Virtually every asset class has had a spectacular run over the 3.5 years. Credit growth is going to slow as asset prices go lower and risk spreads are going to widen. If your getting on average 6.74 percent on Baa corporates and three month tbills at an average of 5.23 percent someone is going to get killed. If you think stocks are moving now wait till interest rate vol picks up. It is strange that the market continues to discount any kind of credit risk, but I dont know how much longer that can last.
Crash is Upon Us
- Thread starter Pabst
- Start date
Because all of the lemmings continue to look at what the consumer is doing . . . when the more significant data is CAPITAL SPENDING!!!
The naysayers and bears point out all of the OBVIOUS hot-buttons like oil prices, the housing market, Iran, North Korea, Oil Prices, the FED, debt levels, consumer spending, etc.
But none of the naysayers actually want to crunch thru the REAL data and look at what actually has a strong correlation.
For example, 20 years ago gasoline was at 7.2% of consumer spending. Today, it is at only HALF that rate ( 3.7% ). Moreover, as a slice of the U.S. GDP, gasoline is down by a third, to a mere 3%.
The Economy continues to hum along, albeit at a slower pace.
Next.
I thought that it costs no more and no less to produce 100 plastic flip flops as it did to produce 99.
So there is more inventory, which cost the same. If there is a tax on the extra flip flop, then there is money creation, which is paid through by higher productivity (as an extra pair is bought).
That higher productivity and growth, I assume, is accounted for by the government bonds whose price and yield vary. Thus higher yields.
I suspect that is why there is a bottle neck with ethanol supply. With the problems with Chavez, Nigeria, and so on, it is likely that once ethanol and flex fuel cars are available, everyone is going to go with ethanol.
This should occur after this summer's driving season.
It's just too bad that the oil producing nations don't realize how anti-oil the western sentiment is, and so if the west can afford to buy gas at 3-6 USD per gallon, I am sure the same will be true for ethanol.
Its just that then, there will not be any Venezuela, Nigeria, Saudi Arabia, or even, Iran and Syria to be bothered with.
No need for personal insults. Just to degrade another thread and another persons point of view.
If I am so ill informed, why not correct me.
Just look at Brazil. It is now virtually oil independent with ethanol made from sugarcane.
The Arabs can send oil up to 200 USD, but no one is going to buy it. Why indeed is Saudi Arabia hinting at 60 USD per barrel, last Thursday (which took oil of its highs at 75)?
There was demand destruction at around 70 USD per barrel. Right now, there is demand destruction going on (i.e. above 60), its just that the major financial institutions are being allowed to unwind out of there oil positions. And hence the volatility in the markets.
Why do you think that emerging markets have taken a hit?
Anyway if there is naivity, then why the rush to produce ethanol. How many people on ET or in the world know about the Du pont, BP and butanol. Indeed why even produce butanol? Why then even consider alternative energy sources?
I suspect if I told you that the half of North eastern Canada, parts of Boston, Seattle were going be under 6 feet of water, you would say the same. Then why is Warren Buffet's Berkshire Hathaway specializing in catastrophic insurance? I'm sure they are not naive.