Meltdown

[Coopmv]

     

     

     

      Is it too early to buy BP?

I would very much hesitate to compare BP with Exxon even if there are much similarities between the Exxon Valdez disaster and this BP Gulf disaster.  Exxon was a AAA-rated company and its successor ExxonMobil continues to be one and among the very few companies in the world with that stellar credit rating.  BP clearly does not have that rock-solid finance ...

[drogulus]

I would very much hesitate to compare BP with Exxon even if there are much similarities between the Exxon Valdez disaster and this BP Gulf disaster.  Exxon was a AAA-rated company and its successor ExxonMobil continues to be one and among the very few companies in the world with that stellar credit rating.  BP clearly does not have that rock-solid finance ...

      I was thinking more in terms of how far down conditions drive the price before they practically put a gun to your head and force you to buy. The yield is 7.5% today. They won't cut the dividend, and bad publicity does not kill an energy company for obvious reasons. So, if the price drops another 10%.......

     

In this world that is more driven by technologies than ever, who is the leading country that can replace the US in the near future, say the next 5 to 7 years.  I do not see Japan and certainly not China or any of the European countries.  Comparing the US to Greece or Argentina is totally inadequate since neither of those countries have much else to offer except agro-business.

      Isn't it the premise of Doomerism generally that all bad trends portend disaster, even those that contradict each other (we're all subject to a devastating inflation/deflation, a dark cloud with no lining at all....). In other words, the entire world is becoming a Restaurant So Crowded No One Goes There, hmm...??

      Remember how giddy the Doomers were 2 years ago, when proof finally arrived. Except it sort of didn't, as it turned out. But no worries, when the Liberal Hoax melts all the glaciers the Doomers will be.....we do believe in the Liberal Hoax, don't we, or is that the other guys?

     

[Coopmv]

      I was thinking more in terms of how far down conditions drive the price before they practically put a gun to your head and force you to buy. The yield is 7.5% today. They won't cut the dividend, and bad publicity does not kill an energy company for obvious reasons. So, if the price drops another 10%.......

Not clear how safe that dividend is.  At any rate, when the current yield of a stock gets too high, it means the market doubts the payout is sustainable.  Crude price has come down substantially due to the Euro crisis.  If the EU slips into another recession, the earnings of many large integrated oils such as BP will be seriously hurt ...

      Isn't it the premise of Doomerism generally that all bad trends portend disaster, even those that contradict each other (we're all subject to a devastating inflation/deflation, a dark cloud with no lining at all....). In other words, the entire world is becoming a Restaurant So Crowded No One Goes There, hmm...??

      Remember how giddy the Doomers were 2 years ago, when proof finally arrived. Except it sort of didn't, as it turned out. But no worries, when the Liberal Hoax melts all the glaciers the Doomers will be.....we do believe in the Liberal Hoax, don't we, or is that the other guys?

     

Only time will tell if the proponents of global warming are a wrong-headed bunch.  I think the truth is probably somewhere between the pro and the anti- global warming arguments.  If the US continues to decline, it will follow a pattern very similar to the decline of the Roman Empire, i.e. it will linger on for years and perhaps centuries.  There may be no clear successor to the US.  I do not think China is likely to take over that role. 

[drogulus]

     

Not clear how safe that dividend is.

      I'm not either, really, I was just speculating. Besides I'm not sure I could stomach buying into such a sleazy operation. Of course, many people are thinking exactly that, which will drive the price too low and.....

     

[Coopmv]

     
      I'm not either, really, I was just speculating. Besides I'm not sure I could stomach buying into such a sleazy operation. Of course, many people are thinking exactly that, which will drive the price too low and.....

     

BP has had an appalling job safety records in the US over the past five years. 

[drogulus]

     That's part of it, certainly. The fallout from this could be huge. Maybe allowing these companies to capture the regulators isn't such a good idea. Sometimes there's nothing like a little "big gummint" to get these guys to do what they know is right. The fact is, ideology and self-interest proved to be a toxic (literally!) combination. I hope Obama wakes up to this. If he's the socialist devil the loons say he is he's choosing a piss-poor way of demonstrating it.

[Coopmv]

     That's part of it, certainly. The fallout from this could be huge. Maybe allowing these companies to capture the regulators isn't such a good idea. Sometimes there's nothing like a little "big gummint" to get these guys to do what they know is right. The fact is, ideology and self-interest proved to be a toxic (literally!) combination. I hope Obama wakes up to this. If he's the socialist devil the loons say he is he's choosing a piss-poor way of demonstrating it.

We are witnessing the pendulum swing the other way.  Extreme capitalism has ushered in the race to the bottom when all people who are not in the corridor of power have lost big-time in their standard of living.

[Coopmv]

DM,  taking a long vacation? 

Bad news for many Europeans - Fiscal crises threaten Europe's generous benefits ...

[Coopmv]

DM,   

With the Euro zone treading water due to the sovereign debt crisis and if the American consumers go on a strike, what would happen to 70% of the Chinese exports?    US Consumer Spending Stalls Out In April
 

[Coopmv]

DM, check this article out ...

Short-Seller Jim Chanos: Red Flag Over China  Charlie Rose talks to James Chanos of Kynikos Associates about the coming property bubble in China ...

[Coopmv]

DM,  This is shocking ...   

Owners Stop Paying Mortgage ... And Stop Fretting About It  Foreclosure procedures have been initiated against 1.7 million of the nation's households.

[Coopmv]

     
      I'm not either, really, I was just speculating. Besides I'm not sure I could stomach buying into such a sleazy operation. Of course, many people are thinking exactly that, which will drive the price too low and.....

     

The continued payout of that generous BP stock dividend is probably in jeopardy ...

BP spill costs could reach $37 billion: analyst

[Lethevich]

Sea Otters, the Cutest Way to Fight Global Warming

[Coopmv]

Sea Otters, the Cutest Way to Fight Global Warming

And why did the dumb-ass humans hunt sea otters to almost extinction? 

[karlhenning]

The number of Massachusetts residents filing for bankruptcy soared in the first half of 2010, as the continued weak economy left thousands of homeowners unable to pay their mortgages or sell their properties.

Nearly 12,000 people filed for bankruptcy in the first six months of this year, 25 percent more than in the first half of 2009, according to data released yesterday by the Warren Group, a Boston real estate information company.

[Coopmv]

The number of Massachusetts residents filing for bankruptcy soared in the first half of 2010, as the continued weak economy left thousands of homeowners unable to pay their mortgages or sell their properties.

Nearly 12,000 people filed for bankruptcy in the first six months of this year, 25 percent more than in the first half of 2009, according to data released yesterday by the Warren Group, a Boston real estate information company.

While the economic picture in MA is not pretty, the one in CA is outright ugly ...   

[drogulus]

     The last few months should have been Doomer Heaven. Why is it so quiet here now that things look really, really bad? Unemployment, far from dropping due to the stimulus looks like it might go up, or at least stay where it is for a long time. There is no real good news in sight.

     So, why aren't the Doomers crowing? I think it's just not as much fun to say things are bad when they are bad as it is to say things will get worse when the issue is in doubt. This is the worse, and the reality may make the fantasy less fun to indulge. Real bad news drives out the fake bad news, forcing people to think realistically against their nature. Oh well, it's just a theory...

     Meanwhile, there are things happening that will change the direction of the country, both positively and negatively.

     First the negative news, which is dealt with in this TNR article:

     Let Them Eat Credit

     How inequality is at the root of the Great Recession.

     The thesis is that politicians know that the growing income inequality and wage stagnation is at the root of the crisis, but know as well that the fixes are long term and will be fiercely contested at every step. There's no payoff there, so the alternative is to provide low cost credit to low income people to fuel consumption. This led to the housing crisis, the consumer debt crisis and where we are today. Until jobs come back and especially until incomes grow the problem can't be addressed except with gimmicks. The bad news is that this is unlikely to change.

     Now the positive from Time magazine, a closer look at the Recovery Act:

     How the Stimulus Is Changing America

     "Let's Just Go Build It!"

After Obama's election, Depression scholar Christina Romer delivered a freak-out briefing to his transition team, warning that to avoid a 1930s-style collapse, Washington needed to pump at least $800 billion into the frozen economy — and fast. "We were in a tailspin," recalls Romer, who is about to step down as chair of Obama's Council of Economic Advisers. "I was completely sympathetic to the idea that we shouldn't just dig ditches and fill them in. But saving the economy had to be paramount." Obama's economists argued for tax cuts and income transfers to get cash circulating quickly, emergency aid to states to prevent layoffs of cops and teachers and off-the-shelf highway projects to put people to work. They wanted a textbook Keynesian response to an economy in cardiac arrest: adding money to existing programs via existing formulas or handing it to governors, seniors and first-time home buyers. They weren't keen to reinvent the wheel.

But Obama and Biden also saw a golden opportunity to address priorities; they emphasized shovel-worthy as well as shovel-ready. Biden recalls brainstorming with Obama about an all-in push for a smarter electrical grid that would reduce blackouts, promote renewables and give families more control over their energy diet: "We said, 'God, wouldn't it be wonderful? Why don't we invest $100 billion? Let's just go build it!' "

     Part of the answer to the question "Why hasn't the stimulus worked?" is that since it was too small (a problem I dealt with in a previous post on the "fork of fear") it didn't have a chance of working. Perhaps a better answer (a different version of the first one) is that it is working as well as can be expected given the size of the hole we are trying to climb out of. The other part of the answer is that a large chunk of the recovery plan was not intended as pump priming, and instead is long term investment that the crisis allowed us to attempt. I hope this turns out to be the right move. It's the move I would have made given a fixed amount of money (first choice would be a Krugman-style balls-to-the-wall effort ).

[Coopmv]

     The last few months should have been Doomer Heaven. Why is it so quiet here now that things look really, really bad? Unemployment, far from dropping due to the stimulus looks like it might go up, or at least stay where it is for a long time. There is no real good news in sight.

     So, why aren't the Doomers crowing? I think it's just not as much fun to say things are bad when they are bad as it is to say things will get worse when the issue is in doubt. This is the worse, and the reality may make the fantasy less fun to indulge. Real bad news drives out the fake bad news, forcing people to think realistically against their nature. Oh well, it's just a theory...

     Meanwhile, there are things happening that will change the direction of the country, both positively and negatively.

     First the negative news, which is dealt with in this TNR article:

     Let Them Eat Credit

     How inequality is at the root of the Great Recession.

     The thesis is that politicians know that the growing income inequality and wage stagnation is at the root of the crisis, but know as well that the fixes are long term and will be fiercely contested at every step. There's no payoff there, so the alternative is to provide low cost credit to low income people to fuel consumption. This led to the housing crisis, the consumer debt crisis and where we are today. Until jobs come back and especially until incomes grow the problem can't be addressed except with gimmicks. The bad news is that this is unlikely to change.

     Now the positive from Time magazine, a closer look at the Recovery Act:

     How the Stimulus Is Changing America

     "Let's Just Go Build It!"

After Obama's election, Depression scholar Christina Romer delivered a freak-out briefing to his transition team, warning that to avoid a 1930s-style collapse, Washington needed to pump at least $800 billion into the frozen economy — and fast. "We were in a tailspin," recalls Romer, who is about to step down as chair of Obama's Council of Economic Advisers. "I was completely sympathetic to the idea that we shouldn't just dig ditches and fill them in. But saving the economy had to be paramount." Obama's economists argued for tax cuts and income transfers to get cash circulating quickly, emergency aid to states to prevent layoffs of cops and teachers and off-the-shelf highway projects to put people to work. They wanted a textbook Keynesian response to an economy in cardiac arrest: adding money to existing programs via existing formulas or handing it to governors, seniors and first-time home buyers. They weren't keen to reinvent the wheel.

But Obama and Biden also saw a golden opportunity to address priorities; they emphasized shovel-worthy as well as shovel-ready. Biden recalls brainstorming with Obama about an all-in push for a smarter electrical grid that would reduce blackouts, promote renewables and give families more control over their energy diet: "We said, 'God, wouldn't it be wonderful? Why don't we invest $100 billion? Let's just go build it!' "

     Part of the answer to the question "Why hasn't the stimulus worked?" is that since it was too small (a problem I dealt with in a previous post on the "fork of fear") it didn't have a chance of working. Perhaps a better answer (a different version of the first one) is that it is working as well as can be expected given the size of the hole we are trying to climb out of. The other part of the answer is that a large chunk of the recovery plan was not intended as pump priming, and instead is long term investment that the crisis allowed us to attempt. I hope this turns out to be the right move. It's the move I would have made given a fixed amount of money (first choice would be a Krugman-style balls-to-the-wall effort ).

The reason why the stimulus has not worked as expected is half that money probably went to China to stimulate its economy.  Why have we not addressed the fundamental problem of trade imbalance?  The administration has been dancing on the edge of these trade issues for a better part of two years.  The WTO bylaw is supposed to provide the US president the authority to renegotiate the terms of this WTO Agreement.

[bwv 1080]

     The last few months should have been Doomer Heaven. Why is it so quiet here now that things look really, really bad? Unemployment, far from dropping due to the stimulus looks like it might go up, or at least stay where it is for a long time. There is no real good news in sight.

     So, why aren't the Doomers crowing? I think it's just not as much fun to say things are bad when they are bad as it is to say things will get worse when the issue is in doubt. This is the worse, and the reality may make the fantasy less fun to indulge. Real bad news drives out the fake bad news, forcing people to think realistically against their nature. Oh well, it's just a theory...

     Meanwhile, there are things happening that will change the direction of the country, both positively and negatively.

     First the negative news, which is dealt with in this TNR article:

     Let Them Eat Credit

     How inequality is at the root of the Great Recession.

     The thesis is that politicians know that the growing income inequality and wage stagnation is at the root of the crisis, but know as well that the fixes are long term and will be fiercely contested at every step. There's no payoff there, so the alternative is to provide low cost credit to low income people to fuel consumption. This led to the housing crisis, the consumer debt crisis and where we are today. Until jobs come back and especially until incomes grow the problem can't be addressed except with gimmicks. The bad news is that this is unlikely to change.

     Now the positive from Time magazine, a closer look at the Recovery Act:

     How the Stimulus Is Changing America

     "Let's Just Go Build It!"

After Obama's election, Depression scholar Christina Romer delivered a freak-out briefing to his transition team, warning that to avoid a 1930s-style collapse, Washington needed to pump at least $800 billion into the frozen economy — and fast. "We were in a tailspin," recalls Romer, who is about to step down as chair of Obama's Council of Economic Advisers. "I was completely sympathetic to the idea that we shouldn't just dig ditches and fill them in. But saving the economy had to be paramount." Obama's economists argued for tax cuts and income transfers to get cash circulating quickly, emergency aid to states to prevent layoffs of cops and teachers and off-the-shelf highway projects to put people to work. They wanted a textbook Keynesian response to an economy in cardiac arrest: adding money to existing programs via existing formulas or handing it to governors, seniors and first-time home buyers. They weren't keen to reinvent the wheel.

But Obama and Biden also saw a golden opportunity to address priorities; they emphasized shovel-worthy as well as shovel-ready. Biden recalls brainstorming with Obama about an all-in push for a smarter electrical grid that would reduce blackouts, promote renewables and give families more control over their energy diet: "We said, 'God, wouldn't it be wonderful? Why don't we invest $100 billion? Let's just go build it!' "

     Part of the answer to the question "Why hasn't the stimulus worked?" is that since it was too small (a problem I dealt with in a previous post on the "fork of fear") it didn't have a chance of working. Perhaps a better answer (a different version of the first one) is that it is working as well as can be expected given the size of the hole we are trying to climb out of. The other part of the answer is that a large chunk of the recovery plan was not intended as pump priming, and instead is long term investment that the crisis allowed us to attempt. I hope this turns out to be the right move. It's the move I would have made given a fixed amount of money (first choice would be a Krugman-style balls-to-the-wall effort ).

Given that the existing stimulus and bailouts are going to put the gross public debt / GDP ratio over 90% (where recent empirical studies find strong evidence of sustained impairment of economic growth) more debt-funded pork-barrel spending is hardly the solution.  Although that is the predictable reaction of Keynesians to the abject failure of Obama's program, but we are already at the point where the solvency of the government is suspect (indeed if you take into account unfunded SS & Medicare liabilities, the US is bankrupt).

And I seriously doubt politicians have any real knowledge either on the causes of the financial crisis or the fixes (particularly because ultimately the politicians are the problem)

[drogulus]

Given that the existing stimulus and bailouts are going to put the gross public debt / GDP ratio over 90% (where recent empirical studies find strong evidence of sustained impairment of economic growth) more debt-funded pork-barrel spending is hardly the solution.  Although that is the predictable reaction of Keynesians to the abject failure of Obama's program, but we are already at the point where the solvency of the government is suspect (indeed if you take into account unfunded SS & Medicare liabilities, the US is bankrupt).

And I seriously doubt politicians have any real knowledge either on the causes of the financial crisis or the fixes (particularly because ultimately the politicians are the problem)

     Pork barrel spending has never played a major role in the economy. It's mostly a distraction. As for calling stimulus spending or investments pork barrel, it really doesn't work. Most stimulus spending is designed to pass the "dig a hole, fill the hole" test. Classic stimulus spending is just an acceleration or intensification of normal spending. Pork barrel is tiny by comparison. Also, Ted Stevens and Robert Byrd are dead.

     I also think that many politicians do know how to fix the crisis. There is no knowledge problem. It's just hard to move all the parts at once in a good direction. You have to combine a huge amount of immediate spending with a longer term tax/spending program in the Darman mold, a spending freeze with tax increases for the upper brackets to halt the upward redistribution.