Robert Peston’s thoughts on the future of the world economy. PDF linked from the blog entry.
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Tags: BBC, economy, Financial, international, Robert Peston
I’ve intermittently wanked on about the credit crunch for quite some time, in many ways it’s been like watching a railway crash, in that there’s been a fixed trajectory, and from a great distance things don’t appear to be moving that fast. I have a couple of comments; firstly, none of the underlying problems with the affected economies have been solved *, and secondly, there aren’t half some head cases that comment on Robert Peston’s blog. I haven’t blogged about anything financial or economic because it depresses the living fuck out of me (plus typing fucks my back). I have kept up with the situation, and, as a part of that, I’ve read RP’s blog. It’s good. I think RP is a credit to the BBC. As for Robert Peston having a political bias – bollocks – he’s pissed people off of all stripes, which is an indicator of how good he is.
There are a lot of people who are sane enough to type their mad ideas (how would I know if I was one of them?), and it appears they’re attracted to Robert Peston’s blog like nutters to church. If you’ve got a few minutes you must have a chuckle at the comments on this post. Some of them go from fat-cats to socialist apocalypse faster than Hackney carriage drivers.
* I think there’s a 50/50 chance this will turn into an aggregate cluster fuck rather than a mere cluster fuck. Oh yeah – and nobody has mentioned the affect St Barack’s election in the US has had on British government tax policy, and/or speculated about what that indicates with upcoming US fiscal policy. I suspect the broad direction of fiscal policy was informally discussed well in advance at a well publicised visit to the UK. Lol.
Tags: banter, BBC, economics, economy, FFS, Financial, Media, news
There’s a sketch from the Fast Show that comprises of Chris Jackson, the crafty cockney, trying to convince naïve people that he’s a thief. But often they don’t believe him because he’s a cheeky, amiable, chap. At a stretch you could pull a metaphor out of your arse with Chris Jackson as certain parts of the financial world and the naïve people as regulators. Here’s an example sketch where he is believed, but told “you can’t do this”.
Robert Peston’s Super Rich: The Greed Game is a much better exploration of the recent turmoil in the financial sector. If you’re in the UK it’s on BBC iPlayer – watch it here. If you’re not in the UK – watch it here. The Damien Hirst reference in the title is a reference to Robert Peston’s Damien Hirst reference. Essential viewing.
The banks that are going to be bailed out by the US taxpayer are going to profit, possibly substantially, from the big bail-out. Not US taxpayers. They get all of the risk though. Specifically from the ludicrously nebulous ‘reverse auction’ that talks in terms of ‘hold to maturity prices’. This is simultaneously unbelievably funny and scary all at the same time. I had a chance to watch most of the US senate hearing today and as far as I can tell it’s more of the same thinking that got us all in this mess in the first place. From and by the same people that got us in this mess.
No doubt people will swallow this shit and the ‘hold to maturity prices’ issue will not be addressed by any of the presidential candidates. Stunningly. mindblowingly, unbelievable.
Edit @ 2:32
The more I think about it this may actually be a good plan, with the proviso that the estimated matured prices are a fair representation. E.g. the prices are what you’d expect for matured dodgy debt and not what you’d expect from vanilla debt. That could end up costing less than the alternatives. It was a shame it was so vague.
I for one hope that whatever happens it happens quickly and puts some kind of end to the present turmoil.
This makes me angry. The BBC has some really good people, including Robert Peston, so when they talk complete bollocks re: oil prices they’ve got no excuse. Here’s what the BBC has to say about today’s spike in oil prices (believe it or not the biggest spike took place in the space of five minutes!) Keep in mind all commodities are up, not just oil:
Record one-day jump in oil price
The price of oil has jumped by more than $16 to $120.92 a barrel, the biggest one-day gain on record.
The increase in the price of US light, sweet crude was driven by concerns about supply.
Production in the Gulf of Mexico is still affected by Hurricane Ike and Saudi Arabia is cutting production.
Oil traders also believe that the US government’s bank bail-out plan will help the economy and therefore demand for oil.
Last week oil traded as low as $91 a barrel. It had fallen from its peak of $147 a barrel that it reached in July.
The volatility in the price has been exacerbated by the fact that the contract for the supply of oil in October expires on Monday.
From here (I’ve cut and pasted for the purposes of discussion and that the BBC has a tendency to edit articles days later). In my opinion what they have written is unmitigated bullshit.
Here’s what Bloomberg had to say (I’ve cut and pasted for the purposes of discussion and commentary):
Oil Posts Biggest Gain as Traders Caught in End-Month Squeeze
By Mark Shenk
Sept. 22 (Bloomberg) — Crude oil climbed more than $25 a barrel, the biggest gain ever, as traders scrambled to unwind positions on the October contract’s last day of trading. The more-active November contract rose $6.62.
“This looks like a squeeze play,” said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. “All of the contracts are up, but nothing like October. This is the last day of trading and someone is scrambling to guarantee supply.”
Crude oil for October delivery rose $16.37, or 17 percent, to settle at $120.92 a barrel at 2:46 p.m. on the New York Mercantile Exchange. It was the highest settlement price since Aug. 21. Futures for November delivery rose 6.4 percent to settle at $109.37 a barrel.
Prices climbed today as traders who sold the October contract last week, when oil dipped close to $90, had to buy the futures back. In a squeeze a trader has gone short by selling contracts hoping the price will decline. In the last days before the contract expires the trader must buy back the same number of futures or be forced to deliver the underlying oil.
“I don’t think there’s any doubt that’s the indication of a huge squeeze,” said Craig Pirrong, director of energy markets for the University of Houston’s Global Energy Management Institute. “It’s just stunning this could happen” given the recent scrutiny in Congress and among U.S. regulators concerning the crude oil markets, he said.
`Yawning Gap’
“It’s a very small pool playing in this market right now, and that’s why you’re seeing those massive differentials” between the October and November contracts, said David Kirsch, an energy markets analyst at PFC Energy in Washington. “Somebody did place a wrong bet and is trying to cover that position.”
“The overarching factor is that the October futures contract expires today,” said Ryan Oatman, an analyst at SunTrust Robinson Humphrey in Houston. “This is a classic short squeeze. What lead up to it was a strong euro, up on concerns U.S. government actions will ultimately result in a greater budget deficit, higher inflation and a weaker dollar.”
Investors looking to hedge against the dollar’s decline earlier this year have helped lead oil, gold, corn and gasoline to records. Oil rose as high as $130 a barrel, up from $104.55 on Sept. 19, as the dollar dropped on concern that a U.S. proposal to buy $700 billion of troubled assets from financial firms will deepen the budget deficit.
The dollar declined 2.4 percent to $1.4817 per euro, from $1.4466 on Sept. 19. It touched $1.4818, the weakest level since Aug. 22.
Hard Assets
“Gold, silver, oil, copper, just about any hard asset, is looking good at this point,” said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. “With the dollar down and stocks getting hit, commodities look like a safe play.”
Oil has risen 33 percent since Sept. 16 as lawmakers pledged fast consideration of the Treasury’s plan to buy devalued mortgage-related securities.
“There’s a flight to quality and the energy markets are benefiting,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The dollar is down again and investors are fleeing to commodities. We are back to the cycle that pushed prices to records earlier this year.”
Hedge-fund managers and other large speculators increased their net-long position in New York crude-oil futures in the week ended Sept. 16, according to U.S. Commodity Futures Trading Commission data.
Speculative long positions, or bets prices will rise, outnumbered short positions by 19,379 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report.
Gasoline
Gasoline for October delivery increased 10.41 cents, or 4 percent, to settle at $2.7038 a gallon in New York. Heating oil rose 14.52 cents, or 5 percent, to settle at $3.043, the biggest single-session gain since June 6.
Regular gasoline, averaged nationwide, declined 1.8 cents to $3.739 a gallon, AAA, the nation’s largest motorist organization, said today on its Web site. Pump prices reached a record $4.114 a gallon on July 17.
Crude oil prices are “too high” because the global economic slowdown may spread and cut consumption, the International Energy Agency’s deputy executive director said.
“The economic slowdown in the U.S., Europe hasn’t gotten into China, India much, but at some point you have to presume it will,” William Ramsay said in an interview in Bangkok today.
The Paris-based IEA, which advises 27 developed nations on energy policy, was set up in 1974 in response to the Arab oil embargo.
Brent crude oil for November settlement rose $6.43, or 6.5 percent, to settle at $106.04 a barrel on London’s ICE Futures Europe exchange.
Who do you think gives a better idea of what happened today? The BBC or Bloomberg?
This could be bollocks. I’m no expert.
The price of oil has jumped today and will continue to rise. If you remember a while back this year lots of people were talking about how supply and demand was responsible for rising oil prices. It’s not difficult to find them. Do a Google search. There were serious editorials about peak oil, how little had been invested in infrastructure, Chinese demand etc. etc. The oil demand situation between last Friday and today has not changed. Yet prices are going up and will continue to do so. Demand is going to go down. All commodities are going to go up. They are going to go up because the Dollar is going to go down and equities are volatile. It will affect inflation as much as a devalued Dollar.
Take a look at the following chart here (via Index Explorer) market cap on loan percentage is an indicator of how much short selling is going on. People have noticed, here’s FT.com’s Alphaville, and, with all of that in mind, why not browse today’s front pages here?
There are very few people asking if there will be any unintended (or blindingly obvious *cough* inflation) consequences from all this.
Robert Peston on what’s going down. It was hoped that someone would merge with it. Didn’t happen. Barclays pulled out. Nobody panic.
Certain Nasdaq tech stocks have, in my opinion, been unfairly tarnished by the fuckwitted problems in the financial sector. They are bargains and had I the cash between one and two years time I’d be laughing. During the dot-com bust it was horrible to watch loads of companies that were fundamentally sound dragged down with idiotic companies. The stock for companies that survived could have been picked up dirt cheap. Had I the foresight to invest, which is easy in retrospect.
The market hasn’t bottomed by any means, but here’s my theory, pulled out of my arse: 1) The tech sector is going to reach a bottom faster than other sectors, not quite as fast as Eliot Spitzer reaching a bottom via an escort service, but within two months. 2) The exact time a bottom is going to be reached is difficult to predict, but less so in the tech sector (there’s unlikely to be bad news to come) than other sectors. But a short loss is worth swallowing for the long term gains. 3) The risk in much of the tech sector is different from other sectors because of transnational assets and sales. It’s diverse rather than localised risk.
With regards of everything other than tech – it’s not bottomed yet because there’s more bad news to come. Anyone that thinks that isn’t the case is being naïve. The Fed does not make moves of the magnitude made over the weekend without reason. History will tell. What I hope is that rationality wins the day, everyone calms down, stops thinking in the short term, and most markets bottom in the next few weeks. But what I hope, indeed, what I say, is pulled from my arse, and is a poor excuse for a blog entry. And could be bollocks.
Here’s what I’d buy, in my imaginary bet:
Intel (Nasdaq symbol INTC) – $20 is not a fuckload off it’s 8 year low and is a bargain. Intel is going to dominate the chip market for the imminent future. Hasn’t been hit by stocking up on a twit load of flash memory.
Nvidia (Nasdaq symbol NVDA) – $20 is nowhere near Nvidia’s lows, but Nvidia has shown surprising resilience in the face of competition from AMD (inc. ATI) and Intel, in both the on-board graphics/motherboard market at the graphics card market. Huge global sales/assets.
Sun (Nasdaq symbol JAVA) – $16 – post acquisition of the ubiquitous MySQL, is a bargain. There will be more webservers and more MySQL. Doesn’t matter which Linux distribution a webhost runs, they still need MySQL.
In two years time I’ll find out if I’m right or not.
Tags: arseburgers, banter, economy, Financial
I think part of the problem with the media coverage of the financial world is that it is unable to see things in shades of grey. The term recession, for instance, is often used as if it’s equivocal with a depression. It’s not. It’s quite possible to be in a recession and, aside from certain parts of an economy, not have a substantial impact on the fundamental things that affect people. The current situation in the US is bad, but nothing on the recessions of the 1980s or 1990s. It’s going to be bad for upwards of six months, particularly in the financial sector (I reckon there’s a great deal of bending the truth regarding liquidity, to keep baying morons from panic selling), but everything else will recover quickly, which will, in turn help the financial sector. And I hate to agree with George W Bush, the fundamentals of the US economy, even in its current state, are better than people think and shouldn’t be underestimated.
Consumer spending has not been affected terribly by the problems of last year. There is a lag, but it could be that many people who are now in trouble with their mortgages were not big consumers because the percentage of their income was eaten by their mortgage was already high. So the knock-on effect to the economy of defaults and loans may have been severely over estimated. And, I suspect, this is reflected in today’s US inflation data. Prices were kept low because people weren’t prepared, or able, to pay more. Oil and grain prices are to be watched as components of the CPI, and the wider international situation. There’s a fuck load of people in West China who have yet to start consuming with the rest of us. I done-gone-think there’s going to be linear growth in world consumers over the next decade as the 700 million odd people in rural China increase demand.
I think the major problem with the last four years of US economic policy is that the fed severely underestimated the stupidity of the market and how it’s often led by mood rather than rationality. If people panic it will get much worse, if people listen to Bush, and they should, because he’s right in this instance, the recession will be a bit of a pain but nothing like being kicked in the balls. Bloomberg‘s coverages has been better than the competition in terms of neutrality and the rationality of its correspondents. As an armchair economist I hope to get my hands on some raw data in the next few weeks and see if I’m talking bollocks.
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Twonilblankblank by Jack P Toerson is licensed under a Creative Commons Attribution-Non-Commercial-Share Alike 2.0 UK: England & Wales License.
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Twitter: doublegamete.
Twonilblankblank by Jack P Toerson is licensed under a Creative Commons Attribution-Non-Commercial-Share Alike 2.0 UK: England & Wales License.
Permissions beyond the scope of this license may be available. Comment.
