Wednesday, December 3, 2008

SAR #8338

Who will buy the products ?

Too Much of a Good Thing: Venice is underwater.

Dasher: GM's November sales fell 41% from the previous year. Toyota was down 34%, Honda 32%, and Ford 31%. Many had expected better sales given the drop in gasoline prices and the large incentives offered.

Straw, Last: Goldman Sachs is expected to report a $2 billion loss in its current quarter. Goldman has not yet announced how much Paulson is going to give them, nor who they will buy with the government's money.

Don't Use That Word: Okay, so it's a recession, not a depression. If what's happened isn't a crash, why are stocks down 50%? Consumers can no longer consume; their earning have stagnated for years and they cannot afford the debt they already have. Anybody notice that the system isn't working?

Population Pop: One day population growth will stop. The question is not so much when as how awful will it be?

Pick-Up-Sticks: The downturn in auto sales hurts not only the auto makers, the dealers, the suppliers - it hurts state and local governments. Car sales are the single largest source of sales tax revenue for most state, county and local governments. No car sales, no tax revenue, etc.

Contrary By Nature: Conventional wisdom now favors the idea that there is a deflationary depression ahead, But if Ben and Hank get their way and the banks begin lending the Government's $280 billion they are sitting on, won't that be inflationary? Especially when they lend it at 10 to 1? Isn't money created by issuing debt? Wouldn't $2.5 trillion new debt, new money, be just a tad inflationary?

Fair's Fair: FEMA abandoned New Orleans and the Katrina coast after barely starting the clean-up. Now it tells Texas, sorry but we're out of here. Texas counties cannot fund the continuing cleanup - they can't match the 25% FEMA requires for road, drainage, building and other repairs.

Hank Gliding: Mortgage delinquencies have increased more than 50% from year-ago levels. Repeat after Hank: "The bailout is working." Click those heels.

Oily Days: In 2005 the world's average petroleum production (C&C - that is, oil from oil wells, not shale etc.) was 73.7 mbd. By August of 2008 the average rate was 74.1 mbd. Tens of billions of dollars spent by the oil industry over these three years has increased production by one-half of one percent, while the price went from $50 to $147 and back to $50. Demand may have decreased a little, but a small cut in OPEC production will take care of that. Price is all about the last barrel.

"Steep Decline" Defined: Paul Krugman ticks off the key points: US indicators are in steep decline, worse than any Japan had in the '90s. Spending is in free-fall. Unemployment is headed to 10%, maybe higher, meaningful employment recovery may not occur before 2011 and the recession will last until then, if not beyond.

Heck of a Job: UT's John Sealy Hospital in Galveston used to be one of the nations 200 Level One Trauma Centers. Now, three months after Hurricane Ike, Galveston's injured are air-lifted to Houston's Ben Taub. Sealy used to handle 60,000 emergencies and 3,000 trauma patients a year. Now the number is zero. Damage from September's storm surge has not been repaired; the cost will be over $700 million, and the hospital only had $100 million in insurance coverage. Falling tax revenues are causing the system to reduce staffing, too. Tell me again about progress in Iraq.

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