Doug Kass asks: “Anyone notice that it took the CRB four and a half years to go from 252 to 478 but it took only four months to go from 478 to 252 !”
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chart courtesy of FusionIQ, Bloomberg
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The chart above reflects the old school cliche: Markets eat like a bird, but shit like a bear . . .
"Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy." —Groucho Marx
Initial Jobless Claims totaled 614k, 1k less than expected but the prior month was revised up by 3k to 630k. Continuing Claims fell by 53k from last week and was 38k less than expected. There has been a big discussion of late over the expiration of unemployment insurance and how the recent drop in Continuing Claims is due to people losing it rather than finding a new job. While there is no question benefits are expiring without one finding a job, as evidenced by the rising exhaustion rate, many losing those benefits now started getting them when initial claims were...
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November 12th, 2008 at 11:23 am
Nothing like a chart like that to remind me that I know nothing about markets. I thought for sure the dollar would go to zero and the CRB to infinity, and yesterday. Wow.
November 12th, 2008 at 11:25 am
Commodities got to a point where price increase could no longer be passed on. Now we have the inverse and that’s what’s going to create the future growth.
Commodities aren’t yet indicating recession pricing, so they have a way down to go.
November 12th, 2008 at 11:44 am
Actually, bears–particularly black bears–eat like birds too! Their main foods are seeds and nuts complimented by fresh ants and beetles dug out of the ground and fallen trees (like woodpeckers), hence, the omnivore tag. Generally don’t eat worms like some birds (robins). OK, once in awhile they’ll take on a deer, but usually carrion, and almost always when they’re starving in the winter.
And while black bears may eat like birds (well, maybe a few flocks of birds), they certainly do shit like bears!
A little woodsy information from one who lives there in nice weather!
November 12th, 2008 at 12:02 pm
Yes. The behaviour of the markets is truly alarming. I simply can’t imagine that we’re headed into a depression, but the markets keep saying otherwise. I’ve been looking for that “trade-able bottom,” but all I see is a trap door.
November 12th, 2008 at 12:23 pm
Can some one please tell me what the heck is the VIX really measuring? It can’t be fear, as advertised. How could people stay so afraid for so long? It looks to me like it is just negatively correlated with the broad indexes: the lower the market goes, the higher the VIX.
Others have said here that bullishness is now relatively high. (That sounds implausible to me in the current economic situation, but I don’t track sentiment indicators, so I don’t now if it is high or not.)
But if bullishness is (was?) “high”, then how could the “fear” index have stayed above 50?!
November 12th, 2008 at 12:24 pm
The movements in the prices of the various individual commodities since the CRB topped out on July 2 are as follows:
CRB: -47%
Agriculture: -41%
Livestock: -13%
Industrial metals: -48%
Copper: -57%
Oil: - 59%
Natural gas: -45%
Gold: -23%
Platinum: -60%
Silver: -47%
The Baltic Dry Index, an excellent barometer of economic activity, plunged by 91% over the same period.
http://www.investmentpostcards.com
November 12th, 2008 at 12:38 pm
I apologize for an observation out of context, but I saw no other place to submit it.
The new site design feels funny and wrong. There is a total disconnect between the main site (bigpicture) and and the blog.
Before, one had the feeling of being “there, with anyone else” (what UI designers call “keep user in the page”). Here, one feels “segregated”.
Of course perhaps, once I get used, I’ll forget the old format; but after this first initial period I still think that this was the wrong decision,
Raul
November 12th, 2008 at 12:42 pm
The CUB spike price in commodities was little understood by most, simply a rotation out of paper assets (including currencies) in search of yield, but pundits galore praised the world economy for its vast demand needs. I would think that nonsense has been put firmly to rest with global recession now underway. Demand destruction is now the name of the game.
The leadup to this event was 25+ years of overexpanding credit. Well, now, we face the ultimate Minsky moment. It won’t be easy to face and it will not pass quickly - borrowers are spent.
Forget peak oil - the killer we face is Peak Credit.
November 12th, 2008 at 1:11 pm
Fun fact: Over 250 million Monopoly sets have been sold, each containing between $15,140 and $20,580 (09/2008 edition) in currency in each box (very rough estimate, as there have been sets sold with different currencies). Using the $15,140 figure, that would be about $3.8T in total Monopoly money in circulation.
November 12th, 2008 at 1:18 pm
Winston:
Agreed. We have reached a Minsky moment…of unknown dimension.
http://www.moneyweek.com/news-and-charts/economics/have-we-reached-a-minsky-moment.aspx
Have we reached a Minsky moment?
November 12th, 2008 at 1:29 pm
Winston Munn Says:
November 12th, 2008 at 12:42 pm
The CUB spike price in commodities was little understood by most, simply a rotation out of paper assets (including currencies) in search of yield, but pundits galore praised the world economy for its vast demand needs.
_______________________________________________________
Absolutely true. What had surprised me to no end was that otherwise smart people believed the Armageddon scenario proffered by the Theory of Boone and others, some of whom won Nobel prizes in economics.
Now the other side is overshooting with the Theory Of Demand Destruction. Demand has fallen due to price elasticity relative to the time people can realistically change energy consumption habits. People are learning to conserve because they know the downside of wasteful consumption.
On the other hand, a temporary worldwide slowdown is not the same as putting Saudi Arabia out of business. Existing wells still hold finite amounts of oil and each individual well has it’s own peak oil graph. Consumption will rise as demand recovers and as new consumers enter the economy. Thus, Exxon might be a bad place to put spare change for a while, but the service companies are still in demand and their stocks are a bargain of the century now.
Thus, oil prices are going down, but not forever. They will rise, but not back to $147 unless credit goes out of control again. The oil market is back to normal, probably for the first time in many years. The floor price is probably close to the marginal cost of production of new and recent wells. OPEC threats to drop down production are nothing more than basic production control decisions. Oil is extremely expensive to inventory. Thus, it is best left in the ground if it is not needed.
RBOB futures are forecasting a price of about $49 for oil right now. BP and Venezuela might not like this, but the Energy Services people will dig regardless of the price.
About gold, I’m wondering if that is on the way to $450. Any insight about that from anyone?
November 12th, 2008 at 1:43 pm
Re oil: It’s also safe to cruise around in the SUV again. Do GM a favor an buy a Hummer at a big discount. It’s ok.
Without wasteful credit spiking the punch bowl, oil prices will remain affordable for several more years. This is more than long enough to make more substantial adjustments to daily living patterns.
November 12th, 2008 at 1:50 pm
Bruce,
Another old but interesting read I have posted before - to me this reinforces the hypothesis of Minksy that stability breeds instability, especially when compared to perceptions of risk then and pre-2008:
http://www.prospect.org/cs/articles?article=the_alarming_parallels_between_1929_and_2007
I use different wording for Minsky: stability breeds arrogance.
Dead Hobo,
I fear an overshoot to the downside, especially in oil, will lead to apathy about needed energy reform and policies when in actually it yields a window of opportunity to develope new energy products in a relatively price-stable environment.
November 12th, 2008 at 1:59 pm
Winston Munn,
I think the invisible hand will solve the problems provided no well meaning people get in the way. Oil will stay low in price, mysteriously, if credible alternatives become available or if serious research is about to get underway.
This is not to say alternatives shouldn’t be explored. They just need to pay their own way and not receive excessive subsidies, such as corn and ethanol. I know the oil producers are evil and avaricious, but two wrongs don’t make a right. The idea of Harry Reid pouring buckets of borrowed money into an industry that should be able to pay it’s own way makes me want to puke. It should be obvious to a halfwit that this kind of support will yield the wrong allocation decisions. Obama is smart. Democrats are dumb to the point of making normal people want to scream. But, at least, they’re not as bad as Republicans at this time.
November 12th, 2008 at 2:06 pm
Continuing on Terry’s comments, where we are in western Massachusetts people have to take their bird feeders down with Spring’s arrival because the bears really like bird seed. I mean REALLY like. We had a big guy in our back year one December (he wasn’t sleepy) using a long tube feeder like a Pez dispenser.
A bear actually did his duty in our yard and it was less than a well-fed poodle would leave, but I haven’t studied the subject.
As Terry says, they are omnivores. One killed a calf at a farm in the next town.
November 12th, 2008 at 2:25 pm
@Bob_in_MA
I have seen a bear dropping in Yosemite and it was the size of a well fed poodle.
November 12th, 2008 at 4:46 pm
And then just when you sold all your commodies - Bloomberg publishes at 3:09 on the China page only - the biggest story of the week. Fishingline commodies followed by ratchet up in the a.m.
China Retail Sales Rise 22%, Help to Counter Slowdown (Update3)
http://www.bloomberg.com/apps/news?pid=20601089&sid=abM29KiepBow&refer=china
November 12th, 2008 at 10:45 pm
The manipulation of the commodities markets is the real horror story of our time, and virtually no one gets it.
Know why we can pursue insane monetary policy and issue debt (at virtually 0% interest) to bailout every irresponsible dickhead under the sun? Because otherwise intelligent people are actually buying into “demand destruction” and commodities deflation propaganda. The punchline to this joke is worldwide poverty and famine.
I hate to be the one to criticize the only area that Hank and Ben have had any degree of success in this train wreck, but what is happening now is supply destruction of things human beings don’t fare too well without. Thanks to the opacity of the CFTC, any dunce with enough credit can short contracts of stuff they don’t have until the price drops. The problem is, no one will produce those goods at the prices set in never-neverland.
As Secretary of the Treasury, Paulson is charged with the task of producing gold and silver coins at market price in quantities sufficient to meet public demand, but doing so would mean the government would be subsidizing production at the artificially low price it created (which defeats the purpose). Instead, they sell this story that we’ve lost the recipe to make coin blanks, and no one even blinks.
People like me get dismissed as “tin-foil-hat-wearing-gold-bugs” who don’t understand how markets work, but when the shelves (and gas pumps) are empty, it ain’t a market anymore, so “prices” mean nothing. We are hurtling to this condition at warp speed and no one seems to mind.
Go figure
November 14th, 2008 at 1:30 am
demand destruction in play in the commodity world. the emerging markets are not finished. this is the pause that refreshes.
kevin
http://www.bullinachinamarket.com