Happy New Year

December 31, 2008

The kids are in bed, guests are gone, and I’m sitting here sipping some bourbon and surfing.   I’ve reached the age where new slippers and booze make for a good Christmas haul, and I’m enjoying both right now.  My progress towards being a grumpy old man continues…

Odds are good I won’t make it to midnight, so happy 2009 everyone.   There will be plenty to write about, think about, prepare for, and live through this year… and not all of it will be bad.   In crisis there is always opportunity, and I hope many of you find those opportunities where you can.


CNN: Stocks will rise in 2009

December 31, 2008

This message brought to you by the good people at Goldman Sachs & JP Morgan, who thank you for your business and are busy shorting the phone book right now.

This strikes me more as wishful thinking than clear analysis.   The assumption is that the Obama stimuli will work and we’ll be back to business as usual.   I for one don’t see that happening over the long term.


Looking at 2009

December 30, 2008

Time again for another predictions post looking at what I see ahead for the new year that’s approaching rapidly.   I do these posts more for my own amusement rather than to engage in any serious attempt at prognostication.    For a more in-depth listing of doomer-ific predictions, please check out Kunstler’s latest post.  Lots of good stuff in there.

I’m picking up on a number of the same vibes that Kunstler and others are and think that 2009 will indeed bring in change, although it will not necessarily be the type that people voted in favor of when they elected Barack Obama to the presidency.   I’m thinking more along the lines of the old intro tagline for the fourth season of Babylon 5… the year “everything changed.”

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Holding Back the Dam

December 30, 2008

I’ve added Jesse’s Cafe Americain to the blogroll… another excellent site for in-depth financial commentary that you’d have a hard time finding in the mainstream media.

The latest post is quite good, in which the author describes his increasing belief that there will be a hyperinflation event in the USA at some point.

A choice quote:

That has now changed. The dollar is a Ponzi scheme, the waters of debt are overflowing the dam of artificial support, and only a few countries, two of them somewhat unstable, are holding back the deluge.

If this comes to pass, we may all pay off our credit card bills and mortgages in record time yet still have trouble paying for food.

For a picture of what a hyperinflation might look like, check out these pictures from Zimbabwe covering the last year or so.

If something like this comes to pass, having basic sustainable living skills like gardening, mending clothing, etc. will become more valuable than ever.  As Steve Solomon states in his book, being able to grow one’s own vegetables can be the difference between barely surviving and maintaining good health.   I for one plan to make it a goal to get a few square foot gardens in this spring, and to start learning how to save seeds.


SUV Sales Rise Due to Cheap Gas

December 26, 2008

What’s that old quote about those who fail to learn the lessons of history are doomed to repeat them?

Trucks and SUVs will outsell cars in December, according to researchers at the automotive Website Edmunds.com, something that hasn’t happened since February.

Meanwhile the forecast finds that sales of hybrid vehicles are expected to be way down.

link

Anyone who had any doubts about the short memories of the American public can use this news as Exhibt A.   I guess the time to get that Prius you’ve had your eyes on is now.

As I mentioned in a comment recently, the global economy swirling the drain will cause lower demand for many commodities, including oil.   Most of the countries that export oil rely on the income from those sales so heavily that they will continue to pump out plenty of the stuff for the time being.  When the choice is pump oil or have the poor, unfed masses rioting in the streets, the calculus regarding how much oil to pump in a falling market gets a hell of a lot easier.   This will cause a glut for a while most likely.  It will also kill off or delay some of the proposed or planned production that was relying on $60-$80 oil to be profitable.

Some pundits are expecting low oil prices to be around for a while.  We may enjoy lower gas prices for some time to come, but keep in the back of your mind that those low prices are caused by the global economic crisis.   If the economy comes roaring back in a few years’ time and in the meantime we have consumed more cheap oil while simultaneously delaying exploration and production of ‘non-conventional’ plays, where do you think we’ll end up?


Merry Christmas!

December 24, 2008

Just a quick note to wish everyone good cheer during this holiday season.  Thank you very much for continuing to read and respond to my posts, and I sincerely hope that you all get as much out of it as I do.

I wish all of you peace & clarity during these tumultuous times.


2008 In Review

December 23, 2008

2008 sure has been an eventful year, no?

We’ve got about a week left in the year, but I think it’s time to start looking back at the year that was and compare it to my predictions from last January.   I’ll readily admit that I didn’t exactly go out on a limb with a lot of these predictions, but let’s see how things stack up.

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Snow

December 22, 2008

Snow is a part of life here in Minnesota.  I don’t mind it for the most part, except when I’ve got to shovel a large amount of it or drive on slick roads.  The landscape right after a snowfall is pristine, and quite beautiful to me.  It covers up things:  brown grass, or a child’s toy absent-mindedly left in the yard.  It can also reveal things:  animal tracks, or a deer silhouetted in woods where it could previously roam unseen.

The snow reveals something else as I move around my neighborhood.   We’ve had several snowfalls in the last week.  Some folks are fastidious about shoveling their driveway off (that includes me, usually); some not so much, and some just don’t bother at all.   The lazy ones just drive over the snow and mash it down to the point that it’s a hard, slippery mess.

The interesting thing lately is that there are several houses where the driveways haven’t been shoveled yet are still in pristine condition.  No tire tracks or footprints have marred them.  The lights are always off, and there’s no ‘for sale’ sign in the yard.    Back in the fall, I thought we had a few empty houses in the development.  Now I am sure of it.

Another resident in my development is a mortgage broker, and he’s also active in the local Cub Scout unit.  We chat once in a while about the housing market, since it affects both of us in admittedly different ways.  He confirmed to me that we’ve had at least seven foreclosures or short sales in 2008, and that several houses in the development are bank-owned and empty.  There’s no signs in these yards, so I am assuming the lenders are being patient waiting for a better market to come along.  Good luck with that.

At least a few of these houses have been trashed by their former occupants.  I’ve heard stories of missing appliances, walls beaten to crap, missing fixtures, etc.   That’ll do wonders for the average sale price in the neighborhood.    This isn’t necessarily a bad thing from my perspective.

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Obama’s Environmental Team: Status Quo We Can Believe In?

December 18, 2008

If anyone needs a reminder that despite the rhetoric, President-Elect Obama is still beholden to the Democratic Party and it’s benefactors, I think this week’s picks for his environmental team should clear things up.

I’ll preface this by saying up front that I know little about either person, but from what I’ve been reading & hearing, environmentalists are unhappy with Obama’s nominations of Tom Vilsack for Ag Secretary and Ken Salazar for Interior Secretary.   Publicly, they are giving hesitant support while hoping that they will be willing to work with them.    Their actions in the first year will probably determine how long a honeymoon Obama has with the green wing of the Democratic party.

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Zero

December 16, 2008

The Federal Reserve just fired the last bullet with regards to interest rates.  Cutting the Federal Funds Rate to a “range from 0% to 0.25%

If this fails to sufficiently motivate the markets, what’s next?  Here’s a hint:

As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant. The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses. The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity.

Agency Debt” refers to securities issued from government agencies like Fannie Mae, Freddie Mac, Sally Mae, etc.

Long story short, the plan is to buy as much crap as they feel they need to to try and jump start the credit markets and re-inflate the economy.  The last sentence refers, I believe, to some reports that the Fed was looking at issuing it’s own debt to compete with Treasury bonds.   Many pundits agree that it’s a bad idea, but you never know.  The government hasn’t been acting rationally for a while now in this mess.

I have been considering refinancing my home to take advantage of lower interest rates but have held off.   With the funds rate approaching zero, I think that we may very well see the 4.5% mortgages for everyone that some people are reporting the Obama administration is working on.  My house has lost a lot of the equity I put into it when I bought it a few years back (bad timing on my part, I know), and I’m hardly alone in that.   I read rumors about slashed interest rates and adjusted loan balances to reflect lost equity.   Will it happen?  Possibly, though the cost would be astronomical.

We have loaned a crapload of money to banks, and all they have done with it is pay executive bonuses, buy up other troubled banks, and for the most part, simply stick the funds in the vault and sit on them.   Both the Fed and the incoming Obama administration have signalled that they are going to hose everyone down with fiat currency in some form of Keynesian fantasy to jumpstart the economy.   We are supporting bad business models, bad decisions, and greed by socializing financial losses for many (but not all) big corporations.    We are attempting to climb out from under a huge pile of debt by adding even more debt on top of that.

When will it end?   How will we EVER be able to pay this debt off?


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