Wednesday, March 25, 2009
Marc Faber predicts stock rally to last a little longer
Dr. Faber predicts the current bear market rally will last for awhile.
Sunday, March 22, 2009
Matthew Simmons Presentation - March 11
Please take a careful look at Matthew Simmons' latest presentation. Click here to read it (1.9MB PDF file)
Here are some snapshots of his presentation:
Despite the constant news stories about "demand destruction", global oil demand has only fallen by 200,000 barrels per day!
Latest U.S. crude stocks are about the same number they were throghout the 1980's! (Daily demand has grown by about 20%)
On the chart below, although 3.4 billion barrels in storage might seem like a lot, total OECD demand per year is roughly 15-17 billion barrels per year (in other words, total stocks can last for about 70-80 days of consumption)
Here are some snapshots of his presentation:
Despite the constant news stories about "demand destruction", global oil demand has only fallen by 200,000 barrels per day!
Latest U.S. crude stocks are about the same number they were throghout the 1980's! (Daily demand has grown by about 20%)
On the chart below, although 3.4 billion barrels in storage might seem like a lot, total OECD demand per year is roughly 15-17 billion barrels per year (in other words, total stocks can last for about 70-80 days of consumption)
Friday, March 20, 2009
Marc Faber Expect wars with Russia and China over Commodities soon
Dr. Faber argues that oil stocks are not expensive, especially looking not only at P/E ratios but actual oil reserves. As usual, Dr. Faber is very bullish on commodities.
He also predicts a commodities war between the US, China & Russia.
Tuesday, March 17, 2009
Why the Meltdown Should Have Surprised No One
By Peter Schiff
Excellent speech by Peter Schiff. He discusses why we got into this financial mess.
Excellent speech by Peter Schiff. He discusses why we got into this financial mess.
Sunday, March 15, 2009
Colin Campbell discusses Peak Oil
Dr. Colin Campbell explains what Peak Oil is, what it means and its consequences.
Friday, March 13, 2009
Ignoring the Austrians Got Us in This Mess
Ignoring the Austrians Got Us in This Mess
By RANDALL W. FORSYTH | MORE ARTICLES BY AUTHOR
Their ideas warned us of the bubble; their prescription for the bust is too harsh, however.
"WILL CAPITALISM SURVIVE?" was the question before the lunch table Wednesday. "It hasn't been tried," I replied, "at least not since the McKinley administration and certainly not since 1914," when the Federal Reserve started operations in earnest.
In doing my conservative curmudgeon act, I probably came across as supercilious. But my response also reflected my reaction to the smug contempt toward free-market philosophy in general and Ronald Reagan and his lesser successors in particular expressed elsewhere in the press of late.
The credit crisis and the ensuing global economic contraction have failed to make an impression on academe, where free-market orthodoxy still reigns supreme, the New York Times asserted in an article in arts section recently ("Ivory Tower Unswayed by Crashing Economy," March 4.)
The problem, the Times asserts, is the current generation of academics have been brought up primarily in free-market orthodoxy exemplified by the so-called Chicago School, named for the University of Chicago, from where Milton Friedman and his fellow adherents spread their ideas.
Ignored was the work of John Maynard Keynes, the Times contends, whose ideas have been revived with the massive expansion of government intervention in reaction to the current crisis. Also overlooked was Hyman Minsky, another 20th century economist who asserted that financial markets are inherently unstable and, in turn, can destabilize the real economy.
On the latter score, Minsky was indeed almost completely unknown by the current generation of economists. When I wrote of the economy having a "Minsky Moment" as the credit crisis first erupted in 2007, the name was met by a blank stare except from a few. Now, Minsky is widely cited as having discerned the link between market crashes and the economy.
But to say that anyone who is a serious student of economics is not thoroughly familiar with Keynes' ideas beggars credulity. The standard construct of the economy used by virtually all forecasters, from the Federal Reserve on down, is basically Keynesian, with varying opinions about how the model works. That none of them predicted the current crisis is telling, and indeed damning of the approach.
What definitely is ignored in academe is the Austrian school of economics, especially for baby boomers brought up on Samuelson's economics text, which was pure Keynesian orthodoxy. I did not learn the names von Mises and Hayek or their ideas until a decade or more after graduation (with a degree in economics, by the way.)
The Austrian view is a mirror image on the right to Minsky's from the left. The economy, if left alone, is self-correcting, say the Austrians. But central banks' inflationary expansion of credit produces booms and malinvestments, which inevitably lead to a crashes and depressions.
The only prevention for boom and busts are sound money, which is impossible with government-controlled central banks. Once the bust comes, the only cure is to let it run its course; allow the malinvestments go bankrupt and let the market reallocate the capital to productive uses.
The most famous expression of that philosophy was the prescription of Treasury Secretary Andrew Mellon: "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system." The result, according to the man of whom it was said three presidents served under him, the last being Herbert Hoover: "Values will be adjusted, and enterprising people will pick up from less competent people."
The Austrian prescription, of course, was rejected first by the New Deal of Franklin D. Roosevelt, and now by massive response by both the purportedly conservative Bush administration and now the Obama administration. First came the $700 billion TARP last year to stabilize the financial system, followed by the $787 billion fiscal stimulus enacted last month. Across party lines, it's accepted that government's role is to prevent the economic pain that would come of "liquidate, liquidate, liquidate."
But the Austrians were the ones who could see the seeds of collapse in the successive credit booms, aided and abetted by Fed policies, especially under former chairman Alan Greenspan. While he disavows (again) the responsibility for the boom and bust, most recently on Wednesday's Wall Street Journal Op-Ed page ("Fed Policy Didn't Cause the Housing Bubble," March 11), monetary policy played a key role in creating successive bubbles and busts during his tenure from 1987 to 2006.
Greenspan always contended that monetary policymakers can neither predict nor prevent bubbles in asset markets. They can, however, clean up the after-effects of the bust -- which meant reflating a new bubble, he argued.
That had a profound effect on risk-taking. Knowing that the Greenspan Fed would bail out the markets after any bust, they went from one excess to another. So, the Long-Term Capital Management collapse in 1998 begat the easy credit that led to the dot-com bubble and bust, which in turn led to the extreme ease and the housing bubble.
Austrian economists assert the current crisis is the inevitable result of the Fed's successive efforts to counter each previous bust. As the credit expansion pumped up asset values to unsustainable levels, the eventual collapse would result in a contraction of credit as losses decimate banks' balance sheets and render them unable to lend. That sounds like an accurate diagnosis of the current problems.
In the meantime, both Western democracies and autocratic governments such as China are actively utilizing the ideas of both Keynes and Friedman alike in enacting massively expansionary fiscal and monetary policies to counter the crisis resulting from the severe contraction in credit.
If these policies are successful, perhaps governments will adhere to Austrian principles to prevent a new boom and bust. That is for the next cycle, however. To paraphrase St. Augustine, governments may be saying, "Make us non-interventionist, but not yet."
By RANDALL W. FORSYTH | MORE ARTICLES BY AUTHOR
Their ideas warned us of the bubble; their prescription for the bust is too harsh, however.
"WILL CAPITALISM SURVIVE?" was the question before the lunch table Wednesday. "It hasn't been tried," I replied, "at least not since the McKinley administration and certainly not since 1914," when the Federal Reserve started operations in earnest.
In doing my conservative curmudgeon act, I probably came across as supercilious. But my response also reflected my reaction to the smug contempt toward free-market philosophy in general and Ronald Reagan and his lesser successors in particular expressed elsewhere in the press of late.
The credit crisis and the ensuing global economic contraction have failed to make an impression on academe, where free-market orthodoxy still reigns supreme, the New York Times asserted in an article in arts section recently ("Ivory Tower Unswayed by Crashing Economy," March 4.)
The problem, the Times asserts, is the current generation of academics have been brought up primarily in free-market orthodoxy exemplified by the so-called Chicago School, named for the University of Chicago, from where Milton Friedman and his fellow adherents spread their ideas.
Ignored was the work of John Maynard Keynes, the Times contends, whose ideas have been revived with the massive expansion of government intervention in reaction to the current crisis. Also overlooked was Hyman Minsky, another 20th century economist who asserted that financial markets are inherently unstable and, in turn, can destabilize the real economy.
On the latter score, Minsky was indeed almost completely unknown by the current generation of economists. When I wrote of the economy having a "Minsky Moment" as the credit crisis first erupted in 2007, the name was met by a blank stare except from a few. Now, Minsky is widely cited as having discerned the link between market crashes and the economy.
But to say that anyone who is a serious student of economics is not thoroughly familiar with Keynes' ideas beggars credulity. The standard construct of the economy used by virtually all forecasters, from the Federal Reserve on down, is basically Keynesian, with varying opinions about how the model works. That none of them predicted the current crisis is telling, and indeed damning of the approach.
What definitely is ignored in academe is the Austrian school of economics, especially for baby boomers brought up on Samuelson's economics text, which was pure Keynesian orthodoxy. I did not learn the names von Mises and Hayek or their ideas until a decade or more after graduation (with a degree in economics, by the way.)
The Austrian view is a mirror image on the right to Minsky's from the left. The economy, if left alone, is self-correcting, say the Austrians. But central banks' inflationary expansion of credit produces booms and malinvestments, which inevitably lead to a crashes and depressions.
The only prevention for boom and busts are sound money, which is impossible with government-controlled central banks. Once the bust comes, the only cure is to let it run its course; allow the malinvestments go bankrupt and let the market reallocate the capital to productive uses.
The most famous expression of that philosophy was the prescription of Treasury Secretary Andrew Mellon: "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system." The result, according to the man of whom it was said three presidents served under him, the last being Herbert Hoover: "Values will be adjusted, and enterprising people will pick up from less competent people."
The Austrian prescription, of course, was rejected first by the New Deal of Franklin D. Roosevelt, and now by massive response by both the purportedly conservative Bush administration and now the Obama administration. First came the $700 billion TARP last year to stabilize the financial system, followed by the $787 billion fiscal stimulus enacted last month. Across party lines, it's accepted that government's role is to prevent the economic pain that would come of "liquidate, liquidate, liquidate."
But the Austrians were the ones who could see the seeds of collapse in the successive credit booms, aided and abetted by Fed policies, especially under former chairman Alan Greenspan. While he disavows (again) the responsibility for the boom and bust, most recently on Wednesday's Wall Street Journal Op-Ed page ("Fed Policy Didn't Cause the Housing Bubble," March 11), monetary policy played a key role in creating successive bubbles and busts during his tenure from 1987 to 2006.
Greenspan always contended that monetary policymakers can neither predict nor prevent bubbles in asset markets. They can, however, clean up the after-effects of the bust -- which meant reflating a new bubble, he argued.
That had a profound effect on risk-taking. Knowing that the Greenspan Fed would bail out the markets after any bust, they went from one excess to another. So, the Long-Term Capital Management collapse in 1998 begat the easy credit that led to the dot-com bubble and bust, which in turn led to the extreme ease and the housing bubble.
Austrian economists assert the current crisis is the inevitable result of the Fed's successive efforts to counter each previous bust. As the credit expansion pumped up asset values to unsustainable levels, the eventual collapse would result in a contraction of credit as losses decimate banks' balance sheets and render them unable to lend. That sounds like an accurate diagnosis of the current problems.
In the meantime, both Western democracies and autocratic governments such as China are actively utilizing the ideas of both Keynes and Friedman alike in enacting massively expansionary fiscal and monetary policies to counter the crisis resulting from the severe contraction in credit.
If these policies are successful, perhaps governments will adhere to Austrian principles to prevent a new boom and bust. That is for the next cycle, however. To paraphrase St. Augustine, governments may be saying, "Make us non-interventionist, but not yet."
Sunday, March 8, 2009
Colin Campbell - Tar Sands Explained
Excellent explanation of Tar Sands by Dr. Colin Campbell. A worldwide known geologist, he was advisor to several large Oil & Gas companies. He is also the founder of the Association for the Study of Peak Oil & Gas (ASPO)
Marc Faber - Stocks May rally soon
As a good contrarian, Dr. Faber argues that stocks may rally temporarily. Faber says that all the news coming out are pessimistic . Faber makes the a good point about stocks having already discounted catastrophic news in the future (in other words, market sentiments are very bearish)
Add that the fact that central banks will continue to print money, so from a liquidity point view we could see a rally.
Friday, March 6, 2009
Synchronized Boom, Synchronized Bust
By Marc Faber
The world has gone from the greatest synchronized global economic boom in history to the first synchronized global bust since the Great Depression. How we got here is not a cautionary tale of free markets gone wild. Rather, it's the story of what can happen when governments ignore market signals and central bankers believe in endless booms.
Following the March 2000 Nasdaq bust, the Federal Reserve began to slash the fed-funds rate from 6.5% in January 2001 to 1.75% by year-end and then to 1% in 2003. (This despite the fact that officially the U.S. economy had begun to recover in November 2001). Almost three years into the economic expansion, the Fed began to increase the fed-funds rate in baby steps beginning June 2004 from 1% to 5.25% in August 2006.
But because interest rates during this time continuously lagged behind nominal GDP growth as well as cost of living increases, the Fed never truly implemented tight monetary policies. Indeed, total credit increased in the U.S. from an annual growth rate of 7% in the June 2004 quarter to over 16% in early 2007. It grew five-times faster than nominal GDP between 2001 and 2007.
Continue reading
The world has gone from the greatest synchronized global economic boom in history to the first synchronized global bust since the Great Depression. How we got here is not a cautionary tale of free markets gone wild. Rather, it's the story of what can happen when governments ignore market signals and central bankers believe in endless booms.
Following the March 2000 Nasdaq bust, the Federal Reserve began to slash the fed-funds rate from 6.5% in January 2001 to 1.75% by year-end and then to 1% in 2003. (This despite the fact that officially the U.S. economy had begun to recover in November 2001). Almost three years into the economic expansion, the Fed began to increase the fed-funds rate in baby steps beginning June 2004 from 1% to 5.25% in August 2006.
But because interest rates during this time continuously lagged behind nominal GDP growth as well as cost of living increases, the Fed never truly implemented tight monetary policies. Indeed, total credit increased in the U.S. from an annual growth rate of 7% in the June 2004 quarter to over 16% in early 2007. It grew five-times faster than nominal GDP between 2001 and 2007.
Continue reading
Sunday, March 1, 2009
Economic Recovery Requires Capital Accumulation, Not Government "Stimulus Packages"
...Capital is accumulated on a foundation of saving. Saving is the act of abstaining from consuming funds that have been earned in the sale of goods or services.
Saving does not mean not spending. It does not mean hoarding. It means not spending for purposes of consumption. Abstaining from spending for consumption makes possible equivalent spending for production. Whoever saves is in a position to that extent to buy capital goods and pay wages to workers, to lend funds for the purchase of expensive consumers' goods, or to lend funds to others who will use them for any of these purposes.
Despite the fact that what the economic system needs for recovery is saving and the accumulation of new capital, to replace as far as possible the capital that has been lost, the effect of stimulus packages is further to reduce the supply of capital, and thus to worsen the recession or depression.
The supporters of stimulus packages look to the fresh production that is required to replace the wealth that has been consumed. It will require the performance of additional labor. They are delighted to the extent that this fresh production and additional employment materialize. They believe that at that point their mission has been accomplished. They have succeeded in generating new and additional economic activity, new and additional employment. The only shortcoming of such a policy, they believe, is that it may not be applied on a sufficiently large scale.
Unfortunately, there is something they have overlooked. And that is the fact that any fresh production and employment that results is incapable by itself of replacing the capital that was consumed in starting the process. The reason for this is that all production, including any new and additional production called into being by stimulus packages, itself entails consumption. And this consumption tends at the very least to approximate the fresh production and, indeed, is capable of equaling or even exceeding it.
Matthew Simmons Presentation - Feb 11 2009
Here's a snapshot of one Matthew's recent presentations:
He makes the case that current low prices are dangerously and will severely impact supply additions.
Continue to read this presentation (PDF file)
He makes the case that current low prices are dangerously and will severely impact supply additions.Continue to read this presentation (PDF file)
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