Archive for February, 2012

QOTD: Bastiat on Plunder

Fantastic quote from Bastiat:

“When plunder becomes a way of life for a group of men living in society, they create for themselves, in the course of time, a legal system that authorizes it and a moral code that glorifies it.”

- Frederic Bastiat, French writer and economist, as quoted by Bill Moyers.

What else is there to add?

Category: Bailouts, Legal, Really, really bad calls

TDS: I Can’t Believe It Got Better!

America’s economic recovery is good news, unless you work for a media organization whose job it is to make sure Barack Obama doesn’t get reelected.

Check out the first segment on Fox following GOP talking points:

Category: Financial Press, UnGuru, Video

10 Mid-Week PM Reads

My afternoon train reading: • Trade of the Year? (The Reformed Broker) • Top 10 Hedge Funds By Net Gains Since Inception (Market Folly) see also Dalio Earned Clients $13.8 Billion to Lead Hedge Funds as Paulson Slumped (Bloomberg) • Swap Talks Over Greece Could Test the Marke (DealBook) • Grantham wonders if Marx was…Read More

Category: Financial Press

Miserable Wants Company

Frederick Sheehan is the co-author of Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve. His new book, Panderer for Power: The True Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession, was published by McGraw-Hill in November 2009. He was Director of Asset Allocation Services at John Hancock…Read More

Category: Think Tank

After ECB and Bernanke, BoE member says ‘no mas’

After getting hammered since Bernanke mentioned the improving labor market and the ECB is now done with LTRO’s (for now), gold is at a fresh low of the day after Bank of England member Martin Weale, a proponent of previous QE moves in England is saying there may be no need for more. “I do…Read More

Category: MacroNotes

The Strategic Petroleum Reserve and Oil Prices

Click to enlarge:

The Financial Times – Obama pressed to open emergency oil stocks

The Obama administration is coming under growing pressure to cool petrol prices by releasing emergency stocks of oil. However, critics say this would be the wrong response to the wrong problem at the wrong time. The oil price surge has increased speculation that the US and its allies could repeat the co-ordinated release of crude stockpiles they undertook last summer to compensate for lost supply from Libya. The move led to an 8 per cent price fall. On Friday, Timothy Geithner, US Treasury secretary, said there was “a case” for releasing crude from the US strategic petroleum reserve, or SPR, “in some circumstances” – a significant shift for an administration that had previously ruled out another release. What has triggered the change is the steady drumbeat of soaring petrol prices, with the US national average now $3.68 a gallon – a record February high. “Nothing terrifies a sitting president more than rising gasoline prices, which in President Obama’s case could imperil the economic recovery and torpedo his re-election prospects,” said Robert McNally, head of the Rapidan Group energy consultancy and a former White House official.


The chart above shows the SPR’s inventory level, highlighting the last four SPR sales.

Regarding the highlighted part above about last year’s release, see the chart below.  The last announcement of an SPR release occurred on June 24, 2011 encompassing a release of 60 million barrels globally, 30 million of which came from the U.S. SPR.

Overlaid on the SPR inventory levels is the price of nearby WTI futures.  WTI closed at $91.16 the day of the announcement.  It rose to $97.60 the week the release began (July 15, 2011) and dropped to $88.18 the week the release ended (September 16).  This is a drop of 3% from the announcement to the end of the release.  It is a drop of 8% to 10% during the release.

The U.S. consumes 19 million barrels of crude oil a day, so a 30 million barrel release is roughly 50 hours of consumption spread out over 30 days.  The world consumes 80 million barrels of crude oil a day, so a 60 million worldwide release is 18 hours of consumption spread out over 30 days.  We will leave it the reader to decide if the SPR release made a difference.

When gas prices rise, politicians are helpless to do anything over the short-term.  This is especially troublesome for politicians when an election is less than a year away.  SPR releases are ineffective at altering the price.  They do, however, give politicians cover to take credit for any down-tick or argue any up-tick would have been worse without the release.

Therefore, we expect an announcement of SPR release in the next several weeks.  We expect it to be met with plenty of fanfare and arguments that it will matter.  We expect it will again amount to hours of consumption and not make a difference.  Administration officials will disagree.

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Category: Consumer Spending, Energy

Bloomberg Robosigning Discussion

You can stream Bloomberg Radio live by clicking below: > I am off to Bloomberg TV to discuss my Washington Post column on Robo-signing — I should be on from 2:45 – 3:00 ish

Category: Legal, Media

Household Deleveraging Slows Recovery

Click to enlarge: Source: Bloomberg BRIEFs Economic Newspaper February 28, 2012 > Why has the recovery been so weak? The short answer is Household Deleveraging. Its why post credit crisis recoveries are so much slower across the boards. Deleveraging prevents the virtuous cycle from beginning. Less borrowing means less retail spending. That eventually bites into…Read More

Category: Bailouts, Credit, Economy

Bernanke speaks

“The recovery of the US economy continues, but the pace of expansion has been uneven and modest by historical standards,” is how Bernanke started off his testimony in front of the House. He noted the recent “positive developments in the labor market” but said “notwithstanding the better recent data, the job market remains far from…Read More

Category: MacroNotes

2012 USMPF Report: Housing, Monetary Policy, and the Recovery

Category: Real Estate, Think Tank