The Destroyer of Finance

 May 8th is an underrated day.  Probably not too hot, probably not too cold.  A fair chance that it might be raining, but not a certainty.  School is not yet out (which is good for everyone NOT in school), but neither are the mosquitoes (the insects… the kids are still in school, remember), or at least not in full force.

 It’s also the day of the year that Robert Heinlein died in 1988.  I’m not to suggest we should celebrate his death, of course.  I just think its underrated as an opportunity to remember one of the foundation authors of modern science fiction.  One of those rare breed of writers that can combine a good story with thought provoking social commentary and a technological prescience that can, from time to time, make your skin crawl.  Not everything he wrote fits in to all three categories.  Not everything he wrote is guaranteed to even fit into one category.  The ones that do, though…

 Yeah, he grew to be a very cranky, very horny old man.  Who doesn’t?  I fit that category right now and I’m under 30.  Give me a wheel chair, a plaid blanket, and some nurses to bother and we’ll see how well I fit into an old folks ranch.  I even play bridge.

 Did he have some hot sports opinions?  The hottest.  Political systems, political thought, social behaviors, social conventions, social structures, economics, personal liberty v. social welfare, polyamory, polygamy, polygynandry.  Oh, did he like the last three.

 Hey, the guy went from being a (not so) closet communist to supporting Barry Goldwater in his lifetime.  He covered the spectrum.  He also described the idea of a waterbed in such detail, and so often, that decades after he wrote about it as US Court ruled that the waterbed was not a patentable invention.

 I’m about to finish his book Friday.  Certainly a controversial work, as pretty much all his later books are.  Some people hate it, some people love it.  I’ve thought that, so far, it’s been an enjoyable read that hasn’t really gone anywhere yet… at least not where I expected it to.  It’s made some points about society that are worth thought… but that’s Heinlein.  What is perhaps more worth note is the stunning degree to which characters use a communications network to research all manner of topics and can find information on anything.. even watch a live concert years after it finished.  He also goes so far as to state in his book that once you put data into this system, it lives forever and can always be found somewhere.

 Sound like anything you know?  Sound like anything from 1982, when the book was published?  The answers are yes and no, of course.  While the internet did exist, it was essentially unheard of outside of military uses, and you’d have to be a sci-fi author to… ah.

 Of course, he also includes flying anti-grav cars, interstellar travel at 18x the speed of light, super-ultra batteries that can power a house for forever, and a some crazy intercontinental travel system, so maybe 1 out of 6 isn’t all that great.  Oh, and genetic engineering/design of human babies and partially human creatures… but maybe we don’t write that one off just yet.

 Heinlein also does have some relevant commentary on energy supplies that, along with his depiction of the interweb, fits right in with today (Shipstone is the name of the guy who invented these super ultra batteries):

…Shipstone saw at once that the problem was not a shortage of energy but lay in the transporting of energy….  Those who spoke of “energy scarcity” and of “conserving energy” simply did not understand the situation.  The sky was “raining soup”; what was need was a bucket in which to carry it.

 It doesn’t take a sci-fi author to make this statement, but it does put it in a frame that most people do not (or can not) put it in.  There is nothing special about the energy of oil.  It has merely been congealed into a form easy to transport and convenient to burn.  Same for coal, although you can’t push it through a pipeline.  Natural gas is harder to transport… because its a gas and it takes up so much damn room.  You can pressurize it and liquefy it, but that’s less convenient… less safe.  The energy is the same in all of it, in the end.

 By the way, Sandworms of Dune?  Come on!  Did Herbert die in the middle of that book and have a couple hacks finish it for him?

 What’s that?

 I was so disappointed by the palpable give up exhibited in the last 1/3 of that book it made me want to dig up an earthworm, mutate it until it became a sand trout and started turning earth into Dune, then wait until a sand worm grew and capture it, torture it and send the pieces encased in a giant bucket of water to Anderson and baby Herbert for their role in that farce.

 Herbert and Heinlein… two cranky old sci fi authors with big opinions that are fun to read.

 Poly want a cracker?

 Stephanie Seymour

 Rockin’.

The Labor Department reported that consumer prices jumped 1.1 percent last month, much worse than had been expected. Energy prices rocketed upward by 6.6 percent, reflecting big gains for gasoline, home heating oil and natural gas.

Bernanke’s comments underscored the bind the central bank is in, caught between a faltering economy that is struggling to overcome a prolonged housing slump and a severe credit squeeze, and the risk that inflation would move higher.

Many analysts believe that the central bank is likely to leave interest rates unchanged for the rest of the year out of concern that any tightening of credit policy could send the economy into an even worse tailspin.

Over the past 12 months, consumer inflation is up by 5 percent, the largest year-over-year gain since a similar 5 percent rise in May 1991.

 Yes, and 1991 was a grand time in the economy.

Core inflation, which excludes energy and food, showed rising pressures too with an increase of 0.3 percent in June, up from a 0.2 percent gain in May and the biggest one-month rise since January.

This increase reflected a 4.5 percent jump in airline ticket prices, the biggest one-month rise for airline fares since March 2000.

 Airline tickets?  Really?  Good lord, talk about discretionary spending.

 Some good points from this and other stuff.

 A) The media is focusing on the total inflation number now, trumpeting the 1.1% increase in June instead of giving center stage to the “core” inflation number.  While I’m still TOTALLY baffled why airline tickets would be included in anything “core”, I take comfort in knowing that the media is almost never ahead of the curve, or even on the curve.  If they are focusing on something terrible, the worst is already past.

 B) I saw on the news last night (while on the treadmill) a graphic that 81% of Americans have negative feelings about the economy now, up from 61% a few months ago.  This is a great sign because, sorry for the offense, the public is generally clueless when it comes to the economy and its opinion really only reflects what has happened in the last 3 to 6 months.  Now that it’s a general concensus that the economy is terrible and doomed, it’s probably a signal that the worst is over.

For informational purposes:

1 month rankings for discussed or relevant stocks:

DRYS
ISRG (still not crazy about this one, so suck it)
UNP
*SP 500 Index*
BNI
NATI
USG
BAC

Strummin,

Jesse Jane

March 18th, 2008.

 Despite the relatively good showing on the market yesterday, I still do not see anything good in the near to medium term future.  The Dow is at just under 12,000 before open today, but I believe we’re much more likely to see 11 or even 10,000 before we see 13,000 again.

 Technically, I admit defeat because the DOW did make it back to 13,000, if only for a few days.  In my heart, though…

 I fucking told you so.  I hell damn god told you so.  Shit.

 Also on that day nearly 4 months ago, I mentioned the falling dollar.  Today we’re about in the same arena as we were back then as far as the strength of the dollar goes, but we’ve lost more ground against the Euro: they’ve taken a harder stance on interest rates and inflation and their currency has appreciated as a result.

 AND on that day I congratulated myself for pinning down National City as “bank most likely to fail”.  Well, Indymac failed first (although I doubt I would have thought about that one if you’d given me 6 hours and a blank sheet of paper), but if you bought NCCstock 4 months ago, I doubt you’re really pleased with the result.  (You’ve lost 64% of your money as of right now and NCC actually had to release a press statement denying that they were experiencing a bank run yesterday.)

 I’d still stay away from NCC.  And Fannie Mae (FNM) and Freddie Mac (FRE).

 If you’ve gotten into Dryships, and you’re wondering about the wisdom or you’re not sure you can handle the volatility, I say: patience.  Wait for it.  I wish I could have timed my investments better and jumped in at $68 instead of 85.  And 105.  And 85.  And 85.  And 79.  And 77.  And 68.  And 75.

 Yet Dryships has STILL outperformed the Dow, NASDAQ, and SP 500 over the last month, last 3 months, and last 6 months.  So, you haven’t lost as much money as you could have.

 Have faith in DRYS.  By the way, the acquisition of Ocean Rig is officially complete, if trivia like that is important.

 Where’s the market heading now?  I no longer have the deep feeling of gloom that I did four months ago, and even though I questioned my gut feeling as the market rode back up to 13K it never felt right.  Bank failures are lagging indicators of the economy.  Banks that have failed or will fail were mortally wounded months ago (although a bank run, senator inspired or not, is still the most lethal thing to a bank).

 I think we’re near the bottom.  Are good times ahead?  Let’s not start the party yet.  The DOW could still touch 10K, but I think a return to 12 thousand is more likely than 10, and there is still plenty of turmoil ahead.

 Kneel before boats,

 Rembrandt

Why living near Dallas is good comedy; why NOT actually living IN Dallas is a bonus; why Dallas might be the same sort of hellhole that Detroit is:  all these things are found here:

A special meeting about Dallas County traffic tickets turned tense and bizarre this afternoon.

County commissioners were discussing problems with the central collections office that is used to process traffic ticket payments and handle other paperwork normally done by the JP Courts.

Commissioner Kenneth Mayfield, who is white, said it seemed that central collections “has become a black hole” because paperwork reportedly has become lost in the office.

Commissioner John Wiley Price, who is black, interrupted him with a loud “Excuse me!” He then corrected his colleague, saying the office has become a “white hole.”

That prompted Judge Thomas Jones, who is black, to demand an apology from Mayfield for his racially insensitive analogy.

Mayfield shot back that it was a figure of speech and a science term. A black hole, according to Webster’s, is perhaps “the invisible remains of a collapsed star, with an intense gravitational field from which neither light nor matter can escape.”

Other county officials quickly interceded to break it up and get the meeting back on track. TV news cameras were rolling, after all.

 And that’s just a meeting about traffic tickets!  You should see the angst in meetings about road repairs (“What do you mean ‘black top’?  I say we line the roads with ‘white top’!) and school board meetings (“I will WHIP YO ASS!) [quotes for illustrative purposes only, not real quotes.  Yet.]

 You know its a bad day when an analyst cuts your target stock price to $0.  Ah, Indymac Bank… how will we survive without your no income verification subprime loans?

 Back in high school I wrote a paper in which I made a claim that the US ought to put more effort into builing our bond with Saudi Arabia and less effort into bonding with Israel.  One of the primary reasons I offered was that playing big brother to Israel was a major ass whipping and they are perfectly capable of taking care of themselves, so why do we need to catch the flack everytime they take a zippo and an aerosol can to an ant hill?

 In retrospect, I can see the utility of staying close to Israel, even if only to be better able to pull back on their reigns when they start getting too far off track.  Still, it sucks when Iran announces that, because they view Israel as eesentially a US colony, they will treat an attack by Israel as an attack by the US.

 The secret threat in the message is that Iran would try to close the Strait of Hormuz in the event that Israel did something… rash.  The Strait, which connects the Persian Gulf with the Indian Ocean, is a whopping 21 miles wide at its narrowest and, oh yeah, something around 20% of the world’s oil supply passes through it.  Iraq, Kuwait, Iran, Saudi Arabia, the UAE (even Bahrain and Qatar) all shiping most or all of their oil out through the Strait.

Above the water is Iran, below the UAE to the left and Oman to the right.

 From the picture, you can probably figure out the problem.  In an age where almost every geographic choke point has been rendered meaningless by technology, we have the Strait of Hormuz.

 Objectively, Iran’s military is really no more than mediocre.  Excluding the land forces, it’s really quite poor.  The air force is not terribly well equipped and lacking in talented pilots and the navy is a collection of jumped up speed boats with only a few frigate sized war vessels of debatable quality themselves.  Oh, and three Kilo submarines.  Ah.

 The rub: to close the Strait, Iran doesn’t have to physically prevent tankers from going through it.  Much like the genius of mining a harbor (which, by the way, Iran could do to the Strait), you don’t actually have to DO it to be effective as the threat alone will bring ship traffic to a halt.

 You’re the owner of an oil tanker.  It’s worth probably no less than $50 million and significantly more than that if it’s one of the really big suckers.  You know all it takes is one missle from an armed speed boat that sneaks by your naval escort, from a jet that manages to come in under the radar, from land even… or a torpedo from one of those damned submarines.  Sure, the subs are one shot weapons sure to be blasted out of the water after the attack, but you probably aren’t anxious to make your boat be the bait.  In addition, your crew is more than likely not going to be willing to man the ship on such a voyage.

 So, I saw a prediction for $300 oil if the Strait were closed, and $8 gallon gas (I guess that would mean, what, $15 gallon gas in Europe?  Just add about $4 to what it is now).  I think they overstate the gas price a little… maybe only $7.50.

 How do you feel about bombing Iran now?

 I really think that if Israel and Iran would go sit in their corners and think about what they’ve done that the price of oil would be ready to come down some.  There are clear signs of demand destruction (both short term and long term), which should help the supply/demand fundamentals, but this other sideline crap is stirring things up too much.  That’s fine with Iran, of course, as they think higher prices are better anyway.

 In closing, please don’t bomb Iran, but if you do, please legalize whale hunting so we can harvest their blubber for oil again.

 I’m going to open up a new Starbucks… oops,

 Rene Lacoste