by Phil Davis - January 12th, 2011 8:27 am
"Portugal will not request financial aid for the simple reason that it’s not necessary" – Socrates
Of course, that was Jose Socrates, Portugal’s Prime Minister, not Σωκρτης the great Philospoher, who was more famous for saying "False words are not only evil in themselves, but they infect the soul with evil" as well as "True knowledge exists in knowing that you know nothing." More apropos for this morning is the more famous Scocrates’ more famous observation that "True wisdom comes to each of us when we realize how little we understand about life, ourselves, and the world around us."
The investors jacking up the markets at 6am this morning understand very little about the relevance of Portugal’s sale of $1.62Bn in bonds. While the auction was a "success" with longer bonds going off at 6.7% that’s WITH intervention by China and Japan on an auction amount that either one of them could have tipped the cab driver on the ride over from the airport and not missed it. This is like going to your rich uncle for a used car loan because the bank wants 12% and your uncle says "sure I will help you out but you will owe me big time and I will make my brother’s life miserable because I have to give his kid money and I’ll never let him forget it" and then he hands you a contract to pay him back at 11.5%.
Actually, Portugal didn’t even get that much of a "family discount," The last bond auction of 2010 went off at 6.8% and the fear was that the rates would go over 7% but let’s not do cartwheels over 6.7%. Oh, sorry, too late, the markets are already doing cartwheels with a 0.5% gain in the futures and just look how excited the Hang Seng was after lunch, gaining 200 points in a virtual straight line and almost doubling the day’s optimistic opening. The Shanghai was just as exciting, falling from 2,828 down almost 1.5% to 2,788 but then flying back to 2,821 to book a 0.6% gain on the day and giving Mainland China’s Main Market this exciting profile:
by ilene - November 22nd, 2010 11:56 pm
Here’s a longer perspective of the chart I’ve often referenced in the past showing how similar our current inflation trend is to Japan’s in the 90′s. As the housing double dip takes hold in the coming months, it’s likely that inflation will remain very low and concerns about deflation will reemerge (via the NY Times):
“The latest figures, released this week, showed that overall inflation in consumer prices was 1.2 percent in the 12 months through October, while the core
inflationrate — excluding food and energy — rose just 0.6 percent. The previous low for that index, of 0.7 percent, came in the 12 months through February 1961, when the economy was in recession.
As the accompanying chart indicates, the core inflation figures are charting a path roughly similar to one shown in
Japan15 years earlier. That has been true despite a much stronger reaction by the American central bank, which was determined not to make the same mistakes the Japanese made.
Deflation is feared for several reasons. If consumers come to expect it, as happened in Japan, there is a strong incentive to delay purchases while waiting for a lower price. That can restrain economic activity and increase unemployment. In addition, deflation places downward pressure on asset prices, worsening the situation of those who are indebted.”
Source: NY Times
by ilene - November 8th, 2010 4:59 pm
The next chapter in the quantitative easing drama takes place in the ag commodity neighborhood.
Over in Britain, the Guardian posted a full-scale freakout piece tying in Bernanke’s policies to a sharp spike in food costs…
UK food prices were 9.8% higher last month than a year ago, the biggest annual increase since October 2008, according to the Office for National Statistics. Imported food prices climbed 4.5% on the year, the fastest rate since October 2009, pushing up the price of bread and margarine. Prices are likely to be pushed higher in coming months, with refined sugar reaching a record of $783.90 a tonne today.
Greg White over at Clusterstock has a very worthwhile slideshow (can’t believe I just wrote that phrase) illustrating the food cost spike by commodity. Corn, for example, is just completely absurd and very scary if you are in the business of feeding large quantities of animals (or addicted to Crackerjacks) :
The agflation beat goes on.
Pic credit: Jr. Deputy Accountant
by ilene - October 31st, 2010 12:41 pm
Courtesy of Sellputs at Hedge Accordingly
My favorite cereal is Kellogg’s Crispix. The cereal is very simple not to sugary not to bland. Lately my box’s of Crispix seem to be getting smaller while theprice is ever increasing? I thought i was a bit crazy and obsessive though i realized i am not, the price of Crispix seems to be going up nearly 50c every 6 months. Perhaps this is the grocery store marking up products… Doubt it. What really happening is the most basic form of inflation, via the price of commodities including but not limited to grains/corn/oil rising.
A normal size box of cereal advertised as a "low price" (above picture) is priced at $4.50 a box, some cereals were over $5.00 a box. Seriously, $5 dollars a box?
Moral of the story, if QEII is implemented we could be seeing $6.00 box’s of Crispix and im gonna be fairly pissed off… but seriously teach this to your kids, tell them to make a game of it marking the prices of their favorite cereals on a graph.
by ilene - October 30th, 2010 8:20 pm
Farmer Brown here…if no one else is going to tell this story, then I might as well.
We do some stupid stuff here in America – playing ultimate frisbee on skis, deep-frying Oreos, calling in to vote for televised dance show contestants…I could go on and on.
But of all the stupid things we do, one of the most dangerous is this ethanol nonsense, in which we gleefully burn up our corn supplies. For very little in the way of environmental impact I might add.
First, look at the December 2010 corn contract, then I’ll give you some insane stats on the demands of ethanol:
You wouldn’t believe it, but according to the most recent estimate from the USDA, corn use for ethanol for the 2010-2011 corn crop will be 37 percent of the projected total harvest. More than a third of our corn supply will be refined for energy use. We’re talking about 4.7 billion bushels of the corn that would normally go to animals as fodder and to our own diets.
And while yields and production are up, corn races to ever higher prices. There’s a good reason for that – industry experts say that we now need to produce 13 billion bushels each year just to keep prices restrained.
The stats above are mind-blowing and to me they represent the bull case for agriculture stocks and commodities in general.
They also represent a society that has become oblivious to the danger right in front of its face. I believe that resource competition between the developed and emerging nations is a given for the coming decade. While many believe this competition will center around oil, I’d be more concerned about the global demand for more and better food.
One of the most important determinants of animal protein prices is the corn fodder that supports production. And we’re mixing this critical element of the food supply into our gas tanks.
One might ask "but if it comes down to it, we can adjust in time, right?"
And the retort might be "if we’ve learned anything from the economic earthquakes of the recent past, it’s that we almost never adjust until it’s too late."
Stupid, stupid, stupid.
h/t David D
by ilene - October 25th, 2010 1:53 pm
High fructose corn syrup, enriched bleached flour, and "natural flavor" is to bread like CDOS, subprime loans and reverse convertibles are to finance. – Ilene
Courtesy of James Kwak at Baseline Scenario
I just read Michael Pollan’s book, In Defense of Food: An Eater’s Manifesto, and what struck me was the parallels between the evolution of food and the evolution of finance since the 1970s. This will only confirm my critics’ belief that I see the same thing everywhere, but bear with me for a minute.
Pollan’s account, grossly simplified, goes something like this. The dominant ideology of food in the United States is nutritionism: the idea that food should be thought of in terms of its component nutrients. Food science is devoted to identifying the nutrients in food that make us healthy or unhealthy, and encouraging us to consume more of the former and less of the latter. This is good for nutritional “science,” since you can write papers about omega-3 fatty acids, while it’s very hard to write papers about broccoli.
It’s especially good for the food industry, because nutritionism justifies even more intensive processing of food. Instead of making bread out of flour, yeast, water, and salt, Sara Lee makes “Soft & Smooth Whole Grain White Bread” out of “enriched bleached flour” (seven ingredients), water, “whole grains” (three ingredients), high fructose corn syrup, whey, wheat gluten, yeast, cellulose, honey, calcium sulfate, vegetable oil, salt, butter, dough conditioners (up to seven ingredients), guar gum, calcium propionate, distilled vinegar, yeast nutrients (three ingredients), corn starch, natural flavor [?], betacarotene, vitamin D3, soy lecithin, and soy flour (pp. 151-52). They add a modest amount of whole grains so they can call it “whole grain” bread, and then they add the sweeteners and the dough conditioners to make it taste more like Wonder Bread. Because processed foods sell at higher margins, we have an enormous food industry pushing highly processed food at us, very cheaply (because it’s mainly made out of highly-subsidized corn and soy), which despite its health claims (or perhaps because of them) is almost certainly bad for us, and bad for the environment as well. This has been abetted by the government, albeit perhaps reluctantly, which now allows labels like this on corn oil (pp. 155-56):
“Very limited and preliminary scientific evidence suggests that eating about one tablespoon (16
by ilene - August 30th, 2010 9:45 am
With concerns about surging food prices recently inflamed courtesy of the series of fires in Russia and the halt of grains exports out of the country, several heavy hitters have come out recently to discuss their views. One among them is the man with the best YTD performing macro hedge fund according to Bloomberg, Hugh Hendry, who appeared on BBC’s ever-informative Newsnight to discuss potash, food prices, and other scarce resources.
On whether the world is facing a massive food shortage, Hugh’s conclusion is that as long as Asia does not have a recession, things are ok, otherwise "in due course there would be great pressure on the food supply." As for Potash, Hendry says that China and Canada "hate each other [in the space]. There has been a profound game of roulette – Chinese consumption of Potash is 35% less than used in Western agriculture. At these prices, the Chinese haven’t been consuming in the manner in that they should and they risk an absolute collapse in their yields… China does have a vulnerability in feeding itself which we don’t have because we embrace potash at productive levels."
As for geopolitics, the topic arises of what African quid pro quo demands for having the most arable land should be and sending products over to China. The observation is that Africa’s bargaining position is negligible (those Goldman offices in Ethiopia, protecting the interests of the locals, are oddly missing).
All this and more in the below clip:
by ilene - June 3rd, 2010 2:59 pm
Hint: perfect recipe for a coronary.
Courtesy of TIME, by Alice Park
Ragnar Schmuck / Getty Images
It should come as no surprise that the typical American diet isn’t exactly brimming with healthy goodness — rather, it’s laden with fat, sugar and salt. And now new research published in the Journal of the American Dietetic Association points to a troubling reason: TV ads for food may be skewing our decisions on what we eat in powerful ways.
To figure out exactly how unhealthy a TV-guided diet would be, researchers studied food commercials that appeared during 84 hours of prime-time programming and 12 hours of Saturday-morning cartoons broadcast over the major U.S. networks during one month in 2004. When the research team calculated the nutritional content of a 2,000-calorie-a-day diet containing only foods that were advertised on television, they found that it exceeded the government’s recommended daily amount of fat by 20 times and had 25 times the recommended daily intake of sugar. "That’s almost a month’s worth of sugar in one day," notes study leader Michael Mink at Armstrong Atlantic State University in Savannah, Ga.
In addition, the TV-marketed diet provided less than half the recommended daily servings of fruit, vegetables and dairy.
In fact, the sources of nutrition in the TV-ad diet were almost the exact opposite of what the government’s food pyramid recommends. Instead of making up the smallest proportion of a day’s calories, as nutritionists advise, fats and sugars accounted for the largest portion of calories in a diet based on television advertising. Couple this nutritional inversion with the fact that marketing campaigns are notoriously effective in influencing people’s behavior and the result is what many nutrition experts call a toxic environment — one that dissuades Americans from making healthy food choices and encourages inactivity.
by ilene - March 5th, 2010 4:08 pm
Elaine Supkis passionately takes on Dr. Niall Ferguson. Her words in Niall’s LA Times excerpt are red. – Ilene
Courtesy of Elaine Supkis at Culture of Life News
It is rather curious how people refuse to see obvious things. This is why so many things are ‘unexpected’ or a ’surprise’. People who do see obvious things are called ‘cynics’. Cynics are the exact opposite of banking gnomes and their ilk. Cynics disparage wealth and power in order to see reality and truth. Often, cynics go around telling people, ‘You are doomed’ which makes them party poopers. But then, often, they are right.
The Cynics (Greek: Κυνικο?, Latin: Cynici) were an influential group of philosophers from the ancient school of Cynicism. Their philosophy was that the purpose of life was to live a life of Virtue in agreement with Nature. This meant rejecting all conventional desires for wealth, power, health, and fame, and by living a life free from all possessions. As reasoning creatures, people could gain happiness by rigorous training and by living in a way which was natural for humans. They believed that the world belonged equally to everyone, and that suffering was caused by false judgments of what was valuable and by the worthless customs and conventions which surrounded society. Many of these thoughts were later absorbed into Stoicism.
The first philosopher to outline these themes was Antisthenes, who had been a pupil of Socrates in the late 5th century BCE. He was followed by Diogenes of Sinope, who lived in a tub on the streets of Athens. He took Cynicism to its logical extremes, and came to be seen as the archetypal Cynic philosopher. He was followed by Crates of Thebes who gave away a large fortune so he could live a life of Cynic poverty in Athens. Cynicism spread with the rise of Imperial Rome in the 1st century, and Cynics could be found begging and preaching throughout the cities of the Empire. It finally disappeared in the late 5th century, although many
by ilene - January 27th, 2010 7:52 pm
Courtesy of Jesse’s Café Américain
My personal view is that this is a manifestation of economic distortions and malinvestment due to government interferience in a variety of feed markets over a number of years, as well as paper speculation driving prices in a way that is not connected with physical supply and demand.
Is there a significant change in American dietary habits and an oversupply of beef and milk? It does not seem as though the retail prices of milk and beef are dropping in concert with this, which may be dampening demand.
Let them eat iPads and CDO’s.
U.S. Cattle Herd Falls to 1958 Low as Losses Climb, Survey Says
By Whitney McFerron
Jan. 27 (Bloomberg) -- The U.S. cattle herd may have shrunk to the smallest size since 1958, as mounting losses during the recession spurred beef and dairy producers to cull animals, analysts said.
Wholesale choice-beef prices averaged $1.4071 a pound last year, the lowest level since at least 2004, as U.S. job losses climbed and meat demand waned. Corn, the main ingredient in livestock feed, jumped to a record $7.9925 a bushel in 2008 on the Chicago Board of Trade, and prices averaged about $3.79 last year, the third-highest annual average since at least 1959.
“There’s not much incentive to be building herds,” said John Nalivka, the president of Sterling Marketing Inc., a livestock-industry consulting company in Vale, Oregon. “Costs of production across the cow-calf sector and in dairy have gone up in the past two years, and prices have come down” for beef and milk, he said.
Futures prices for feeder cattle, the young animals that ranchers sell to feedlots to be fattened for slaughter, averaged 96.821 cents a pound last year on the Chicago Mercantile Exchange, the lowest level since 2003. Feeder-cattle futures for March settlement rose 0.2 percent yesterday to 98.975 cents a pound on the CME.
Slaughter-ready cattle futures for April delivery dropped 0.9 percent yesterday to 89.325 cents a pound.
Cattle ranchers in the southern Great Plains lost about $34 on every breeding cow they owned last year, following losses of about $18 a head in 2008, according to Jim Robb, the director of the Denver-based Livestock Marketing Information…