“It should be obvious from simple arithmetic that population growth is on a direct collision course with increasingly scarce resources.” -Jeremy Grantham
The notion of peak water probably sounds crazy to most people. The earth is 70% covered by water. The water cycle replenishes water on a continuous basis. The global warming enthusiasts tell us that glaciers are melting and oceans are rising. This should make water more plentiful. But, as they say in the real estate business – Location, Location, Location. Freshwater shortages in the wrong places could have calamitous consequences to those regions, worldwide commodity prices, the economic future of nations with water shortages and possible war. Regional water scarcity means water usage exceeds the annual natural replenishment from the water cycle. The impact of water scarcity can be far reaching. It can lead to food shortages, famine, and starvation. Many nations, regions and states have mismanaged their water resources, and they will have to suffer the long-term consequences.
The peak oil debate gets a tremendous amount of press and generates heated disagreements on both sides. The focus on peak oil has permitted the future water crisis to stay under the radar. As usual, myopic self serving politicians have ignored resource issues for the last 30 years. These were 30 years of debt financed good times with relatively low prices for all natural resources and commodities. The end of this period of low prices is nigh. The brilliant investment manager Jeremy Grantham lays out the future in his recent newsletter:
“We must prepare ourselves for waves of higher resource prices and periods of shortages unlike anything we have faced outside of wartime conditions. In fact, I believe we are already several years into this painful transition but are still mostly invested in denying it.”
The following chart provides a useful comparison of oil and water as resources. While oil is non-renewable and limited, it is replaceable by other more costly alternatives. Water is renewable and relatively unlimited, but there is no substitute and it is only useful in the precise places. The Southwest region of the United States, our fastest growing region, has considerable freshwater constraints and could ultimately run out
So, I got lucky and somehow predicted Q2 GDP the night before the release (as a friend of mine told me, "even the blind chicken gets the kernel of corn"), BUT I’ll try again. Economists (smarter than me) are predicting a month over month CPI print of 0.0%. I’ll go on record here that it will come in lower. To understand my reasoning, lets take a look at details from today’s July import price levels release. Marketwatch reported:
Prices of imported goods fell 0.7% in July, the first decrease since January as petroleum prices declined, the Labor Department estimated Thursday.
Analysts polled by MarketWatch had expected the import price index to fall 0.1%.
Import prices were down 19.3% in the past year, the largest annual decline since the data were first published in 1982. In June, the import price index rose a revised 2.6%, compared with a prior estimate of a 3.2% gain.
In July, imported petroleum prices fell 2.8%, the first decrease since January. The petroleum imports price index is down 49.9% over 12 months. Non-petroleum import prices fell 0.2% in July, and are down 7.3% for the year, the largest 12-month decline since the data began publication in 1985.
We can see below that the change in the import price level was largely driven by the change in fuel (i.e. petroleum) prices.
Now the significance. There has been a very strong relationship between the price level of imports and broad CPI, as changes in the price of petroleum has been the main driver of CPI. Thus, the fact that July’s import prices declined makes me think we may be in for a surprise regarding July’s CPI print. The below chart shows the longer term relationship.
Regardless of the month over month figure, expect a sizable drop in the year over year number. As we can see below, prices spiked last July as the bubble in oil was in full gear. Thus, if prices are flat month over month (as expected), the year over year CPI will move down to -1.9%.
The important question… how do you position for this? I personally own TLT (a long positon in the long bond). My view is if CPI comes in lower than…
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.
The Department of Transportation's Federal Highway Commission has released the latest report on Traffic Volume Trends, data through July.
Travel on all roads and streets changed by 1.5% (4.0 billion vehicle miles) for July 2014 as compared with July 2013 (see report). The less volatile 12-month moving average is up 0.13% month-over-month. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) is up 0.05% month-over-month and down 0.2% year-over-year.
Here is a chart that illustrates this data series from its inception in 1970. I'm plotting the "Moving 12-Month Total on ALL Roads," as the DOT terms it. See Figure 1...
US imperialism was once a fearsome force - mainly for ill. Under the latter heading, Washington’s savage destruction of Vietnam four decades ago comes readily to mind. But now the American Imperium has become just a gong show on the Potomac - even as its weapons have gotten more lethal and its purposes more spurious and convoluted.
There is no more conspicuous proof than Obama’s quixotic “war” on ISIS. ...
Grgurich formulated his article after reading "an intriguing piece just published in Foreign Affairs, Brown University political economist Mark Blyth and London-based hedge fund manager Eric Lonergan argue the Fed could have done better by pursuing a far different type of grand policy experiment."
Investors are dumping shares in Yahoo, sending the stock down 5.0% to $40.08 after shares in Alibaba made their debut on the floor of the NYSE just before midday. Shares in BABA for their part initially traded up to a high of $99.70, a near 47% increase over the IPO price of $68.00. Typically, one would expect put options that are 5% out of the money with roughly 4-hours left to trade to see waning implied volatility. But, at the start of the trading session and ahead of the first trade for BABA, the Sep 19 ’14 40.0 strike put options were trading with 271% volatility or $0.30 per contract amid uncertainty as to how the start of trading for Alibaba would take shape.
Administradora de Fondos de Pensiones Provida S.A. (PVD) shares will not be trading on the NY Stock Exchange after today. Tomorrow, shares will be harder to sell. Strangely, I wasn't able to find information on the internet, but Paul just sent me a copy of the email he received from Interactive Brokers.
We're selling PVD out of the Virtual Portfolio today at $87.18.
From: Interactive Brokers dated July 18, 2014
Holders of AFP Provida S.A. American Depository Receipts (ADR) are advised that the Company has elected to terminate the Deposit Agreement effective 2014-09-18.
Although the stock market displayed weakness last week as I suggested it would, bulls aren’t going down easily. In fact, they’re going down swinging, absorbing most of the blows delivered by hesitant bears. Despite holding up admirably when weakness was both expected and warranted, and although I still see higher highs ahead, I am still not convinced that we have seen the ultimate lows for this pullback. A number of signs point to more weakness ahead.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-r...
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Despite the various opinions on Bitcoin, there is no question as to its ultimate value: its ability to bypass government restrictions, including economic embargoes and capital controls, to transmit quasi-anonymous money to anyone anywhere.
Opinions differ as to what constitutes "money."
The English word "money" derives from the Latin word "moneta," which means to "mint." Historically, "money" was minted in the form of precious metals, most notably gold and silver. Minted metal was considered "money" because it possessed luster, was scarce, and had perceive...
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Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
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