Daily Digest

Daily Digest - July 5

Sunday, July 5, 2009, 10:52 AM
  • Glut of oil could push gasoline prices back down below $2 a gallon
  • The Collapse Of The Non-Backstopped Agency Market
  • Personal Consumption Expenditure (Chart)
  • States brace for shutdowns (Repost)
  • What have I done? (Video)
  • Didn't get the memo?
  • Hydroponics (Video on page)
  • Peter Boockvar on Gold (Video)
  • Congress's Travel Tab Swells
  • A New Media Low: Washington Post sells access, $25,000+
  • Digital Imbusols? (Video, Dennis Kneale Selling Hope & Recovery and Bashing Bloggers)
  • Birth Death Model Has Added 800,000 Jobs (in the past 12 months)

Economy

Glut of oil could push gasoline prices back down below $2 a gallon

A year after oil hit a record closing price, the commodity's price is way down -- and may fall significantly further as supply continues to dwarf demand.

Downward pressure on oil prices is so great that crude could trade for as little as $20 a barrel by the end of the year -- less than a third of what it traded for this week and an 86% drop from its peak last year, analysts said.

That could push gasoline prices back down to $2 a gallon, prices last seen this March after last fall's slide slammed retail gasoline to its lowest value in four years.

The reasons are simple, said Philip K. Verleger Jr., an expert on energy markets at the University of Calgary in Canada: The still-sputtering economy has lessened demand at a time when there is already a big surplus of oil.

For eight straight months, oil supplies have been running about 2 million barrels a day higher than the global demand of 83 million barrels a day, Verleger said. Eventually, he and others predicted, suppliers will tire of paying to store all of the surplus oil and flood the market.

"That is the largest and longest continuous glut of supply that I have seen in 30 years of following energy prices," Verleger said. "It's a huge surplus. There has never been anything like it."

The Collapse Of The Non-Backstopped Agency Market

[Charts on page] Complete collapse in foreign interest for GSE [Government-Sposnerered "Enterprise"] debt: North American holdings of the latter have increased from 50% to 80% of total notional in one year!

Personal Consumption Expenditure (Chart)

States brace for shutdowns (Repost)

Reporting from Indianapolis and Denver -- The last time Indiana missed its deadline for passing a budget and had to shut down the government was during the Civil War.

But on Monday, as lawmakers raced to hammer out an agreement over school funding, state agencies began preparing 31,000 workers to be temporarily out of a job. Republican Gov. Mitch Daniels has warned residents that most of the state's services -- including its parks, the Bureau of Motor Vehicles and state-regulated casinos -- would be shuttered unless a budget is passed today.

Indiana is one of five states -- along with Arizona, California, Mississippi and Pennsylvania -- bracing for possible shutdowns this week as time runs out for lawmakers to close billion-dollar gaps in their fiscal 2010 budgets.

Of the 46 states whose fiscal year ends today, 32 did not have budgets passed and approved by their governors as of Monday afternoon, according to the National Conference of State Legislatures.

What have I done? (Video)

Didn't get the memo?

Citi announced it was temporarily suspending its mortgage securitization unit – after management “discovered” that it had never stopped buying and packaging fraudulent mortgages (i.e. mortgages lacking appraisal and/or income documentation). I suppose we should applaud management for its 'vigilance' – after all, it's only been two years since the U.S. mortgage Ponzi-scheme was revealed to the world.

Hydroponics (Video on page)

Hydroponics is defined as "the cultivation of plants in nutrient solution rather than in soil," or simply as "the science of gardening without soil."

As early as 600 B.C., Nebuchadnezzar II built the "hanging gardens" in the dry, arid and rain-starved area of Babylonia. These famous gardens, tagged as one of the Seven Wonders of the World, blossomed with plants grown, not in soil, but in a steady stream of water from converted from the Euphrates River. The practice of hydroponics can be traced back to Ancient China, Egypt and India.

Peter Boockvar on Gold (Video)

Congress's Travel Tab Swells

The cost of so-called congressional delegations, known among lawmakers as "codels," has risen nearly 70% since 2005, when an influence-peddling scandal led to a ban on travel funded by lobbyists, according to the data.

Lawmakers say that the trips are a good use of government funds because they allow members of Congress and their staff members to learn more about the world, inspect U.S. assets abroad and forge better working relationships with each other. The travel, for example, includes official visits to American troops in Iraq and Afghanistan.

The Journal analysis, based on information published in the Congressional Record, also shows that taxpayer-funded travel is a big and growing perk for lawmakers and their families. Some members of Congress have complained in recent months about chief executives of bailed-out banks, insurance companies and car makers who sponsored corporate trips to resorts or used corporate jets for their own travel.

Although complete travel records aren't yet available for 2009, it appears that such costs continue to rise. The Journal analysis shows that the government has picked up the tab for travel to destinations such as Jamaica, the Virgin Islands and Australia's Great Barrier Reef.

Lawmakers frequently bring along spouses on congressional trips. If they take commercial flights, they have to buy tickets for spouses. If they fly on government planes -- as they usually do -- their spouses can fly free.

Financial Desperation Leads to a New Media Low: Washington Post sells access, $25,000+

The offer — which essentially turns a news organization into a facilitator for private lobbyist-official encounters — is a new sign of the lengths to which news organizations will go to find revenue at a time when most newspapers are struggling for survival.

Digital Imbusols? (Video, Dennis Kneale Selling Hope & Recovery and Bashing Bloggers)

Birth Death Model Has Added 800,000 Jobs (in the past 12 months)

[CHART ON PAGE]

Birth Death Adjustment: A major modification to the NFP measure is the Birth Death adjustment. Changes to the BD were proposed in 2001, and implemented a few years later. This attempts to capture early improvements in employment at the start of a recovery was the goal. The trade off is it wildly overstates strength at the end of a cycle. For example, in 2007, approximately 75% of reported new jobs were due to this adjusatment. In 2008, the BD adjustment inexplicably showed lots of job creation in construction and finance.
How wildly? Well according to the Birth / Death model, small businesses have added 800,000 jobs over the past 12 months (through May)... right.

26 Comments

idoctor's picture
idoctor
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Re: Daily Digest - July 5

Bill Gross

http://www.cnbc.com/id/15840232?video=1170601078&play=1

California Runs Out of Money - Issues 3.3 Billion in IOUs

green_achers's picture
green_achers
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Re: Daily Digest - July 5

Planet, people happier in Costa Rica:

http://www.cnn.com/2009/WORLD/americas/07/05/costa.rica.happy.nation/ind...

joemanc's picture
joemanc
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Re: Daily Digest - July 5

I had recently read a book by Kevin Phillips called Bad Money. In it, he says that the US dollar is pretty much linked to the price of oil. I know some of you guys out there are great at charts...can anyone pull up a chart with the USD index overlayed with the Oil price? I'd love to see the correlation. I suppose $20/barrel oil would mean a stronger dollar, similar to what happened after last year's price crash?

idoctor's picture
idoctor
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ernie's picture
ernie
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Re: Daily Digest - July 5

$20 oil will just mean even more rigs will get laid down, and new projects cancelled.

Long term effect when demand recovers supply won't keep up.

 

 

- Ernie.

 

FireJack's picture
FireJack
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Re: Daily Digest - July 5

Has there really been 2 million barrels a day oversupply lately? Why the hell would they suddenly flood the market with oil? Anyone have any stats on actual oil production/demand lately?

Damnthematrix's picture
Damnthematrix
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Re: Daily Digest - July 5

It's never going to happen......  people who write crap like that have no idea what they're saying, and obviously have zero understanding or even knowledge of Peak Oil.

Matt Simmons has been saying for years that most of the world's oil rigs are now rust buckets all [nearly] needing replacement, at a cost of trillions of dollars.  If oil should ever drop to $20, exactly where will the money come from?  The price of oil is no longer in the hands of supply/demand, but geology, and to some extent geo-politics.  And now entropy too, because it's fast becoming evident, even here in Australia, that maintaining current infrastructures of any kind, whilst at the same time attempting to maintain growth in services (health/education/transport) for the still growing population is overwhelming governments...

In just two years, Australia has gone from importing 50% of its oil/fuel to 77%.....  how much longer can a trend like THAT continue?

Mike

Damnthematrix's picture
Damnthematrix
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Re: Daily Digest - July 5

I recently read that there is currently a week's global supply of oil floating in tankers no one wants to unload.......  but that doesn't mean the price is about to fall substantially, because it still costs lots of $ to pump the stuff out, and who's going to sell it at a loss?

Mike

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fujisan
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Re: Daily Digest - July 5

Sveriges Riksbank/Riksbanken - Repo rate cut to 0.25 per cent

...

The minutes from the Executive Board’s monetary policy discussion will be published on 16 July. The decision on the repo rate will apply with effect from Wednesday, 8 July. The deposit rate is at the same time cut to -0.25 per cent and the lending rate to 0.75 per cent. A press conference with Deputy Governor Barbro Wickman-Parak and Anders Vredin, Head of the Monetary Policy Department, will be held today at 11 a.m. in the Riksbank. Entry via the bank's main entrance, Brunkebergstorg 11. Press cards must be shown. The press conference will be broadcast live on the Riksbank’s website, www.riksbank.se/.

They did it: negative interest rate. IOW: the CB does not want banks to deposit their money at the CB.

Headless's picture
Headless
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Re: Daily Digest - July 5

All stop!

A daily "surplus" of 2 million barrels for 8 months results in 6 days of world supply; and that claimed "overproduction" makes a plethora of assumptions--about what has actually occurred (in those 8 months) and what is going to occur henceforth. The idea that price could collapse to a level that would make most production unprofitable by a factor of more than 2 is simply absurd; any such collapse would cause massive additional consumption that would turn the "surplus" into a massive deficit within days. The "opinion" offered in this bogus article is simply a "floater"; interpret that as you will, but the underlying motive is without a doubt very closely related to one of two well known phenomena: insanity or the artificially high or low starting price in a transaction. This is more manipulation; it's just a matter of making the connections between the degrees (links) of separation...

 

straight's picture
straight
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Re: Daily Digest - July 5

http://www.rollingstone.com/politics/story/28816321/the_great_american_bubble_machine/print#

On Oil and supply / demand dynamics, have you read the Rollingstone Magazine article on Golman Sachs?

It is a Blinder.  A great article on one of the real ememies of the state. This is a great expose on America Inc.

It appears that oil prices are about paper oil, not real oil... surprise surprise.  Each barrel of oil is traded 20+ times before it is delivered.  I think it is time to forget supply and demand. 

The new market dynamic is Manipulation. 

If you are not 'Insider Trading' you are not trading, you are donating.

Straight.

 

 

idoctor's picture
idoctor
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Re: Daily Digest - July 5

Stock Market Investors Roller Coaster Ride Hit by Bad U.S. Jobs Data

http://www.marketoracle.co.uk/Article11804.html

EndGamePlayer's picture
EndGamePlayer
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$20 Barrel

I think idoctor chart says it all. Oil goes up when the dollar goes down so the same amount of money is made since oil is presently trading in dollars.

Question - IF oil went to $20/Barrel - then does that correlate to USD & CAD at $1.60 of exchange value?

EGP

Davos's picture
Davos
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Re: Daily Digest - July 5

Hello iDoctor:

Good post... Heard on FSN this weekend that the job losses for June were 700,000 after you correct for their Birth Death model adjustment. I have still to see this in print. Take care

joemanc's picture
joemanc
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Re: Daily Digest - July 5

A Goldman Sachs trading scandal...you can bet your bottom dollar they will throw the book at this guy

http://www.cnbc.com/id/31750907

rowmat's picture
rowmat
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Re: Daily Digest - July 5

Pity he doesn't get a medal.

Funny it took ten years to nab Madoff and five minutes to get this guy.... and he was about to do some good by screwing 'Golden Stacks' .

See what happens when you try and screw the crooks?

But when the crooks are screwing you the 'regulators' are all looking the other way.

Sigh.. there's no justice!

joemanc wrote:

A Goldman Sachs trading scandal...you can bet your bottom dollar they will throw the book at this guy

http://www.cnbc.com/id/31750907

idoctor's picture
idoctor
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Re: Daily Digest - July 5

7/5/09 Gerald Celente on Fox News: Obamageddon is coming!

 

Damnthematrix's picture
Damnthematrix
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Re: Daily Digest - July 5

Volatile Swings in Price of Oil Stir Fears on Recovery

Daniel Acker/Bloomberg News

By JAD MOUAWAD
<http://topics.nytimes.com/top/reference/timestopics/people/m/jad_mouawad/index.\
html?inline=nyt-per
>
Published: July 5, 2009

The extreme volatility that has gripped oil markets for the last 18
months has shown no signs of slowing down, with oil prices more than
doubling since the beginning of the year despite an exceptionally weak
economy.

The instability of oil and gas prices is puzzling government officials
and policy analysts, who fear it could jeopardize a global recovery. It
is also hobbling businesses and consumers, who are already facing the
effects of a stinging recession, as they try in vain to guess where
prices will be a year from now — or even next month.

tedsan's picture
tedsan
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Re: Daily Digest - July 5
green_achers wrote:

Planet, people happier in Costa Rica:

http://www.cnn.com/2009/WORLD/americas/07/05/costa.rica.happy.nation/ind...

An associate of mine, Al Benner, has been creating a community (i.e. development) down there, trying to keep it "green". It looks like a cool project, though I've not gone down to check it out.

http://fincalasbrisas.org

Tim_P's picture
Tim_P
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Re: Daily Digest - July 5

Indiana ended up passing its budget about 12 hours before it was going to shut down.  Everything continued on without a hiccup.  Indiana is probably one of the states in better condition right now.  The picture is not too rosy, but I think it still has a 3 billion reserve.

Tim

CB's picture
CB
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Re: new job opportunity for investment bankers

NPR is reporting that the CIA is recruiting investment bankers to advise on the threat to national security presented by the global economic crisis. Supposedly they will accept 180,000 resumes this year for an unknown number of positions. (likely this figure is for total recruitment efforts, not just this particular task)

Sure would be interesting to know what their assessment of the threat is...

mainecooncat's picture
mainecooncat
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Re: Daily Digest - July 5

I hope the CIA is only taking applications from investment bankers who predicted the crash of '08. Somehow I don't think so. Sounds like a backdoor bailout for unemployed bankers to me. Not to mention, I know one hundred people or more from this site who could give the CIA a pretty good idea of the threat. 

CB's picture
CB
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Re: Daily Digest - July 5

LOL, yes that would be a good interview question. I think this indicates that the administration doesn't really have much confidence in their own "happy talk" and it would be interesting to know what their take is - not that their assessments will ever be released to the public except in an effort to sway public opinion one way or another...

Davos's picture
Davos
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Re: Daily Digest - July 5

'Unintelligence', 2 things come to mind:

  1. GIGO
  2. A day late and a dollar 80 trillion dollars short
strive4impact's picture
strive4impact
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Re: Daily Digest - July 5

Hey Davos,

I see that Chris is going to be here in Denver very soon.  Would it be possible to set up a time to interview him or even have lunch?  Would make for interesting content for GreenJoyment readers no doubt, and we'd be happy to share whatever content we created from the meeting with you.

Please let me know at your earliest.

Thanks very much for all your work!

Warmest,
Jonathan Kraft
http://www.GreenJoyment.com
http://www.strive4impact.com
 

Davos's picture
Davos
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Posts: 3620
Re: Daily Digest - July 5

Hello Johnathan: Please email him, believe it or not, I have very little to do with the site, other than an occosinal email I have spoken live to CM just once, I just contribute the best of my daily readings to his fine site each day. This site is all CM and Becca and the other fine members of the team. Like your site! Take care

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