Daily Digest 12/20 - Algae To Crude Oil, Why Do So Many People Hate QE?
Why Do So Many People Hate QE? (Doug A.)
Wrongly Positioned: Equities: A huge swath of market participants have not been properly positioned to profit from market upside. Hence, the relentless bubble talk, crash warnings, end of days chatter. You should have no doubt that this rally will end someday. In the meantime, find a better source of criticism than the sour grapes of those folks who missed most of a generational 170 percent (and counting) U.S. equity rally.
CBO on SS - Another 29' Crash? (Doug A.)
In 2012 a 'fix' for SS would have required an immediate and permanent tax increase of 1.95%. A year later the cost of the fix has risen to 3.36%. That's a 70% deterioration in twelve months. To right the SS ship a payroll tax increase equal to $180B would be required for 2014, and that higher tax rate would have to be sustained forever. A tax increase of this magnitude would sink the economy into a recession that the country would struggle to get out of.
Reflecting on the level of participation he sees coming from institutional investors in this market, Eric said, “There’s no interest. Maybe 2%-3% will listen and maybe 5% of those will act. So it’s a very, very, very small world these days of people who are interested in gold…it’s almost like you have the plague when you’re talking about gold, even though of course over the last 13 years it has been an awesome investment. It just hasn’t been in the last two.”
The authors – Christopher Foote, Kristopher Gerardi and Paul Willen – argue that the financial crisis was caused by over-optimistic expectations for house prices, while other factors such as distorted incentives for bankers played only minor roles or no roles at all. In other words, it was a bubble just like the Dutch tulip mania of the 1630s or South Sea bubble of the early 1700s, and had nothing to do with modern financial practices.
Then the authors make absolutely sure of their work being well-received by those who matter. The financial crisis is surely a touchy subject at the Fed, where the biggest PR challenge is “bubble blowing” criticism from those of us who aren’t on the payroll (directly or indirectly). But Foote, Gerardi and Willen are, of course, on the payroll. They tell us there’s little else that can be said about the origins of the crisis, because any “honest economist” will admit to not understanding bubbles.
For gold to be at $5,000 (in the next five years) we must either be close to world war III or there must be multiple currency crisis. A single currency crisis will not bring gold to $5,000. If the Euro where to collapse, Gold will not go to $5,000. In that case the dollar, they Yen, the Kroner and the Swiss Franc would go up. However if there was a sudden loss of trust in the major currencies investors would turn to assets like Bitcoin, Gold, Silver, Art, Farmland etc. Some will prefer only Gold , only Silver, or a portfolio of e-currencies such as Bitcoin. Others will invested in a mix.
The long-awaited approval includes 209 environmental, financial and technical conditions. Enbridge must set aside $950-million in liability coverage to cover costs of a potential spill, including at least $100-million available within 10 days in the event of a large rupture and $250-million of “no-fault” insurance, the panel said.
On December 16, 2013, Venezuelan President Nicolas Maduro outlined plans to use a weaker exchange rate in order to lift the prospects of its ailing oil sector and deal with a worsening economic crisis. Venezuela’s foreign exchange reserves have depleted to their lowest levels since 2004. The weaker exchange rate allows the government to earn more Bolivars for every barrel of oil sold, which is priced in dollars on the international market. Desperate to Boost Oil Production, Venezuela Moves to Devalue Currency
In the PNNL process, a slurry of wet algae is pumped into the front end of a chemical reactor. Once the system is up and running, out comes crude oil in less than an hour, along with water and a byproduct stream of material containing phosphorus that can be recycled to grow more algae.
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