There are times life is slow, and times life turns fast. We appear to be entering into the left lane of life for a while…
- The stock market continues to see-saw around. It drops during the day and then makes amazing comebacks late in the day. Whether this is truly ‘bargain hunters’ (well-coordinated ones at that), devious machinations of the Fed and their minions, or computerized trading programs deciding it’s time to jump back into the pool I don’t know. The fun & games with subprime mortgage debt continues, with Countrywide Financial (i.e. the largest mortgage company in the USA) feeling the heat hard enough to tap an $11.5 billion dollar line of credit. As explained here, this is akin to you or I getting behind on our bills and having to go to one of those payday loan shops for a loan to go to the grocery store. If your dad finds out about this, he’ll probably give you hell for being such an idiot with your finances. In a similar vein, Moody’s is punishing Countrywide by downgrading it’s corporate bond rating from A3 (pretty good) to Baa3 (one step above junk). Any further downgrading of Countrywide’s rating will spell disaster for the company, as many institutional funds would be forced to sell any bonds now rated as junk. This is the largest home mortgage lender in the country folks, and they have minimal exposure to subprime loans. It’s another example of how the liquidity binge of the last five yars or so is now unwinding and catching a lot of other companies, investors and others in it’s net… and this is probably just the start of this cycle.
- Right after winning praise from conservative pundits for standing their ground and not caving in to demands to cut interest rates, the Fed has indeed caved and done just that, even after the world’s central banks have been feverishly adding money to the system to avoid a liquidity crisis. The Fed dropped the ‘discount window’ rate for banks by a half-percent. This isn’t the same as the ‘Federal Funds Rate’, but it does make it cheaper for banks to get ahold of cash in a hurry. There appears to be a lot of fear in the markets these days, and this sure looks like a desperate move on the Fed’s part to try and stabilize the markets. We’ll see how long the positive effect lasts, considering that markets worldwide are in retreat these days.
- If you haven’t seen CNBC’s Jim Cramer’s famous on-screen meltdown earlier this month, here’s an annotated version that includes some handy translation. Great stuff!
- There’s a lot more going on in this area… just google ‘credit crunch’ or ‘liquidity’ in the news.
Peak Oil and Climate
- Tropical Storm Erin dumped a lot of rain on South Texas this week, but more and more people are watching Hurricane Dean as it pounds its way across the Atlantic. Already a Category 2 ‘cane, Dean is expected to gain a lot of strength as it crosses into the very warm waters of the Western Carribean, with one NHC forecaster already thinking it’ll hit Category 4 (possibly 5) . The long-range forecasts are still pretty inaccurate at this point, but it appears Dean will slam into the Yucatan just south of Cancun, cross over into the Gulf of Mexico and then hit Northern Mexico/Southern Texas. Some models show it moving northward between Mexico and Cuba and entering the GOM at full strength, which *could* put it on a course to hit closer to Houston, which would run right through a big chunk of the oil patch down there. If you think gas prices are going crazy right now, just think about what would happen if that were the case. If it looks like Dean is going to head for the straits between Mexico and Cuba, I’d keep your gas tanks topped off. Remember that Katrina hit as a category 3 hurricane, so if Dean slams into Texas as a Cat 4 or 5, it’ll be ugly, and there are a lot of refineries down that way.
- Oh, and to make matters worse, the Atlantic hurricane season appears to be just getting started. Conditions appear to be getting more favorable for tropical storm formation in the pipeline that rolls off the western coast of Africa, so we may be seeing several more storms in the next few weeks.
- Michael Klare has an interesting new article out about our near energy future: the ‘Tough Oil’ era. There will still be plenty of oil to bring online in the next 15 years or so, it’s just going to be smaller formations in nastier places, so it’ll be a lot more expensive to bring to market, and it won’t be enough to satisfy growing world demand. Money quote: “Read between the lines and one quickly perceives a worst-case scenario in which the necessary investment is not forthcoming; OPEC production does not grow by five million barrels per day year after year; ethanol and other substitute-fuel production, along with alternate fuels of various sorts, do not grow fast enough to fill the gap; and, in the not-too-distant future, a substantial shortage of oil leads to a global economic meltdown.”
- One sign that peak oil is becoming more mainstream is that the various pundits are starting to go after each other more often. Jason Godesky of Anthropik has started rebutting the articles written by John Michael Greer on his own blog, after Greer apparently banned him from commenting on his posts. I find both writers’ posts interesting, though I rarely agree with either one of them entirely. It’s too bad that the two authors can’t debate things directly, for I’d find that to be a very interesting exchange of ideas, but such is life.
- This article has been printed in several places by now, but if you haven’t seen it, I’d highly recommend you read the article on “Peak Phosphorous” and what it could mean for agriculture.
- Speaking of the Oil Drum, Robert Rapier has issued a public challenge for the corn-ethanol shills to discuss the facts about that product. Considering Rapier is working on ethanol from other sources, this would be interesting to see if it would ever happen, which I sadly doubt.