Archive for the ‘US Economic Recovery’ Category

Wednesday is 9/11 retribution day

Tuesday, September 27th, 2016

Congress is set to adjourn this week and not return until after the election. President Obama has officially vetoed the bill allowing lawsuits by families of 9/11 victims to sue the government of Saudi Arabia for its role in funding and organizing the attack on the World Trade Center.

The Saudis have threatened to try to collapse the US debt market if Congress passes the bill, which probably will happen tomorrow.

Isn’t it odd that within sight of the World Trade Center, Lester Holt did not ask about that as an issue involving American Security and prosperity?

Food prices ARE going down

Tuesday, September 27th, 2016

Dropping food prices isn’t my overactive imagination or a local competitive price war. Bloomberg reports that retail food prices have dropped 5%. While some of that is due to increasing competition, it is mostly due to energy being a major factor in food production and distribution.

Trump “could have” hammered Hillary over the Keystone XL pipeline. He “should have” pointed out that Canadians are buying up our railroads and pipelines. I “would have” connected the fracking boom to lower utility bills, dropping food prices and people being able to afford to drive bigger cars – that are not death traps that burn our children to death in fiery crashes.

But he didn’t.

Broad Selloff

Friday, September 9th, 2016

No, not Hugh Hefner or Melania Trump

There have been lingering rumors that Deutsche Bank in Germany is on the verge of collapse. North Korea exploded another nuclear bomb. Hillary has a glint in her ear. The Congress is ready to provoke Saudi Arabia into economic conflict.

Of the 34 individual stocks I own, only one is up as of 11:00. If interest rates shoot up, stocks will go down. The good news is no income tax for this year! 💸

Coming to a money market near you…

Thursday, September 8th, 2016

Bloomberg reinforces that interest rates are controlled by global banks, not the US Federal reserve discount window

Get ready for a surge in LIBOR

Money Market funds have been in a bind since the 2008 panic. When Lehman failed, money market mutual funds were holding paper from the bankrupt Lehman, but had an obligation to not “break the buck” and pass along the losses. Doing so would create a panic among people who believed money market mutual funds are a riskfree place to park money. Unlike the similarly named money market funds at your bank, money market mutual funds are not insured. SIPC insurance only guaranteed the number of shares, not that the price would stay at $1.00

Recognizing the problem, the elves within the Bush Administration retroactively insured the money market mutual funds. The tradeoff was those funds would have to start paying for insurance from their earnings. With overnight interest rates approaching 0% 8 years later, it became impossible to create a net positive interest rate by investing only in treasury securities. The 5 year industry average for money market funds has yielded $0.00%

So the funds resumed taking risks like investing in AAA Commercial Paper, putting them right back in the same position that caused the problem in the first place.

October 14th, 2016 new SEC rules created in 2014 go into effect
SEC Explanation
Vanguard’s explanation

These funds will be split into three types

– retail funds for individuals that invest in things other than government securities will have provisions blocking withdrawals or charging fees if you want your money back during a liquidity crisis
– government only funds that don’t have the safeguards against sudden withdrawals
– institutional funds where the price is not guaranteed to stay at $1.00

It’s entirely possible that the government only funds will pay nothing, or even charge you to hold the money. According to the Bloomberg story, mutual funds are bailing on holding Commercial Paper as they expect a large portion of their $2.7 billion portfolio to evaporate when the 99% of people who are not paying attention learn about the changes.

With these funds no longer investing in Commercial paper, entities that borrow that way are seeing the costs go up as the commercial paper supply dries up, creating a larger difference between government paper and Commercial paper. Bloomberg says that explains why LIBOR has been going up all year, as banks go to each other for liquidity rather than selling commercial paper.

Some brokers have an alternative where excess funds in the brokerage account are deposited overnight in FDIC insured bank account, and brought back to the brokerage account only when you draw down the funds, but earn negligible interest.

No ¥en for the dollar

Wednesday, August 17th, 2016

The world doesn’t want dollars. Who could blame them? For several years the Federal Reserve has been convincingly indecisive about what it wants to do.

We have the simmering conflict in Syria, unfinished business in Iraq and Afghanistan, Russia warming up to Iran and Turkey, China preparing for war with somebody or anybody, Saudi Arabia in disarray, and Donald Trump wanting to bring back the 1960s of Fortress America. What, me worry?

As of today, $1 will buy you 99.9 yen. The smaller that number the weaker the dollar is. Counterintuitively, countries do not want a strong currency. If your money is too strong, your citizens buy more stuff from other countries, and your exports become too expensive, causing your export businesses to become unprofitable. Tourism falls off as people can’t afford hotels and restaurants. The Yen and the Swiss Franc are historically the currencies people run to if they get scared of the dollar.

When the dollar gets weak, the price of oil goes up. The US Stock market looks cheap, so money sloshes in, having nothing to do with companies making stuff and earning profits. Everything is connected to everything else to the point nothing makes sense.

The lie of “peak oil”

Tuesday, July 5th, 2016

The financial times of London is reporting the results of a global survey of oil reserves

http://www.ft.com/cms/s/0/7525f1dc-41d6-11e6-9b66-0712b3873ae1.html

The report estimates the world’s oil reserves at 2.1 trillion barrels, which is 70 years of production at current levels. In 1979, President Jimmy Carter stated as a fact that the world would run out of oil by 1990.

http://www.pbs.org/wgbh/americanexperience/features/primary-resources/carter-energy/

There will never be a “last barrel of oil”. If oil supplies slow down and go up in price, new and more effective techniques will be developed. Horizontal hydraulic fracking is still a relatively new tech, discovered by accident. As drillers use the technique, they learn ways to change the mixture of chemicals and drilling patterns to increase yields. As the price goes up, substitution will occur – natural gas has almost completely replaced oil in electricity generation in. The United States.

In the long run, oil is more valuable as petrochemicals to make plastics and fertilizer rather than powering cars, but market forces will sort that out if governments just stop trying to steer the boat.

The sky is falling!

Thursday, January 7th, 2016

While you were sleeping, George Soros declared the world’s financial system would implode today.

image

This is the index futures – they trade before the markets open and generally indicate where prices are headed at 9:30 ET. The futures can also trigger people to dump “market on open” orders to rush out the door first, which can then trigger stop loss orders to kick in.

WTI (Texas) crude dipped below $33.

Remember this?

The day that Congress passed the change to allow US crude to be sold internationally, the price difference between US oil and Brent (North Sea) crude vaporized. Back in August, there was a $5 a barrel difference.

I think the underlying reason is not George Soros, but the recent “we think we can control the climate” treaty which is essentially civilization committing suicide. That will show up in many different ways, like China exploding a hydrogen bomb, pretending that North Korea isn’t its puppet.

Walmart: Made in America

Friday, March 7th, 2014

Dirk Van did his callin portion of the show about the announcement that Walmart has pledged to buy $250 billion more in goods made in the United States over the next ten years.

Beyond the preposterous government like claim of “well, we’ll do it soon, until we don’t”, Dirk stated the reality without realizing it. Walmart now owns 25% of the grocery business in the United States with no plans to stop. Safeway just died, being acquired by Albertsons’s. In Chicago, Dominick’s just recently went under.

Food by its nature is largely domestically produced, with a few notable exceptions – like frozen seafood. As Walmart continues to grow their grocery business and open more stores, their purchases of US made goods will increase without changing a thing – but groceries are close to a zero sum market. Each customer buying groceries at Walmart used to buy them somewhere else. It won’t create any new jobs in the food making business

Quiznos Subs launches pasta dishes, prepares for bankruptcy

Monday, March 3rd, 2014

http://www.denverpost.com/business/ci_25241309/quiznos-preparing-file-bankruptcy-protection

Between the government push for “healthy” food, Obamacare and pressure for a $5 minimum wage, fast food for the masses is a risky business.

I think I’ve been in a Quiznos twice. They used to advertise on radio – there was one within probably 500 feet of my condo in Connecticut (but impossible to get to on foot because of no sidewalks)

I walked in to the place and it was empty. The guy behind the counter was exuding contempt that a customer had come in and was making him work. He was probably an unemployed Yale dropout – right at home working at a book store deliberating hiding Limbaugh’s books and listening to NPR. No eye contact, piercings on his face – he likely was even a vegetarian. My memory is the sub was okay, but way overpriced for what it was.

Trails to Rails

Monday, February 3rd, 2014

You may have noticed there is a blog category of “Trails to Rails”. It wouldn’t be shocking if you thought that was a typo. 😉

As the United States has deliberately been weakened by deindustrialization, one marker of “Progress” by the Left has been the rate at which destroyed railroads have been converted into bike paths (using gasoline excise tax dollars, of course).

A continuous flat deeded (or easement) strip of land connecting two communities is a very valuable resource – they have often been used for pipelines and fiber optic cables. Typically an easement will say something like if the railroad abandons the right of way for some period of time, the easement ends and control returns to the landowner.

Making a bike trail is a way to hold the rights to the ROW even though it no longer has tracks. The Rails to Trails contract typically has language allowing the railroad to tear up the bike path and put down a new roadbed and convert “Trails to Rails”.

Introducing the Wheeling and Lake Erie Railroad
http://www.wlerwy.com/index.php/history/

As was commonly done, large amounts of unprofitable trackage was spin off from the major railroads to small privately owned railroads. Freed of onerous union rules and operating rules designed only to protect obsolete jobs, these railroads typically could survive by giving local businesses service the big guys never could.

The Wheeling and Lake Erie has had a miracle. This thing called fracking came along. The railroad is springing back to life – hauling sand to West Virginia and Pennsylvsnia from The Midwest, and hauling the condensed hydrocarbons (Butane, Propane, etc) that are by products of natural gas production to Toledo, Ohio for further processing.

http://www.indeonline.com/article/20130813/NEWS/308139877/1994

Now there is real Progress!