Thursday, January 24, 2008

Vince Farrell of Scotsman Capital

1) Oil is up sharply despite an increase in inventories. I think the short term movement is down for reasons articulated recently. But, there is a mention in the WSJ today that 78% of China's electricity is coal fired and they are now importing coal. Not likely to ease the Chinese seemingly insatiable demand for oil.
2) No way are foreign economies decoupled from the fortunes of the U.S. The U.S. consumer spent $9.5 trillion last year, six times more than the consumers of China and India combined.. The world exports to the U.S., and if we falter, so do they. 65% of Japans GDP is export and 23% of Mexicos GDP is derived from exports to the U.S. alone (Wall Street Journal.) Emerging economies,however, which are 30% of world GDP and 85% of the world's population, are better equipped today to weather a downturn. Brazil, for example, has a $185 billion foreign reserve, Russia $160 billion, and emerging economies in total have $4.1 trillion. Not so long ago many of these countries were faced with bankruptcy.
In fact, it costs $155,000 to insure $10,000,000 of Latvian debt via a credit default swap (see several prior notes on swaps), and $164,000 to insure the same amount of Merrill Lynch debt. Ouch!!! Latvia is (in one sense) a better credit than Merrill !


Anonymous said...

Yep, not much in the way of the Dow hitting 15,000+ by the end of the year. Unemployment levels are fine, GDP will come in at 2.0% give or take for 2007Q4, the housing crisis is finally easing, and corporate profits are growing in the single digit range, instead of the double-digits for the first time in years. Thank God Ben Bernanke is not afraid to make decisive moves. GaryK sounds as befuddled as the rest of the bears. Doesn't matter though, he'll claim he called it no matter which way the market turns. Looks like you recessionista's will have to wait at least another quarter before thinking about taking your victory lap.

Leisa said...

I suspect that GaryK and others who were prudently positioned lost a little less than those fully invested.

GaryK sounds befuddled. Not to my ear.

Agree that unemployment numbers have not moved decisively negative.

Victory laps on a recession? I don't think that so-called recessionista's have any corner on smugness.

Anonymous said...

Oh brother. The boldness of an anon post.

Anyway, miners should explode again today. I see gold is up double digits again. The market senses capitulation by the CBers. Oil hass become another proxy currency. I hope you followed me in this time.