Category Archives: Economy

Climate-Gate: Media Ignored Scientific Back-Trackers

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This story back in September ought to have made a lot of headlines, but didn´t. Perhaps it will now:

“When a leading proponent for one point of view suddenly starts batting for the other side, it’s usually newsworthy.

So why was a speech last week by Prof. Mojib Latif of Germany’s Leibniz Institute not given more prominence?

Latif is one of the leading climate modellers in the world. He is the recipient of several international climate-study prizes and a lead author for the United Nations’ Intergovernmental Panel on Climate Change (IPCC). He has contributed significantly to the IPCC’s last two five-year reports that have stated unequivocally that man-made greenhouse emissions are causing the planet to warm dangerously.

Yet last week in Geneva, at the UN’s World Climate Conference — an annual gathering of the so-called “scientific consensus” on man-made climate change — Latif conceded the Earth has not warmed for nearly a decade and that we are likely entering “one or even two decades during which temperatures cool.”

The global warming theory has been based all along on the idea that the Atlantic and Pacific Oceans would absorb much of the greenhouse warming caused by a rise in man-made carbon dioxide, then they would let off that heat and warm the atmosphere and the land.

But as Latif pointed out, the Atlantic, and particularly the North Atlantic, has been cooling instead. And it looks set to continue a cooling phase for 10 to 20 more years.”

My Comment

Now why would Latif come out with this suddenly? Maybe he had a peek at some of that data the CRU scientists were trying to hide and decided to dissociate himself in advance from a scandal threatening to blow up…

More Fall Out From Dubai On Indian Market

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Business Standard:

“Segments of the economy such as consumer durable and core industrial growth that are driving the current recovery in the Indian economy are purely a function of domestic stimulus initiatives and remain to that extent relatively insulated,” HDFC Bank said in a report today.

However, areas such as exports, remittance, banking and construction as well as real estate are likely to see further damage, the report added.

Exports are going to be the most affected by Dubai woes, as the UAE region is now India’s largest export destination toppling the United States.

Besides, bullion trading in Dubai is likely to be impacted, which may have ripple effect for India as around $29 billion of gold from the country is being traded in Dubai.”

Dubai Govt. Unable to Pay Debt

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Via EconomicPolicyJournal:

“The government of Dubai is in major financial trouble.

The government late Wednesday said it would restructure Dubai World and announced a six-month “standstill” on repayments of the state-run wide-ranging conglomerate’s debt.

Government-owned Dubai World is a conglomerate with interests in real estate, ports and the leisure industry. The firm carries around $60 billion in liabilities. Credit agencies Moody’s Investors Service and Standard & Poor’s downgraded the debt of a range of government-related firms, including DP World, after the restructuring announcement.

The dollar amounts involved with Dubai are relatively small in this tranche (compared to the real estate debacle0, but this continues to indicate the shortage of dollars to support the current capital structure.

As one would expect, markets are reacting negatively. International stock markets are down across the board. The dollar is climbing.”

More at The Telegraph.

My Comment

We´ve been watching this story since we first read it via Peter Cooper, who has some other insightful comments on his blog, Arabian Money.net.

“The Private Equity World Middle East 2009 conference this week attracted a good crowd and many sponsors. However, the gloom and despondency among delegates and speakers is tangible. Why are these canny business operators so depressed?

Basically they do not believe in the recovery and see a double-dip in the global economy as stimulus packages are withdrawn. The current uptick has left businesses too highly priced and their owners overconfident in the opinion of private equity firms.”

Cooper has also noted that gold sales in Dubai have crashed, although with the increase in general investor interest, he thinks this won´t have a major impact on the world gold market. Cooper also thinks the China boom is driven mostly by government stimulus money and is very vulnerable to a collapse.

His opinion comes with regional expertise behind it, while mine is simply based on my sense that the 2008 crash was only a preview of coming attractions…but still, I´m wary of the move in gold.  My sense is that speculative money is pushing up the price and it could go down fast short-term. Long-term fundamentals remain good, of course.

Now, this is Thanksgiving and trading is thinner that usual, so market fluctuations do get amplified. Also, the move down in gold shouldn´t be taken out of context. It´s only to be expected, given its strong performance recently. But nonetheless, the strengthening of the dollar and the sell-off in the markets is significant.

Also significant is the fact that the Dubai government made the announcement after the local stock market had closed and on the eve of the Eid holiday that runs upto December 6.

Here are the numbers:

[(Note: the Asian markets sold off on Thursday, the other figures are opening figures in Europe and America.]

Update: there was some recovery in the markets by the close of Friday.

[Note also: First set of figures is from AP, Friday, November 27, 5:34 AM.]

Figures in brackets are from IBNLive.

Japanese Nikkei 225 down 3.2% (2.28%)

Australia down 2.9%

Shanghai down 2.4% (1.82%)

(India´s Sensex down 2.67%, Nifty down 2.8%)

Hang Seng (Hong Kong) down 4.8% (3.45%)

Kospi in S. Korea down 4.7% (4.01%)

Europe, down over 3% on Thursday, slid further:

FTSE 100 (UK) (down 3.2% on Thursday) 0.3%

DAX (Germ) (down 3.25% on Thursday) 0.4%

CAC-40 (France) (down 3.4% on Thursday) 0.6%

The Canadia market (TSX) dropped over 200 points.

On Wall Street, the Dow is down this morning by 2% and the S&P by 2.5%

Oil down by $4.17 to $73. 79 a barrel in Europe ($72.39 in Asia).

The dollar climbed back up from a 14 yr low of 84.81 yen to 86.33 and moved above parity to the Swissie.

Gold fell from a high above $1192 on Thursday to as low as $1136 (a move of $52 $56, which isn´t that big a deal for it, but nonetheless could be an indication of future downside volatility)

Looks like in a market sell-off, as before, the dollar gains..

This is why price-chasing is a danger.

Secy of IMF – Siddharth Tiwari

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On November 21 an Indian was named Secretary of the IMF, according to Press Trust of India:

“With a proven track record in managing complex work programmes, Indian economist Siddharth Tiwari has been named as the Secretary of the IMF by its Managing Director Dominique Strauss-Kahn.

Tiwari, currently Director of the Office of Budget and Planning, is set to assume the position, which was held by Shailendra Anjaria before his retirement from the IMF earlier this year.

“Mr Tiwari has the experience and skills” to promote consensus building, which is a critical goal of the IMF Board and Management, Strauss-Kahn said in a statement.”

Buffett Bets Big On US Economy

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Warren Buffett’s Berkshire Hathaway fund has pumped $34 billion into Burlington Northern Santa Fe Corporation, the USA’s second largest railroad.

“Berkshire’s $34 billion investment in BNSF is a huge bet on that company, CEO Matt Rose and his team, and the railroad industry,” Buffett said in a statement.

“Most important of all, however, it’s an all-in wager on the economic future of the United States. I love these bets,” he said.”

More at AP.

What A Billionaire Can Buy

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For those who think that nationalism is the threat, rather than transnationalism, consider this:

“Bill Gates, America’s richest man with a net worth of $50 billion, has a personal balance sheet larger than the gross domestic product (GDP) of 140 countries, including Costa Rica, El Salvador, Bolivia and Uruguay. The Microsoft ( MSFT – news – people ) visionary’s nest egg is just short of the GDP of Tanzania and Burma.”

More here at Forbes.

Faber: Indian Central Bank One of the Best in the World

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Marc Faber on CNBC:

“Where does India fit in your preferred or not preferred list right now of markets?

A: I think the Reserve Bank of India (RBI) has one of the best monetary policies in the world because they supervise the financial sector very closely. They have maintained relatively tight monetary policies and also they pay attention not only to core inflation which is not representative of the cost of living increase and is not representative of inflation in the system but the RBI also pays attention to rising and falling asset prices. So I have to give them credit for being one of the best Central Banks in the world.

My Comment:

Faber goes on to argue for a pull-back in markets everywhere (maybe immediately, maybe after a further 10% rise), for a snap-back of the dollar in the near term (by around 10%), and for substantial further decline in the market, and over the next 2-3 years, in the dollar.

I like the point he makes in the quote that inflation isn’t just “core” inflation – the rise in prices in the stuff on the grocery shelves – but should also include asset price inflation. Because then you’d have a better judgment of what was going on in the markets.

My own take is that the media is misjudging some of the numbers coming from the emerging markets. The Chinese figures are likely to be highly over-optimistic and inflated, maybe by as much as 50% or more. The Indian market is also not that transparent….

People Leaving Florida and California..

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When bad times came in earlier days, Americans were likely to up and leave town for greener pastures.
This time, they’re hunkering down. It’s the new depression mentality.

Those that are moving seem to be moving out of the two states that had the biggest booms in housing – Florida and California.The reason is clear. With the housing market in crisis, the economies of the two sunshine states have been hit proportionately hard.

CNN Money reports:

“The Florida economy is based on growth and home construction,” said Lang. With building projects dying on the vine, unemployment soared to 7.6% for the state in 2008. It’s now up to 10.7%.

The same job problems plague many California cities, especially Central Valley towns like Stockton, Fresno and Merced. Construction-related job losses helped send state unemployment to 8.7% by December 2008 from 5.9% a year earlier. Today, some cities report breathtakingly high unemployment rates: 30.2% in El Centro; 17.6% in Merced; and 17.2% in Yuba City.

So, if people aren’t heading for the good life in California and Florida, where are they going?
D.C., Alaska and Wyoming. (Seriously……

…To be fair, however, small populations in these places convert modest in-migration increases into large percentage gains. They’re each among the smallest states (or district) in the Union. That’s just the opposite of California and Florida where each percentage point represents hundreds of thousands of people….In terms of net migration — those moving in minus those leaving — Texas was the star performer in 2008, with the population growing by 140,000.”

My Comment:

I thought of Texas – way back in 2003. Houston or San Antonio, I thought. I liked the fact that Houston had a large Asian community and was reckoned one of the best places to begin a new business and one of the best places for immigrants. Property was also reasonably priced and the place had a healthy libertarian community. It’s reputed to be a safe, family-friendly city – and greener than you’d think. And there are all those jobs in the energy business.

But there are negatives. Both places are a long way off from anywhere else. In many ways, you’d be going to a new country. To get to any other city in Texas, let alone anywhere else, is a long haul. Houston’s roads are congested. The housing is largely modern – no old architecture. The weather is extremely hot and humid, and there’s hurricane season. I told a friend of mine he’d find me on a ranch, chewing baccy, spitting, and eying down rattlesnakes. I’d fit right in, I said. I probably would have. But I would have lost something in fitting in. In Uruguay, subtly, I feel I gain by fitting in.

And the prison system – not that I was planning on ending up in it – has serious problems. I am not sure it would have been the ideal place for a political blogger.

I still wonder about Texas and if I made a mistake coming here. My reasoning was that if I was going to uproot that much, I might as well go abroad, where I’d also have the advantage of being out of the country. But I admit to being conflicted about it all…still.

What made up my mind for me ultimately was the privacy issue. You can move to Texas, but you can’t move out of the way of the snoop state. And you can’t get away from litigators and stalkers…from enemies with their malevolence and the government with its benevolence….

Weak Housing Figures Hit Gold, Boost Dollar

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“Resales of U.S. homes dropped 2.7% in August to a seasonally adjusted annual rate of 5.1 million, the first decline in five months, prompting the National Association of Realtors to again plead for more taxpayer subsidies for their business.”

That’s sent spot gold below $1000 and pushed the dollar higher.

Aha. So Ben Bernanke finishes his little piece of quackery yesterday, delivering it in the best bedside manner (the patient is doing so much better etc. etc..), and the silly patient refuses to cooperate and slides right back into his coma…

Read the whole piece at Market Watch, if you can do it without popping a blood vessel.

Here’s Lawrence Yun, chief economist of the National Association of Realtors (which is the lobby for the real estate agents) “pleading” for more tax payer moolah in order to have a “self-sustaining” recovery.

How does a recovery based on taxing people amount to a “self-sustaining” recovery?
Huh?

Slap on the forehead. Silly me. Subsidized self-sustaining recovery is exactly the right phrase. Goes right along with war is peace, strength is ignorance and the rest of the Orwelliana lining the cabinets of US Govt. Incorp.

And how about this gem:

“Most economists had not been anticipating a decline in sales.”

Oh really? Most economists hadn’t? And why hadn’t they?

After all, IO loans (interest only loans) are waiting to be reset, the tax payer rebates from April have been used up, commercial real estate is collapsing, foreclosures are spreading to the higher end of the market, the impact of the first wave of government finance and mortgage subsidies is about to run out, so why in the world (heavy sarcasm alert) would economists worry about anything, right? Why in the world would they anticipate anything?


Thinking bad, evil thoughts about the economy is the job of us bloggers. It’s our unpatriotic, unprofessional duty to tell you what’s really going on instead of the moonshine being handed out.

Professional economists it seems are too busy professing economics to actually tell you anything marginally helpful about the economy.