Oil Crush: Model Portfolio Update

• Posted by: Gregor Macdonald, March 10th, 2010 at 5:37 pm
• Comments: 0

Fresh figures were released today from the Bureau of Labor Statistics, showing that the big states lost further ground in the battle of unemployment. California, Illinois, Florida, and North Carolina set new highs in their unemployment rates. Interestingly, these are four of the seven large states I identified in February as energy-deficit states. It’s not just the collapse of the FIRE economy (Finance, Insurance, Real Estate) that ails these states but also the fact that they are large, net importers of oil, natural gas, and electricity. Perhaps it’s a sign that overnight Google added Bicycle Routes to their Map application.

The model portfolio here at Gregor Weekly continues to do well, however, because despite my strongly negative macro outlook, I have remained open to the effects of global reflationary policy since the portfolio’s inception last September. Don Coxe, formerly of BMO in Canada, put it nicely this week in an interview on BNN when he said that commodities remain a play on the Developing World whereas Developed World stock markets remain less enticing. Indeed, the model portfolio’s exposure to coal, Australian stocks, energy, and the commodity currencies the past 6 months has served us well. Despite the strong correction in February.

That said, subscribers know the change I anticipate starting in late Q2 2010 and into Q3 2010, both in terms of the economy–and–in terms of asset prices. That oil is embarking on a new advance higher at a time of successively higher unemployment in a state like California (which is leveraged negatively to the price of gasoline) fits nicely with my view. By the time we enter July…(this article continues for subscribers through the membership gateway, on the right side of this page)

Tickers: FXA, FXC, GLD, IVN, SLV

Readings: Tuesday 9 March 2010

• Posted by: Gregor Macdonald, March 9th, 2010 at 11:58 pm
• Comments: 0

Peak Demand Yes, But Not the Nice Kind: Chris Nelder, GetRealList.com.

Can California Declare Bankruptcy?: Christopher Beam, Slate.

Exxon Lowers Bar, Buys Assets Once Seen Unattractive: Edward Klump, Bloomberg.com.

Requiem for a Dying City: Damien Perrotin, Energy Bulletin.

What’s Wrong with Venture Capital?: James Surowiecki, MIT Technology Review.

Losses Wipe Out Equity of Mexico’s Pemex: Robert Campbell, Reuters.

California Job Losses Grow: George Avolis, Contra Costa Times.

-Gregor

Photo: Cincinnati, Ohio 1975 by Lytha Scott Eiler, from The EPA DOCUMERICA Project.

Tickers: California, Oil, VC, XOM

The End?: Gregor Weekly Macro Note

• Posted by: Gregor Macdonald, March 6th, 2010 at 11:53 pm
• Comments: 0

Apparently the (labor) recession ended while I was attending the MIT Energy Conference in Cambridge-Boston on Friday. Job losses came in less than expected and the economists who are prone to keep things simple were generally quite upbeat on the report. Bloomberg Radio had two macroeconomic observers back to back on Friday, the first being David Rosenberg who was predictably scathing of the report. However, David was followed by another analyst who described the jobs data as wonderful news, and the hour long radio show went out on a high note. Meanwhile, Apple hit a new all time high on Friday and the Nasdaq now looks poised to break out, at the 2325 level. Save for all the horrible macro data from the past 60 days, therefore, life is good.

My time in Boston gave me a chance to update my economic tour, taken last Summer in the shopping districts of Harvard Square and Newbury Street. I was also able to get a sense of car and train traffic, activity at malls, and even some nightlife. In addition, the Clean Energy workshop I attended in Cambridge, and the conversations I had at the Energy Showcase gave me a sense of mood, surrounded as I was by students, investors, venture capitalists, and company representatives. First, me start off by reporting…(this article continues for subscribers through the membership gateway, on the right side of this page)

Tickers: FXA, FXC, GLD, KOL, TBF

Podcast Picks: Friday 5 March 2009

• Posted by: Gregor Macdonald, March 5th, 2010 at 5:15 am
• Comments: 0

After Words: Facing Unpleasant Facts – Packer and Hitchens on George Orwell, C-SPAN Podcasts.

The 2010 Census: roundtable with Williams, Frey, Jost, Sparks, Dianne Rhem WAMU Radio.

China’s Forgotten Admiral: Nick Baker on Zheng He, BBC World Service Documentary.

Coal in the Heartland: Coal in the Heartland – Jeff Biggers on Clean Coal and Coal Policy, Democracy Now Radio.

Environment and the Economy: series on migration and immigration – Merson and Oram, Smart Talk -Radio New Zealand National.

Earthquakes in the 21st Century: roundtable with Whitcomb, Beach, Blanpied, Dianne Rhem WAMU Radio.

-Gregor

Painting: Zheng He.

Silver Flashing: Model Portfolio Update

• Posted by: Gregor Macdonald, March 3rd, 2010 at 6:07 pm
• Comments: 0

The gold/silver ratio continues to come down from recent highs, when the 72.81 level was hit, and is currently sitting at 66.28. This most recent thrust off the Greece drama looks like it’s going to carry some. At least through the end of March. And, I think we should look for the ratio to fall further, possibly as low as 60 before another flare-up occurs in sovereign credit. Additionally, the patchwork efforts at putting the near-broken pieces of Greece back together are holding up for now, and should probably buy another month or two for EU and Greece officials. Until then, silver is flashing a renewed flow of liquidity.

Of greater note has been the volatility in UK Gilts. In a brief exchange with one of my contacts, we both expressed surprise that observers don’t pay more attention to the British Pound and UK Gilts…(this article continues for subscribers through the membership gateway, on the right side of this page)

Tickers: Gilts, GLD, SLV, TBF, UK

Readings: Tuesday 2 March 2010

• Posted by: Gregor Macdonald, March 2nd, 2010 at 9:49 pm
• Comments: 0

My Verdict on the Bloom Box: Chris Nelder, GetRealList.com.

Drought Threatens Syria Economy as Refugees Flee Parched Farms: Daniel Williams, Bloomberg.com.

Bad weather and uncertainty hit construction sector recovery: Phillip Inman, Guardian.co.uk.

U.K. Teeters on the Brink of Its Own Greek Debt Tragedy: Landon Thomas Jr., The New York Times.

A Game of Tag Breaks Out Between London’s Graffiti Elite: Gabriele Steinhauser, Wall Street Journal Europe.

The Economist’s New Clothes: Adam Curtis, BBC Blogs.

Don’t go wobbly on us now, Ben Bernanke: Ambrose Evans-Pritchard, Telegraph.co.uk.

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-Gregor

Tickers: Art, Bloom Energy, Collapse, Construction, Debt, Drought, GLD, Illinois, States, UK

MacroTwits Hour: Sunday Night Show 28 February 2010

• Posted by: Gregor Macdonald, March 1st, 2010 at 9:04 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

Tickers: GLD, SLV, UNG, USO

Maybe Next Year: Gregor Weekly Macro Note

• Posted by: Gregor Macdonald, February 27th, 2010 at 11:05 pm
• Comments: 0

Neither Ted Williams nor Carl Yastrzemski won a World Series with the Red Sox. In fact, whole generations of Red Sox fans lived, and died, without seeing the Red Sox win a World Series. I thought of these long-cycle disappointments today as I read over the investor newsletter from Warren Buffet. Warren appears to be thinking he’ll see a recovery in the American consumer and in American housing. Maybe. But I don’t think so. I see US residential real estate as a dead asset class for the rest of the decade. The problem is that a US house is no longer a tactical asset that gives one access to a future of high wage growth. But let Buffet think what he will. Despite his company’s historical leverage to the consumer, he has added natural gas, chemicals, and a railroad in recent years in a sign he knows what’s coming.

Still, I’m left wondering more generally why anyone, including Mr. Buffet, thought a recovery in US housing was either already underway, or coming along in 12 months time. There is certainly nothing in the data to suggest any recovery is underway. (And that’s an understatement). But should it really come as a surprise? Fannie Mae continues to bleed. There is no wage growth either in nominal or real terms. And even the FHA, which admittedly goosed the low-end for about 9 months last year, may now turn out to have created little more than a new class of mortgage defaulters, as they were “helped” into low priced homes with 5% downpayments. Perhaps they call them The 2009 Vintage of defaulters.

Meanwhile, the big states like California, Illinois, Florida, and New York are all getting into position to do their part for the “housing recovery.” They are about to release government workers back into the private sector.Yes, in cities from Chicago to Los Angeles a run of 24 months of falling tax revenues has finally met head-on with a state’s inability to print money. For those of you who tune in to my Sunday night MacroTwits show, you will know that I’ve felt for some time that tensions would eventually arise between the growing ranks of the unemployed, and the protected, pensioned, high-salaried workers of cities, counties, and states. It can’t help that the unemployed are still paying a schedule of state and local taxes and fees, while they watch services deteriorate or disappear altogether. I was pleased therefore to see Joe Mysak at Bloomberg/Business Week latch on to this emerging story last week. | see: Banker Bonus Anger is Shifting to Government Workers.

Given the aforementioned, I think it’s not really necessary that I re-hash the recent data on new home sales, existing home sales, foreclosures, rising vacancy rates, falling rents, and the growth of shadow inventory. Nor, do I need to cite the FED’s intention to stop buying MBS towards the end of March, the coming wave of mortgage rate re-sets starting up again later this year, or that mortgage rates ticked back above 5.00% again. Instead, I want to show you a chart…(this article continues for subscribers through the membership gateway, on the right side of this page)

Tickers: GLD, SPY

House of FED: Model Portfolio Update

• Posted by: Gregor Macdonald, February 24th, 2010 at 11:55 pm
• Comments: 0

When the FED confirmed its intentions to terminate its MBS buying program as planned in March, I immediately began to wonder how they could diplomatically reverse course should they change their mind. A very funny commentator, on the Calculated Risk blog, wrote sarcastically: As of April 30th, the FED mortgage-backed security buying program is now 118% complete. Thankyou, signed Ben S. Bernanke. Well, that gave me both a good laugh and a confirmation that others were thinking along similar lines. Also around that time, I noticed that Mervyn King was beginning to signal that the Bank of England might restart QE (quantitative easing) should conditions warrant. And I regarded that as a reliable sign the FED could make the same sort of climb down without too much negative market reaction.

I did not have to wonder for long. The surprise hike in the FED’s Discount Rate now looks nothing more than the brief flare of a technical operation. The meat of the matter, the major thrust of the FED’s intentions, were revealed this week when Janet Yellen hinted that QE of MBS could be put back on at any time. And, when Bernanke testified in his Humphrey-Hawkins appearance that the FED would need to keep rates very low, for a long time. It should also not be forgotten, in addition,  that even on the day of the FED’s surprise discount rate hike at least one FED governor made remarks that evening to broadcast the FED’s intention to keep rates low.

Because further clarity on FED policy has come at the same time as news releases on the economy, I think it bears mentioning again that housing…(this article continues for subscribers through the membership gateway, on the right side of this page)

Tickers: FED, GLD, gold, MBS, TBF

Readings: Tuesday 23 February 2010

• Posted by: Gregor Macdonald, February 23rd, 2010 at 10:30 am
• Comments: 0

The Bloom Box – An Energy Breakthrough?: Big Gav, The Oil Drum.

The New Poor – Million of Unemployed Face Years Without Jobs: Peter S. Goodman, The New York Times.

The Long-Term Employment Bust: David Goldman, First Things.

America’s Wind Energy Triples in New Estimate: Alexis Madrigal, WIRED.

The Third Industrial Revolution: Jeremy Rifkin, The New Scientist.

Be Lucky – It’s An Easy Skill to Learn: Richard Wiseman, Bloomberg.com.

Soccer and Energy Policy: Chris Nelder, GetRealList.com.

-Gregor

Photo: Energy Miracles?

Tickers: Bloom Box, Luck, Soccer and Energy Policy, Transition, Unemployed, Wind