This post is by Jim Fitch of Some Assembly Required.
Americans want cheap fuel, no matter what it costs.
Sign Here: JPMorgan, Citigroup, Morgan Stanley. The Usual Suspects. Now they want to take over all the pension funds. With Uncle Sam’s help, blessing, and taxpayer backing. Sort of a consolation prize for not getting their hands on Social Security yet.
Another Shoe: AmeriCredit announced a net loss of $150 million for the quarter. The interesting part is that AmeriCredit’s business is financing new car purchases, and loan originations were down 70% this year over last. Not so much the less lending, but the less buying.
The Road to Perdition: A group of wizards called the Counterparty Risk Management Policy Group III has unfolded the map to the future, where the financial collapse we’re drowning in today will never be repeated. One little problem: the wizards are from Goldman Sachs, HSCB, JP Morgan Chase, Merrill Lynch, Morgan Stanley, Bank of America – everyone but Mozilo and he probably submitted a brief. If these guys can lead us to the promised land, just who was it that lead us into the desert?
Preferences : Pimco’s Bill Gross says that by September Fannie and Freddie will issue preferred stock and the US Treasury will buy it. Mussolini said: “Fascism should more properly be called corporatism because it is the merger of state and corporate power.”
Midnight Sun Oil: Norway, the most conservative producer in the North Sea oilfields, will likely end petroleum exports by 2030. Its larger fields are declining at 13% a year. This announcement is in line with predictions made by the Export Land Model. Recall that the UK went from their peak production to importer in less than 8 years.
Mauled: The retailers got beaten up wholesale in July; 60% have reported disappointing results and missed analysts (lowered) expectations. From Wal-Mart and JCPenny to Target, Kohls, A&F, and The Gap. And that’s with the stimulus checks…
Some Assembly Required reflects my somewhat cynical view of the world on a daily basis. Think of it as having coffee with a curmudgeon. Come visit; bring your own coffee.
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Bush had a goal 8 very long years ago to hand Social Security over to wall street, and by God if he can’t do it in an honest way, why not use the backdoor while no one is watching! Paulson is doing a heck of a job and so is Cox, Bernanke and all the other FEMA members that have used nepotism to cash in!
I think the respite is temporary. As I discussed recently, Oil prices long term will go back up due to the following main factors:
– The planet remains in a state of energy stress. Asian countries are adding an estimated 50,000 new cars per day to their roads. Adding this growth plus that from other oil based consumables, will provide a huge demand side effect. With supply limited and growing very slowly, this will lead to a steep rise in prices.
– If China’s oil demand growth rate continues at its current pace of 6% to 7% per year, China will use 20 million barrels a day by 2020 – about the same as what the U.S. uses today. And by 2030, China would be up to 40 million barrels per day – twice what America uses now.
– Tensions between Iran and the U.S. and other Middle east countries don’t look like abating in the longer term despite recent diplomatic efforts and a lull in tensions.
– We’ll drive more, fly more and waste more. As prices fall, the alliance of environmentalists and consumers, brought together by pain at the pump, is already coming apart. When has is below $4, people will think of it as a relief and unfortunately most will go back to their old habits.
– Renewable energy is still a long way from being a viable alternative to oil in terms of widespread usage. The world economy cannot and will not quickly convert from an oil-based consumer to a blend of other energy options such as natural gas, solar, wind and so on
“Renewable energy is still a long way from being a viable alternative to oil in terms of widespread usage. The world economy cannot and will not quickly convert from an oil-based consumer to a blend of other energy options such as natural gas, solar, wind and so on.”
That much is true…as long as economic conditions remain fairly stable.
But what will happen if the price of oil resume a northward trajectory to, say…200 USD? 250 USD? or even higher to stabilize around 230?
The economy couldn’t or wouldn’t convert to other forms of energy?
Call me skeptic, but I think all the incentives would be there. Policies would HAVE to change to foster the conversion. Whether some wouldn’t like it would become absolutely irrelevant in such a context.