Daily Digest 11/12 - Insider Selling Record, Energy Demand Jump by 2035, Who Pays for Toxic Spill?
- The Dollar: Every Man For Himself
- The Fed’s Got POMO Fever!
- NFIB: Small Business Optimism Improves Slightly
- Hayward Admits Banks Stopped Lending to BP
- Insider Selling Hits Record $4.5B As Everyone Gets Out Of Market
- Oil Rises to Two-Year High as Equities, Dollar Offset Supplies
- Jump in Energy Demand Seen by 2035
- An Arctic Oil Spill Could Linger for Years
- Post Europe: Environmental Damage - Who Pays?
On substance, the Fed recently stated in the Federal Open Market Committee (FOMC) Minutes that businesses were holding back investments because of fiscal and regulatory uncertainties. In the FOMC’s own analysis, the economic recovery should strengthen in 2011, even without additional stimulus. Additionally, commonly followed metrics used to measure the market’s inflation expectations are, and have been, approximately 2%. Even if inflation expectations were to drop lower, the lone dissenting voice on the Fed, Thomas Hoenig, rightfully argues a little deflation may not be any worse than a little inflation. In our view, printing upwards of US$600 billion in fresh money may be the wrong prescription for the current situation.
The Fed’s Got POMO Fever! (ilene)
Pretty much EVERY SINGLE DAY the market is open and twice on the 29th, the Fed will hand out Billions to "fix" the economy. Keep in mind they have no intention of stopping on the 9th, that’s just the end of month one! I know that we have all gotten comfortably numb with regards to large numbers but let’s consider for a moment how much money EACH $8Bn is as this is OUR money the Fed is spending: It’s enough to pay 5.33M $1,500 Mortgage Payments – enough to pay off every home in America each month! It’s enough to buy out 40,000 $200,000 Mortgages EACH DAY. It’s enough to pay a full year’s $50,000 Salary for 160,000 workers – EACH DAY. In a single month, the Fed could put 4.8M people back to work rather than flushing it back through the banks and Treasury in the hopes that a few jobs will trickle down to the people.
Optimism rose again in October, but the index remains stuck in the recession zone established over the past two years, not a good reading even with a 2.7 point improvement over September. This is still a recession level reading based on Index values since 1973. However, job creation plans did turn positive and job reductions ceased.
It’s a preview of the BBC’s Money Programme special on BP’s ‘$30bn blowout,’ which is set for broadcast later this Tuesday. And it features the first official interview with Tony Hayward since his resignation as BP CEO back in July. Including this startling admission by Hayward: Prior to the meeting, the capital markets were effectively closed to BP. We were not able to borrow either short or medium-term debt at all.
Insiders have officially marked the top of the stock market: last week's insider selling of all stocks (not just S&P) hit an all time record of $4.5 billion. This is the biggest weekly number ever recorded by tracking company InsiderScore.com: as Sentiment Trader highlights no other week before had more than $2 billion in net selling. Furthermore, selling in just S&P companies hit a whopping $2.8 billion: over 4 times more than the week prior! As such the ratio of insider selling to buying is now meaningless.
“Financial factors like the euro-dollar and equities are driving the recovery, but sustained gains on the back of fundamentals are unlikely,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. “Inventories are plentiful, there are no serious supply disruptions and the dollar rebound is capping gains.” Crude for December delivery rose as much as 57 cents, or 0.7 percent, to $87.63 a barrel in electronic trading on the New York Mercantile Exchange. That’s the highest price since Oct. 9, 2008. It was at $87.41 as of 12:27 p.m. London time. The contract earlier fell to a low of $86.44. Brent crude for December gained 26 cents to $88.74 a barrel on the London-based ICE Futures exchange.
The I.E.A. also said that the world energy outlook in 2035 hinged critically on government policies and how their actions affect technology, the price of energy services and consumer behavior. The I.E.A. said it based its outlook on governments sticking to their commitments to reduce greenhouse gas emissions and to phase out subsidies for fossil fuels. Oil is expected to remain the dominant fuel while demand for coal is expected to rise until about 2020, the agency said. Demand for natural gas is to “resume its long-term upward trajectory from 2010” after a drop in 2009 because of the recession, and would be especially strong from China and the Middle East, it said.
Pulling together a lot of the existing research on cleanup technologies and how well they might work under the kind of nightmare scenarios that are all too easy to imagine -- a spill underneath a solid sheet of pack ice, for example, or oil that attaches itself to drifting ice floes and travels hundreds of miles out to sea. Cleanup could be hampered by wintertime temperatures that drop on average to minus 49 degrees, fierce Arctic storms, endless darkness and fog that shrouds the region for more than half the days of the year, said the report, prepared by Nuka Research and Planning Group LLC, and Pearson Consulting LLC. BP's upcoming Liberty production unit, slated to pump oil from beneath the Beaufort Sea by means of long-range drilling tunnels reaching from near shore, has the potential for a blowout of 20,000 barrels a day -- the highest rate in the U.S. Arctic, the report said.
In the aftermath of the MAL Alumina toxic spill in Hungary, it has become evident that the company was ill-prepared both financially and practically for an environmental incident. MAL had very low limits of third party liability insurance (under £120k), and it would appear that it had no environmental liability cover to help pay the costs associated with restoring the damaged environment to its previous state. MAL has had to be nationalised and the Hungarian taxpayer - and probably taxpayers across the European Union - will end up having to pay for the environmental remediation and recovery costs for years to come.
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