Monday, June 30, 2008

SAR # 8182

Do you deserve most of what you have? Why?

Tact: In an unusual display of stupidity, even for the Bush administration, US Special Operations troops swept into Iraqi Prime Minister Maliki's hometown, killed one of his relatives and terrorized the village - while US negotiators were meeting with Maliki, trying to shove terms for a permanent US occupation down his throat.

Doomed! The Chairman of he Netherlands leading international bank, Fortis, expects a complete collapse of the US financial markets within a few weeks.

Nude, Descending Stairs: Officially - and who are these people, anyway? - we're in a bear market. Typically the Dow will fall 30% (it's already down 20%). But in the big ones - 2001, early 70's - the Dow lost 50%. We're not at the bottom. We're barely to the first landing and the stairstep down -rally up- down further -weaker rally cycle went all the way to 85% losses in the Big One. Keep one hand on the railing.

Get Serious: Will Iraq's oil resources be used to create a sustainable state, or will it reward Bush's cronies? No, really. The question is from the New York Times...

Acts of War: Bush has been conducting an illegal war (no, not Iraq, Iran!) for over six months, capturing Al Quds soldiers and hauling them to Iraq for tortu interrogation. They are also killing 'high value targets' in an attempt to destabelize Iran. Oh, and to drive the price of oil up even further. Don't forget the oil.

For Your Safety: The vigilant folks at Homeland Sicherheit Security want to use satellites to watch you, day and night, "for natural disasters and law enforcement purposes". As if Homeland Security wasn't a big enough disaster already.

Be Prepared: FDIC Chair Sheila Bair says the failure of a big US bank is "remote". But just in case, the FDIC is requiring banks with over $2 billion in deposits to provide the FDIC with information it would need calculate depositors payments, if.... Or when.

Stimulating: Even with free money in hand the US consumer fell ever further behind on their credit cards in May. Payment rates on credit cards are a leading indicator for future delinquency rates. Payment levels have been down for seven consecutive months.

Q& A: Will the Last Superpower Recognize In Time What We Must Do to Save the Planet? No.

Rephrasing Malthus: "Reconciling global economic growth, especially in developing countries, with the intensifying constraints on global supplies of energy, food, land, and water is the great question of our time... " says Jeffery Sachs. Least Sachs could have done was acknowledge his source. He concludes: "simplistic free-market optimism is misplaced" Has been for 20 years or more.

Bell Jar: The world's rapid expansion to 7 billion has been possible only because we were burning our way through an immense, one-time store of fossil energy. As the fuel becomes less available, economies will become smaller. So will populations.

Another Contest: Non-OPEC oil production will peak and begin to decline during the next 5 years. Already half of the world's oil producing countries are reporting declines in output. By 2015 OPEC nations will be unable to meet the world's increasing demands. War games are based on these simple observations.

Porn O'Graph: Promises, Promises, Saudi Promises.

Sunday, June 29, 2008

SAR # 8181

The financial system is collapsing due to bad debts
and we're turning to the Government for help?

Worth Less to Worthless? Citi closed Friday at $17.25, having lost two-thirds of its value in a year. These are our financial geniuses leaders.

New Math : It was a problem in translation. Apparently 500,000 really means 200,000 in Arabic. As in the Saudis are actually going to up production by 200,000 barrels a day, not the oft reported half million. A one quarter of one percent increase in world production levels. Wow.

Lack of Gravity: Please explain why the price of British houses can rise, even a tad, when their house sales are off 50%.

Delta Adds Fuel Fee To Frequent-Flier Tickets: In the latest fee to hit the airline industry, Delta Air Lines said Friday that it planned to begin charging a fuel surcharge of up to $50 for booking frequent-flier tickets under its awards program.

Sharecroppers: Most US cities are facing shortfalls in sales and real estate taxes receipts at the same time costs for supplies and energy are increasing. This forces a reduction in city services and maintenance. Meanwhile the population will tolerate no tax increases yet insists that the mayor or city council "Do Something". God knows what, prayer seems to be the only affordable option and it hasn't worked so far.

Confidence Building: After panicking customers and resturants across the nation, Federal officials now suspect tomatoes were not the source of the salmonella outbreak.

Directions, No Map: One reason we get confusing reports about the credit debacle, energy prices, housing problems and so on, is that we ask experts. The experts then explain in terms of their area of expertise - whether it is relevant or not. Checking with reality shows that leading up to the our current problems, the investment bankers had no idea what they were doing, the real estate markets were clueless, the Fed led us happily into another bubble, economists commited fraud regularly, and the leaders of the oil community didn't know oil was running out until they heard the slurping sound. Maybe we should give the experts a rest and try a little common sense.

Game, Set, Match: When Ilargi is wound up, he gives great rant. He was really, really wound up today.

Me, Too! Barclays is warning its clients to expect a worldwide financial collapse now that the Fed has lost all credibility. They expect a "nasty environment" that "is going to be very negative for financial assets." Particularly endangered are those who have taken investment advice from Barclays.

Long Division: Only 12.5 million vehicles will be sold in the US in June, a 25% decrease from last year. GM will sell 25% fewer than last year, while Ford and Chrylsler will each drop 30%. Honda's sales are up. America used to make the world's cars, now they can barely make the car payments.

Porn O'Grpah: Shady Sources Drying Up.

Saturday, June 28, 2008

SAR # 8180

"Investing on the basis of forecasts is a waste of time."
Albert Edwards, Equities Strategist, Societé General.

The first thing we do, let's kill all the lawyers: "That 6-year-old's going to sit in front of me, and I'm going to rip them apart. I'm going to make sure that the rest of their life is ruined, that when they're 8 years old, they throw up; when they're 12 years old, they won't sleep; when they're 19 years old, they'll have nightmares. And they'll never have a relationship with anybody." Defense Attorney James Fagan

The New Sub-Prime: As of May 08, 21% of 2006 vintage Alt-A loans are 60 or more days delinquent. The 2007's - not even a year old - are already at 18.5%. This will translate into big cuts in the ratings for derivatives based on these mortgages, which in turn will translate into big losses.

Trickle-Down: The GOP should take note of how the oil people do it. The trickle-down effect of higher oil prices is much more noticeable than the trickle-down effect of cutting taxes for the rich has been.

Things That Matter: It does not matter how much oil Russia, Libya, or the Saudis pump out of the ground. What matters is how much oil they put on the market for the rest of us to fight over. Exports come second after the home folks get their helping. Exports will decline faster than production. Read the text - after you look at the graph.

Contest: Send your guess as to the date and exact time of day on which the ice will disappear completely from the North Pole this year. Usual prize & conditions.

Imitation: Following the Supremes' lead, a federal appeals court refused to make the Bush administration follow the spirit or the the letter of the law. Why start now? The DC Court of Appeals ruled the EPA can wait until people are dying in the streets before deciding whether greenhouse gases and global warming are a threat.

Summer Programming: CBS carried a report predicting $200 a barrel oil in the next two years, with gasoline topping $7 a gallon, resulting taking 10 million cars off the road. It's a start.

Three Card Monte: There are more explanations for the increasing price of oil than my son has for not cleaning his room. But the decline in production from the world's largest oil fields is seldom mentioned. Declining fields lose about 4.5% of their total production every year, so new fields producing 3.9 mbd are required every year just to break even. Meanwhile demand continues to grow. Keep your eye on the ball.

Weight Watchers: New York state intends to cut its future energy use by 15% by economizing. I showed the article to my wife.

Safety First: The Bushwhackers, confronting a surge in solar power proposals, insists that - 25 years after Solar One was built on federal lands - there mus be a moratorium on new solar power plants on public lands (a) while the oil companies explore for oil (b) until after the miners tear up the land (c) while the cattle ranchers graze their stock for free (d) until the coal miners get through stripping the land (e) until an environmental impact study can be completed and (f) until hell freezes over.

Porn O'Graph: Sledding in the City.

Friday, June 27, 2008

SAR #8179

Our society runs on cheap oil,
and the days of cheap oil are over.

James Kunstler.

Bully: Libya says theirs is bigger than Uncle Sam's, and if the US insists on seizing assets in connection with a few acts of terrorism, it will reduce its oil production. Libya has Africa's largest oil reserves. Get used to this sort of blackmail brinkmanship; the US holds the losing hand.

Just Asking: What's the breakup value of General Motors? At $11 a share, how much would it take to find out? Less than $6.7 billion. Pocket change.

Daytime Soaps: Goldman Sachs has been busy chumming the water investment banks like Citigroup swim in; they say sell the stock short before the losses get worse. Ditto for GM. They're right. Late, but right. Meanwhile, Wachovia downgraded Goldman Sachs, but hired them to help find a new CEO and to give advice on Wachovia's loans.

Record Run: Guns, Rapists, Exxon, Electing Bush... My, it has certainly been a long time since the Supreme Court got one right.

Timing is Everything: Wisconsin, Washington, and California have filed against Countrywide, citing predatory lending practices. Why now? Because it keeps Bank of America from hiding Countrywide behind a separate limited corporation far away from BoA's checkbook.

So They Say: Deutsche Bank opines that the global economy will collapse when crude oil reaches $200 a barrel. (Cue the theme from Rocky.)

Borrowing from Peter to Pay Paul Dividends: General Motors Corp., the world's largest maker of unsold cars, may seek to borrow as much as $8 billion as GM is paying shareholders a dividend rate of 7.3% or so. Borrowing money at 10%+ and paying dividends of 7.3% is simply fiscal incompetence. Citigroup does the same thing, and so do many other financial institutions.

Boilerplate: (Deputy) (Assistant) Secretary __________ of the __________ Department/Agency in Washington, resigned after the Bush White House denied censoring reports on ____________ .

Threat or Promise? OPEC's President predicts oil prices will surpass $150 a barrel this summer, perhaps $170. And reaching ever further into the wallets of the world.

Porn O'Graph: Oil Exports Declined.

Thursday, June 26, 2008

SAR #8178

"Torture: If the detainee dies, you are doing it wrong."
CIA Lawyer Jonathan Fredman

Headline: Bush Administration To Leave Iraq Oil Deals Alone. Why is this news? Exxon gets free access to plunder Iraqi oil; that's what the war was about, why should Bush complain?

1 - 2 - 3 Infinity: One: The Royal Bank of Scotland foresees "a global equity and credit crash" this autumn. Two: Morgan Stanley bank sees a "catastrophic event" in the markets, soon. Three: Hedge fund guru John Paulson says global losses from the credit crisis will reach $1.3 trillion. Four: Moneyweek Magazine sees "the biggest financial storm of our lifetimes". Five: George Soros says what he always says. And most worrisome: Investment experts say the worst is over.

Simple Choices: The only way to save the bluefin tuna from extinction may be to domesticate the species - or say industrial fishing experts. Could we try not catching and eating them?

Speaking The Language: Countrywide claims it was not attempting to bribe anybody, it was just trying to incentivize members of Congress.

Say 10 Hail Marys: The Supreme Court has rewarded Exxon by cutting its fine for ruining Alaska by 80%, saying that the punitive damages were not part of common law. On that basis, I would think that the Emancipation Act was not constitutional, being a deviation from existing common law. Wouldn't want to change any laws, strict constructionism at work.

Half Again: Last winter natural gas cost $8 per dekatherm. Forecast for the 2008-9 heating season is $12 a dekatherm. If you're going to get hot under the collar about this, wait until next January when you can use the heat.

Bedfellow: Maybe Obama is making a change; GOP Senator Gordon Smith is running an ad in which he brags about working with Obama to improve fuel efficiency requirements. Don't tell Karl.

Hint: The United Arab Emirates, noted producers of oil and natural gas, are planning to transition to atomic energy within a decade. Wonder why?

Porn O'Graph: A crude (oil) bell curve, illustrated.

Wednesday, June 25, 2008

SAR #8177

When they're talking government bailout, remember:
the government gets its money from you.

Mortgaged: Following revelations of Senator Dodd's special treatment from Countrywide, 23 other senators have refused to disclose the details of their own mortgage deals. They claim that the details are private. Some claimed that in that they got their special deals from firms other than Countrywide, it isn't relevant how big a bribe they took.

Contingency Planning: The US economy needs cheaper and more abundant oil to assure its very survival. A significant portion of current needs could be satisfied by invading and occupying the Eastern Province of Saudi Arabia. This thought has probably occurred to the Saudi's, too.

Unitary Executive: Robert Mugabe lost the election but refuses to leave office. In a rigged runoff against the victor - who has been campaigning from a jail cell - Mugabe has explained that voting in the re-canvass will consist of ballots marked "Yes" and suicide notes. Unitary executive, unlimited power, no civil liberties. Yes, I'm still talking about Zimbabwe.

Peter & Paul: When Peter wants to buy Paul's house but doesn't have the required down payment, Paul gives BigHeartedCharity an amount equal to the down payment, BHC then gives Peter the money. Peter then who puts it down on the house and gets an FHA backed loan. IRS says it is a scam. Just an 'innovative financial product'.

Volunteers, Please: Research shows that general anesthesia during surgery may increase a patient's pain after they regain consciousness. The report didn't suggest how much pain the subjects felt when they had the same surgery without the anesthesia.

Relativity Theory: If you use 1000 gallons of gas a year, the greedy oil companies profit mongering has increased your gas bill about $1,000. If you own an average house, the greedy bastards on Wall Street have cost you abut $30,000 in the same time. So let's get the Fed, Fannie Mae, FHA and the GOP to bail out the fellas on Wall Street but harass the people who pump oil from a mile under the ocean, ship it half-way around the world, refine it and deliver it down the block from your house for 21 cents a cup.

Numbers: A Harvard study suggests that to return housing to 2000's levels of affordability "would take some combination of large price declines, interest rate reductions, rent deflation and unprecedented real income growth." Even then, houses would be out of reach for "vulnerable households" - those consisting of "low-wage workers, families with children and veterans."

If / Then: The House passed 'The Gas Price Relief for Consumers Act of 2008' which criminalizes "acting collectively" to limit the production and/or distribution of oil. Note that the Act does not seem to include "in the United States' when defining the crime. So if petrol stations in Sicily agree to fix the price of gasoline, the Justice Department sends in the Marines, right?

Crash Course: In two previous warmings at the begining of the present warm period, temperatures increased by as much as 7°F in a single year and over 15°F in a single decade. Yesterday would have been a good day to start doing something too lessen the chances of this happening to us.

Porn O'Graph: Peeking at (Saudi) Peak

Tuesday, June 24, 2008

SAR #8176

Modern civilization is based on the illusion
that we are what we possess.

Here and Now: There's lots of oil to be found in ANWR, they claim. We're going to pump more, the Saudi's say, 5 million barrels a day more. Someday. Deep off-shore fields will deliver millions of barrels, we're told. I've told all this to my car but it seems to want a few real gallons today, refuses to run on promises.

Viewpoint: I remember my father describing the excitement he felt when he bought his first Ford back in 1926. I doubt I'll feel nearly as excited when I buy one of the last ones in 2009.

China Shop Rules: Leading climate change scientist James Hansen thinks mankind should take the big oil and coal companies to court and charge them with felony theft and reckless endangerment for their cynical funding of the global warming deniers. They broke the environment, now they should at least shut up and let us try to fix it.

National Healthcare: I just got home with a month's supply of the three Rx's I must take, $12 poorer. Twelve bucks, because Wal-Mart, unlike Medicare, can negotiate lower prices from drug manufacturers. Tell me again why we can't have rational healthcare at a rational cost.

Three Card Monte: Everybody complains about Bernanke. Lots of blame falls on Greenspan. The Fed gets bad-mouthed. These people are not fools, good sir. It is quite possible that the Fed, under their tutelage, has done exactly what it was supposed to do: facilitate the transfer of wealth from the many to the few. Looked at that way, it's been a job well done.

Delta Queen: It's not that don't need the 10% of the crop that Iowa farmers have already lost, but the real tragedy is that they've lost 10% of their topsoil.

Trickery & Deceit: The housing bailout legislation designates Ginnie Mae as the issuer of the $300 billion (soo to be $2.5 trillion) in bailout-loans. Why Ginnie Mae and not Fannie or Freddie, whose job it might actually be? Ginnie Mae has explicit US government funding. That means direct access to taxes. The bad loans will go straight to Ginnie Mae and the banks' hands straight to your wallet. And after the first $300 billion there'll be the other $2 trillion waiting to be transfered from the wage earners to the investment bankers.

Tea Leaves: Petroleum exports from Norway, Mexico, Russia and Venezuela are declining. At its current rate of decline, Mexico will stop exporting oil by the fall of 2010. Mexico's export decline began to steepen four years after Cantarell peaked. If Saudi Arabia follows the same pattern, Saudi exports will start to crater in 2009. After they reach zero exports - vide England - they will quickly enter the market bidding for part of the shrinking supply of available exports.

Back to the Future: We are witnessing the culmination of the largest transfer of wealth in human history, resulting in the domination of the earth by a very small group of megalomaniacs.

Chance of Storms: Oil prices may come down a bit, for a while. But GM's shutterd truck and 4x4 plants are never reopening and the 8,000 laid-off are not going back to work for GM. Meanwhile Chrysler is going to “break some of the old paradigms” and Ford is going to transform itself. Translation: Downsizing of both vehicles and companies. If they survive.

Monday, June 23, 2008

SAR #8175

Continuous consumption of a finite supply is unlikely.

Collector's classic: Go down to the Ford place and put in an order for a 2009 F-150 pickup. It'll probably be the last of its kind. Put it in a barn with a tarp over it.

Self Incrimination : Curiously, Senator Dodd's housing bill requires the reporting of nearly all electronic transactions to Homeland Security. Not just Master card and Visa, but also PayPal and most other electronic sales. Why? And why is this hidden in a housing bill?

Extra (Non) Credit: Losses on Credit card debt, now around 5.7 percent, could go as high as 10 percent in the next 18 months

Sausage The Dodd-Shelby housing bill is an interesting document. First it limits banks losses to 10% - which certainly takes the risk out of investing; the $300 billion lost in subprime will become $30 billion for the banks and $270 billion for you. The rest - home equity loans, credit card debt, Alt-A and Option Pay ARMS - will drive losses over a trillion dollars. But don't worry about the banks, they'll accept their 10% losses. Oh, Bank of America wrote the bill for Senator Dodd, too. Full service banking

The Joke's On Us : Median US house price is about $200,000, headed South. So Congress, in all its wisdom, wants the FHA to insure houses costing over $700,000. Either they're trying to help people making $42,000 a year to get in over their heads, or there's some sort of payback going on here.

Yesterday, Upon the Stair: Trevor Paglen has taken pictures of 189 spy satellites that don't officially exist. Hope the enemy - whomever that may turn out to be - doesn't find out too.

Enlightenment: Basic capitalist economic theory is based on the assumption that each will try to maximize his or her advantage over others. Like much economic theory, this is not always true. Experiments show that people often act against their personal self-interest. How else to explain voting for Bush?

Squaring the Circle: Congressional leaders have come up with compromise wording in the wiretap legislation that will not just give retroactive immunity to telecommunications companies, but will retroactively make the crimes of Bush & Co. legal. Works both ways; now there's a precedent for making something retroactively illegal, too

Lost and Found: Terrorist may have gotten parts of nuclear weapons systems that the Pentagon has mislaid. Perhaps the Boy Scouts have found them; missing means they have no idea where they are.

Peer Review: Plagiarism, faked results, and outright fabrications make it into peer-reviewed scientific journals at the rate of about 1,000 a year, according to a research report in Nature, a peer-reviewed journal. This apparently is in addition to pharmaceutical company sponsored research.

False Dawn: Those who think new, more fuel efficient cars are going to solve the oil problem should bear in mind that about 12.5 million new vehicles will be sold this year. It will take 20 years to replace all the cars on the road today. We don't have 20 years.

Sunday, June 22, 2008

SAR #8174

Neither the housing crash nor the derivatives collapse
was a black swan; they are the result of perfectly
predictable human greed.

False Dawn: Declining auto travel and canceled airline flights will reduce US petroleum demand by about a million barrels a day(mbd). The US uses about 20 mbd. A 5% reduction in US use amounts to a 1% reduction in world demand. It is going to take a bit more than that to bring the price down to where we can go back to wasting it.

Looks Like Rain: Merrill Lynch forecast more cuts in dividends and earnings - by an average of 22% - by banks like Bank of America and Wachovia, as well as "regional banks", and that higher loan losses will persist through 2009.

Point Of View: Hunger wasn't a problem last year, when a billion were hungry. Hunger became a problem only when people rioted and damaged some property. Can't have that.. Suddenly there is a concern about the world food supply. Relax. The current global food system was designed by Archer Daniels Midland, Cargill, Monsanto, Nestle and friends, with the assistance of the World Bank, IMF and WTO. It is working just fine; the profits roll in, the rich get richer. For example, Cargill's profits are up 86%. And they are (still) the ones in charge.

Lack of Faith: Selling a stock short means betting the price is going to go down. More such bets (some 17 billion of them) are now outstanding. Most ever.

The States of the Economy: States that are required to have balanced budgets (and most do) are suffering as the slowing economy reduces tax revenue. Nevada is short $1 billion with a July 1st deadline. California is spending a billion dollars a month that it does not have. Pennsylvania must slash spending or raise taxes. Arizona will shut down government come July 1st. State tax shortfalls typically lag the economy by two years, so this parade has just gotten started.

Head Count: Researchers suggest that previous techniques for measuring the death toll in wars under-estimates the slaughter by a factor of three.

Not So Innocent A Fraud: Seems fast growing retailer Steve & Barry's was a bit disingenuous about its business model. Seems their tremendous potential was based not on sales - which were a tad less than break-even - but on the up-front payments (bribes?) they received from malls to come in and occupy vacant spaces, so the mall could look busy to other prospective occupants.

Fighting Financial Terrorists : The White House claims the Fed needs "sweeping new powers ... to access necessary information from financial institutions and to intervene to protect the system when it is threatened." Bush is seeking to extend Homeland Security's mandate to include wiretaps and email intercepts of all Wall Street communications, warrantless searches of investment banks, and to include gray suited bankers among those sent to undisclosed locations for corrective interrogations.

Doom: Wages in China are rising more than 15% a year. Fuel costs to ship goods to the US are up 17% this year. The old one, two. Soon China will be outsourcing to Sudan.

Saturday, June 21, 2008

SAR #8173

A very nasty period is soon to be upon us; be prepared.
Bob Janjuah , Royal Bank Of Scotland.

The US "We Don't Torture", Inc.: Lawrence Wilkerson, Colin Powell's former chief of staff, testified before Congress that over 100 ("Last time I checked it was 108.") detainees have died in US custody. Further, "we have murdered at least 25 people in detention."

It's Official: More than a dozen government agencies have joined to warn that global warming will cause more severe droughts, more severe and more frequent flooding, and that tornadoes and other once rare events will become commonplace. The White House is recalling the report and sending the authors to Guantanamo for re-education.

You Bet Your Life Profits: Ever consider that the people running Big Oil aren't building more refineries because they know they would run out of crude before the plant was fully depreciated? They are in business to make money, making gasoline is secondary.

California Leads The Way: Former UCLA economics professor Chris Thornberg says house prices must fall at least 40% from their peak to return to historic norms. He estimates prices will decay by 50% before the bottom is reached. Case-Shiller suggests California is half-way there.

Pour encourager les autres: Martha Stewart has been refused a visa to Britain because of her criminal convictions for obstructing justice. Fair notice, Mr. Bush.

Footnotes: On top of counting the decline in the market value of their bonds as a profit, now banks are changing the rules without telling the other side - the stockholders. Wells Fargo, for instance, used to write off home equity loans that were 120 days behind. Now it's 180 days, which will let them hide bad paper longer.

Days Of Our Lives: Saudi Arabia may announce an increase in production this weekend at the OPEC meeting. But they may not, too. Tune in tomorrow. But can they meet the promise with actual oil? Tune in this fall.

Wrong Place/Time: An eight-month investigation found dozens, perhaps hundreds, of men the U.S. has wrongfully imprisoned in Afghanistan, Cuba and elsewhere on the basis of flimsy or fabricated evidence, old personal scores or bounty payments. Innocent men, incarcerated, interrogated, and tortured for years. Not the worst of the worst, simply the unluckiest.

Poll: Less than half the people in the US think global warming is a serious problem. They were unable to include the folks in Iowa.

Required Reading: Robert Hirsch, energy expert and author of the Energy Department's 2005 report on peak oil says "we now don’t have 20 years; we don’t even have 10" before the onset of "a global recession that deepens each year for more than a decade," during which "populations are going to suffer beyond what most can imagine."

Developments: Investment in U.S. commercial real estate fell 70% in the first quarter from a year earlier, $48 billion vs. $158 billion.

Porn O'Graph: You can bank on it.

Friday, June 20, 2008

SAR #8172

"There is no longer any doubt as to whether the current
administration has committed war crimes. The only
question that remains to be answered is whether those
who ordered the use of torture will be held to account."

Major General Antonio Taguba

Most Excellent Question: If your investments are being managed by a company that has lost billions and billions of dollars, isn't it time to ask yourself "If this is the best they can do for themselves, why should I pay them for advice?"

Hi Yo Silver! Politicians want to open the US coastline to drilling for oil. A world-wide shortage of off-shore and deep-water drilling rigs makes this harmless pandering, for there are no deep-water rigs available. The existing fleet is booked solid for the next five years. Nearly all of the 75 deep-sea rigs scheduled for completion by 2012 are already booked until 2015 and some until 2020. So exploration off the US coast might start by 2015 or 2020. Assuming the US companies outbid the rest of the world for use of the rigs we could see gasoline from this effort by 2025.

Clues: Two Bear Stearns investment managers have been arrested for being silly enough to put into emails the truth about some dogs they were peddling. The crime is not in fleecing the customers, but in leaving the evidence around.

Hide And Seek: Iran has withdrawn $75 billion from European accounts and hidden them where the US cannot impound them.

Help Yourself: The European Central Bank (ECB), is trying to get banks to place newly created asset-backed derivatives with investors, instead of continuing to dump them on the ECB. It seems banks now design securities solely to park them with the ECB. Of €208 billion of recent securities, only about 3% have been placed with investors, the other 97% have gone straight to the central bank in exchange for perfectly good Euros.

Non-Starter: US coal producers claim they can power the world, but... But they fear a boom-bust cycle and won't invest in new projects. But they face more stringent environmental rules on mining. But US railroads cannot handle an increase in coal shipments. And the US has no spare port capacity to handle the coal if the railroads could get it there.

Mission Accomplished: There may not be gold in them there hills, but there's soon to be Exxon in those sand dunes. In Iraq. Finally the spoils of war will go to the invasion's sponsors..

Blackmail: When KBR was confronted with a billion dollars in overcharges for supplies and services in Iraq it simply said "Fine. Do without." and said if the bill wasn't paid the toops wouldn't be fed. The Army paid because "We could not let operational support suffer because of some other things.” Privatizing the Military was such a good idea.

Sledding : The US Energy Department's Hirsch Report said that peak oil was a fact, that the deline from peak oil would be a sudden, steep and scary ride. It claimed that efforts to get ready for these changes should start 10 years before the peak and might take 20 years of "accelerated effort" to attain alternative fuels. The report was issued in 2005. The process of getting ready should have started in 1995 to avoid “major economic upheaval”.

Porn O'Graph: Home improvement?

Thursday, June 19, 2008

SAR #8171

When Homeland Security talks about "security"
they really mean "control".

Take An Umbrella: The Royal Bank of Scotland is advising clients to expect a global stock crash and massive credit crunch within three months. July, August, September. Pick a date, place your bets.

Progress: The Iraqi Foreign Minister says that the new bilateral security agreement will end US contractors immunity from prosecution when they commit rape, murder and mayhem. The contractors, who outnumber and sometimes out-gun US military forces, are viewed as vital by US planners, and as thugs by the rest of the world.

Rare, Very Rare: Feedlots are loosing $139.56 a head on cattle for slaughter, and that's before the corn was flooded. Put some in the freezer today; probably a better investment than gold or oil over the next few months.

Growth Spurt: India and Iran, with the cooperation of Pakistan, have agreed to build a natural gas pipeline from Iran's gas fields to India's homes and factories. Washington opposes the pipeline because that gas is supposed to belong to the US... .

Benefits: Wachovia says it wants applicants to understand the key feature of "Pick-A-Payment" mortgages. The key feature is you don't have to pay your mortgage, but can live in a nice place rent free for quite a while before Wachovia kicks you out.

Joe Friday: World food prices were up 60% in the last year. World oil prices are up over 80% in the last year. Natural gas prices are up 160%. Them's facts.

The Fix Is In: In a desperate and doomed attempt to placate both industry and the population, Mexico has reached an agreement to fix the price of over 150 items, from tuna to coffee to beans, for the rest of 2008 as a way to fight inflation. Like supply side policies in the US, that this approach has never worked doesn't dim its luster.

Hat Dance: Mexico may increase crude production to 3 million barrels a day next year. May not, too.

Outlook Look Out: To sell it, it has to get to the store. Often once it's sold it has to be shipped to the customer. Shipping is generally a good gage of the economy. FedEx reports fewer shipments, much higher costs - through 2009. Buckle up, watch your step.

Oil Shale Salvation: No commercial oil shale project has yet to show a profit, or even that it might. Commercial production is several years and several major technical, environmental, political, and financial solutions away. But it'll save us one day. Meanwhile, let's drill in the National Parks.

Let Them Eat Cake: William Poole, former president of the St. Louis Federal Reserve says the Fed must be careful to keep from encouraging wage increases as the economy tanks and prices rise. Wouldn't do to let the proles get used to eating and all.

Going, Not Gone: Hedge fund head John Paulson sees global write-downs from the current mess exceeding $1.3 trillion. At that rate, we're still in the first quarter, a long way from half-time.

Porn O'Graph: Mortgage Equity Withdrawals: MEW.

Wednesday, June 18, 2008

SAR #8170

Do you ever wonder what the purpose
f the United States is?

Without FEMA: After three years since being damaged by Huricane Katrina, BP's long-delayed Thunder Horse platform in the Gulf of Mexico is finally pumping oil. Elsewhere, FEMA trailers are still in use in the wealthiest nation on earth.

On The Oil Bubble : What if it really is peak oil and there is no oil bubble, just supply, demand and shortages?

Relief: Saudi Arabia is increasing its petroleum output either 200,000 or 300,000 barrels a day - guesses vary. But India's Reliance refinery is contracting for 90,000 of those barrels - so immediately either one-third or one-half of the life-saving increase is gone. And the remaining 100,000 'new' barrels wouldn't impress my niece, much less the WTI spot market.

Geography Quiz: Locate Chad on the map. For extra credit, briefly explain why the US embassy in Chad has moved non-essential staff to Cameroon and suspended visa services.

Ker-Thunk - Inflation will prevent the Bank of England from cutting interest rates to bolster the economy, causing the UK housing market to simply crater. Deutsche Bank analyst Jim Reid says "The housing slump in the U.K. could easily turn into a crash".

What's The Score? Asked about the consequences of high energy prices, economist Dr. Stephen Leeb said simply: " I fear it is game over."
Is, Isn't, Do, Don't: The Senate, except for the one Senator who has any first hand knowledge of the subject, discussed the use of torture. Or the use techniques that are not torture because the US uses them and the US "does not torture" (phrase trademarked by the Bush administration). All I'd like to know is how many innocent people has the US tortured to get information they did not have? And isn't one too high a number?

Positive Spin: May housing starts were 32% below May 2007. Some see this as a cheerful development because it wasn't worse. On the other hand, it was over 50% below the levels of 2005 and 2006, reaching a 17 year low.

No Supper For Him: Brigadier-General James Ellery, Britian's top representative to the Coalition Provisional Authority in Baghdad asserts that alleviating a world petroleum shortage and keeping the Middle East out of Chinese hands were the prime reasons for the invasion of Iraq.

Hypocrisy: Do you find it odd that China and other totalitarian countries seek to insulate their citizens from the ravages of peak oil, but the democracies only care to protect the profits of the oil companies? Whatever happened to "We, the People?" Sold, on K street.

Delivery: There have been more-or-less successful trucker 'job actions' in England, Spain, Italy, Portugal, Thailand and others. How long before I-95 is a 5mp parade of semi's 3 abreast and 10 miles long? Or worse, they just park 'em? How long does Atlanta survive with no trucks?

Porn O'Graph: Housing Starts, or Not.

Tuesday, June 17, 2008

SAR #8169

The innovative in finance is generally just a new way
to do what has already been forbidden.

Pay to Play: Electricity prices are going up about 30% this summer to cover increased costs for fuels, as well as maintain the power grid and build new plants. Don't complain, it's for a good cause.

Double or Nothing: US airlines have gone from crisis to survival mode in the last six months. If petroleum goes to $150 a barrel, the industry will have to double ticket prices just to break even. And double ticket prices will kill air passenger traffic, so to survive they'll have to raise prices some more....

Under The Mattress: The Bank of England is more than a little upset that banks are hiding money under the mattress rather than lending it out - even to other banks. It is a sign of how much the banks, and The Bank, fear that the crisis is far from over.

Rabbits/Hats: From 2004 to July of 2007, the seven big Wall Street firms had $254 billion in profits. Since July 2007 they have written off $107 billion. In less than a year these titans of finance have lost half the profit they earned in three years. Explain investing to me again, I don't think I understand.

To Scale: It is not just the cod off the Atlantic Coast or the Salmon off the Pacific that have been done in by over-fishing. Nearly 80% of the world's fisheries are at risk from over-fishing, yet governments continue to subsidize fleets that are taking the last of the fish from the sea.

More Oil! The announced increase in Saudi oil production (a) will not solve the problem – it’s only 0.4% increase in world supply, and (b) while the dollar price per barrel may fall, rest assured the political price extracted by the Saudis has been enormous – even if secret.

Showdown: A bill pending in Kuwait would require disclosure of the country's actual reserves and limit production to 1% of those reserves. Kuwait claims reserves of 100 billion barrels, but internal documents cite only 48 billion barrels. Some suspect it may be as low as 24 billion barrels. Even if there were 100 billion barrels of proven reserves, the 1% limit would cut Kuwaiti production in half.

Promotion: Nearly ten million families now have negative equity in their houses. No family member can accept a promotion that requires a transfer because they cannot afford to sell the house. Will being single become a requirement for promotion in the years ahead?

Science, Explained: Competitive Enterprise Institute climate change denier Iain Murray: "A scientist who says that the atmosphere is warming, and cites certain physical processes, is still a scientist. A scientist who argues that people must take certain acts to avoid disaster has become a priest." Similarly: A plumber who tells you the pipes are leaking is a plumber. The plumber who tells you you need to replace the pipes is a voodoo doctor.

Put It On My Tab: There is suspicion that banks are not foreclosing overdue loans because they don't want to have to recognize the losses on their balance sheets. And if they hold them quietly undr the desk, then they can eventually dump them on one of the GSEs at par. Gentlemanly fraud.

Porn O'Graph: Real Estate Index Turnaround?

Monday, June 16, 2008

SAR #8168

We can deny reality a lot longer than is good for us.

Has Beens: Following 9/11 the government launched a "war on terror." Terrorists, however, have not been defined beyond Bush's circular claim that a terrorist is whomever he defines as a terrorist. It takes no evidence, no due process, no judicial review. The Bush administration is a greater threat to Americans than any handful of terrorists.

Stormy Weather: Another sharp spike in food costs is expected because of the floods in Iowa; be ready for more 'non-inflationary' increases in food prices. More hunger and starvation, too.

Father's Day Massacre? "We have confidence in the firm, in the leadership," Blackstone President Robert Kapito, 50, said of Lehman Brothers, which just fired two of its top executives. Meanwhile Lehman's remaining executives spent Father's Day hiding out in the board room. Speculation suggests the firm may be sold to a larger bank, soon.

In Tents Slum: Tent cities are springing up around major cities in California like the shanty-towns around major Third World cities. Go take a look.

Too Little, Too Late: Newly discovered oil fields will save us! So we're told. Brazil, for example, has found 87 gazillion barrels of oil in the deep ocean. But... Here's the but: But the Tupi field will not be operational until 2015. By 2020 it will have an output over over half a million barrels of oil a day. Great. in 12 years we will be saved by the addition of one half of one percent of a day's supply. The first 11 wells will cost $1 billion. Do the math.

Trend-setter: Schwarzenegger's $4.8 billion in education cuts has been translated into 20,000 teacher terminations in California. The creationists are pleased, for if there are no teachers, they won't be teaching evolution. Or math or citizenship. And it won't be just California either.

Quoted: "Our government has kept us in a perpetual state of fear - kept us in a continuous stampede of patriotic fervor - with the cry of grave national emergency." Douglas MacArthur

Banking 201: Learning about 'high finance' is like gawking at car wrecks, fascinating but scary. For some developers a bank will loan construction money and then, each month, "loan" the interest payment by adding it to the loan. Just like those Option ARMs. No one knows whether or not the developer is ever going to pay back the loan, or if he's even still in town.

All Balled Up: Thomas Friedman's flat earth is curving in on itself as the increase in oil prices balls up the brief era of cheap transportation that made globalization work. Globalization depended on cheap energy that will not be seen again. Think locally.

Come Fly With Us: Jeff Rubin, chief economist for CIBC, predicts that airline bankruptcies will lead to airports like Heathrow and Gatwick to be half-empty as oil prices over $225 a barrel force airlines to raise prices so much that customers cease flying, which will make airlines charge even more.

Rainy Days: Credit card debt is up 8% from a year ago. People are buying 'life settlements' (don't ask: I'll pay you Tuesday for a hamburger today). In 2007, 18% of US workers took a loan against their retirement plans, a 50% increase over 2006. Planning for retirement takes second place to pretending to be middle class.

Here's My Plan: Iran promises that if the Bush Administration - or the US client state of Israel - attacks Iran can and will shut down the Strait of Hormuz and its oil facilities with a swarm of Silkworm missiles. This used to be called Mutually Assured Destruction.

Porn O'Graph: A model for the world's oil production.

Sunday, June 15, 2008

SAR #8167

Some see no solution; worse, some see no problem.

Evidence? Defense Secretary Gates fired the top two USAF leaders last week as 'responsible' for the unauthorized shipment of live nuclear weapons across the country. Okay, they were "responsible"; who actually had the authority to commandeer US nuclear weapons?

Catastrophe: Way back in 2007, President Bush declared in National Security Presidential Directive 51 that the president had the authority to do whatever he damn well wants to in a "catastrophic emergency". Go ahead; Google 'NSPD 51' for yourself.

Big Whoop! S&P cut 19 different Residential Mortgage-Backed Securities backed by 2006 vintage Alt-A loans from the theoretical AAA given on issuance (because of monoline insurance) to BB or BBB-. This is an early step in the unwinding of all those fake triple-A's, yet CNBC and Wall Street didn't even glance at them. Yesterday's news.

Wrong Question: A fairly long rant followed the straw-man question "Why is capitalism failing us?" After trying to read it, I must conclude that the answer is: Because it's capitalism. Nothing has gone wrong; it is supposed to function this way.

Conservatives: Turns out the IPCC was a really conservative bunch. Way underestimated the effects of global warming on the arctic and on sea levels. Turns out that current data depicts a doubling in the amount of freshwater melt from Greenland into the North Atlantic originally predicted by the IPCC. I seem to remember something about freshwater in the North Atlantic slowing or shutting down the Gulf Stream....

Exit Strategy: Poorly controlled puppet Iraqi Prime Minister Maliki says that if the US insists on permanent bases and exemption from the law and complete control of Iraqi airspace, he will invite the US to get the hell out of Iraq.

Example: Opposition leader (and presumed president-elect) Tsvangirai was arrested on his return to Zimbabwe. He faces trial for treason and will be found guilty if he beats Mugabe in the June 27 run-off election. Think Carl Rove is taking notes?

Friendly Skies: A study done for the Business Travel Coalition suggests that the airline industry is "heading toward a catastrophe". How much will they be asking Congress for this time?

Next: As we've been forecasting for some time, mortgage delinquencies are starting to increase rapidly in middle and upper middle class neighborhoods where buyers used "affordability products" such as ARMs and Option ARMs to buy houses they couldn't afford. With interest rates headed up just as the resets start coming due, these unaffordable houses will become more unaffordable. Too bad, because these people can't afford to pay the mortgage but are stuck with negative equity and can't sell.

A Pound Of Cure: Oil's high prices will cause sufficient demand destruction to slow the economy substantially. This will lead to national hoarding by the haves and military adventures by the wants.

Bribery or Extortion? Zimmer Holdings (and others) conspired to manipulate the market for hip and knee replacement devices - which are mostly paid for by Medicare. Zimmer avoided trial by paying the Justice Department $169.5 million in fines, and by paying John once-upon-a-time-AG Ashcroft over $28 million to "monitor" the company for 18 months.

Porn O'Graph: It's a gas, Naturally.