in Lisbon caused an unusually large wave to hit southern ports.
The computer model, compiled in collaboration with Steven Ward of the University of California, Santa Cruz, predicts that the tsunami will have a height of 100 metres (330ft) from crest to trough when it crashes into the shores of nearby north-west Africa. By the time it reached its final destination, the east coast of Florida and the Caribbean islands, the tsunami would still be up to 50 metres high.
Low-lying land in Florida would be vulnerable to a sea wave that would inundate the mainland for several kilometres inland. Everything in its path would be flattened, the computer model predicted.
Even though the wave would be much smaller when it reached Britain, it would still breach sea defences because it would be larger than the biggest storm waves for which they were designed, Dr Day said. "For low-lying land along the south coast it could penetrate up to a mile," he said.
Although there is little doubt that the landslide on La Palma will happen after a volcanic eruption, the difficulty is knowing exactly when it will occur. "Eruptions of Cumbre Vieja occur at intervals of decades to a century or so and there may be a number of eruptions before its collapse," Dr Day said. "Although the year-to-year probability of a collapse is therefore low, the resulting tsunami would be a major disaster with indirect effects around the world."
The scientists are calling for better warning instruments to be placed on La Palma so that an impending eruption can be detected quickly enough to alert other areas that might be affected by a tsunami.
"Cumbre Vieja needs to be monitored closely for any signs of impending volcanic activity and for the deformation that would precede collapse. The collapse will occur during some future eruption after days or weeks of precursory deformation and earthquakes," Dr Day predicted.
"An effective earthquake monitoring system could provide advanced warning of a likely collapse and allow early emergency management organisations a valuable window of time in which to plan and respond," he said.
A history of tsunamis
The Pacific Ocean is prone to earthquake-induced tsunamis caused by the so-called ring of fire volcanoes that girdle it. Ten lethal big waves have struck Japan, Hawaii, Alaska, Chile, Nicaragua and New Guinea over the past 100 years.
One of the most terrifying tsunamis occurred in 1792 when part of the Unzen volcano in Japan collapsed into the sea, setting up 100m (330ft) waves that killed 15,000 people in nearby fishing villages.
In 1868, a powerful tsunami killed 10,000 people when it smashed into the coast of Peru with enough energy to carry an American warship 3km (1.9m) inland.
When the Indonesian volcano of Krakatoa blew itself apart in 1883, it generated a wave that killed 36,000 inhabitants of Java and Sumatra.
Just 13 years later, in 1896, Japanese deep-water fishermen returned to their home ports to find their homes destroyed and 26,000 dead from a tsunami that must have slipped below the keels of their ships without them noticing.
http://news.independent.co.uk/world/africa/story.jsp?dir=69&story=91098&host=3&p rintable=1 ___
Scientists Warn Of Massive Tidal Wave
This Is London.com 8-29-1
Britain may be hit by a monster wave predicted to devastate the coasts of Florida and Brazil following a volcanic eruption in the Canary Islands.
Scientists warn that the UK would probably not escape the disaster unscathed. A weaker, but still hugely destructive, wave is likely to hit Britain's Atlantic coastline.
Travelling at speeds of up to 500mph, the tsunami would be an unstoppable force.
Its first target was expected to be the West Saharan coast of Morocco, where the wave would measure an awesome 330ft from crest to trough.
But the built up coastal areas of Florida, Brazil and the Caribbean were expected to suffer the greatest destruction, according to a new forecast by Dr Simon Day, of the Benfield Greig Hazard Research Centre at University College London.
Here, the wave would reach heights of 130ft to 164ft - higher than Nelson's column - and travel four or five miles inland flattening everything in its path.
Previous research by Dr Day predicted that a future eruption of the Cumbre Vieja volcano was likely to cause the western flank of the mountain to slide into the sea.
The energy released by the collapse would be equal to the electricity consumption of the entire US in six months.
Working with Dr Steven Ward, from the University of California, Dr Day has now produced a new model which predicts more accurately how big the tsunami will be and where it will strike.
© Associated Newspapers Ltd.
http://www.thisislondon.com/
Rogue
"Lunar cycles don’t mean a thing".....you've go to be kidding me??
What causes an ocean tide?
Rogue
OIL/Gold/Natural Resources......I've lightend up pretty well in these areas the past few weeks and months and eagarly await an excellent long-term re-entry point.
I think we may get it....I'd be all over oil below $47 an gold below $400.
Rogue
Astrology......years ago when I was trading the grains at the Chicago Board of Trade, I always payed attention to the moon cycles. The swing highs and lows in the grains had an uncanny ability to co-incide with the new moon and full moon.
There were some famous futures traders back then that alerted me to that. Alot of the floor traders were always aware of the lunar cycles......self fulfilling prophesy?
There may be something to astrology....I like your "open mind" FA.
Rogue
interesting post from SI board....Natural Resource Stocks
To: Fillmore Hagan who wrote (25689) 6/9/2005 12:19:37 AM
From: SliderOnTheBlack Read Replies (1) of 25748
re:["I am not surprised that bonds rallied in the wake of the "capitulation" by Gross and Roach"]
I am sure there was significant short covering and that was part of the Hedge Fund mini-crisis, but I don't believe that was the major reason for the move and I'm not sure "capitulation" is the fair term... perhaps they've merely morphed from being idealists to realists ?
Consider what has quietly unfolded in the global economies and markets:
Great Britain, Australia and New Zealand now have Inverted Yield Curves.
The German 10 Year Bund Yield is below our falling 10 Year Yield.
German unemployment ranges from 10 to 20% depending on the State. All of Europe is slowing... No Votes on the adoption of the Euro Constitution.
Housing Bubbles in Great Britain, Australia and the USA... 2 of the 3 have already started to rollover.
GM just laid off 25,000 workers.
Downgraded Debt - just massively flooded the Junk Market.
The last Employment Numbers from the BLS were entirely the result of Birth/Death Rate Adjustments...literally Bogus.
No one has to remind threadsters here of the incredible Debt & Credit Bubble that has unfolded over the last few years.
There is no inflation...but, yet everything from Home Prices, to the Taxes & Insurance and Utility Bills that come along with a Mortgage, or Home Ownership - are all rising.
A huge hidden Tax Increase has evolved from Property Taxes escalating as a result of the Housing Bubble.
The Average American is neither buying, or selling his home... his wealth on paper has went up...but that is "paper" wealth and his realworld expenditures have ramped. Government Inflation Models use "rents" versus Ownsership costs... absolutely bogus and a classic "GIGO - garbage in = garbage out scenario.
Ramping Gasoline Prices hammer the working poor and the Middle Class. Heating & Cooling Bills are ramping as well with rising Energy Costs.
Food... everything from Milk, to Coffee, to Meat has increased rapidly... but, yet Inflation is firmly under control...
Pay no attention to the little man behind the curtain ~
Welcome to Fantasyland led by the Wizzard of Oz-span.
...just remember that it only took an inflation rate of 4%... yes, 4% was all it took to get the last Gold Bull rolling & we've got to be double that right here - right now... if the numbers weren't manipulated.
FNM is a Derivatives Ticking Time Bomb - still offloading $15 Billion each & every Month...the Fed can NOT raise rates much higher or FNM could trigger a Derivatives Daisy Chain Meltdown.
We allowed FNM to delve into SubPrime which was insane... and now as Greenspan "talks" about pricking the Housing Bubble... FNM is allowed to buy 40 Year Mortgage Paper !?!?!
That's like helping a Heroin Addict thru withdrawl by giving them Cocaine instead of Heroin.... they'll both ultimately kill you dead... and dead is dead.
FNM is Enron-Walking...
They're offloading $15 Billion a month in Old $hi^ Paper made up of Reckless Underwriting, Qualification Standards and Inflated Appraisals out the backdoor - while now buying 40 Year Paper & Subprime thru the Front !?!?!?...all the while Greenspan plays lip service to the Housing Bubble... ?
Greenspan has no intention of popping the Housing Bubble...because he knows he can't afford to.
He can't allow FNM to implode and trigger a Derivatives Crisis and the Housing Bubble and continued Refinance Activity is the key to sustaining Consumer Confidence and Spending... and given Consumer Spending is 2/3rds of GDP; with no "real" Job,or Wage Growth and a "0" Savings Rate... sustaining the Housing & Refi Bubble is the only thing keeping the Good Ship Bubbletop afloat.
Look to Japan to see how low Rates can go... "0" and what they call "Quantative Easing."
Japan increased liquidity from Y 5,000bn in 2001 to Y 30-35,000bn presently....and yet the Nikkei has cratered.
Let the Dow catch a little Nikkei Deja Vu -Flu and Bill Gross's Dow 5,000 Call may look irrationally exhuberant before it's all over.
The World is awash simultaneously with Mountains of Bad Debt and Massive Liquidity. It is trying to manage historic paradigm shifts in Manufacturing, Industrial Growth, Commodity Demand and Currency & Political Alliance Shifts... throw in a War on Terrorism, Nuclear Tensions vis a vie Iran & North Korea; China Sabre Rattling Taiwan and Japan...and the odds of the World getting it all right - are rather slim.
China is the ultimate conundrum.
In a race to show off the New Modern China Miracle to the World at the 2008 Beijing Olympics...it still possesses massive corruption, a cratering Stock Market, a 3rd World Banking System with up to 50% non-performing loans and a social revolt building with a population that is multiples of the entire US population - still left behind and not too happy about it...
That the Fed can't raise rates past 3.5% tells us how damn fragile this economy and the markets really are.
- THAT is an important message.
I don't think Greenspan can raise rates if he wanted to... the Bogey Men in the Dark are just too Big... too Big too Fail and too Big to be bailed out.
Greenspan is also haunted by the memory of him going too far, for too long and triggering the last recession...which is being constantly refreshed via the media almost daily - so there is a lot of pressure for Greenspan to keep the markets happy and ease off the brake after one more .25bp hike...which may leave the door open for the winds of inflation.
Hence... rates will stay low and may go even lower yet in my opinion.
I've always thought of a 5-10% Position in Gold and/or Gold/PMstocks as a minimum "core" position... in this environment - that should probably be increased.
I sold a bit of what I've bought recently into stength and got stopped out of a bit here of late...but, am still calmly holding the majority of what I bought and am always looking for bargains and remain a Strong Buyer in this environment. I don't think we'll see HUI 150.... it's not impossible, but unless Gold breaks $400 -it's improbable. I think the bottom is in...and we're basing for a very significant run here.
I think the stage is being set for a run to $500 Gold before years end...and given what is unfolding in the World... HUI 350 within 12-15 months in in the Cards.
Don't be caught in less than a core position.... given Gold Prices there is still plenty of "value" out there... let alone if one looks at historic Dow:Gold Ratio's, or Oil:Gold ratio's.
I saw in that NY Times Article on Gold, that James Sinclair is a "marksman" (that makes 3 of us Roebear)...we should give credit where credit is due... I think he's got the Crosshairs on the Right Target for the next wave down in the US Dollar and the next Leg Up in Gold.
Watch the Foreign Central Bank Treasury Buying.
Carribean Hedge Funds don't & won't cut it...
Rogue
littlejohn.....read the article and let me know what part of the interview is crazy? "He's a nut" is just too simplistic for me.....seems like your killing the messenger cause maybe you don't like the message??
Let me know what part of the oil interview is "nuts"......then maybe I'd give you some crediblity! LOL!!
Rogue
Martin Weiss ....(another good read!)
Monday May 30, 2005
Dear Subscriber,
The price of oil is turning up again, surging last week by
more than 9% and blasting back over $50 per barrel.
Watch it carefully over the next few weeks. If last week's
rise is sustained, it will re-ignite recent fears of
inflation ... push long-term interest rates back up ...
light a fire under the gold market ... and put the kibosh
on the stock market rally.
No matter what, do everything you can to better understand
the powerful, fundamental forces likely to drive oil prices
higher this summer and beyond.
One person who's got his finger on the pulse of these
forces is my associate, Larry Edelson, contributing editor
to my Safe Money Report and editor of his Real Wealth
Report.
It was based primarily on Larry's fundamental insights that
we forecast $50 oil three years ago. It was also Larry who
urged me to recommend energy stocks to subscribers,
delivering stellar appreciation and high, steady yields.
MY INTERVIEW WITH LARRY EDELSON
MARTIN: Some observers are saying that last week's surge in
oil was a fluke. They say it was just an over-reaction to a
report from the U.S. Energy Department showing an
unexpected drop in the nation's oil stockpiles.
LARRY: Maybe. But anyone who gets hung up on the short-term
fluctuations in oil needs to have their brain reprogrammed.
If any market is being driven by long-term megatrends, it's
this one.
The long-term, virtually unstoppable surge in oil you see
in this oil price chart below is no fluke.
The acceleration in the price rises that began around July
of last year is no fluke.
And although nothing can be absolutely certain, last week's
surge that you see at the very right of the chart is also
consistent with the long-term, no-fluke pattern.
To view the chart, click here ...
http://www.martinonmonday.com/i/080/chart1.html
MARTIN: The long-term picture is clear. But tell us what
you think is going on right here and now.
LARRY: Let me sum up recent events: Oil jumps to $58.
There's some profit-taking and it falls back to $50, a
perfectly normal correction in a major bull market. Then,
it dips a bit below $50, and suddenly people think the
surge is all over!?
That's baseless. Right now, oil is within 10% of all-time
highs. Just a week or two more of the kind of price rises
we saw last week and you'd be back up there again ... or
beyond.
MARTIN: What's driving this?
LARRY: Exactly the same thing that's been driving it all
along -- China and India. Over two billion people. Nearly a
third of the world's population.
MARTIN: You were there recently. What did you see?
LARRY: First let me tell you what I didn't see. I didn't
see any signs whatsoever of a slowdown. And believe me, I
looked hard. I talked to central bankers, business
entrepreneurs, and people on the street. Back in the U.S.,
there's plenty of talk about threats to the Asian boom, and
there are some. But they're just not a factor right now.
China's GDP came in at 9.5% for 2004. The Chinese
authorities tried to cool it off a bit. But they failed to
do so.
MARTIN: Some people say it's a bubble. Do you agree?
LARRY: In some aspects, perhaps. But at the core of this is
the phenomenally rapid growth of the middle class in China
-- now close to 280 million people. That's almost the same
as the ENTIRE U.S. population, all classes included.
MARTIN: Why such rapid growth? And why do you think it will
continue?
LARRY: Because of the rapid diffusion of consumer
technology -- computers, cell phones, the Internet, cheap
automobiles.
You're a cultural anthropologist. So you know what I'm
talking about. When new technologies are introduced into a
relatively well-educated but low-tech society, they spread
like wildfire. The culture and the economy are transformed.
And the transformation gains a life of its own, at a
grass-roots level.
This transformation has little or nothing to do with
government edicts. The Chinese government didn't start it.
And they can't stop it.
MARTIN: Why so fast?
LARRY: Look at it this way. Just a few years ago, the
Chinese middle class -- and middle-class buying power –-
was isolated to a few pockets here and there. Now, it has
spread out and engulfed almost all major urban centers in
China.
A few years from now, it could double in size. And that
will still be only about half of the total Chinese
population. Suddenly, you'll have the equivalent of TWO
U.S. populations driving up the price of oil, industrial
metals, precious metals, and raw materials.
And that's just one country -- China. We see a similar (but
not identical) pattern in India, which is nearly as large.
This is causing huge demand for natural resources, taxing
Mother Earth to the max. Oil -- energy -- is the prime
target of that demand.
Will there be recessions and busts in Asia? Of course. But
this demand is not going away in your lifetime or mine.
It's going to be there for decades.
MARTIN: I just read about the huge shopping malls in China
in the New York Times. They say that, already, four
shopping malls in China are larger than the Mall of
America. Two are even bigger than the West Edmonton Mall in
Canada.
People are swarming into the malls. On just one day, one
mall in Southern China attracts about 600,000 people. They
come by car, by bus, by train. Isn't this the sign of an
economic bubble?
LARRY: If you told me those shopping malls were being built
here, in Europe, or in Australia -- I'd say yes, that's
another signal of a bubble in those industrialized
countries. But not in China. The living standards of an
estimated 400 million people in China have now been raised
above the poverty level, and they are just starting to
shop.
MARTIN: Are there any other signs that support your view?
LARRY: Many! Take steel production, for example. Steel is
at the core of a country's industrial machine. As long as
steel production is growing rapidly, you know that a major
industrial transformation is still underway and that its
momentum is bound to continue.
China alone has pushed world steel production up by
one-third in the last five years. Last year, China's steel
production exceeded the billion-ton threshold for the first
time. Overall, China now produces a whopping 27% of the
world's steel.
But even that's not enough steel to meet Chinese demand!
That's why China's now cutting deals with Australia,
Argentina, Brazil and many more countries -- they need
those countries' iron ore to make steel.
According to Vital Signs, the source of this chart below,
China's rise is as if all of Europe, Russia, and North and
South America were simultaneously to undertake a century's
worth of economic development in a few decades. Add in India
and Southeast Asia -- and you're talking double that!
MARTIN: So you've got massive growth in China and India.
Assuming that continues unabated, what does it mean for
oil?
LARRY: At the very minimum, it means you've established
firm underpinnings for a solid floor under the price of
oil.
MARTIN: At what level?
LARRY: Close to $50, give or take a few dollars in either
direction.
MARTIN: $50? A floor? That's quite amazing. For years, you
and I talked about $50 as the next major upside target for
a barrel of oil. Now, $50 is emerging as the floor for a
barrel of oil? Unbelievable ... and yet, at the same time,
very logical. But suppose it dips to the low $40s like some
people are saying.
LARRY: That won't change a thing. The key is: How long will
it stay there? A temporary dip means very little. This is a
classic "buy-the-dip" market.
MARTIN: You've talked about the demand. What about supply?
LARRY: We're running out! The world is running out of oil.
MARTIN: What about alternate energy?
LARRY: Still decades away from being a viable substitute.
The world was complacently coasting along with fossil fuels
for decades. Now we're going to pay the price -- a very
HIGH price.
MARTIN: Which alternate technology is closest?
LARRY: There are two -- solar and nuclear.
MARTIN: And windmills?
LARRY: A distant third. But the real sin of the supply
situation is that in the late 1990s, when everyone was
enamored with high tech, when investment bankers and
venture capital firms were throwing good money at the
dot-bomb companies, they ignored the basics, especially the
energy infrastructure. So capital was diverted from
necessity to greed.
Right now, China is trying to rectify that by mandating 10%
reliance on solar for all energy needs by 2008. That's just
a short three years away. So to the degree they can make
the mandate stick, it's going to drive up the demand for
solar technology.
MARTIN: Who's going to fulfill that demand?
LARRY: I'm looking at two companies right now. They'll be
in an upcoming issue of my Real Wealth Report.
NEAR-TERM OUTLOOK
MARTIN: Let's refocus on the near term. What's going to
happen this summer?
LARRY: The summer travel season is going to be bigger than
expected. We can already see preliminary signs of that –-
with an upsurge in airline travel. Higher fuel prices are
still not making a dent in travel. They have to go a lot
higher before that's going to happen.
But despite all the talk about big shortfalls in refining
capacity in this country, we still don't see hardly any
movement to add capacity. No new refineries have been built
in 25 years! Can you believe that? All those new autos on
the road, all those new SUVs and trucks, all that growth
over a 25-year time span ... and not one new gasoline
refinery!? It's crazy.
MARTIN: Supply is tight. We know that. But what could
change it?
LARRY: What could change it is a series of unexpected
events that make supply even tighter -- that throw us into
a panic. Panic shortages. Panic buying. Panicky energy
markets driving prices through the roof.
WORLD'S HOT SPOTS
MARTIN: I know you can't predict this, but name a few. If
it doesn't happen, we won't hold it against you.
LARRY: Start in the most obvious place -- Iraq. Oil
production in Iraq is still far below projections. Their
drilling and refining facilities are falling apart.
Dilapidated. Dangerous. In disarray.
But their oil ministry is between a rock and a hard place.
If they want to rebuild the oil industry infrastructure,
they have to stop oil production. But if they stop
production, they don't earn the money they need to rebuild
infrastructure.
MARTIN: So what are they doing?
LARRY: Nothing. Just pumping whatever they can. They need
the money NOW. So they're pumping oil now -- despite huge
waste. But it's not nearly enough because of the decaying
facilities. Besides, why invest big bucks in new rigs or
refineries if they could be blown up by insurgents at any
moment? It just doesn't make sense right now.
MARTIN: And beyond Iraq?
LARRY: Iran! I don't think you can rule out an attack by
the United States. But if Iran moves forward with nuclear
weapons development, which I suspect they will, you should
also keep your eyes open for a possible pre-emptive strike
by Israel.
Internally, Iran also has serious problems. The country is
boiling up toward a confrontation between the
fundamentalists and the reformists, which could be almost
as disruptive as the fall of the Shah.
Beyond Iran, nearly all of Central Asia is a tinderbox, on
the verge of a fundamentalist revolution. I'm talking about
former Soviet republics that are major sources of the
world's natural resources.
MARTIN: Bring that home to us. What does that mean for the
oil markets? What does that mean for gold and other
commodities?
LARRY: Even if there is no blow-up, it means more support
for the floor I told you about earlier -- not only a floor
near $50 for oil, but also a floor in the low $400s for
gold.
MARTIN: Please explain.
LARRY: Oil traders are afraid they could wake one morning
to the news of a major attack on an oil facility somewhere
in the world, driving crude up by $5, $10, even more.
Short-sellers are even more antsy. So that gives the market
buying support on any dips. No one wants to be out of the
market -- let alone short the market -- for any length of
time.
MARTIN: What else are you worried about?
LARRY: I'm worried about oil production in Venezuela, now
careening toward a confrontation with the United States.
I'm worried about production in Nigeria, on the verge of
another ethnic civil war. I'm worried about the Soviet
Union which, unlike Poland, the Czech Republic, or Hungary,
has had a very choppy transition to capitalism, a
transition that is now getting a lot choppier.
Plus, I'm watching the Spratly Islands in the South China
Sea. These islands encompass the third largest oil reserves
in the world -- under the ocean floor. But the entire
territory is in dispute.
It's claimed by China, Taiwan, and Vietnam. Parts are also
claimed by Malaysia and the Philippines. Japan and the U.S.
also have a big stake because the islands are smack in the
middle of the biggest oil shipping route in the world –-
the one through which oil flows from the Persian Gulf to
Japan and the West Coast of the Americas.
MARTIN: What could be the outcome?
LARRY: The area could be blocked off due to territorial
disputes, causing shipping delays. If world supplies were
abundant, no big deal. They'd work around it. But with
world supplies so tight, the impact could be dramatic.
MARTIN: This all sounds very volatile and a source of some
major windfalls for aggressive investors. But if you're
more conservative, what would you be buying right now?
LARRY: I like the Canadian royalty trusts, like Enerplus. A
nice 9% dividend yield. Great potential for capital
appreciation. Nothing is guaranteed. But this stock is like
an ATM machine. All they do is buy interests in solid
properties, collect royalties, and pay it out in dividends.
MARTIN: One final question. Where is oil headed? Ultimately.
LARRY: Go back to basics. When oil fell to $10 a barrel in
1998, it was the steal of a lifetime. That was less than 24
cents a gallon for oil and the equivalent of 51 cents for a
gallon of gas. Those prices hadn't been seen since 1973,
and the dollar has lost 95% of its purchasing power since
then.
It was artificially depressed because almost everyone was
investing in the stock market and technology and no one
cared about oil.
But a market that's depressed that much doesn't stay that
way for long. Soon, it explodes higher and makes up for
lost time very quickly.
Now, sure enough, the price of oil has jumped from $10 to
over $50. And even that's cheap. Fully adjusting the price
of oil for the depreciation in the dollar since 1973 means
oil should be close to $100.
MARTIN: Thank you for your insights.
Good luck and God bless!
Martin
Martin D. Weiss, Ph.D.
Editor, Safe Money Report
Chairman, Weiss Ratings, Inc
Rogue
Martin Weiss ....(another good read!)
Monday May 30, 2005
Dear Subscriber,
The price of oil is turning up again, surging last week by
more than 9% and blasting back over $50 per barrel.
Watch it carefully over the next few weeks. If last week's
rise is sustained, it will re-ignite recent fears of
inflation ... push long-term interest rates back up ...
light a fire under the gold market ... and put the kibosh
on the stock market rally.
No matter what, do everything you can to better understand
the powerful, fundamental forces likely to drive oil prices
higher this summer and beyond.
One person who's got his finger on the pulse of these
forces is my associate, Larry Edelson, contributing editor
to my Safe Money Report and editor of his Real Wealth
Report.
It was based primarily on Larry's fundamental insights that
we forecast $50 oil three years ago. It was also Larry who
urged me to recommend energy stocks to subscribers,
delivering stellar appreciation and high, steady yields.
MY INTERVIEW WITH LARRY EDELSON
MARTIN: Some observers are saying that last week's surge in
oil was a fluke. They say it was just an over-reaction to a
report from the U.S. Energy Department showing an
unexpected drop in the nation's oil stockpiles.
LARRY: Maybe. But anyone who gets hung up on the short-term
fluctuations in oil needs to have their brain reprogrammed.
If any market is being driven by long-term megatrends, it's
this one.
The long-term, virtually unstoppable surge in oil you see
in this oil price chart below is no fluke.
The acceleration in the price rises that began around July
of last year is no fluke.
And although nothing can be absolutely certain, last week's
surge that you see at the very right of the chart is also
consistent with the long-term, no-fluke pattern.
To view the chart, click here ...
http://www.martinonmonday.com/i/080/chart1.html
MARTIN: The long-term picture is clear. But tell us what
you think is going on right here and now.
LARRY: Let me sum up recent events: Oil jumps to $58.
There's some profit-taking and it falls back to $50, a
perfectly normal correction in a major bull market. Then,
it dips a bit below $50, and suddenly people think the
surge is all over!?
That's baseless. Right now, oil is within 10% of all-time
highs. Just a week or two more of the kind of price rises
we saw last week and you'd be back up there again ... or
beyond.
MARTIN: What's driving this?
LARRY: Exactly the same thing that's been driving it all
along -- China and India. Over two billion people. Nearly a
third of the world's population.
MARTIN: You were there recently. What did you see?
LARRY: First let me tell you what I didn't see. I didn't
see any signs whatsoever of a slowdown. And believe me, I
looked hard. I talked to central bankers, business
entrepreneurs, and people on the street. Back in the U.S.,
there's plenty of talk about threats to the Asian boom, and
there are some. But they're just not a factor right now.
China's GDP came in at 9.5% for 2004. The Chinese
authorities tried to cool it off a bit. But they failed to
do so.
MARTIN: Some people say it's a bubble. Do you agree?
LARRY: In some aspects, perhaps. But at the core of this is
the phenomenally rapid growth of the middle class in China
-- now close to 280 million people. That's almost the same
as the ENTIRE U.S. population, all classes included.
MARTIN: Why such rapid growth? And why do you think it will
continue?
LARRY: Because of the rapid diffusion of consumer
technology -- computers, cell phones, the Internet, cheap
automobiles.
You're a cultural anthropologist. So you know what I'm
talking about. When new technologies are introduced into a
relatively well-educated but low-tech society, they spread
like wildfire. The culture and the economy are transformed.
And the transformation gains a life of its own, at a
grass-roots level.
This transformation has little or nothing to do with
government edicts. The Chinese government didn't start it.
And they can't stop it.
MARTIN: Why so fast?
LARRY: Look at it this way. Just a few years ago, the
Chinese middle class -- and middle-class buying power –-
was isolated to a few pockets here and there. Now, it has
spread out and engulfed almost all major urban centers in
China.
A few years from now, it could double in size. And that
will still be only about half of the total Chinese
population. Suddenly, you'll have the equivalent of TWO
U.S. populations driving up the price of oil, industrial
metals, precious metals, and raw materials.
And that's just one country -- China. We see a similar (but
not identical) pattern in India, which is nearly as large.
This is causing huge demand for natural resources, taxing
Mother Earth to the max. Oil -- energy -- is the prime
target of that demand.
Will there be recessions and busts in Asia? Of course. But
this demand is not going away in your lifetime or mine.
It's going to be there for decades.
MARTIN: I just read about the huge shopping malls in China
in the New York Times. They say that, already, four
shopping malls in China are larger than the Mall of
America. Two are even bigger than the West Edmonton Mall in
Canada.
People are swarming into the malls. On just one day, one
mall in Southern China attracts about 600,000 people. They
come by car, by bus, by train. Isn't this the sign of an
economic bubble?
LARRY: If you told me those shopping malls were being built
here, in Europe, or in Australia -- I'd say yes, that's
another signal of a bubble in those industrialized
countries. But not in China. The living standards of an
estimated 400 million people in China have now been raised
above the poverty level, and they are just starting to
shop.
MARTIN: Are there any other signs that support your view?
LARRY: Many! Take steel production, for example. Steel is
at the core of a country's industrial machine. As long as
steel production is growing rapidly, you know that a major
industrial transformation is still underway and that its
momentum is bound to continue.
China alone has pushed world steel production up by
one-third in the last five years. Last year, China's steel
production exceeded the billion-ton threshold for the first
time. Overall, China now produces a whopping 27% of the
world's steel.
But even that's not enough steel to meet Chinese demand!
That's why China's now cutting deals with Australia,
Argentina, Brazil and many more countries -- they need
those countries' iron ore to make steel.
According to Vital Signs, the source of this chart below,
China's rise is as if all of Europe, Russia, and North and
South America were simultaneously to undertake a century's
worth of economic development in a few decades. Add in India
and Southeast Asia -- and you're talking double that!
MARTIN: So you've got massive growth in China and India.
Assuming that continues unabated, what does it mean for
oil?
LARRY: At the very minimum, it means you've established
firm underpinnings for a solid floor under the price of
oil.
MARTIN: At what level?
LARRY: Close to $50, give or take a few dollars in either
direction.
MARTIN: $50? A floor? That's quite amazing. For years, you
and I talked about $50 as the next major upside target for
a barrel of oil. Now, $50 is emerging as the floor for a
barrel of oil? Unbelievable ... and yet, at the same time,
very logical. But suppose it dips to the low $40s like some
people are saying.
LARRY: That won't change a thing. The key is: How long will
it stay there? A temporary dip means very little. This is a
classic "buy-the-dip" market.
MARTIN: You've talked about the demand. What about supply?
LARRY: We're running out! The world is running out of oil.
MARTIN: What about alternate energy?
LARRY: Still decades away from being a viable substitute.
The world was complacently coasting along with fossil fuels
for decades. Now we're going to pay the price -- a very
HIGH price.
MARTIN: Which alternate technology is closest?
LARRY: There are two -- solar and nuclear.
MARTIN: And windmills?
LARRY: A distant third. But the real sin of the supply
situation is that in the late 1990s, when everyone was
enamored with high tech, when investment bankers and
venture capital firms were throwing good money at the
dot-bomb companies, they ignored the basics, especially the
energy infrastructure. So capital was diverted from
necessity to greed.
Right now, China is trying to rectify that by mandating 10%
reliance on solar for all energy needs by 2008. That's just
a short three years away. So to the degree they can make
the mandate stick, it's going to drive up the demand for
solar technology.
MARTIN: Who's going to fulfill that demand?
LARRY: I'm looking at two companies right now. They'll be
in an upcoming issue of my Real Wealth Report.
NEAR-TERM OUTLOOK
MARTIN: Let's refocus on the near term. What's going to
happen this summer?
LARRY: The summer travel season is going to be bigger than
expected. We can already see preliminary signs of that –-
with an upsurge in airline travel. Higher fuel prices are
still not making a dent in travel. They have to go a lot
higher before that's going to happen.
But despite all the talk about big shortfalls in refining
capacity in this country, we still don't see hardly any
movement to add capacity. No new refineries have been built
in 25 years! Can you believe that? All those new autos on
the road, all those new SUVs and trucks, all that growth
over a 25-year time span ... and not one new gasoline
refinery!? It's crazy.
MARTIN: Supply is tight. We know that. But what could
change it?
LARRY: What could change it is a series of unexpected
events that make supply even tighter -- that throw us into
a panic. Panic shortages. Panic buying. Panicky energy
markets driving prices through the roof.
WORLD'S HOT SPOTS
MARTIN: I know you can't predict this, but name a few. If
it doesn't happen, we won't hold it against you.
LARRY: Start in the most obvious place -- Iraq. Oil
production in Iraq is still far below projections. Their
drilling and refining facilities are falling apart.
Dilapidated. Dangerous. In disarray.
But their oil ministry is between a rock and a hard place.
If they want to rebuild the oil industry infrastructure,
they have to stop oil production. But if they stop
production, they don't earn the money they need to rebuild
infrastructure.
MARTIN: So what are they doing?
LARRY: Nothing. Just pumping whatever they can. They need
the money NOW. So they're pumping oil now -- despite huge
waste. But it's not nearly enough because of the decaying
facilities. Besides, why invest big bucks in new rigs or
refineries if they could be blown up by insurgents at any
moment? It just doesn't make sense right now.
MARTIN: And beyond Iraq?
LARRY: Iran! I don't think you can rule out an attack by
the United States. But if Iran moves forward with nuclear
weapons development, which I suspect they will, you should
also keep your eyes open for a possible pre-emptive strike
by Israel.
Internally, Iran also has serious problems. The country is
boiling up toward a confrontation between the
fundamentalists and the reformists, which could be almost
as disruptive as the fall of the Shah.
Beyond Iran, nearly all of Central Asia is a tinderbox, on
the verge of a fundamentalist revolution. I'm talking about
former Soviet republics that are major sources of the
world's natural resources.
MARTIN: Bring that home to us. What does that mean for the
oil markets? What does that mean for gold and other
commodities?
LARRY: Even if there is no blow-up, it means more support
for the floor I told you about earlier -- not only a floor
near $50 for oil, but also a floor in the low $400s for
gold.
MARTIN: Please explain.
LARRY: Oil traders are afraid they could wake one morning
to the news of a major attack on an oil facility somewhere
in the world, driving crude up by $5, $10, even more.
Short-sellers are even more antsy. So that gives the market
buying support on any dips. No one wants to be out of the
market -- let alone short the market -- for any length of
time.
MARTIN: What else are you worried about?
LARRY: I'm worried about oil production in Venezuela, now
careening toward a confrontation with the United States.
I'm worried about production in Nigeria, on the verge of
another ethnic civil war. I'm worried about the Soviet
Union which, unlike Poland, the Czech Republic, or Hungary,
has had a very choppy transition to capitalism, a
transition that is now getting a lot choppier.
Plus, I'm watching the Spratly Islands in the South China
Sea. These islands encompass the third largest oil reserves
in the world -- under the ocean floor. But the entire
territory is in dispute.
It's claimed by China, Taiwan, and Vietnam. Parts are also
claimed by Malaysia and the Philippines. Japan and the U.S.
also have a big stake because the islands are smack in the
middle of the biggest oil shipping route in the world –-
the one through which oil flows from the Persian Gulf to
Japan and the West Coast of the Americas.
MARTIN: What could be the outcome?
LARRY: The area could be blocked off due to territorial
disputes, causing shipping delays. If world supplies were
abundant, no big deal. They'd work around it. But with
world supplies so tight, the impact could be dramatic.
MARTIN: This all sounds very volatile and a source of some
major windfalls for aggressive investors. But if you're
more conservative, what would you be buying right now?
LARRY: I like the Canadian royalty trusts, like Enerplus. A
nice 9% dividend yield. Great potential for capital
appreciation. Nothing is guaranteed. But this stock is like
an ATM machine. All they do is buy interests in solid
properties, collect royalties, and pay it out in dividends.
MARTIN: One final question. Where is oil headed? Ultimately.
LARRY: Go back to basics. When oil fell to $10 a barrel in
1998, it was the steal of a lifetime. That was less than 24
cents a gallon for oil and the equivalent of 51 cents for a
gallon of gas. Those prices hadn't been seen since 1973,
and the dollar has lost 95% of its purchasing power since
then.
It was artificially depressed because almost everyone was
investing in the stock market and technology and no one
cared about oil.
But a market that's depressed that much doesn't stay that
way for long. Soon, it explodes higher and makes up for
lost time very quickly.
Now, sure enough, the price of oil has jumped from $10 to
over $50. And even that's cheap. Fully adjusting the price
of oil for the depreciation in the dollar since 1973 means
oil should be close to $100.
MARTIN: Thank you for your insights.
Good luck and God bless!
Martin
Martin D. Weiss, Ph.D.
Editor, Safe Money Report
Chairman, Weiss Ratings, Inc
Rogue
The Long Emergency ......(long but great article!)
What's going to happen as we start running out of cheap gas to guzzle?
By JAMES HOWARD KUNSTLER
http://toodumbtobepresident.com/rothschilds.html
A few weeks ago, the price of oil ratcheted above fifty-five dollars a barrel, which is about twenty dollars a barrel more than a year ago. The next day, the oil story was buried on page six of the New York Times business section. Apparently, the price of oil is not considered significant news, even when it goes up five bucks a barrel in the span of ten days. That same day, the stock market shot up more than a hundred points because, CNN said, government data showed no signs of inflation. Note to clueless nation: Call planet Earth.
Carl Jung, one of the fathers of psychology, famously remarked that "people cannot stand too much reality." What you're about to read may challenge your assumptions about the kind of world we live in, and especially the kind of world into which events are propelling us. We are in for a rough ride through uncharted territory.
It has been very hard for Americans -- lost in dark raptures of nonstop infotainment, recreational shopping and compulsive motoring -- to make sense of the gathering forces that will fundamentally alter the terms of everyday life in our technological society. Even after the terrorist attacks of 9/11, America is still sleepwalking into the future. I call this coming time the Long Emergency.
Most immediately we face the end of the cheap-fossil-fuel era. It is no exaggeration to state that reliable supplies of cheap oil and natural gas underlie everything we identify as the necessities of modern life -- not to mention all of its comforts and luxuries: central heating, air conditioning, cars, airplanes, electric lights, inexpensive clothing, recorded music, movies, hip-replacement surgery, national defense -- you name it.
The few Americans who are even aware that there is a gathering global-energy predicament usually misunderstand the core of the argument. That argument states that we don't have to run out of oil to start having severe problems with industrial civilization and its dependent systems. We only have to slip over the all-time production peak and begin a slide down the arc of steady depletion.
The term "global oil-production peak" means that a turning point will come when the world produces the most oil it will ever produce in a given year and, after that, yearly production will inexorably decline. It is usually represented graphically in a bell curve. The peak is the top of the curve, the halfway point of the world's all-time total endowment, meaning half the world's oil will be left. That seems like a lot of oil, and it is, but there's a big catch: It's the half that is much more difficult to extract, far more costly to get, of much poorer quality and located mostly in places where the people hate us. A substantial amount of it will never be extracted.
The United States passed its own oil peak -- about 11 million barrels a day -- in 1970, and since then production has dropped steadily. In 2004 it ran just above 5 million barrels a day (we get a tad more from natural-gas condensates). Yet we consume roughly 20 million barrels a day now. That means we have to import about two-thirds of our oil, and the ratio will continue to worsen.
The U.S. peak in 1970 brought on a portentous change in geoeconomic power. Within a few years, foreign producers, chiefly OPEC, were setting the price of oil, and this in turn led to the oil crises of the 1970s. In response, frantic development of non-OPEC oil, especially the North Sea fields of England and Norway, essentially saved the West's ass for about two decades. Since 1999, these fields have entered depletion. Meanwhile, worldwide discovery of new oil has steadily declined to insignificant levels in 2003 and 2004.
Some "cornucopians" claim that the Earth has something like a creamy nougat center of "abiotic" oil that will naturally replenish the great oil fields of the world. The facts speak differently. There has been no replacement whatsoever of oil already extracted from the fields of America or any other place.
Now we are faced with the global oil-production peak. The best estimates of when this will actually happen have been somewhere between now and 2010. In 2004, however, after demand from burgeoning China and India shot up, and revelations that Shell Oil wildly misstated its reserves, and Saudi Arabia proved incapable of goosing up its production despite promises to do so, the most knowledgeable experts revised their predictions and now concur that 2005 is apt to be the year of all-time global peak production.
It will change everything about how we live.
To aggravate matters, American natural-gas production is also declining, at five percent a year, despite frenetic new drilling, and with the potential of much steeper declines ahead. Because of the oil crises of the 1970s, the nuclear-plant disasters at Three Mile Island and Chernobyl and the acid-rain problem, the U.S. chose to make gas its first choice for electric-power generation. The result was that just about every power plant built after 1980 has to run on gas. Half the homes in America are heated with gas. To further complicate matters, gas isn't easy to import. Here in North America, it is distributed through a vast pipeline network. Gas imported from overseas would have to be compressed at minus-260 degrees Fahrenheit in pressurized tanker ships and unloaded (re-gasified) at special terminals, of which few exist in America. Moreover, the first attempts to site new terminals have met furious opposition because they are such ripe targets for terrorism.
Some other things about the global energy predicament are poorly understood by the public and even our leaders. This is going to be a permanent energy crisis, and these energy problems will synergize with the disruptions of climate change, epidemic disease and population overshoot to produce higher orders of trouble.
We will have to accommodate ourselves to fundamentally changed conditions.
No combination of alternative fuels will allow us to run American life the way we have been used to running it, or even a substantial fraction of it. The wonders of steady technological progress achieved through the reign of cheap oil have lulled us into a kind of Jiminy Cricket syndrome, leading many Americans to believe that anything we wish for hard enough will come true. These days, even people who ought to know better are wishing ardently for a seamless transition from fossil fuels to their putative replacements.
The widely touted "hydrogen economy" is a particularly cruel hoax. We are not going to replace the U.S. automobile and truck fleet with vehicles run on fuel cells. For one thing, the current generation of fuel cells is largely designed to run on hydrogen obtained from natural gas. The other way to get hydrogen in the quantities wished for would be electrolysis of water using power from hundreds of nuclear plants. Apart from the dim prospect of our building that many nuclear plants soon enough, there are also numerous severe problems with hydrogen's nature as an element that present forbidding obstacles to its use as a replacement for oil and gas, especially in storage and transport.
Wishful notions about rescuing our way of life with "renewables" are also unrealistic. Solar-electric systems and wind turbines face not only the enormous problem of scale but the fact that the components require substantial amounts of energy to manufacture and the probability that they can't be manufactured at all without the underlying support platform of a fossil-fuel economy. We will surely use solar and wind technology to generate some electricity for a period ahead but probably at a very local and small scale.
Virtually all "biomass" schemes for using plants to create liquid fuels cannot be scaled up to even a fraction of the level at which things are currently run. What's more, these schemes are predicated on using oil and gas "inputs" (fertilizers, weed-killers) to grow the biomass crops that would be converted into ethanol or bio-diesel fuels. This is a net energy loser -- you might as well just burn the inputs and not bother with the biomass products. Proposals to distill trash and waste into oil by means of thermal depolymerization depend on the huge waste stream produced by a cheap oil and gas economy in the first place.
Coal is far less versatile than oil and gas, extant in less abundant supplies than many people assume and fraught with huge ecological drawbacks -- as a contributor to greenhouse "global warming" gases and many health and toxicity issues ranging from widespread mercury poisoning to acid rain. You can make synthetic oil from coal, but the only time this was tried on a large scale was by the Nazis under wartime conditions, using impressive amounts of slave labor.
If we wish to keep the lights on in America after 2020, we may indeed have to resort to nuclear power, with all its practical problems and eco-conundrums. Under optimal conditions, it could take ten years to get a new generation of nuclear power plants into operation, and the price may be beyond our means. Uranium is also a resource in finite supply. We are no closer to the more difficult project of atomic fusion, by the way, than we were in the 1970s.
The upshot of all this is that we are entering a historical period of potentially great instability, turbulence and hardship. Obviously, geopolitical maneuvering around the world's richest energy regions has already led to war and promises more international military conflict. Since the Middle East contains two-thirds of the world's remaining oil supplies, the U.S. has attempted desperately to stabilize the region by, in effect, opening a big police station in Iraq. The intent was not just to secure Iraq's oil but to modify and influence the behavior of neighboring states around the Persian Gulf, especially Iran and Saudi Arabia. The results have been far from entirely positive, and our future prospects in that part of the world are not something we can feel altogether confident about.
And then there is the issue of China, which, in 2004, became the world's second-greatest consumer of oil, surpassing Japan. China's surging industrial growth has made it increasingly dependent on the imports we are counting on. If China wanted to, it could easily walk into some of these places -- the Middle East, former Soviet republics in central Asia -- and extend its hegemony by force. Is America prepared to contest for this oil in an Asian land war with the Chinese army? I doubt it. Nor can the U.S. military occupy regions of the Eastern Hemisphere indefinitely, or hope to secure either the terrain or the oil infrastructure of one distant, unfriendly country after another. A likely scenario is that the U.S. could exhaust and bankrupt itself trying to do this, and be forced to withdraw back into our own hemisphere, having lost access to most of the world's remaining oil in the process.
We know that our national leaders are hardly uninformed about this predicament. President George W. Bush has been briefed on the dangers of the oil-peak situation as long ago as before the 2000 election and repeatedly since then. In March, the Department of Energy released a report that officially acknowledges for the first time that peak oil is for real and states plainly that "the world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary."
Most of all, the Long Emergency will require us to make other arrangements for the way we live in the United States. America is in a special predicament due to a set of unfortunate choices we made as a society in the twentieth century. Perhaps the worst was to let our towns and cities rot away and to replace them with suburbia, which had the additional side effect of trashing a lot of the best farmland in America. Suburbia will come to be regarded as the greatest misallocation of resources in the history of the world. It has a tragic destiny. The psychology of previous investment suggests that we will defend our drive-in utopia long after it has become a terrible liability.
Before long, the suburbs will fail us in practical terms. We made the ongoing development of housing subdivisions, highway strips, fried-food shacks and shopping malls the basis of our economy, and when we have to stop making more of those things, the bottom will fall out.
The circumstances of the Long Emergency will require us to downscale and re-scale virtually everything we do and how we do it, from the kind of communities we physically inhabit to the way we grow our food to the way we work and trade the products of our work. Our lives will become profoundly and intensely local. Daily life will be far less about mobility and much more about staying where you are. Anything organized on the large scale, whether it is government or a corporate business enterprise such as Wal-Mart, will wither as the cheap energy props that support bigness fall away. The turbulence of the Long Emergency will produce a lot of economic losers, and many of these will be members of an angry and aggrieved former middle class.
Food production is going to be an enormous problem in the Long Emergency. As industrial agriculture fails due to a scarcity of oil- and gas-based inputs, we will certainly have to grow more of our food closer to where we live, and do it on a smaller scale. The American economy of the mid-twenty-first century may actually center on agriculture, not information, not high tech, not "services" like real estate sales or hawking cheeseburgers to tourists. Farming. This is no doubt a startling, radical idea, and it raises extremely difficult questions about the reallocation of land and the nature of work. The relentless subdividing of land in the late twentieth century has destroyed the contiguity and integrity of the rural landscape in most places. The process of readjustment is apt to be disorderly and improvisational. Food production will necessarily be much more labor-intensive than it has been for decades. We can anticipate the re-formation of a native-born American farm-laboring class. It will be composed largely of the aforementioned economic losers who had to relinquish their grip on the American dream. These masses of disentitled people may enter into quasi-feudal social relations with those who own land in exchange for food and physical security. But their sense of grievance will remain fresh, and if mistreated they may simply seize that land.
The way that commerce is currently organized in America will not survive far into the Long Emergency. Wal-Mart's "warehouse on wheels" won't be such a bargain in a non-cheap-oil economy. The national chain stores' 12,000-mile manufacturing supply lines could easily be interrupted by military contests over oil and by internal conflict in the nations that have been supplying us with ultra-cheap manufactured goods, because they, too, will be struggling with similar issues of energy famine and all the disorders that go with it.
As these things occur, America will have to make other arrangements for the manufacture, distribution and sale of ordinary goods. They will probably be made on a "cottage industry" basis rather than the factory system we once had, since the scale of available energy will be much lower -- and we are not going to replay the twentieth century. Tens of thousands of the common products we enjoy today, from paints to pharmaceuticals, are made out of oil. They will become increasingly scarce or unavailable. The selling of things will have to be reorganized at the local scale. It will have to be based on moving merchandise shorter distances. It is almost certain to result in higher costs for the things we buy and far fewer choices.
The automobile will be a diminished presence in our lives, to say the least. With gasoline in short supply, not to mention tax revenue, our roads will surely suffer. The interstate highway system is more delicate than the public realizes. If the "level of service" (as traffic engineers call it) is not maintained to the highest degree, problems multiply and escalate quickly. The system does not tolerate partial failure. The interstates are either in excellent condition, or they quickly fall apart.
America today has a railroad system that the Bulgarians would be ashamed of. Neither of the two major presidential candidates in 2004 mentioned railroads, but if we don't refurbish our rail system, then there may be no long-range travel or transport of goods at all a few decades from now. The commercial aviation industry, already on its knees financially, is likely to vanish. The sheer cost of maintaining gigantic airports may not justify the operation of a much-reduced air-travel fleet. Railroads are far more energy efficient than cars, trucks or airplanes, and they can be run on anything from wood to electricity. The rail-bed infrastructure is also far more economical to maintain than our highway network.
The successful regions in the twenty-first century will be the ones surrounded by viable farming hinterlands that can reconstitute locally sustainable economies on an armature of civic cohesion. Small towns and smaller cities have better prospects than the big cities, which will probably have to contract substantially. The process will be painful and tumultuous. In many American cities, such as Cleveland, Detroit and St. Louis, that process is already well advanced. Others have further to fall. New York and Chicago face extraordinary difficulties, being oversupplied with gigantic buildings out of scale with the reality of declining energy supplies. Their former agricultural hinterlands have long been paved over. They will be encysted in a surrounding fabric of necrotic suburbia that will only amplify and reinforce the cities' problems. Still, our cities occupy important sites. Some kind of urban entities will exist where they are in the future, but probably not the colossi of twentieth-century industrialism.
Some regions of the country will do better than others in the Long Emergency. The Southwest will suffer in proportion to the degree that it prospered during the cheap-oil blowout of the late twentieth century. I predict that Sunbelt states like Arizona and Nevada will become significantly depopulated, since the region will be short of water as well as gasoline and natural gas. Imagine Phoenix without cheap air conditioning.
I'm not optimistic about the Southeast, either, for different reasons. I think it will be subject to substantial levels of violence as the grievances of the formerly middle class boil over and collide with the delusions of Pentecostal Christian extremism. The latent encoded behavior of Southern culture includes an outsized notion of individualism and the belief that firearms ought to be used in the defense of it. This is a poor recipe for civic cohesion.
The Mountain States and Great Plains will face an array of problems, from poor farming potential to water shortages to population loss. The Pacific Northwest, New England and the Upper Midwest have somewhat better prospects. I regard them as less likely to fall into lawlessness, anarchy or despotism and more likely to salvage the bits and pieces of our best social traditions and keep them in operation at some level.
These are daunting and even dreadful prospects. The Long Emergency is going to be a tremendous trauma for the human race. We will not believe that this is happening to us, that 200 years of modernity can be brought to its knees by a world-wide power shortage. The survivors will have to cultivate a religion of hope -- that is, a deep and comprehensive belief that humanity is worth carrying on. If there is any positive side to stark changes coming our way, it may be in the benefits of close communal relations, of having to really work intimately (and physically) with our neighbors, to be part of an enterprise that really matters and to be fully engaged in meaningful social enactments instead of being merely entertained to avoid boredom. Years from now, when we hear singing at all, we will hear ourselves, and we will sing with our whole hearts.
Adapted from The Long Emergency, 2005, by James Howard Kunstler, and reprinted with permission of the publisher, Grove/Atlantic, Inc.
(Posted Mar 24, 2005)
Rogue
The Long Emergency ......(long but great article!)
What's going to happen as we start running out of cheap gas to guzzle?
By JAMES HOWARD KUNSTLER
http://toodumbtobepresident.com/rothschilds.html
A few weeks ago, the price of oil ratcheted above fifty-five dollars a barrel, which is about twenty dollars a barrel more than a year ago. The next day, the oil story was buried on page six of the New York Times business section. Apparently, the price of oil is not considered significant news, even when it goes up five bucks a barrel in the span of ten days. That same day, the stock market shot up more than a hundred points because, CNN said, government data showed no signs of inflation. Note to clueless nation: Call planet Earth.
Carl Jung, one of the fathers of psychology, famously remarked that "people cannot stand too much reality." What you're about to read may challenge your assumptions about the kind of world we live in, and especially the kind of world into which events are propelling us. We are in for a rough ride through uncharted territory.
It has been very hard for Americans -- lost in dark raptures of nonstop infotainment, recreational shopping and compulsive motoring -- to make sense of the gathering forces that will fundamentally alter the terms of everyday life in our technological society. Even after the terrorist attacks of 9/11, America is still sleepwalking into the future. I call this coming time the Long Emergency.
Most immediately we face the end of the cheap-fossil-fuel era. It is no exaggeration to state that reliable supplies of cheap oil and natural gas underlie everything we identify as the necessities of modern life -- not to mention all of its comforts and luxuries: central heating, air conditioning, cars, airplanes, electric lights, inexpensive clothing, recorded music, movies, hip-replacement surgery, national defense -- you name it.
The few Americans who are even aware that there is a gathering global-energy predicament usually misunderstand the core of the argument. That argument states that we don't have to run out of oil to start having severe problems with industrial civilization and its dependent systems. We only have to slip over the all-time production peak and begin a slide down the arc of steady depletion.
The term "global oil-production peak" means that a turning point will come when the world produces the most oil it will ever produce in a given year and, after that, yearly production will inexorably decline. It is usually represented graphically in a bell curve. The peak is the top of the curve, the halfway point of the world's all-time total endowment, meaning half the world's oil will be left. That seems like a lot of oil, and it is, but there's a big catch: It's the half that is much more difficult to extract, far more costly to get, of much poorer quality and located mostly in places where the people hate us. A substantial amount of it will never be extracted.
The United States passed its own oil peak -- about 11 million barrels a day -- in 1970, and since then production has dropped steadily. In 2004 it ran just above 5 million barrels a day (we get a tad more from natural-gas condensates). Yet we consume roughly 20 million barrels a day now. That means we have to import about two-thirds of our oil, and the ratio will continue to worsen.
The U.S. peak in 1970 brought on a portentous change in geoeconomic power. Within a few years, foreign producers, chiefly OPEC, were setting the price of oil, and this in turn led to the oil crises of the 1970s. In response, frantic development of non-OPEC oil, especially the North Sea fields of England and Norway, essentially saved the West's ass for about two decades. Since 1999, these fields have entered depletion. Meanwhile, worldwide discovery of new oil has steadily declined to insignificant levels in 2003 and 2004.
Some "cornucopians" claim that the Earth has something like a creamy nougat center of "abiotic" oil that will naturally replenish the great oil fields of the world. The facts speak differently. There has been no replacement whatsoever of oil already extracted from the fields of America or any other place.
Now we are faced with the global oil-production peak. The best estimates of when this will actually happen have been somewhere between now and 2010. In 2004, however, after demand from burgeoning China and India shot up, and revelations that Shell Oil wildly misstated its reserves, and Saudi Arabia proved incapable of goosing up its production despite promises to do so, the most knowledgeable experts revised their predictions and now concur that 2005 is apt to be the year of all-time global peak production.
It will change everything about how we live.
To aggravate matters, American natural-gas production is also declining, at five percent a year, despite frenetic new drilling, and with the potential of much steeper declines ahead. Because of the oil crises of the 1970s, the nuclear-plant disasters at Three Mile Island and Chernobyl and the acid-rain problem, the U.S. chose to make gas its first choice for electric-power generation. The result was that just about every power plant built after 1980 has to run on gas. Half the homes in America are heated with gas. To further complicate matters, gas isn't easy to import. Here in North America, it is distributed through a vast pipeline network. Gas imported from overseas would have to be compressed at minus-260 degrees Fahrenheit in pressurized tanker ships and unloaded (re-gasified) at special terminals, of which few exist in America. Moreover, the first attempts to site new terminals have met furious opposition because they are such ripe targets for terrorism.
Some other things about the global energy predicament are poorly understood by the public and even our leaders. This is going to be a permanent energy crisis, and these energy problems will synergize with the disruptions of climate change, epidemic disease and population overshoot to produce higher orders of trouble.
We will have to accommodate ourselves to fundamentally changed conditions.
No combination of alternative fuels will allow us to run American life the way we have been used to running it, or even a substantial fraction of it. The wonders of steady technological progress achieved through the reign of cheap oil have lulled us into a kind of Jiminy Cricket syndrome, leading many Americans to believe that anything we wish for hard enough will come true. These days, even people who ought to know better are wishing ardently for a seamless transition from fossil fuels to their putative replacements.
The widely touted "hydrogen economy" is a particularly cruel hoax. We are not going to replace the U.S. automobile and truck fleet with vehicles run on fuel cells. For one thing, the current generation of fuel cells is largely designed to run on hydrogen obtained from natural gas. The other way to get hydrogen in the quantities wished for would be electrolysis of water using power from hundreds of nuclear plants. Apart from the dim prospect of our building that many nuclear plants soon enough, there are also numerous severe problems with hydrogen's nature as an element that present forbidding obstacles to its use as a replacement for oil and gas, especially in storage and transport.
Wishful notions about rescuing our way of life with "renewables" are also unrealistic. Solar-electric systems and wind turbines face not only the enormous problem of scale but the fact that the components require substantial amounts of energy to manufacture and the probability that they can't be manufactured at all without the underlying support platform of a fossil-fuel economy. We will surely use solar and wind technology to generate some electricity for a period ahead but probably at a very local and small scale.
Virtually all "biomass" schemes for using plants to create liquid fuels cannot be scaled up to even a fraction of the level at which things are currently run. What's more, these schemes are predicated on using oil and gas "inputs" (fertilizers, weed-killers) to grow the biomass crops that would be converted into ethanol or bio-diesel fuels. This is a net energy loser -- you might as well just burn the inputs and not bother with the biomass products. Proposals to distill trash and waste into oil by means of thermal depolymerization depend on the huge waste stream produced by a cheap oil and gas economy in the first place.
Coal is far less versatile than oil and gas, extant in less abundant supplies than many people assume and fraught with huge ecological drawbacks -- as a contributor to greenhouse "global warming" gases and many health and toxicity issues ranging from widespread mercury poisoning to acid rain. You can make synthetic oil from coal, but the only time this was tried on a large scale was by the Nazis under wartime conditions, using impressive amounts of slave labor.
If we wish to keep the lights on in America after 2020, we may indeed have to resort to nuclear power, with all its practical problems and eco-conundrums. Under optimal conditions, it could take ten years to get a new generation of nuclear power plants into operation, and the price may be beyond our means. Uranium is also a resource in finite supply. We are no closer to the more difficult project of atomic fusion, by the way, than we were in the 1970s.
The upshot of all this is that we are entering a historical period of potentially great instability, turbulence and hardship. Obviously, geopolitical maneuvering around the world's richest energy regions has already led to war and promises more international military conflict. Since the Middle East contains two-thirds of the world's remaining oil supplies, the U.S. has attempted desperately to stabilize the region by, in effect, opening a big police station in Iraq. The intent was not just to secure Iraq's oil but to modify and influence the behavior of neighboring states around the Persian Gulf, especially Iran and Saudi Arabia. The results have been far from entirely positive, and our future prospects in that part of the world are not something we can feel altogether confident about.
And then there is the issue of China, which, in 2004, became the world's second-greatest consumer of oil, surpassing Japan. China's surging industrial growth has made it increasingly dependent on the imports we are counting on. If China wanted to, it could easily walk into some of these places -- the Middle East, former Soviet republics in central Asia -- and extend its hegemony by force. Is America prepared to contest for this oil in an Asian land war with the Chinese army? I doubt it. Nor can the U.S. military occupy regions of the Eastern Hemisphere indefinitely, or hope to secure either the terrain or the oil infrastructure of one distant, unfriendly country after another. A likely scenario is that the U.S. could exhaust and bankrupt itself trying to do this, and be forced to withdraw back into our own hemisphere, having lost access to most of the world's remaining oil in the process.
We know that our national leaders are hardly uninformed about this predicament. President George W. Bush has been briefed on the dangers of the oil-peak situation as long ago as before the 2000 election and repeatedly since then. In March, the Department of Energy released a report that officially acknowledges for the first time that peak oil is for real and states plainly that "the world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary."
Most of all, the Long Emergency will require us to make other arrangements for the way we live in the United States. America is in a special predicament due to a set of unfortunate choices we made as a society in the twentieth century. Perhaps the worst was to let our towns and cities rot away and to replace them with suburbia, which had the additional side effect of trashing a lot of the best farmland in America. Suburbia will come to be regarded as the greatest misallocation of resources in the history of the world. It has a tragic destiny. The psychology of previous investment suggests that we will defend our drive-in utopia long after it has become a terrible liability.
Before long, the suburbs will fail us in practical terms. We made the ongoing development of housing subdivisions, highway strips, fried-food shacks and shopping malls the basis of our economy, and when we have to stop making more of those things, the bottom will fall out.
The circumstances of the Long Emergency will require us to downscale and re-scale virtually everything we do and how we do it, from the kind of communities we physically inhabit to the way we grow our food to the way we work and trade the products of our work. Our lives will become profoundly and intensely local. Daily life will be far less about mobility and much more about staying where you are. Anything organized on the large scale, whether it is government or a corporate business enterprise such as Wal-Mart, will wither as the cheap energy props that support bigness fall away. The turbulence of the Long Emergency will produce a lot of economic losers, and many of these will be members of an angry and aggrieved former middle class.
Food production is going to be an enormous problem in the Long Emergency. As industrial agriculture fails due to a scarcity of oil- and gas-based inputs, we will certainly have to grow more of our food closer to where we live, and do it on a smaller scale. The American economy of the mid-twenty-first century may actually center on agriculture, not information, not high tech, not "services" like real estate sales or hawking cheeseburgers to tourists. Farming. This is no doubt a startling, radical idea, and it raises extremely difficult questions about the reallocation of land and the nature of work. The relentless subdividing of land in the late twentieth century has destroyed the contiguity and integrity of the rural landscape in most places. The process of readjustment is apt to be disorderly and improvisational. Food production will necessarily be much more labor-intensive than it has been for decades. We can anticipate the re-formation of a native-born American farm-laboring class. It will be composed largely of the aforementioned economic losers who had to relinquish their grip on the American dream. These masses of disentitled people may enter into quasi-feudal social relations with those who own land in exchange for food and physical security. But their sense of grievance will remain fresh, and if mistreated they may simply seize that land.
The way that commerce is currently organized in America will not survive far into the Long Emergency. Wal-Mart's "warehouse on wheels" won't be such a bargain in a non-cheap-oil economy. The national chain stores' 12,000-mile manufacturing supply lines could easily be interrupted by military contests over oil and by internal conflict in the nations that have been supplying us with ultra-cheap manufactured goods, because they, too, will be struggling with similar issues of energy famine and all the disorders that go with it.
As these things occur, America will have to make other arrangements for the manufacture, distribution and sale of ordinary goods. They will probably be made on a "cottage industry" basis rather than the factory system we once had, since the scale of available energy will be much lower -- and we are not going to replay the twentieth century. Tens of thousands of the common products we enjoy today, from paints to pharmaceuticals, are made out of oil. They will become increasingly scarce or unavailable. The selling of things will have to be reorganized at the local scale. It will have to be based on moving merchandise shorter distances. It is almost certain to result in higher costs for the things we buy and far fewer choices.
The automobile will be a diminished presence in our lives, to say the least. With gasoline in short supply, not to mention tax revenue, our roads will surely suffer. The interstate highway system is more delicate than the public realizes. If the "level of service" (as traffic engineers call it) is not maintained to the highest degree, problems multiply and escalate quickly. The system does not tolerate partial failure. The interstates are either in excellent condition, or they quickly fall apart.
America today has a railroad system that the Bulgarians would be ashamed of. Neither of the two major presidential candidates in 2004 mentioned railroads, but if we don't refurbish our rail system, then there may be no long-range travel or transport of goods at all a few decades from now. The commercial aviation industry, already on its knees financially, is likely to vanish. The sheer cost of maintaining gigantic airports may not justify the operation of a much-reduced air-travel fleet. Railroads are far more energy efficient than cars, trucks or airplanes, and they can be run on anything from wood to electricity. The rail-bed infrastructure is also far more economical to maintain than our highway network.
The successful regions in the twenty-first century will be the ones surrounded by viable farming hinterlands that can reconstitute locally sustainable economies on an armature of civic cohesion. Small towns and smaller cities have better prospects than the big cities, which will probably have to contract substantially. The process will be painful and tumultuous. In many American cities, such as Cleveland, Detroit and St. Louis, that process is already well advanced. Others have further to fall. New York and Chicago face extraordinary difficulties, being oversupplied with gigantic buildings out of scale with the reality of declining energy supplies. Their former agricultural hinterlands have long been paved over. They will be encysted in a surrounding fabric of necrotic suburbia that will only amplify and reinforce the cities' problems. Still, our cities occupy important sites. Some kind of urban entities will exist where they are in the future, but probably not the colossi of twentieth-century industrialism.
Some regions of the country will do better than others in the Long Emergency. The Southwest will suffer in proportion to the degree that it prospered during the cheap-oil blowout of the late twentieth century. I predict that Sunbelt states like Arizona and Nevada will become significantly depopulated, since the region will be short of water as well as gasoline and natural gas. Imagine Phoenix without cheap air conditioning.
I'm not optimistic about the Southeast, either, for different reasons. I think it will be subject to substantial levels of violence as the grievances of the formerly middle class boil over and collide with the delusions of Pentecostal Christian extremism. The latent encoded behavior of Southern culture includes an outsized notion of individualism and the belief that firearms ought to be used in the defense of it. This is a poor recipe for civic cohesion.
The Mountain States and Great Plains will face an array of problems, from poor farming potential to water shortages to population loss. The Pacific Northwest, New England and the Upper Midwest have somewhat better prospects. I regard them as less likely to fall into lawlessness, anarchy or despotism and more likely to salvage the bits and pieces of our best social traditions and keep them in operation at some level.
These are daunting and even dreadful prospects. The Long Emergency is going to be a tremendous trauma for the human race. We will not believe that this is happening to us, that 200 years of modernity can be brought to its knees by a world-wide power shortage. The survivors will have to cultivate a religion of hope -- that is, a deep and comprehensive belief that humanity is worth carrying on. If there is any positive side to stark changes coming our way, it may be in the benefits of close communal relations, of having to really work intimately (and physically) with our neighbors, to be part of an enterprise that really matters and to be fully engaged in meaningful social enactments instead of being merely entertained to avoid boredom. Years from now, when we hear singing at all, we will hear ourselves, and we will sing with our whole hearts.
Adapted from The Long Emergency, 2005, by James Howard Kunstler, and reprinted with permission of the publisher, Grove/Atlantic, Inc.
(Posted Mar 24, 2005)
Rogue
wantoberich...My father worked in those GM plants in Janesville in the 1980's. I've done some speculating in real estate in the state of Wisconsin. There were some great bargains around 1991-1996.
There may be some bargains again someday.....
Where do you live at now?
Rogue
Janseville, Wi....Have they announced that the GM plants there will close yet? Are you looking to play "vulture" in the area if that happens?
There probably will be some real giveaways in that area if that happens.
Rogue
I would imagine that if a killer tsunami wave rolled into the Florida coast......that might put a little damper onto the Florida real estate bubble.
That could never happen though......right???
Rogue
It already is messy. Iran has already sold 200 BILLION dollars of forward oil production to China.
We better be real careful about doing anything funny with Iran. It could be a real disaster.
Rogue
I agree CPST looks like the more solid speculation.
What sort of intrigues me about PRCS is that Heartland Value Fund is the largest institutional holder with 1,000,000,000 share or 1.9% of the outstanding.
These guys are pretty solid deep value players and over the years I've made some really good capital gains following their picks and mostly buying them when they were under deep distress. I've even gone so far as to call those guys in Wisconsin and talk to the portfolio managers about their severely underperforming picks .....and kind of "picked their brain". You've got to be "sly" about how you talk to them. I always wanted to get a feel if they were going to dump or stay with/and/or add to their laggerds in their Value Funds.
Rogue
PRCS and CPST.......I do believe at some point in the near future they will have made a very long-term bottom. At what price I don't know......they could ultimately still go much lower. But I do believe they have huge home-run "potential" 2-3 years out.
Although they have lot's of cash on the balance sheet they have a very high cash-burn rate. How long can the cash last until they go broke or run break-even??
I don't own any yet.....I really kind of hope they decimate them both so I can make one of my "patented" "large block of stock" long-term speculative bets way down low.
Rogue
www.theinternationalforecaster.com
Train Wreck of the Week
By Bob Chapman
June 4 2005
In a previous issue we discussed that over the last 25 years the destruction of General Motors and Ford were being executed deliberately. Operating losses in the first quarter from automotive operations including special items was $2 billion. Those losses were offset by gains of $729 million at GMAC, GM’s financial arm. GM said it had a positive cash flow of $2 billion, that was then “adjusted” and they announced a negative $2 billion cash flow. That was not the truth. Bloomberg said GM had a first quarter, one-time special charge cash flow loss of $1.7 billion to cover the severing of ties to Italian car manufacturer Fiat, and an additional negative cash flow of $3 billion on regular operations, for an astounding negative $4.7 billion cash flow during the first quarter alone. That means overall reserves of $25 billion could be exhausted in 15 months. Quarter to quarter GM produced 12% fewer vehicles, and sales fell 5%. We expect that trend to continue as the US and world economy slows and competitors with no pension and health benefits make inroads into GM’s market share. As GM’s situation gets more difficult, they have stated that they would draw $6 billion in cash over the next 18 months from a $20 billion fund set up to provide for retired US union workers and their dependents. They would loot the funds in the health-care trust. This is what American steel companies did prior to their bankruptcy in the 1980s and 90s. The result was retired workers ended up with no health care benefits.
The response from the investment banking industry is to break up GM into pieces. For starters shut four assembly plants and put 30,000 out of work. Eliminate the Buick line and reduce health-care benefits and cut off laid-off workers from benefits. That will be accompanied by a plan to eliminate production of one million cars and trucks as excess capacity, that is as China exports 300,000 cars to the US in 2007, manufactured by workers earning slave wages.
As this all transpires GM’s bonds are now rated junk and when they raise over $100 billion next year they will pay between 11% and 14% for the privilege of rolling its debt and getting fresh capital. That puts their borrowing status four levels below that of Brazil, which owes $500 billion. When the lunatic in the White House was asked about the situation he said, “GM is going to have to learn to compete.” The problem is that the playing field is not level. It is unbalanced to favor our foreign competitors to deliberately destroy our manufacturing capabilities and our markets. The collapse of GM could be the event that finally brings down our financial system and few have taken that into consideration.
Ford isn’t much better off. It has $172 billion in outstanding debt and has virtual junk status. First quarter profits were $1.21 billion but over 60% of that profit, which was 38% below the level of the comparable quarter a year ago, was earned by Ford Credit. Ford’s answer to Chinese inroads is to cut production. While this goes on at GM & Ford, suppliers in trouble such as Dana Corp, Delphi and Visteon are on the verge of collapse.
These are all revolting developments that can easily be solved by tariff trade barriers, and until they are put in force our economy will continue to be destroyed, so that elitist transnational corporations can get richer.
America is a superpower and China, Europe and Russia have the basics of also becoming superpowers. We will not be a superpower long if we continue to export our industrial capacity and technology to China with its huge pool of slave labor, which has so often become cannon fodder. Communist China is emerging as a major economic and military power and we are helping them attain that status. While these others stand in the wings we are rapidly depleting our domestic wealth and military strength in endless foreign conflicts for the profit of elitists who run our government. Our military is supposed to be defending our country and the interests of its citizens, not the interest of a select minority who happen to wield great power. These foreign conflicts are also being used to abet the growth of government beyond its constitutional limits. Our great defense has been replaced by a massive offensive war machine. We are not preventing lethal acts of warfare against us – we are the aggressors. This creates the problem of the sacrificing of our military personnel and their exploitation by a policy-making elite that has perverted the purpose of our military for profit. We are not defending our country, we are promoting global governance. This irrational commitment to being a globalist superpower is unsustainable economically and financially and it is another method of destroying our country. Along with our fiscal and monetary policies and the fiat nature of our currency, we are fast headed into bankruptcy. We have been betrayed by our government and the elitists who control it.
We again bring to your attention that military recruitment is bottoming out and it will get worse as our occupation of Iraq and Afghanistan wears on. Enlistment bonuses have been raised for the third time since last August, but to no avail. Thus an expanding military and diminished recruitment can only lead to a return of the draft. If drafted, your sons, daughters, grandsons and grand daughters will either go into the military or be compelled to participate in national service. Those not forced into the military would be drafted into AmeriCorps, homeland security, etc. Those on active duty would receive shorter service terms and more generous benefits. No matter which way you cut it, if you survive, you will lose three to five years of your life as we post WWII veterans did up until the 1970s. Those are some of the best years of your lives stolen by a maniacal group of megalomaniacs. Our federal government is utterly shameless in wasting our money and our lives. You should quickly prepare for such events. We already know of young people who are leaving the US. Many are headed to New Zealand, which will not extradite and Mexico, which may extradite. The presidential election should be won by socialist/’populist Andres Manuel Lopez Obradar and if he is elected, we do not believe he will extradite. If he did you could move to Paraguay, Uruguay, Argentina, Brazil or Venezuela. Remember what Major General Smealey Butler said in 1933, “War is a racket.”
Depending on the region and area 30% to 40% of real estate loans are now interest only loans. They are attractive due to low loan payments and the fact that buyers are speculating on higher sale prices. On a $320,000 mortgage payments are $1,367 versus $1,842 on a 30-year fixed. In some hot areas 55% of mortgages are interest only. Just five years ago they made up 2% of all loans. The risks are enormous and the market cannot rise forever.
The average Bay area luxury home is $2.7 million, up $329,000 from a year ago. California median prices were up 10.9% from a year ago with unit volume up 5.7%. Annualized value rose 17.2%. Y-t-d sales are up 8% with new houses up 13.3%. California median price rose $12,698 during April to $509.203. Condo prices were up 14.4% y-o-y to $401,830. The two-year gain is 49%.
The MBA says the total volume of new commercial mortgages totaled $31.4 billion in the first quarter, up $8.9 billion or 39.6% y-o-y. For April Freddie Mac’s Book of Business increased $18.3 billion, or 14.4% annualized to $1.548 trillion. The retained portfolio expanded $5.3 billion, or 9.8% annualized. Fannie’s book declined at a 54.3% annualized rate to $2.297 trillion, while its retained portfolio sunk at a 16.3% pace to $851.9 billion.
We reported on this before, but now the WSJ has decided to spill the beans. FedEx has voluntarily become a government snitch by turning over to our government names, addresses, credit card information and lists of when and where FedEx customers send and receive packages. This under the guise of fighting terrorism. Now FedEx has gone a step far, too far. They have granted US Customs inspectors access to the company’s database of international shipments, including names and addresses of shippers, package origin and destination, credit card information and payment details (names of banks), all things the US government is not entitled to outside a criminal investigation. We than assume the FBI, CIA, DEA, IRS and state and local police get some of the information they need or want via Patriot Act powers, supposedly aimed at suspected terrorist. Many illegal operations have been busted via this illegal procedure. We want criminals to get caught, but within constitutional bounds.
It wasn’t but four years ago the IRS went after credit cards issued by offshore banks, alleged to be used to evade taxes via MasterCard and Visa. Much to their credit American Express refused to cooperate. About 1,000 people out of millions were evading taxes. Thus, millions had their rights abridged to satisfy the IRS goons.
We stopped using FedEx three years ago when we first reported what they were doing. Even if you have nothing to hide you should not use FedEx because they are violating our rights. Use UPS, which still follows traditional rules. For that they deserve the business.
George W. Bush is an absolute lunatic who has to have obedience, disregards the facts and does whatever he pleases. He has cleared the CIA of most of its best people because they wouldn’t stand still for his lies. Porter Goss is a lapdog. George is a switch hitter and a pedophile and the White House is full of his kind. We can’t figure out if Carl Rove is the Queen or it’s George. Maybe we should ask Mr. Gannon who services them frequently.
George was elected by a rigged election twice, which were essentially coups. George is assisted by many other fascist elitists whose only God is money and power. Due to these predilections George has surrounded himself with massive security because he is afraid of a coup or assassination. Cheney is equally terrified. That grenade found in Georgia during George’s visit really put fear into him.
John Bolton is being put in place to militarize the UN and Paul Wolfowitz is going to bring Pentagon thinking to the World Bank. Both individuals emphasize militance. George and his neocons evidently believe that the UN and the World Bank are going to come to the assistance of his collapsing occupation in Iraq and Afghanistan and his collapsing economy. It is a little late for that, conspirators. The money is not available for either, never mind both. No matter which way you look George is stretched every which way. That means Wolfie will be pouring money into Iraq and Israel. Not loans, but grants, which are not repayable. If after members, like the Europeans complain, he will simply tell them he will invade them or at best make their lives miserable. That means the European elitists could back a coup or have George whacked. If you ever wondered why Stanley Fischer of MIT and the IMF is now a newly minted Israeli citizen and head of the Israeli Central Bank, you can now understand, the world bank is going to subsidize war and occupation and finance Israel as it expands throughout the region This is all an extension of US and Israeli looting as well. The move will be reminiscent of the Harvard sponsored looting of Russia after the Wall fell. The Office of Reconstruction and Stabilization will be the vehicle from this end to accumulate the loot. Those in charge will all be ex-Marxists. What a cozy den of thieves. Ideology means nothing – it is the money stupid.
Rogue
ROYL...Royale Energy, I had initially been a buyer at $7 and saw this drift all the way to $4.55 recently. As I saw price stabilization at $5 recently I "doubled up" on my position.
Sold 1/2 of my shares yesterday near yesterdays highs ($7.42).....if we see any continued strengh in price later today/tommorow(we should its bid higher after hours) I will sell my remaining 1/2 into it.
I think there is time to buy again after the current "news runup" has run it's course and burned out. We should be able to re-enter at much better prices.
JMHO.....
Rogue
Yahoo Finance.....It seems to be "degenerating" as a "one stop" stock research site. I concur with Lentinman on this.
Any suggestions as to an alternative to Yahoo Finance for "one stop" stock research??.....or is it still the best site out there for this???
Rogue