Tuesday, November 10, 2009
Back to the Grind
It has been 6 months since the last blog. Long difficult trip up from Mexico on Koho, our Cal48 with daughter Heidi. It is docked near Glacier Bay for the winter. I may tell the story here someday. When I left the depression had started and my retirement was toast. When I got back 4.5 months later, the depression was still starting and the S&P had staged a monster bear market rally up almost 60% so I took that as a sign from heaven that it might be time to sell. I was out of touch most of the time from the brouhaha of the industrial world and it was with dismay that I returned to the same world I left. Barak has not figured it out and remains a captive puppet to his GS Thug Advisers and the Federal Reserve and is presiding over quantitative easing pouring money into wall street banks stealing a favorable economic future from my children. In the process he is destroying the dollar(down %16 in the past 6 months against most currencies). And there was huge news from the middle east totally ignored by all the media except Reuters. Saudi Arabia is moving to have it's crude listed on the Argus US Sour Crude Index based in London. So what, you say. How is that news? It's big news pilgrim and I hope somebody notes it somewhere. KSA has been unhappy with the volatility of the crude markets which are mostly western based, and of course primarily in the NYMEX in New York. It has been the perfect playground of the speculators who play in the futures market sandbox and the Saudis think a lot of the last spike to $147 was due to the unregulated futures speculators with their contracts and derivatives. So they have had enough and they have taken their dog and pony show elsewhere. They hope to have a more stable environment for oil prices which will help their fiscal planning and we will have to see if it works for them. I did not see any reference on how crude will be priced but I would not be surprised to see if petrodollar pricing may be nearing an end. If oil becomes priced in say, the Euro or a new Gulf currency(also rumored), the US can still buy oil on the world market as long as dollars can be exchanged for the new currency. But it is another sign that the days of dollar and US hegemony are nearing an end. And the Saudis are not even the biggest producer. Russia last month produced 10.04 MBPD which may be a peak for them. The Saudi Arabia peaked 29 years ago in 1980 at 9.9 MBPD. If the Russians and Africans and Latin Producers decide to emulate the Saudis, it is checkmate for the dollar. Oil demand in the US is now down to the mid 18 MBPD which is off 4.4% from a year ago but interestingly, that is due entirely to distillate fuels. Gasoline consumption is unchanged. Back here in Jackson Hole the Depression is marching on. For the first time in memory properties are being foreclosed on the courthouse steps and with the exception of some relatively cheap condos, the foreclosures have failed to attract bids any where near the reserve prices. Hotels are turning into rooming houses and advertising weekly and monthly rates. The Point is demanding $239 a week and super 8 only %650 a month. These cheap rates for pretty nice hotels are killing the apartment and condo market especially in the commuter towns of Victor and Driggs ID and Alpine WY and vacant rental listings are flooding the want ads just as job wanted ads have almost disappeared. Naturally the residential real estate market is dead and hundreds of tradesmen and carpenters have packed their dogs and tool belts into their pickups and fled for greener pastures. Boom and bust cycles are the rule in Wyoming but a residential bust this big has never happened. Credit is drying up and a builder recently advertised in the News and Guide for a loan of $1.2 Million for which he was willing to pay %12 "guaranteed" over 48 months. All of these local tidbits have the earmarks of a deflationary depression. Ah...Life at the end of empire.