MacroTwits Hour: Sunday Night Show 07 February 2010

• Posted by: Gregor Macdonald, February 8th, 2010 at 11:48 am
• Comments: 0

The full range of stocktwits.tv programming can now be taken through iTunes. See link at bottom of the StockTwits. TV front page. Regards, –Gregor

Safe in the Empire: Gregor Weekly Macro Note

• Posted by: Gregor Macdonald, February 6th, 2010 at 6:24 pm
• Comments: 0

All the current thinking is that the old thinking will enjoy one final day in the sun before the new thinking arrives, and replaces the current thinking. In other words, another bout of deflation before the inflation finally arrives. Or perhaps one last round of dollar strength, before gold heads above 2000 an ounce. Treasury yields lower again, before going higher. And so on. You get the idea. And this week in the world of sovereign debt the current thinking was that default (or perhaps just price crashes) in government debt would follow an orderly pattern. Small, peripheral countries would fall first. Then larger countries closer to the core would fall next. And finally, last to fall would be the debt of the United States. In other words, until the new thinking arrived, perhaps some years from now, you’d be safe in the debt of the Empire.

The idea that large systems contract, starting first with the outer reaches, is an understandable assumption and at first glance is as good a map as any for the future. This is especially true for those who need to hold a map, regardless of whether the map one is holding even covers your target region. (H/T Taleb). And yet, I think it behooves to consider other possibilities.

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Photo: Andy Warhol’s Empire, 1964. via MOMA.

Tickers: GLD, SLV, SPY

MacroTwits Hour: 31 January 2010

• Posted by: Gregor Macdonald, February 4th, 2010 at 10:41 pm
• Comments: 0

Subscribers and readers to this blog who may not have caught  the regular Sunday Night’s MacroTwits show may find this re-broadcast an easy on-ramp to a very good discussion of the problems that confront both US States, and European Union States. Readers may also find it helpful to know that the full range of stocktwits.tv programming can now be taken through iTunes. See link at bottom of the StockTwits. TV front page. Regards, –Gregor

Tickers: EU, MacroTwits, secession, States

Oil Looks Ornery: Model Portfolio Update

• Posted by: Gregor Macdonald, February 3rd, 2010 at 11:44 pm
• Comments: 0

For 14 months now those who’ve been bearish on the price of oil have pointed to very high oil inventories. And while it’s true that US inventories remain high, it’s quite clear that global inventories peaked between March and August of last year. Additionally, the price trend higher is now a year old. It started in the unsustainable depths of 35 dollar oil last Winter, which is not only too low to fund new exploration, but is too low to operate many high-cost existing fields around the world. Oil then derived strength from OPEC cuts, a strong rebound in Asian demand, and of course the peaking and then the tailing off of global inventories. As has been the case for years, US inventories only give you price outcomes on a 4-8 week basis. They are merely a piece of the whole.

I bring this up today because it’s possible the mid-Winter low in oil was just achieved in the past two weeks, as both fundamental data and policy threats converged to send most asset prices lower. If that’s the case, then the one month fall during January sets oil up to make its more typical double highs–one in late May, and another in late August. While I would agree that the US is always a good candidate to drive global demand lower, and, that OPEC does indeed sit on spare capacity, it’s not likely that here in early February that either of these factors…(this article continues for subscribers through the membership gateway, on the right side of this page)

Tickers: ENY, GLD, TBF

Readings: Tuesday 02 February 2010

• Posted by: Gregor Macdonald, February 2nd, 2010 at 8:19 pm
• Comments: 0

L.A. Takes a Shine to Another Owens Valley Product – Sun (solar): Phil Willon, The Los Angeles Times.

PHOTOS: Taking a shine to the Owens Valley’s sun:  Brian Vander Brug, The Los Angeles Times.

Paying Zero for Public Services (Zero Rupee Notes):Fumiko Nagano, blogs.worldbank.org.

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On Proliferation, Climate, and Oil: Solving for Pattern: Amory Lovins, Foreign Policy.

Free – Adventures on the Margins of a Wasteful Society: review of Katherine Hibbert’s new book, GreenFudge.org.

The Day the World Turned from Brown to Green: Chris Nelder, GetRealList.com.

-Gregor

Photo: Saguaro National Monument, by Ansel Adams courtesy The US National Archives on flickr

Tickers: California, Debt, Free, Green, Solar, Transition, Zero Rupee

Printing GDP: Gregor Weekly Macro Note

• Posted by: Gregor Macdonald, January 30th, 2010 at 10:26 pm
• Comments: 0

Friday’s GDP report was a headline stunner. It gave cover to the more bullish and conventional street analysts. And, it helped President Obama win the weekly newscycle. I found the attempts to downplay the result, typical among perma-bears, to be tiresome although in truth their analysis is accurate. In general, macro bears of which I am one overplayed their dissection of a 5.7% GDP print essentially for the following reason: the bounce-back on inventory rebuilding doesn’t require sleuth-y analysis. It was standard, and to be expected in the wake of trillions from both the FED and from Congress.

Some of the GDP prints during the Great Depression were much stronger than 5.7%. Of course, the country deflated for nearly three full years before FDR stimulus programs kicked in, and alot of the debt and general insolvency had already found resolution by that time. In our case, while it’s true we’ve worked through losses over the past 12 month, there remains the matter of Fannie and Freddie as proxies for national negative equity, the ongoing 50% loss pattern in commercial real estate, all the unsecured credit card debt, and then the town, city, state debt in The States. At best, we have perhaps resolved a third of the private debt, pushed at least another third onto government balance sheets, and we still face the other third. In short, given the pawning off of losses to the government, the country still carries 66% of the problematic debt. And this is being both conservative, and simplistic.

More quietly on Friday however in the wake of the GDP release with its slew of attendant data was a rather important information dump from The Bureau of Labor Statistics,  around 2 o’clock in the afternoon. Each quarter…(this article continues for subscribers through the membership gateway, on the right side of this page)

Tickers: ENY, GDXJ, GLD, SPY

Podcast Picks: Friday 29 January 2009

• Posted by: Gregor Macdonald, January 29th, 2010 at 5:15 pm
• Comments: 0

Rethinking Energy Security: roundtable with IEA’s Fatih Birol, Davos Podcasts.

Anglo-American financial situation: Bill Sharon and Mike Hampton, Frisby’s Bulls and Bears Radio.

24 Hours in Tulsa: Officer Jay Chiarito-Mazarrella’s cult following for his Street Story podcasts, BBC World Service Documentaries.

Big Slide (Act 1): James Kunstler’s latest – a Three Act Play on post crisis America, Kunstler Cast Radio.

Running out of Oil with Few Alternatives: interview with Jeff Rubin (23 January 2010), Financial Sense Newshour.

Nicholas Tesla and Innovation Today: roundtable with Pontin of MIT Tech Review, WBUR On Point Radio.

-Gregor

Photo: Nicholas Tesla in front of his high-voltage transformer on East Houston Street, in New York.

Tickers: Big Slide, Energy, Peak Oil, Tesla, Tulsa, UK

MBS Catch-22: Model Portfolio Update

• Posted by: Gregor Macdonald, January 27th, 2010 at 11:13 pm
• Comments: 0

The FED confirmed its intention today to end its MBS purchase program, which saw the uptake of 1.25 trillion in mortgages over the past 9 months, since March of last year. I remain doubtful that the FED will be able to halt this program for long. After all, this operation served a double purpose. Not only did the FED buy most (if not nearly all) of the newly generated conforming mortgages in 2009–which had the effect of keeping mortgage rates low–but, this injection of liquidity enabled existing holders of mortgages to trade them for cash. And what did they do with that cash? Given poor investment prospects during our depression, they bought treasuries.

We can anticipate the problem therefore, during a time of falling wages, no job growth, and confirmation of the next leg down in housing, that is presented by the end of the FED’s MBS program. Not only would it starve the housing market, introducing a shift higher in risk premiums (mortgage rates), but it raises the question: from where will the bid come for the treasury market, which surely will continue to see enormous supply as 2010 rolls onward? To this point, it’s unclear (as it always is) how to best analyze movements in treasury prices these past few weeks. While in one sense…(this article continues for subscribers through the membership gateway, on the right side of this page)

Tickers: ENY, GLD, SLV

Readings: Tuesday 26 January 2009

• Posted by: Gregor Macdonald, January 26th, 2010 at 7:03 pm
• Comments: 0

L.A. County transit agency projects historic budget shortfall: Ari Bloomekatz, The Los Angeles Times.

The Economic Case Against Ben Bernanke: Steve Keen, Steve Keen’s Debtwatch.

Superfast Bullet Trains Are Finally Coming to the U.S.: James Glave and Rachel Swaby, WIRED.

UK: using woodlands to cut emissions: Chris Goodall, scitizen.com.

One quarter of US grain crops fed to cars – not people, new figures show: John Vidal, The Guardian.

Water Pricing in China: The Economist.

Resistance, Resilience, and Rebellion – Survival Strategies for Systemic Failures: Chris Nelder, getrealist.com.

-Gregor

Photo: Los Angeles Gold Line Extension, LA Metro

Tickers: Bernanke, Grains, HSR, Water, Wood

First Responders: Gregor Weekly Macro Note

• Posted by: Gregor Macdonald, January 23rd, 2010 at 11:47 pm
• Comments: 0

The largest nationalisation in the history of the United States occurred in the first week of September 2008, when the US took over Fannie Mae and Freddie Mac. At the time, I don’t recall President Bush, Treasury Secretary Paulson, or FED Chairman Bernanke referred to as socialists. Since President Obama took office his administration has carried the torch of this bailout policy across the fields of industry from the financial to the automobile sectors. With the exception of some voices on the left and some thoughtful centrists, the current administration has neither been accused of being oligarchists or, in the case of the two wars, imperialists. Yet much of Obama’s approach can only be described as anti-reformist. What the two administrations have in common since September 2008 is that they each turned out to be status quo protectionists.

Seen within a larger framework of systemic collapse we can think of the two administrations as forming a First Response Team to the financial crisis. The team members are Bush, Paulson, Bernanke, Geithner, Summers, and Obama. Their goal has been to refuse the message emanating from myriad failed systems, and to hold all the pieces together for as long as humanly (and operationally) possible. The First Response Team’s guiding principle is to prevent uncertainty. The Team is completely persuaded by the idea that the economy’s basic architecture is sentimental, not structural, and the goal has been to contain fear long enough to pave the return for business as usual.

It was inevitable the populace would eventually intervene. As it turns out, the twin problems of debt and unemployment trump our political leadership’s overfocus on uncertainty. Thus, we had the election result here in Massachusetts. Which, despite the perspective of political partisans, was yet another outburst of dissatisfaction with the status quo. All status quo. And there you have it: The First Reponse Team had as its only goal to hold all systems together and prevent uncertainty, convinced this is what the populace needed. But the public neither needs it, or wants it. And that has sent a shockwave through the political class.

Throughout last year I wrote the crisis doesn’t end until the industrial class, the political class, and the intellectual class take big hits and accept finally that many of their most cherished tactics and philosophies are defunct. You can see why a figure like Ben Bernanke is next on the list because he occupies positions in all three classes: from banking to politics to academia. The FED chairman has shown himself to be weak on all three fronts but his greatest problem has been in his theory. This is why…(this article continues for subscribers through the membership gateway, on the right side of this page)

Tickers: GLD, SLV