now go from wall street bull jibberish to substance
night and day
--------------------------------------------------------------
December 17, 2007
A Little Acid Test for Fed "Liquidity"
John P. Hussman, Ph.D.
All rights reserved and actively enforced.
Reprint Policy
The stock market retreated from its overbought position last week, as typically happens when overbought conditions occur in unfavorable Market Climates. Given that last week's decline cleared that overbought condition, I'm back to the more typical position of having no specific short-term views. That said, there is one particular scenario that would be ominous in my view. That would be if we see a relatively uninterrupted series of declines that breaks cleanly through the August and November lows, followed by a one-day advance of 200-400 Dow points. That's a script that markets tend to follow pre-crash. Though it's not a strong expectation or forecast, it's something worth monitoring, because we've started to see the pattern of abrupt jumps and declines at 10-minute intervals that is often a hallmark of nervous markets.
Last week's quarter-point move by the Fed gave the dollar an opportunity to rebound from its own oversold condition. A move to about 115 yen/dollar would be about where that condition would “clear,” and given still weak economic conditions and inflation pressures, that's about where the buck may again be vulnerable to fresh downward pressure.
With the November CPI figures released last week, the year-over-year headline CPI inflation rate is now 4.3%. That's not a surprise. As I noted way back in my July 30 market comment, “If you look carefully at the CPI figures (and tinker with the monthly numbers), you'll also discover that even if the figures average a 2% annual rate in the months ahead, the year-over-year headline CPI inflation rate will be pushing 4% by November. This is already “baked in the cake.” Since Bernanke is clearly concerned with the inflation expectations of the public, as well as the Fed's credibility, that headline CPI figure may create some complications for cutting rates in the months ahead, unless resource utilization falls out of bed.”
As usual, that's not to say that Fed actions provide more than psychological effects and a sort of “square dance call” for short-term rates anyway (which market rates often ignore, or precede). Still, inflation and dollar risk does complicate things a bit for the Fed, which is now forced to finance its predictable repos with great fanfare, as if they actually matter.
Case in point is the ridiculously over-hyped “term auction facility” announced last week. According to that announcement, the Fed plans to auction about $40 billion of “liquidity” this week: $20 billion on Monday December 17th, which will be a 28-day repo, and another $20 billion on December 20th.
If you've been following my weekly comments about Fed repos at all in recent weeks, you can figure out that there are currently $53 billion of repos outstanding (as of Friday), fully $39 billion that mature this week. And wouldn't you know it, the Fed is going to be “injecting” $40 billion this week too.
Acid Test
So here's a little acid-test of whether the Fed will actually be providing new “liquidity,” or whether it's just trying to brew up a tempest with what's already in that little teapot. Watch the NY Fed's listings of open market operations:
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
If the Fed is actually adding liquidity, you'll see not only the two $20 billion repos on the 17th and 20th, but additional repos to replace the $39 billion that are coming due this week ($5 billion mature on Tuesday the 18th, and fully $34 billion are set to mature on Thursday the 20th). If the Fed does nothing but those two $20 billion longer-dated repos, all it will have done is to change the maturity of its outstanding repos, without changing the amount.
Now, that's not to say I believe that even if the Fed does temporarily buy $40 billion of government securities for 28 days, before selling them back out, it will do much for the solvency of the $12.7 trillion U.S. banking system, much less exotic CDOs and mortgage-backed securities. As I've emphasized in recent weeks, if you track all those daily and weekly rollovers and figure out the total quantity of Fed repos outstanding at any given time, you'll find that the Fed has only injected $18 billion in “liquidity” since March.
If investors think the Fed buying up a few billion of Treasury and agency debt means a hill of beans, they might do well to remember that the U.S. government is running up annual deficits in the hundreds of billions. In fact, the U.S. Treasury will float tens of billions of new debt in December alone (most of which will be sopped up by foreigners, who have increased their holdings of Treasuries by well over $200 billion in the past year). This will be mixed in with refinancings.
Last week, for example, the Treasury auctioned $21 billion in 3-month bills and $20 billion in 6-month bills. In doing so, the Treasury offset every bit of the Federal Reserve's actions this week, even if it turns out that the $40 billion “term auction facility” represents new liquidity and not just rollovers. Why aren't investors just as interested in that? When the Fed does open market operations, all it's doing is buying up (temporarily or permanently) a tiny fraction of U.S. Treasury debt and replacing it with currency and bank reserves. But every time the Federal government issues more debt to finance its deficits, the new issuance cancels out any beneficial increase in liquidity the Fed could possibly provide.
So it's difficult to understand why investors would get all excited about the Fed temporarily buying up a few billion in government securities, when we've got a Federal government that's simultaneously and permanently issuing and then constantly rolling over many, many times that amount. It‘s an escape into dreamland to believe that Fed actions have any chance at all of providing more “liquidity” when the Federal government's deficits suck up in a matter of weeks every bit of liquidity that the Fed has provided in a year. These Fed actions are nothing but marginal tinkering around the edges of the global financial system, and investors are starting to catch on.
Still, it's fun to watch when you understand what's going on. In fact, there will be all kinds of interesting things we'll get to watch this week. For instance, the Fed does its first $20 billion auction on Monday, but there's a timing disparity - only about $5 billion of expiring repos come on Tuesday, and the other $34 billion come due on Thursday. So between Monday and Thursday, we'll observe at least a temporary jump of $15-20 billion in Fed repos outstanding. There's a good chance that during that 3-day overlap, the actual Fed Funds rate will creep below the current target of 4.25% (watch the chart here: http://www.ny.frb.org/markets/openmarket.html ). If that happens, you can bet that some analysts will incorrectly conclude that the Fed is doing some sort of “stealth easing.” But it will be nothing more than a 3-day timing overlap between maturing and new repos.
More interesting is to watch what happens on Thursday. That's when we get $34 billion of repos coming due. If the Fed does little more than $20 billion through its “term auction facility,” that will put the total for the week at $40 billion, versus $39 billion expiring, and it will be clear that this whole maneuver is simply a way for the Fed to temporarily refinance its expiring repos using a slightly longer 28-day maturity, rather than any effort to actually increase the amount of reserves.
In any event, banking conditions aren't likely to change even if $40 billion in additional 28-day repos actually materialize. Indeed, a Bloomberg report noted “A Fed official told reporters that the U.S. central bank's efforts won't add net liquidity to the banking system. The plans are aimed at buttressing so-called term funding markets, such as for one-month loans, rather than overnight cash.” Should be interesting.
Finally, it's worth repeating that the total amount of outstanding repos has increased by only $18 billion since March, nearly all of which has been drawn out as currency in circulation. Most likely, the Fed will enter a “permanent” open market operation on the order of $10-20 billion at some point in the coming weeks to formalize that increase in outstanding currency. That move will probably be met by ridiculously over-hyped reporting as well. But it's entirely predictable.
In short, Wall Street analysts aren't paying attention to the data if they believe that the Fed is "pumping" hundreds of billions into the economy to provide some kind of “safety net” for the banking system or the mortgage market. Is it really too much to ask that they make some attempt to understand the subject about which they opine incessantly?
As for the Fed itself, it's a great gift to offer people hope, but a great disservice to offer people false hope, and I think that's what the Fed is doing. What's going on in the mortgage market is not a crisis of confidence that we can talk ourselves out of – it's a problem of structural insolvency, where many borrowers literally don't have the means to service their debt over the long-term, because many of them were counting on rising home prices over the short-term. By acting as if a few billion in repos will substantially change this equation, the Fed is raising hopes, and setting the markets and the economy up for disappointment that will be far worse as a result. Bernanke would be better off admitting that the Fed has no chance of providing meaningful “liquidity” when the Federal government is issuing Treasuries at ten times the rate the Fed can absorb them. At that point, Americans would see better that the resources we need to invest, compete and become a financially sound nation are being hoarded by the Federal government and sent up in flames.
Market Climate
As of last week, the Market Climate for stocks remained characterized by unfavorable valuations and unfavorable market action. With last weeks' decline having cleared the overbought condition from the prior week, I have no pointed expectations about near-term market action. Again, however, I do think it's important to emphasize that the likelihood of recession remains intact, so investors should allow for the potential for substantial further market weakness. The Strategic Growth Fund remains fully hedged, not because of any specific near-term forecast about market direction, but because the prevailing conditions of valuations and market action have historically been associated with average returns well below Treasury yields.
In bonds, the Market Climate remains characterized by unfavorable yield levels and modestly favorable market action. As usual, we'll tend to increase our durations in the Strategic Total Return Fund on periodic spikes in yields, and clip them after significant dips. Credit spreads remain wide, and the potential for further loan losses does have the tendency to mitigate inflation pressures. That said, commodity prices and a generally weak dollar, combined with continued federal deficits are putting up a good fight to keep inflation pressures alive. My impression is that the default pressures will ultimately win out, but we've got a good chance of seeing a run on the dollar first. Again, the recent rebound in the dollar appears to be mostly a “clearing rally” from an oversold low, with the modest quarter-point Fed cut serving as the occasion. The Market Climate for precious metals remains favorable here, and the Strategic Total Return Fund continues to carry about 15% of assets in precious metals shares.
night and day
--------------------------------------------------------------
December 17, 2007
A Little Acid Test for Fed "Liquidity"
John P. Hussman, Ph.D.
All rights reserved and actively enforced.
Reprint Policy
The stock market retreated from its overbought position last week, as typically happens when overbought conditions occur in unfavorable Market Climates. Given that last week's decline cleared that overbought condition, I'm back to the more typical position of having no specific short-term views. That said, there is one particular scenario that would be ominous in my view. That would be if we see a relatively uninterrupted series of declines that breaks cleanly through the August and November lows, followed by a one-day advance of 200-400 Dow points. That's a script that markets tend to follow pre-crash. Though it's not a strong expectation or forecast, it's something worth monitoring, because we've started to see the pattern of abrupt jumps and declines at 10-minute intervals that is often a hallmark of nervous markets.
Last week's quarter-point move by the Fed gave the dollar an opportunity to rebound from its own oversold condition. A move to about 115 yen/dollar would be about where that condition would “clear,” and given still weak economic conditions and inflation pressures, that's about where the buck may again be vulnerable to fresh downward pressure.
With the November CPI figures released last week, the year-over-year headline CPI inflation rate is now 4.3%. That's not a surprise. As I noted way back in my July 30 market comment, “If you look carefully at the CPI figures (and tinker with the monthly numbers), you'll also discover that even if the figures average a 2% annual rate in the months ahead, the year-over-year headline CPI inflation rate will be pushing 4% by November. This is already “baked in the cake.” Since Bernanke is clearly concerned with the inflation expectations of the public, as well as the Fed's credibility, that headline CPI figure may create some complications for cutting rates in the months ahead, unless resource utilization falls out of bed.”
As usual, that's not to say that Fed actions provide more than psychological effects and a sort of “square dance call” for short-term rates anyway (which market rates often ignore, or precede). Still, inflation and dollar risk does complicate things a bit for the Fed, which is now forced to finance its predictable repos with great fanfare, as if they actually matter.
Case in point is the ridiculously over-hyped “term auction facility” announced last week. According to that announcement, the Fed plans to auction about $40 billion of “liquidity” this week: $20 billion on Monday December 17th, which will be a 28-day repo, and another $20 billion on December 20th.
If you've been following my weekly comments about Fed repos at all in recent weeks, you can figure out that there are currently $53 billion of repos outstanding (as of Friday), fully $39 billion that mature this week. And wouldn't you know it, the Fed is going to be “injecting” $40 billion this week too.
Acid Test
So here's a little acid-test of whether the Fed will actually be providing new “liquidity,” or whether it's just trying to brew up a tempest with what's already in that little teapot. Watch the NY Fed's listings of open market operations:
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
If the Fed is actually adding liquidity, you'll see not only the two $20 billion repos on the 17th and 20th, but additional repos to replace the $39 billion that are coming due this week ($5 billion mature on Tuesday the 18th, and fully $34 billion are set to mature on Thursday the 20th). If the Fed does nothing but those two $20 billion longer-dated repos, all it will have done is to change the maturity of its outstanding repos, without changing the amount.
Now, that's not to say I believe that even if the Fed does temporarily buy $40 billion of government securities for 28 days, before selling them back out, it will do much for the solvency of the $12.7 trillion U.S. banking system, much less exotic CDOs and mortgage-backed securities. As I've emphasized in recent weeks, if you track all those daily and weekly rollovers and figure out the total quantity of Fed repos outstanding at any given time, you'll find that the Fed has only injected $18 billion in “liquidity” since March.
If investors think the Fed buying up a few billion of Treasury and agency debt means a hill of beans, they might do well to remember that the U.S. government is running up annual deficits in the hundreds of billions. In fact, the U.S. Treasury will float tens of billions of new debt in December alone (most of which will be sopped up by foreigners, who have increased their holdings of Treasuries by well over $200 billion in the past year). This will be mixed in with refinancings.
Last week, for example, the Treasury auctioned $21 billion in 3-month bills and $20 billion in 6-month bills. In doing so, the Treasury offset every bit of the Federal Reserve's actions this week, even if it turns out that the $40 billion “term auction facility” represents new liquidity and not just rollovers. Why aren't investors just as interested in that? When the Fed does open market operations, all it's doing is buying up (temporarily or permanently) a tiny fraction of U.S. Treasury debt and replacing it with currency and bank reserves. But every time the Federal government issues more debt to finance its deficits, the new issuance cancels out any beneficial increase in liquidity the Fed could possibly provide.
So it's difficult to understand why investors would get all excited about the Fed temporarily buying up a few billion in government securities, when we've got a Federal government that's simultaneously and permanently issuing and then constantly rolling over many, many times that amount. It‘s an escape into dreamland to believe that Fed actions have any chance at all of providing more “liquidity” when the Federal government's deficits suck up in a matter of weeks every bit of liquidity that the Fed has provided in a year. These Fed actions are nothing but marginal tinkering around the edges of the global financial system, and investors are starting to catch on.
Still, it's fun to watch when you understand what's going on. In fact, there will be all kinds of interesting things we'll get to watch this week. For instance, the Fed does its first $20 billion auction on Monday, but there's a timing disparity - only about $5 billion of expiring repos come on Tuesday, and the other $34 billion come due on Thursday. So between Monday and Thursday, we'll observe at least a temporary jump of $15-20 billion in Fed repos outstanding. There's a good chance that during that 3-day overlap, the actual Fed Funds rate will creep below the current target of 4.25% (watch the chart here: http://www.ny.frb.org/markets/openmarket.html ). If that happens, you can bet that some analysts will incorrectly conclude that the Fed is doing some sort of “stealth easing.” But it will be nothing more than a 3-day timing overlap between maturing and new repos.
More interesting is to watch what happens on Thursday. That's when we get $34 billion of repos coming due. If the Fed does little more than $20 billion through its “term auction facility,” that will put the total for the week at $40 billion, versus $39 billion expiring, and it will be clear that this whole maneuver is simply a way for the Fed to temporarily refinance its expiring repos using a slightly longer 28-day maturity, rather than any effort to actually increase the amount of reserves.
In any event, banking conditions aren't likely to change even if $40 billion in additional 28-day repos actually materialize. Indeed, a Bloomberg report noted “A Fed official told reporters that the U.S. central bank's efforts won't add net liquidity to the banking system. The plans are aimed at buttressing so-called term funding markets, such as for one-month loans, rather than overnight cash.” Should be interesting.
Finally, it's worth repeating that the total amount of outstanding repos has increased by only $18 billion since March, nearly all of which has been drawn out as currency in circulation. Most likely, the Fed will enter a “permanent” open market operation on the order of $10-20 billion at some point in the coming weeks to formalize that increase in outstanding currency. That move will probably be met by ridiculously over-hyped reporting as well. But it's entirely predictable.
In short, Wall Street analysts aren't paying attention to the data if they believe that the Fed is "pumping" hundreds of billions into the economy to provide some kind of “safety net” for the banking system or the mortgage market. Is it really too much to ask that they make some attempt to understand the subject about which they opine incessantly?
As for the Fed itself, it's a great gift to offer people hope, but a great disservice to offer people false hope, and I think that's what the Fed is doing. What's going on in the mortgage market is not a crisis of confidence that we can talk ourselves out of – it's a problem of structural insolvency, where many borrowers literally don't have the means to service their debt over the long-term, because many of them were counting on rising home prices over the short-term. By acting as if a few billion in repos will substantially change this equation, the Fed is raising hopes, and setting the markets and the economy up for disappointment that will be far worse as a result. Bernanke would be better off admitting that the Fed has no chance of providing meaningful “liquidity” when the Federal government is issuing Treasuries at ten times the rate the Fed can absorb them. At that point, Americans would see better that the resources we need to invest, compete and become a financially sound nation are being hoarded by the Federal government and sent up in flames.
Market Climate
As of last week, the Market Climate for stocks remained characterized by unfavorable valuations and unfavorable market action. With last weeks' decline having cleared the overbought condition from the prior week, I have no pointed expectations about near-term market action. Again, however, I do think it's important to emphasize that the likelihood of recession remains intact, so investors should allow for the potential for substantial further market weakness. The Strategic Growth Fund remains fully hedged, not because of any specific near-term forecast about market direction, but because the prevailing conditions of valuations and market action have historically been associated with average returns well below Treasury yields.
In bonds, the Market Climate remains characterized by unfavorable yield levels and modestly favorable market action. As usual, we'll tend to increase our durations in the Strategic Total Return Fund on periodic spikes in yields, and clip them after significant dips. Credit spreads remain wide, and the potential for further loan losses does have the tendency to mitigate inflation pressures. That said, commodity prices and a generally weak dollar, combined with continued federal deficits are putting up a good fight to keep inflation pressures alive. My impression is that the default pressures will ultimately win out, but we've got a good chance of seeing a run on the dollar first. Again, the recent rebound in the dollar appears to be mostly a “clearing rally” from an oversold low, with the modest quarter-point Fed cut serving as the occasion. The Market Climate for precious metals remains favorable here, and the Strategic Total Return Fund continues to carry about 15% of assets in precious metals shares.
man i love hussman
this is the paragraphs to read
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As for the Fed itself, it's a great gift to offer people hope, but a great disservice to offer people false hope, and I think that's what the Fed is doing. What's going on in the mortgage market is not a crisis of confidence that we can talk ourselves out of – it's a problem of structural insolvency, where many borrowers literally don't have the means to service their debt over the long-term, because many of them were counting on rising home prices over the short-term. By acting as if a few billion in repos will substantially change this equation, the Fed is raising hopes, and setting the markets and the economy up for disappointment that will be far worse as a result. Bernanke would be better off admitting that the Fed has no chance of providing meaningful “liquidity” when the Federal government is issuing Treasuries at ten times the rate the Fed can absorb them. At that point, Americans would see better that the resources we need to invest, compete and become a financially sound nation are being hoarded by the Federal government and sent up in flames. :aktion033
this is the paragraphs to read
------------------------------------------------------------
As for the Fed itself, it's a great gift to offer people hope, but a great disservice to offer people false hope, and I think that's what the Fed is doing. What's going on in the mortgage market is not a crisis of confidence that we can talk ourselves out of – it's a problem of structural insolvency, where many borrowers literally don't have the means to service their debt over the long-term, because many of them were counting on rising home prices over the short-term. By acting as if a few billion in repos will substantially change this equation, the Fed is raising hopes, and setting the markets and the economy up for disappointment that will be far worse as a result. Bernanke would be better off admitting that the Fed has no chance of providing meaningful “liquidity” when the Federal government is issuing Treasuries at ten times the rate the Fed can absorb them. At that point, Americans would see better that the resources we need to invest, compete and become a financially sound nation are being hoarded by the Federal government and sent up in flames. :aktion033
its called a last hurrah to enjoy the holidays CNBC, next year once the holidays pass and those things they are worried about start really kicking into high gear is when the consumer dies
seeing alot of anti-recession press popping up so bear markets near term looking solid
once they start screaming recession once again is probably a near term bottom
plus only 16% believe their home prices will decrease up from 9%...33% believe it will increase down from 40%, people moving towards the right answer but still living in la-la land
3/4 say economy is "only fair" to "poor"
hey DAW i know you talked about SBUX they did a poll only 1 in 9 cutting back on their 5 dollar cup of joe supposedly so far.....
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What Recession? CNBC Survey Shows Holiday Spending Expected to Rise
Monday December 17, 11:29 am ET
Easing fears the Economic Grinch will steal Christmas, the CNBC Holiday Central Survey finds that Americans appear ready to increase their holiday spending a healthy 6% over last year to $782. But downbeat views on housing and the economy are sapping some of the holiday cheer.
As housing and economic worries have captured the public's attention, Americans eased back spending plans but not to the disastrous levels some feared. While up from a year ago, spending plans did decline 16% from the last survey in October and views on the economy and housing could be responsible.
The percentage of Americans homeowners expecting a decrease in their home price has grown to 16% from 9%. An American who believes his home price will decrease in the next 12 months will spend 23% less, or $110, this holiday season than the average American. Fortunately, most Americans don't believe their home prices will decline.
About a third still believe their home values will increase over the next year, down from 40% in March. The average expected growth in home prices is just 2.2%, about half the expectation from October. Still, half of Americans expect their home price to stay the same over the next year and the survey shows their holiday spending will be more than $100 higher than average.
Americans are relatively downbeat on the economy. Nearly three-quarters rate the economy "only fair" or "poor." An American who rates the economy as poor will spend 13% less than the average.
The Holiday Central Survey also finds:
CNBC's Starbucks Indicator: 1 in 9 polled say they're cutting back on their high-priced coffee purchases. A whopping two-thirds of Americans say they don't drink premium coffee drinks at all.
Discounts Matter:| 3 out of every 4 Americans say discount and holiday sales are critical in determining where to shop and what to buy.
Big Boxes Rule, Online Is Cool: Big Box stores like Wal-Mart are still the prime destination for holiday shopping, but they've lost some ground to online shopping.
Holiday Payback: While nearly half of Americans won't have leftover debt following their shopping when the Christmas Season, a full 23% will still be in debt more than two months after the holidays.
Wii Nation: Last holiday season, Americans were split as to which console they wanted: Wii, XBox360 of PlayStation3. They're split no longer...| Amongst consumers who have a specific video game console in mind, nearly 80% are looking for a Wii.
seeing alot of anti-recession press popping up so bear markets near term looking solid
once they start screaming recession once again is probably a near term bottom
plus only 16% believe their home prices will decrease up from 9%...33% believe it will increase down from 40%, people moving towards the right answer but still living in la-la land
3/4 say economy is "only fair" to "poor"
hey DAW i know you talked about SBUX they did a poll only 1 in 9 cutting back on their 5 dollar cup of joe supposedly so far.....
------------------------------------------------------------
What Recession? CNBC Survey Shows Holiday Spending Expected to Rise
Monday December 17, 11:29 am ET
Easing fears the Economic Grinch will steal Christmas, the CNBC Holiday Central Survey finds that Americans appear ready to increase their holiday spending a healthy 6% over last year to $782. But downbeat views on housing and the economy are sapping some of the holiday cheer.
As housing and economic worries have captured the public's attention, Americans eased back spending plans but not to the disastrous levels some feared. While up from a year ago, spending plans did decline 16% from the last survey in October and views on the economy and housing could be responsible.
The percentage of Americans homeowners expecting a decrease in their home price has grown to 16% from 9%. An American who believes his home price will decrease in the next 12 months will spend 23% less, or $110, this holiday season than the average American. Fortunately, most Americans don't believe their home prices will decline.
About a third still believe their home values will increase over the next year, down from 40% in March. The average expected growth in home prices is just 2.2%, about half the expectation from October. Still, half of Americans expect their home price to stay the same over the next year and the survey shows their holiday spending will be more than $100 higher than average.
Americans are relatively downbeat on the economy. Nearly three-quarters rate the economy "only fair" or "poor." An American who rates the economy as poor will spend 13% less than the average.
The Holiday Central Survey also finds:
CNBC's Starbucks Indicator: 1 in 9 polled say they're cutting back on their high-priced coffee purchases. A whopping two-thirds of Americans say they don't drink premium coffee drinks at all.
Discounts Matter:| 3 out of every 4 Americans say discount and holiday sales are critical in determining where to shop and what to buy.
Big Boxes Rule, Online Is Cool: Big Box stores like Wal-Mart are still the prime destination for holiday shopping, but they've lost some ground to online shopping.
Holiday Payback: While nearly half of Americans won't have leftover debt following their shopping when the Christmas Season, a full 23% will still be in debt more than two months after the holidays.
Wii Nation: Last holiday season, Americans were split as to which console they wanted: Wii, XBox360 of PlayStation3. They're split no longer...| Amongst consumers who have a specific video game console in mind, nearly 80% are looking for a Wii.
Although i believe prices in food and oil will fall as the world falls into a global recession that i think is on the horizon personally
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December 18, 2007
World Food Supply Is Shrinking, U.N. Agency Warns
By ELISABETH ROSENTHAL
NY Times
ROME — In an “unforeseen and unprecedented” shift, the world food supply is dwindling rapidly and food prices are soaring to historic levels, the United Nations' top food and agriculture official warned Monday.
The changes created “a very serious risk that fewer people will be able to get food,” particularly in the developing world, said Jacques Diouf, head of the United Nations Food and Agriculture Organization.
The agency's food price index rose by more than 40 percent this year, compared with 9 percent the year before — a rate that was already unacceptable, Mr. Diouf said. New figures show that the total cost of food imported by the neediest countries rose 25 percent in the last year, to $107 million.
At the same time, reserves of cereals are severely depleted, the agency's records show. World wheat stores declined 11 percent this year, to the lowest level since 1980. That corresponds with 12 weeks of the world's total consumption, much less than the average of 18 weeks' consumption, in storage during the 2000-2005 period.
There are only 8 weeks of corn left, down from 11 weeks in the same five-year period.
Prices of wheat and oilseeds are at record highs, Mr. Diouf said Monday. Wheat prices have risen by $130 a ton, or 52 percent, since a year ago. United States wheat futures broke $10 a bushel for the first time Monday, a psychological milestone.
Mr. Diouf said the crisis was a result of a confluence of recent supply and demand factors that, he said, were here to stay.
On the supply side, the early effects of global warming have decreased crop yields in some crucial places. So has a shift away from farming for human consumption to crops for biofuels and cattle feed. Demand for grain is increasing as the world's population grows and more is diverted to feed cattle as the population of upwardly mobile meat-eaters grows.
“We're concerned that we are facing the perfect storm for the world's hungry,” said Josette Sheeran, executive director of the World Food Program, in a telephone interview. She said that her agency's food procurement costs had gone up 50 percent in the last five years and that some poor people were being “priced out of the food market.”
To make matters worse, high oil prices have doubled shipping costs in the last year, putting stress on poor nations that need to import food and the humanitarian agencies that provide it.
Climate specialists say the poor's vulnerability will only increase.
“If there's a significant change in climate in one of our high production areas, if there is a disease that affects a major crop, we are in a very risky situation,” said S. Mark Howden of the Commonwealth Scientific and Industrial Research organization in Canberra, Australia. Already “unusual weather events,” linked to climate change — like drought, floods and storms — have decreased production in important exporting countries like Australia and Ukraine, Mr. Diouf said. In southern Australia, a significant reduction in rainfall in the last few years led some farmers to sell their land and move to Tasmania, where water is more reliable, said Mr. Howden, one of the authors of a recent series of papers on climate change and the world food supply, published in the proceedings of the National Academy of Sciences.
“In the U.S., Australia and Europe, there's a very substantial capacity to adapt to the effects on food — with money, technology, research and development. In the developing world, there isn't.”
Ms. Sheeran said that on a recent trip to Mali she was told that food stocks were at an all-time low. The World Food Program feeds millions of children in schools and people with H.I.V. and AIDS. Poor nutrition in these groups increases the risk of serious disease and death.
Mr. Diouf suggested that all countries and international agencies would have to “revisit” agricultural and aid policies they adopted “in a different economic environment.” For example, with food and oil prices approaching records, it may not make sense to send food aid to poorer countries, but instead to focus on helping farmers grow food locally.
The food organization plans to start a new initiative that will offer farmers in poor countries vouchers that can be redeemed for seeds and fertilizer and will try to help them adapt to climate change.
-------------------------------------------------------------------------
December 18, 2007
World Food Supply Is Shrinking, U.N. Agency Warns
By ELISABETH ROSENTHAL
NY Times
ROME — In an “unforeseen and unprecedented” shift, the world food supply is dwindling rapidly and food prices are soaring to historic levels, the United Nations' top food and agriculture official warned Monday.
The changes created “a very serious risk that fewer people will be able to get food,” particularly in the developing world, said Jacques Diouf, head of the United Nations Food and Agriculture Organization.
The agency's food price index rose by more than 40 percent this year, compared with 9 percent the year before — a rate that was already unacceptable, Mr. Diouf said. New figures show that the total cost of food imported by the neediest countries rose 25 percent in the last year, to $107 million.
At the same time, reserves of cereals are severely depleted, the agency's records show. World wheat stores declined 11 percent this year, to the lowest level since 1980. That corresponds with 12 weeks of the world's total consumption, much less than the average of 18 weeks' consumption, in storage during the 2000-2005 period.
There are only 8 weeks of corn left, down from 11 weeks in the same five-year period.
Prices of wheat and oilseeds are at record highs, Mr. Diouf said Monday. Wheat prices have risen by $130 a ton, or 52 percent, since a year ago. United States wheat futures broke $10 a bushel for the first time Monday, a psychological milestone.
Mr. Diouf said the crisis was a result of a confluence of recent supply and demand factors that, he said, were here to stay.
On the supply side, the early effects of global warming have decreased crop yields in some crucial places. So has a shift away from farming for human consumption to crops for biofuels and cattle feed. Demand for grain is increasing as the world's population grows and more is diverted to feed cattle as the population of upwardly mobile meat-eaters grows.
“We're concerned that we are facing the perfect storm for the world's hungry,” said Josette Sheeran, executive director of the World Food Program, in a telephone interview. She said that her agency's food procurement costs had gone up 50 percent in the last five years and that some poor people were being “priced out of the food market.”
To make matters worse, high oil prices have doubled shipping costs in the last year, putting stress on poor nations that need to import food and the humanitarian agencies that provide it.
Climate specialists say the poor's vulnerability will only increase.
“If there's a significant change in climate in one of our high production areas, if there is a disease that affects a major crop, we are in a very risky situation,” said S. Mark Howden of the Commonwealth Scientific and Industrial Research organization in Canberra, Australia. Already “unusual weather events,” linked to climate change — like drought, floods and storms — have decreased production in important exporting countries like Australia and Ukraine, Mr. Diouf said. In southern Australia, a significant reduction in rainfall in the last few years led some farmers to sell their land and move to Tasmania, where water is more reliable, said Mr. Howden, one of the authors of a recent series of papers on climate change and the world food supply, published in the proceedings of the National Academy of Sciences.
“In the U.S., Australia and Europe, there's a very substantial capacity to adapt to the effects on food — with money, technology, research and development. In the developing world, there isn't.”
Ms. Sheeran said that on a recent trip to Mali she was told that food stocks were at an all-time low. The World Food Program feeds millions of children in schools and people with H.I.V. and AIDS. Poor nutrition in these groups increases the risk of serious disease and death.
Mr. Diouf suggested that all countries and international agencies would have to “revisit” agricultural and aid policies they adopted “in a different economic environment.” For example, with food and oil prices approaching records, it may not make sense to send food aid to poorer countries, but instead to focus on helping farmers grow food locally.
The food organization plans to start a new initiative that will offer farmers in poor countries vouchers that can be redeemed for seeds and fertilizer and will try to help them adapt to climate change.
The past couple weeks, WB has been on TV more than I can remember.
Bill Gross, head honcho at largest bond fund Pimco, hired Greenspan (10mil a year) and he's also on TV every day or so now talking his own book like the other bigwigs.
They arent going to be able to bail out real estate.
Time to forget using recession and start using depression. Humpty Dumpty really has fallen off the wall this time.
Unfortunately, my commodity plays are getting hammered along with everything else. I would have been ok today, had I been short nasdaq, but I wasnt so I got hammered like most others.
today's central bank helping the markets bit, not working much anymore markets only up a nudge
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Stocks Rise on Tender by ECB
Tuesday December 18, 10:52 am ET
By Madlen Read, AP Business Writer <table border="0" cellpadding="0" cellspacing="0" height="4"><tbody><tr><td height="4">
</td></tr></tbody></table>Stocks Gain Modestly As European Central Bank Lends $500B; Goldman, Best Buy Post Profit Gains NEW YORK (AP) -- Wall Street rebounded modestly Tuesday from recent losses, finding some comfort in the European Central Bank's issuance of $500 billion in loans to the world's commercial banks.The ECB's massive 16-day tender boosted investors' optimism that the world's central banks may help bring back demand to the struggling areas of the credit market. The Bank of England also said it will offer additional reserves to lenders Tuesday, after the U.S. Federal Reserve on Monday conducted a $20 billion auction of 28-day credit.
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Stocks Rise on Tender by ECB
Tuesday December 18, 10:52 am ET
By Madlen Read, AP Business Writer <table border="0" cellpadding="0" cellspacing="0" height="4"><tbody><tr><td height="4">
</td></tr></tbody></table>Stocks Gain Modestly As European Central Bank Lends $500B; Goldman, Best Buy Post Profit Gains NEW YORK (AP) -- Wall Street rebounded modestly Tuesday from recent losses, finding some comfort in the European Central Bank's issuance of $500 billion in loans to the world's commercial banks.The ECB's massive 16-day tender boosted investors' optimism that the world's central banks may help bring back demand to the struggling areas of the credit market. The Bank of England also said it will offer additional reserves to lenders Tuesday, after the U.S. Federal Reserve on Monday conducted a $20 billion auction of 28-day credit.
thanks tiznow...ive been waiting for that bear for a while this morning.
market has the carving knife out for the high fliers again so far today.
even the kingpins at goldman getting a haircut.
i'll try to mix it up a bit more
this is a nice one
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Americans' longstanding addiction to gasoline will continue well into 2008, despite rising fuel costs, and may contribute to a slowdown in the overall economy, a new CreditCards.com poll suggests.
Two out of three Americans say they'll cut back on spending for other things as a result of higher energy costs in 2008, with nearly a quarter saying they'll cut back significantly on other spending. If they follow through, it will not bode well for the economy in 2008, say oil industry analysts and economists. Rising gas prices, the housing slump, the sagging dollar, the employment outlook and the stock market all may converge during the year, boosting the odds of a recession, they say.
http://finance.yahoo.com/banking-bu.../Poll-Gas-Prices-Will-Make-08-Economy-Sputter
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Seven of 10 of those surveyed expect gas prices to be higher a year from now. Only a fifth (22 percent) said they believe prices will be the same and only one in twenty believe they will be lower.
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majority wrong here IMO as likely recession in 2008 and gas prices will fall along with it 1 in 20 believe gas prices will be lower a year from now....i'm in that category
Two out of three Americans say they'll cut back on spending for other things as a result of higher energy costs in 2008, with nearly a quarter saying they'll cut back significantly on other spending. If they follow through, it will not bode well for the economy in 2008, say oil industry analysts and economists. Rising gas prices, the housing slump, the sagging dollar, the employment outlook and the stock market all may converge during the year, boosting the odds of a recession, they say.
http://finance.yahoo.com/banking-bu.../Poll-Gas-Prices-Will-Make-08-Economy-Sputter
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Seven of 10 of those surveyed expect gas prices to be higher a year from now. Only a fifth (22 percent) said they believe prices will be the same and only one in twenty believe they will be lower.
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majority wrong here IMO as likely recession in 2008 and gas prices will fall along with it 1 in 20 believe gas prices will be lower a year from now....i'm in that category
