Wednesday, February 20, 2008

dizzy



These are very strange times. I am concerned.

Today oil spiked above $101/bbl. That in itself does not concern me so much as the reason why.

It seems that traders see oil as a currency hedge. The Fed is speculated to cut rates soon, which will mean a further hit to the US$. That will be a hit on the Americonomy, since it is based on consumption. More expensive goods mean less consumption - cut the rates - dollar drops - everything goes up... in flames.

It's a good article, and there were lots of things that I wanted to quote, but I liked this;
But the prospect that the Fed will reduce rates proved too strong, feeding a new buying frenzy, analysts said.

This is all about momentum and driving [prices] higher right now,” Mr. Flynn said.

Despite the return of $100 oil, and now $101 oil, there are concerns that high oil prices — and the higher gasoline and heating oil prices they spawn — are sowing the seeds of their own destruction by contributing to the economic slowdown.

“The price gains raise questions about their sustainability in the face of eroding fundamental strength,” said Antoine Halff, an analyst a Newedge USA LLC in a research note.
emboldening mine - ah, just imagine the whole quote is in bold type. It is the same story as RE, just a different product.

So someone else's arbitrage means that your gas costs more (not to mention the 2.8 cents a litre carbon tax coming in July), so does your heating fuel, and food, and building materials, and labour, until no one can afford anything any more.

Still, oil is priced in USD, so a sinking dollar takes some of the edge off for Canada (imagine if our dollar was at $0.65), but that is cold comfort to the laid-off auto worker, or forestry worker, etc.

I don't know about you, but I am getting dizzy as this whole global economy, and beyond, spins ever more out of control.

11 comments:

Tony Danza said...

At least you can be thankful that you won't be holding a $600k mortgage on a mold factory during the fallout of this party! During the RE crash in the 80's the "owners" I knew were much worse off financially than the renters. Of course anyone in trades or unskilled services could end up on the brink as well.

solipsist said...

Indeed Tony Danza.

But the suspense of awaiting the commencement of the retrenchment is killing me.

Let's have at 'er.

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Shea said...
This comment has been removed by the author.
patriotz said...

It's kind of eerie actually. Like a Twilight Zone episode where a man watches his own future on TV but doesn't recognize it.

During the 1980-81 runup at least there was some credibility to the viewpoint that since there had been no RE crash since the Great Depression, there could not be another crash barring another depression.

Yet we now have the whole US market now going up in flames with low interest rates and low unemployment at the outset. And it seems the whole city spends its waking hours coming up with rationalizations as to why we're "different", instead of the logically simpler explanation that we're just behind the curve.

I have a vision of heads blowing up like in "Scanners" when the inevitable arrives.

Tony Danza said...

It is kind of cool to be able to look into our future via the US debacle though isn't it?

I should replace cool with surreal, and maybe even replace surreal with terrifying.

S2 said...

My husband keeps telling me to be careful of what you wish for because you just might get it.

I also await this with baited breath and trepidation.

Scullboy said...

If heads are going to explode scanner style then PLEASE SWEET JESUS LET SATV BE FIRST!

Drachen said...

2011 will be the time to buy.

Prices will be approximately 1/3 of current.

I have seen the future.

(unfortunately in my glimpse of the future my vision was just a bit too blurry to catch the 6/49 numbers)

patriotz said...

My husband keeps telling me to be careful of what you wish for because you just might get it.

Like what happens has anything to do with what you wish for? I'm still waiting for that date with Angelina Jolie.

Mr. Market always gets his way. You can play with him and win, or play against him and lose.

Anonymous said...

Drachen said...
2011 will be the time to buy.

Prices will be approximately 1/3 of current.

....................

That would be fine by me. I wonder though, how long it would take to reach that level? It took a few years to get to these nosebleed levels so how long should the unwind take? I seem to recall a chart of the early 80's crash and it didn't look to take long at all. A year and a half?

solipsist said...

kind of feels like waiting for Santa as a kid

Yeah. Weird. And just like Santa, the "fundamentals" "justifying" these prices are just as fake and untrue.

Now, the Tooth Fairy. Well she's real. I seen her.

It's kind of eerie actually. Like a Twilight Zone episode where a man watches his own future on TV but doesn't recognize it.

I thought that it was just "me".

replace surreal with terrifying

There is nothing to fear, but fear itself (and other such platitudes). I find it to be more curious than terrifying. What's the worse that can happen? For me, it's the big banks folding up, the Gov't of Canada (and with it, CDIC) going bankrupt, and my fiscal conservatism being pointless.

But if that happens, you better have ammo.

be careful of what you wish for because you just might get it

Like that old story of the Monkey's Paw.

It is important to know what one wishes for. Thirty-five hundred sq. ft. in suburbia may not end up being all it's cracked up to be. A palm-thatched hut on a warm beach with papayas and mangoes, and cheap beer, might well be a better home.

PLEASE SWEET JESUS LET SATV BE FIRST

I believe that satv-cum-thumbsup-cum-krrish will be a bit more subdued in the coming days. The Sophia (which for some strange reason..., I believe that the suspect has bought numerous pre-sales in) was announced to be a cancelled project this afternoon. It is 85% completed, and has 83 units.

This sounds like another Riverbend scam. It's the second cancelled project for the Eden Group, the first being the Elyse.

Stay cool man, satv is either flipping lost in his dreams, or a clever fellow trying to get under your skin. Hell, it could even be VHB just having some fun.

I have seen the future.

I have too. Weird, eh? But I see no more than a 55% down from now. I suspect - unless all hell breaks loose, which it might - that 40% off from today might be the new plateau.

I'm still waiting for that date with Angelina Jolie

With, or without the squalling twins?

Now Bianca Jagger, even at 60, is a date that I would like. (I'm nowhere near 60, or even 50.)

It took a few years to get to these nosebleed levels so how long should the unwind take?

It can turn on a dime (6 months), but I don't think that I have seen a RE market with so many amateur speculators before. The question is, how long can they last?