Did the nation heave a sigh of relief when BP announced that their latest gambit to "cap" the Deepwater Horizon gusher will result in hosing up fifty percent of the leaking oil? If so, the nation may be sighing too soon since the other half of the oil will still collect in underwater plumes and hover all around the Gulf Coast like those baleful mother ships in the most recent generation of alien invasion movies. I shudder to imagine the tonnage of dead wildlife flotsam that will wash up with the tide for years to come. It will seem like a "necklace of death" for several states, though even that may not be enough to distract them from the more gratifying raptures of Nascar and NFL football.
For the moment we can only speculate on what the still-unresolved incident will mean for America’s oil supply. The zeal to prosecute BP for something like criminal negligence has bestirred a Department of Justice comatose during the rape-and-pillage of the US financial system. BP may be driven out of business, but then what? The net effect of the oil spill, one way or another, will be the gradual shut-down of oil drilling activity in the Gulf of Mexico. New government supervision will make operations very costly, if not non-viable, and the surviving companies will probably pack up for the west coast of Africa where supervision is almost non-existent. Anyway you cut it, the US will produce less oil and import more — and have to rely on the political stability of places like Angola and Nigeria, not to mention the simmering Middle East.
So far, also, the US has done nothing in the way of holding a serious national political discussion about the the most important part of the story: our pathological dependency on cars. I don’t know if this will ever happen, even right up to the moment when the lines form at the filling stations. For years, anyway, the few public figures such as Boone Pickens who give the appearance of concern about our oil problem, end up down the rabbit hole of denial when they get behind schemes to run the whole US car-and-truck fleet on something besides gasoline.
This unfortunate techno-narcissism shows that almost nobody wants to think about living…
It’s good to see more focus on this issue of oil prices, which Phil addressed over the weekend.
As dismal as the pictures James Kunstler paints, his writing is so poetic:
…It’s like the quote oft-repeated these days (because it’s so apt for these times) by surly old Ernest Hemingway about how the man in a story went broke: slowly, and then all at once. In the background of last week’s reassuring torpor, one ominous little signal flashed perhaps dimly in all that sunshine: the price of oil broke above $81-a-barrel. Of course in that range it becomes impossible for the staggering monster of our so-called "consumer" economy to enter the much-wished-for nirvana of "recovery" — where the orgies of spending on houses and cars and electronic entertainment machines will resume like the force of nature it is presumed to be. Over $80-a-barrel and we’re in the zone where what’s left of this economy cracks and crumbles a little bit more each day, lurching forward to that moment when something life-changing occurs all at once.
I was plying the interstate highways of New England this weekend — there is no sane way to get from Albany, New York, to the vicinity of Middletown, Connecticut, by public transit — marveling at the vistas of normality all around me: the freeway lanes with their orderly streams of happy motorists, the chain stores floating like islands on the gray undulating landscape, the corporate towers of Springfield, Mass, and then Hartford, gleaming in the persistent pre-spring sunshine, as though they physically represented the wished-for dynamism of economies in recovery. "I see dead people…" said the kid in that horror movie. I see dying ways of life.
There was no denying the spectacular weather for us long-suffering northeasterners. A week ago, it was like living in a banana daiquiri around here. Now, it was sixty-two degrees in East Haddam, CT, along a very beautiful stretch of the Connecticut River somehow miraculously unmarred by the usual mutilations of industry or recreation. On a few hillsides facing south, daffodils were already up with blossom heads ready to pop. The mind could go two ways: into the past, when wooden sailing craft were built in yards along the river; or into the future, when it would be easy to imagine wooden sailing craft being
They also questioned whether the rescue of GMAC, achieved in part by making it a bank, had created a long-term situation in which the government guarantee of bank deposits was subsidizing sales at General Motors and Chrysler.
GMAC is the primary source of financing for GM and Chrysler dealers, and a major source of loans for buyers of their vehicles. Elizabeth Warren, a Harvard law professor who chairs the panel, said she understood GMAC’s utility for GM and Chrysler.
"What I don’t understand," she said, "is what the justification is for being an independent bank that takes deposits that has a backup from the United States government."
Ron Bloom, a senior adviser to Treasury Secretary Timothy F. Geithner, told the panel that the rescue of GMAC was necessary to save the automakers, and that the $17.2 billion price tag was a good deal for taxpayers. He said that no other lender or combination of lenders could have quickly replaced GMAC’s role in the marketplace.
Not much. At least not from an engineering, mechanical or even a quality point of view. You don’t reach the top gear in the global auto industry unless you make outstanding cars, which Toyota does — most of the time. Though cars are familiar machines, they are also highly complex ones. To create a modern car, a company has to design, engineer, build, buy and then assemble some 10,000 parts. Sell 7.8 million cars, as Toyota did worldwide in 2009 — a horrible year for the industry — and there are billions of new parts with the potential to go kerflooey. Inevitably, some do.
What makes the recall since November of nearly 9 million Toyotas that are susceptible to uncontrolled acceleration and balky brakes such a shocking story is not so much the company’s manufacture of some shoddy cars or even its dreadful crisis management — though those are errors that will cost it more than $2 billion in repairs and lost sales this year. It’s something more pernicious: the vapor lock that seems to have seized Toyota’s mythologized corporate culture and turned one of the most admired companies in the world into a bunch of flailing gearheads. Not only is Toyota producing more flawed cars than in the past, but an organization known for its unrivaled ability to suss out problems, fix them and turn them into advantages is looking clueless on all counts.
Although the recalls seemed sudden, the evidence has been piling up. Literally. According to a report from Massachusetts-based Safety Research & Strategies (SRS), a consumer-advocacy group, there was a spike in the number of unintended-acceleration incidents in some Toyota vehicles in 2002, about the same time that Toyota introduced its electronic throttle control. The problem was initially blamed on a floor mat or vehicle trim that, if it came loose, could jam the accelerator pedal in an open-throttle position. That was followed by the first of several National Highway Traffic Safety Administration (NHTSA) investigations, in 2003, and two small recalls in 2005 and 2007. But accidents mounted, and last November the company had to take back nearly 3.8 million U.S. Vehicles — its biggest-ever recall — to address the problem.
Modifying the floor mats, though, didn’t fix things. Toyota at first refused to…
It’s the first business day of the new year and oil is trading above $80 a barrel, which means the price has re-entered the danger zone where it can crush industrial economies. This is a central element of the predicament we find ourselves in. The US economy is essentially a Happy Motoring economy. During the whole nervous period since the collapse of Lehman Brothers, American gasoline consumption hardly went down at all, though so many other activities collapsed, from house-building to trucking. Yesterday, The Seattle Times published a story with the idiotic headline: Oil Touches $80 on US Economy, Demand Optimism. Apparently, they think high oil prices are "a good sign."
How much can a nation not get it? Would $100 oil ignite a new orgy of "consumer" spending and another round of investment in commercial real estate? Welcome to the Futility Economy. This is the economy where Nature and its material companion, Reality, punish us for our stupidity and fecklessness. This is the economy that will tear the United States apart, after it bankrupts us at every level, and mercilessly drives the population down by one-third through starvation, homelessness, violence, disease, and sheer political cruelty.
Whatever you thought our economy was the past thirty years — whatever model of it you have in your head — that is definitely not what we are going back to. Like one of Dickens’s Yuletide ghosts, Reality is leading us by the hand into new circumstances. We resist like crazy. We throw our hands over our eyes. We don’t want to look. We want to return to the comfort of our dreary routines — living in places that aren’t worth caring about, weaving endlessly in freeway traffic, drawing a paycheck at the air-conditioned cubicle, inhaling Buffalo wings by the platterful, with periodic side-trips to the state-chartered casino where there’s always a chance of scoring a lifetime’s income on one lucky bet. And at the end of the day, you can retire with a simulated prostitute on your laptop screen! And not even have to fork over a dime — except perhaps for the Internet connection fee.
Reality is taking us out of that familiar, if sordid, realm, whether we like it or not. Our destination is an
Gluskin-Sheff economist David Rosenberg has some harsh words about the Cash For Clunkers program in his daily letter:
We couldn’t believe this when we saw this quote from the U.S. Transportation Secretary (Ray Lahood) in yesterday’s NYT (page B3) on the “Cash for Clunkers” program: “There obviously is a real pent-up demand in America … people love to buy cars, and we’ve given them the incentive to do that. I think the last thing that any politician wants to do is cut off the opportunity for somebody who’s going to be able to get a rebate from the government to buy a new vehicle.”
Are you kidding me? If there is pent-up demand for autos why do we need a rebate? If there are 20% more vehicles than there are licensed drivers, why the need to perpetuate this cycle of overspending? Why is it a politician’s job to create incentives to spend? Shouldn’t they be focusing their attention on health, education, defense, infrastructure, public safety, job skills and productivity growth (and perhaps the youth unemployment rate of around 20%)? We’re not exactly espousing an Ayn Rand libertarian view but at a time when the deficit is running at 13% of GDP, at what point is enough? These rebates are not manna from heaven — it’s a future tax liability to hasten a decision that the auto buyer would have made in any event. This is fiscal
policy short-termism at its best (we say this as we read the article on page B5 of the NYT — $2 Billion in Grants to Bolster U.S. Manufacturing of Parts for Electric Cars).
After flirting with contraction for three months, the Manufacturing ISM fell into negative territory with a 48.6 reading, below the lowest Econoday estimate of 49.7. The Econoday Consensus guess was 50.5, an improvement over the October reading of 50.1 After skirting right at the breakeven 50 line since September, ISM's manufacturing index broke below in November to 48.6 which is more than 1 point below Econoday's low-end estimate for the lowest reading since June 2009. The decline includes a significant dip for new orders which are down 4.0 points to 48.9 and the lowest reading since August 2012. At 43.0, backlog orders are in a six-month streak of contraction. With orders down, ISM's sample cut back ...
Could one stock really tell you where the broad market heads? Joe Friday shared he thought so on November the 13th in the chart below. Bio-tech stock Valeant Pharma (VRX) had been slammed the prior few months and the broad market dipped along with it.
The chart below reflected the VRX was testing five support lines at one time at (3), along with oversold momentum at (1) and volume was sky high at (2), which could have reflected panic selling. All of these conditions would suggest this price point was key for the stock and maybe the broad markets.
Since the Joe Friday post, VRX is up over 28% in less than 3-weeks
It’s an unfortunate truth that, when people are worried about the future, they often put their faith in politicians to somehow make everything better.
Politicians, of course, are famous for promising panaceas for whatever is troubling voters, and they even invent new troubles to worry about, presenting themselves as the only ones who can solve these woes.
Not surprising then, that, over time, any nation may slowly deteriorate into a population of nebbishes who turn to their government to do their thinking for them and take responsibility for their futures.
Today offered a heavier than expected volume day post-holiday. The majority of this action was to the downside, but the Semiconductor Index bucked the trend. The latter index was able to push above its 200-day MA as it posted a relative advantage against the Nasdaq 100. While the Nasdaq and Nasdaq 100 suffered losses today, both will be helped by strength in the Semiconductor Index. All technicals for the Semiconductor Index are in the green, with a return of the MACD to a 'buy' trigger (above the bullish zero line - a bullish development).
The Nasdaq suffered a minor loss. It wasn't able to challenge the recent high, but it's close enough ...
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As evidenced by the Greek, Chinese, and now Argentine 'jumps', the world remains increasingly aware of the inevitable worth of fiat currencies and fears the desperate acts of governments as the react to that reality (and is looking for alternatives).
This infographic explains the wide ranges of the Bitcoin universe, accompanied with quotes from some of its best-known business leaders.
Some weeks when I write this article there is little new to talk about from the prior week. It’s always the Fed, global QE, China growth, election chatter, oil prices, etc. And then there are times like this in which there is so much happening that I don’t know where to start. Of course, the biggest market-moving news came the weekend before last when Paris was put face-to-face with the depths of human depravity and savagery. And yet the stock market responded with its best week of the year. As a result, the key issues dominating the front page and election chatter have moved from the economy and jobs to national security and a real war (rather than police ...
1) The shares of one of my largest short positions (~3%), Exact Sciences, crashed by more than 46% yesterday. Below is the article I published this morning on SeekingAlpha, explaining why I think it’s still a great short and thus shorted more yesterday. Here’s a summary:
The U.S. Preventative Services Task Force’s Colorectal Cancer Screening Draft Recommendation issued yesterday is devastating for Exact Sciences’ only product, Cologuard.
I think this is the beginning of the end for the company.
My price target for the stock a year from now is $3, so I shorted more yes...
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Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).
Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself.
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at email@example.com with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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