Rolling US Economy Into The Shitbin Thread

given the amount of money hedgies and ibanks spend on complex quant modeling I seriously doubt that boredom drives the derivative (and other complex vehicles) market.

I think there is has been way too much of a rush to proclaim a gold bubble (or a wheat bubble! what???) we have a bubble that last for years on end sustained entirely by cheap credit, the credit bubble busts and we're suddenly supposed to be in another bubble already? but bought with what? credit? the credit thats so much harder to get hold of? how does this work?

if this is a bubble the central banks and the IMF better hurry up and sell off their gold at the top of this 'bubble', no?

Which comes back to the fed and the printing presses...where is that helicopter money actually going?

banks

Seems there will be some winners from all this then. Rather like in previous episodes

f this is a bubble the central banks and the IMF better hurry up and sell off their gold at the top of this 'bubble', no?

shame they did it years ago.

Seems there will be some winners from all this then. Rather like in previous episodes

Seems to be the same people every time.

I don't think it is boredom driving the commodities bubble but I do think that some of those quant modeling chaps have discovered just how to create a beneficial (to them) feedback loop to increase the returns they can make from economic phenomena.

Well the IMF are getting ready for a big sell off aren't they?

there's probably a growing market in hedge funds that deal with distressed companies or sectors.

quant modeling is so sophisticated that the investor is usually totally clueless about where the growth is actually coming from. Most popular modeling at hedge funds is based on complex debt structure and bank rates...this year is going to be an interesting year for hedges, that's for sure. I suspect most models don't account for a) a downturn this size, b) government intervention or c) more regulation. There's a lot of uncharted waters and turbulence in hedge funds right now.

http://www.schoolnutrition.org/Index.aspx?id=2813

"Free" lunches starting to cost school districts money as a result of rising food and gas consts.

We'd better hurry up and occupy another oil-rich country so as to reap the benfit of cheap oil again, such as we enjoyed after we invaded Iraq. I vote for Kazakhstan. Too many Shiites in Iran.

Food costs rising fastest in 17 years
By ELLEN SIMON, AP Business Writer
Mon Apr 14, 4:10 PM ET
Steve Tarpin can bake a graham cracker crust in his sleep, but explaining why the price for his Key lime pies went from $20 to $25 required mastering a thornier topic: global economics.

He recently wrote a letter to his customers and posted it near the cash register listing the factors — dairy prices driven higher by conglomerates buying up milk supplies, heat waves in Europe and California, demand from emerging markets and the weak dollar.

The owner of Steve's Authentic Key Lime Pies in Brooklyn said he didn't want customers thinking he was "jacking up prices because I have a unique product."

"I have to justify it," he said.

The U.S. is wrestling with the worst food inflation in 17 years, and analysts expect new data due on Wednesday to show it's getting worse. That's putting the squeeze on poor families and forcing bakeries, bagel shops and delis to explain price increases to their customers.

U.S. food prices rose 4 percent in 2007, compared with an average 2.5 percent annual rise for the last 15 years, according to the U.S. Department of Agriculture. And the agency says 2008 could be worse, with a rise of as much as 4.5 percent.

Higher prices for food and energy are again expected to play a leading role in pushing the government's consumer price index higher for March.

Analysts are forecasting that Wednesday's Department of Labor report will show the Consumer Price Index rose at a 4 percent annual rate in the first three months of the year, up from last year's overall rise of 2.8 percent.

For the U.S. poor, any increase in food costs sets up an either-or equation: Give something up to pay for food.

"I was talking to people who make $9 an hour, talking about how they might save $5 a week," said Kathleen DiChiara, president and CEO of the Community FoodBank of New Jersey. "They really felt they couldn't. That was before. Now, they have to."

For some, that means adding an extra cup of water to their soup, watering down their milk, or giving their children soda because it's cheaper than milk, DiChiara said.

U.S. households still spend a smaller chunk of their expenses for foods than in any other country — 7.2 percent in 2006, according to the USDA. By contrast, the figure was 22 percent in Poland and more than 40 percent in Egypt and Vietnam.

In Bangladesh, economists estimate 30 million of the country's 150 million people could be going hungry. Haiti's prime minister was ousted over the weekend following food riots there.

Still, the higher U.S. prices seem eye-popping after years of low inflation. Eggs cost 25 percent more in February than they did a year ago, according to the USDA. Milk and other dairy products jumped 13 percent, chicken and other poultry nearly 7 percent.

USDA economist Ephraim Leibtag explained the jumps in a recent presentation to the Food Marketing Institute, starting with the factors everyone knows about: sharply higher commodity costs for wheat, corn, soybeans and milk, plus higher energy and transportation costs.

The other reasons are more complex. Rapid economic growth in China and India has increased demand for meat there, and exports of U.S. products, such as corn, have set records as the weak dollar has made them cheaper. That's lowered the supply of corn available for sale in the U.S., raising prices here. Ethanol production has also diverted corn from dinner tables and into fuel tanks.

Soybean prices have gone up as farmers switched more of their acreage to corn. Drought in Australia has even affected the price of bread, as it led to tighter global wheat supplies.

The jump has left people in the food business to do their own explaining. Twin Cafe Caterers in lower Manhattan posted a letter on its deli cooler: "Due to the huge increase of the gas, the electricity, the water and all the other utilities, we had to raise the prices a little bit." It went on to say that all its food prices have risen, too.

Wonder Bagels, in Jersey City, N.J., posted a letter from its wheat supplier, A. Oliveri & Sons, saying the recent situation was unprecedented.

"The major mills across the country are using words like 'rationing' and 'shortages' if things continue," it said. "We will sweat out the summer together, hoping there will be some flour left to purchase at any price."

The letter called for an immediate halt to exports and a change in farm policy, "stop paying farmers NOT to grow crops." A new farm bill, stalled in Congress, would expand farm subsidies if it passes, however.

For some Americans, the resulting increases might be barely perceptible. The Cheesecake Factory raised prices by 1.5 percent at the end of February, Applebee's by 3 percent.

But for the poorest U.S. families, the higher costs may mean going hungry. A family of four is eligible for a maximum $542 a month in food stamps, which never lasted the whole month before, Food Bank of New Jersey's DiChiara said.

"Now food stamps go fewer and fewer days of the month," she said.

The Food Bank recently got a letter of its own from a key vendor. Its grim message: Sorry, but the prices they charge the Food Bank would be increasing 20 percent, due to food inflation.

Hey, Wonder Bagels! That place is good!

what happened to the food riot thread? I couldn't get search to bring it up.

what does this mean for I DIED

how will the poor be able to afford maybe a little knosh? I wonder how long before some of the social fabric in the urban areas begins to fray if this stuff gets worse. Cities like Newark were solidly middle /upper middle class (with sections of extreme poverty) until the forgotten and marginalized rioted.

A bit more localized, but still: wow, a lot to look forward to! - > http://www.slate.com/id/2188982
Here Comes the Next Mortgage Crisis
SUBPRIME WAS JUST THE BEGINNING. WAIT UNTIL CALIFORNIA'S PRIME BORROWERS START HANDING THEIR KEYS TO THE BANK.

quote:
"a coming wave of interest-rate resets in prime loans given to people with good credit that are just as bad, or worse, than we've seen in subprime."

lol "Next", lol "was" - subprime foreclosures haven't even peaked.

This is only 2007 data:

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html

(FYI: "Current account balance This entry records a country's net trade in goods and services, plus net earnings from rents, interest, profits, and dividends, and net transfer payments (such as pension funds and worker remittances) to and from the rest of the world during the period specified. These figures are calculated on an exchange rate basis, i.e., not in purchasing power parity (PPP) terms." )

HOW MANY MEXICANS WERE AT THE APOCALYPSE

8 MILLION

WE ONLY HAD ONE PICKUP

lol "subprime"

Ok, can someone explain the behavior of the U.S. stock market to me?

(current behavior)

i assume something happened overnight?

Well, these are the headlines from the WSJ:

Write-Downs Hit Citigroup Results

Associated Press
Citigroup posted a deep quarterly loss, booking at least $13.9 billion in write-downs stemming from its risk-taking ahead of the credit crisis and $3.1 billion in extra consumer-credit costs. The bank plans to cut 9,000 more jobs during the second quarter. 11:38 a.m.
• Deal Journal: Buyout Debt: Now Available in Stores
• MarketBeat: Live-Blogging the Conference Call
• Great Expectations for Merrill CEO
• Earnings Previews: Bank of America, Countrywide

Earnings Relief Rallies Stocks
Stocks surged, with major market benchmarks climbing by 1.5% or more, as encouraging earnings from Citigroup, Google, Caterpillar and others helped to turn aside some of the uneasiness that had hemmed in markets in recent weeks. 12:25 p.m.
• MarketBeat: MF Global to Investors: All Is Well.
• Deals of the Day: We'll Need You to Save Merrill Lynch.
• Data: Overview | Treasurys | Forex | Crude

I mean that explains the day's rally I guess, but I still find it bizarre. Is this just missing the long-term forest for the short-term trees?

perish the thought

http://goldprice.org/james-turk/uploaded_images/Oil-Price-780567.GIF

Interesting.

Can anyone explain the phenomenon of the "petrodollar" to me, on that note? Are countries with stronger currenices more insulated against the current oil price spikes or are they purchasing with reserve dollars?

Also, sorry what do the thousands on the side of that graph represent? Is that number of goldgrams?

Hurting 2, the thousands on the side represent Ron Paul.

Blue line = Ron Paul's stiff bonarz

(not trying to imply that the US should be on gold standard here, or that fiat is inherently bad, or any of that kind of stuff - more to point out the debasement of the dollar is long running, and that debasement of any currency must surely always lead to bubbles, because it encourages borrowing beyond means)

the chart further upthread showing $ vs CHF quartering since 1971 presumably implies that oil in CHF has not risen in the same way - i'll try find an oil/CHF chart to see if that is actually true or not

Controlling the world's reserve currency distorts the market in your favor. The USA has progressively leveraged that distortion.

The reason the world has tolerated this shit is that, while unwinding that leverage would certainly be disasterous for the USA, it would also hurt the world economy to a lesser but still quite painful degree.

And the best thing about this is that there will be no comeuppance for the USA and the debased dollar. Do you hear me? No comeuppance!

eotw fr

Another good article from n+1's "Interviews with a Hedge Fund Manager" series:

Financial Meltdown: Anonymous Hedge Fund Manager Returns

my "emerging markets" mutual fund is up 23% YTD! not that I had any money in it for most of last year.

Financial speculators reap profits from global hunger

By Stefan Steinberg

Global Research, April 24, 2008
wsws.org

A series of reports in the international media have drawn attention to the role of professional speculators and hedge funds in driving up the price of basic commodities—in particular, foodstuffs. The sharp increase in food prices in recent months has led to protests and riots in a number of countries across the globe.

On Tuesday, April 22, a UN spokesperson referred to a “silent tsunami” that threatens to plunge more than 100 million people on every continent into hunger. Josette Sheeran, executive director of the UN World Food Programme (WFP), noted: “This is the new face of hunger—the millions of people who were not in the urgent hunger category six months ago but now are.”

A recent article in the British New Statesman magazine, entitled “The Trading Frenzy That Sent Prices Soaring,” notes that increases in global population and the switch to bio-fuels are important factors in the rise of food prices, but then declares:

“These long-term factors are important, but they are not the real reasons why food prices have doubled or why India is rationing rice, or why British farmers are killing pigs for which they can’t afford feedstocks. It’s the credit crisis.”

The article states that the food crisis has developed over “an incredibly short space of time—essentially over the past 18 months.” It continues: “The reason for food ‘shortages’ is speculation in commodity futures following the collapse of the financial derivatives markets. Desperate for quick returns, dealers are taking trillions of dollars out of equities and mortgage bonds and ploughing them into food and raw materials. It’s called the ‘commodities super-cycle’ on Wall Street, and it is likely to cause starvation on an epic scale.”

World prices for basic commodities such as cereals, cooking oil and milk have risen steadily since 2000, but have escalated dramatically since the developing financial crisis in the US began to bite in 2006. Since the start of 2006, the average world price for rice has risen by 217 percent, wheat by 136 percent, corn by 125 percent and soybeans by 107 percent.

Under conditions of growing debt defaults arising from the US subprime crisis, speculators and hedge fund groups have increasingly switched their investments from high-risk “bundled” securities into so-called “stores of value,” which include gold and oil at one end of the spectrum and “soft commodities” such as corn, cocoa and cattle at the other. The article in the New Statesman points out that “speculators are even placing bets on water prices” and then concludes:

“Just like the boom in house prices, commodity price inflation feeds on itself. The more prices rise, and big profits are made, the more others invest, hoping for big returns. Look at the financial web sites: everyone and their mother is piling into commodities.... The trouble is that if you are one of the 2.8 billion people, almost half the world’s population, who live on less than $2 a day, you may pay for these profits with your life.”

Investment in “soft commodities” is currently highly recommended by leading market analysts. According to Patrick Armstrong, a manager at Insight Investment Management in London, “Raw materials can prove to be the best investment class for hedge funds because the market is so inefficient. This results in more chances for profit.”

Much of the international speculation in food commodities takes place on the Chicago Stock Exchange (CHX), where a number of hedge funds, investment banks and pension funds have substantially increased their activities in the past two years. Since January of this year alone, investment activity in the agricultural sector has risen by a quarter at the CHX, and, according to the Chicago firm Cole Partners, involvement by hedge funds in the raw material sector has trebled in the past two years to reach a total of $55 billion.

Large-scale investors such as hedge and pension funds buy futures—shares in basic goods and foodstuffs to be delivered at a fixed date in the future. When the price of the commodity rises significantly between the time of the investment and the time of delivery, the investor is able to take home a large profit.

In light of the current food crisis, substantial returns of profit are guaranteed. According to CHX figures, wheat futures (for delivery in December) are expected to rise by at least 73 percent, soybeans by 52 percent, and soy oil by 44 percent.

Major ecological disasters, such as the recent drought in Australia, which hit food production and drive up basic commodity prices, are good news for the corporate investor.

Substantially reduced harvests in Australia and Canada this year have led to soaring wheat prices. Deutsche Bank has estimated that the price for corn will double, while the price for wheat will rise by 80 percent in the short term.

Such ecological disasters, which can ruin ordinary farmers and mean poverty for millions through increased food prices, are an aspect of the “inefficiency” of the raw materials market referred to above, which currently makes “soft commodities” such an attractive prospect for major speculators.

Deadly greed

An article headlined “Deadly Greed” in the current edition of the German weekly Der Spiegel gives some details of the activities of hedge funds in food market speculation. The magazine cites the example of the hedge fund Ospraie, which is generally regarded as the biggest of the management funds currently dealing in basic foodstuffs.

The manager of the fund, Dwight Anderson, is nicknamed “the raw materials king.” Already, in the summer of 2006, Anderson was recommending the “extraordinary profitability” of agricultural crops to his shareholders. While Ospraie is reluctant to publicise its profit levels from speculation in basic commodities, a leading German investor is less reticent.

Andreas Grünewald started up his Münchner Investment Club (MIC) in 1989 with seed capital equal to just €15,000. MIC now controls a volume of €50 million, of which €15 million is from investment in raw materials.

According to Grünewald, “Raw materials are the mega-trend of the decade,” and his company intends to intensify its involvement in both water and agricultural stocks. MIC investment in wheat alone has already yielded profit levels of 93 percent for the 2,500 members of the club.

The Spiegel article points out that MIC and its members give little thought to the catastrophic consequences of their speculative investment policy for undeveloped countries. “Most of our members are rather passive and orientated to profit,” Grünewald notes.

MIC, with its €50 million, is a minor player compared to the finance giant ABN Amro, which recently acquired a unique certificate allowing it to speculate on behalf of smaller investors on the CHX.

In the wake of the hunger revolts that took place a few weeks ago, ABN Amro put out a prospectus noting that India has enforced a ban on exports of rice, which, together with poor harvests in a number of countries, has led to a worldwide decline in rice reserves. “Now,” ABN Amro notes in its prospectus, “it is possible for the first time to have a share in the number one foodstuff in Asia.”

According to the Spiegel report, those responding to the ABN Amro appeal were able to realise a 20 percent rate of profit in the space of three weeks—a period that saw a huge increase in investment in rice in Chicago and other major centres.

Biofuel investment

Another particularly lucrative investment sector contributing substantially to the current global food crisis is biofuels. Initially championed as a means of protecting the environment, biofuels have become increasingly identified by big business as a profitable alternative to increasingly expensive oil. Within the space of a few years, biofuel has become a booming private industry capable of generating large rates of profit.

Huge tracts of land across the planet have in recent years been switched from food crops to the production of ethanol or biofuel, aimed primarily as a supplement to oil-based gasoline. Next year, the use of US corn for ethanol is forecast to rise to 114 million tonnes—nearly a third of the entire projected US crop.

In the words of Jean Ziegler, the United Nations special rapporteur on the right to food, the switch to biofuels at the expense of traditional forms of agriculture is nothing less than a “crime against humanity.”

Although maize production worldwide is growing, the increase is being more than absorbed by biofuel diversification. According to the World Bank, global maize production increased by 51 million tonnes between 2004 and 2007. During that time, biofuel production in the US alone (mostly ethanol) rose by 50 million tonnes, absorbing almost the entire global increase.

Subsidised by the US government, American farmers have diverted fully 30 percent of corn production into the ethanol scheme, driving up the cost of other, more expensive, grains that are being bought as substitutes for animal feed.

The European Union, India, Brazil and China all have their own targets to increase biofuels. The EU has declared that by 2010, 5.75 percent of all gasoline sold to motorists in Europe must stem from biofuel production. This month, a UK law enforced a mandatory mix of 2.5 percent biofuel in gasoline sold to motorists. A similar law stipulating a staggered 10 percent increase in biofuel share in gasoline was recently struck down in Germany following opposition from the auto industry, as well as ordinary car owners who would be forced to buy new cars to accommodate the new fuel.

In addition to the rapidly rising price of basic commodities as a result of the decreased production of grains for food purposes, the switch to crop production of biofuels has served to orient food prices to the high price of fuel. An equivalence is emerging between the price of food and the price of oil.

According to Josette Sheeran of the World Food Programme: “We are seeing food in many places in the world priced at fuel levels,” with increasing quantities of food “being bought by energy markets” for biofuels.

With oil topping $100 a barrel, the biofuel sector is currently regarded as a potential source of huge returns for investors. The drive for maximum profits by the biofuels sector was summed up in the advertisement for a congress held in 2006, which declared:

“Biofuels Finance and Investment World is Europe’s definitive investor congress focusing exclusively on the value chain evolving around the new biofuels economy. Investors and financial institutions will gather with key industry stakeholders to discuss future investment opportunities, the risks and areas with huge potential for profit.”

The April 22 edition of Money Week recommends that investors stung by the subprime crisis switch their funds to the lucrative biofuels market. Money Week sides with Fortune magazine in identifying the oil multinational Royal Dutch Shell group as a guarantor of good returns: “We love it because it makes huge profits and is very cheap, but apparently it also has a large stake in Iogen, a Canadian firm with an exciting-sounding ‘potential breakthrough in ethanol technology.’”

ya, letting people gamble financially on food and oil is a great idea.

bush's speech this morning: DRILLING IN ANWR WILL FIX GAS PRICES, what're you people fucking retarded?

yes

Who was the politician just on the Lou Dobbs show about credit cards.

And - is he for real?

It's yet another $200 barrel of oil = apocalypse00 barrel of oil = apocalypse article, but the comments on it are funny in an intensely scary sort of way.

lol america

Wayne Flanagan, a RE/MAX agent who sells bank-owned properties, said in zip codes like 30310 and 30315 values have taken a nosedive faster than public officials can account for.

"There are some price ranges like $20,000-$80,000 where 90 percent of the properties on the market are foreclosures," Flanagan said. "You've got one bank competing against another. It's a spiraling situation, downward."

http://pics4.city-data.com/ztrends/30310.png

At least two real estate agents stop into Sweeney's each week looking for a job as bartenders or waitresses, he said.

People of America do not worry. The Government is pleased to tell you that gasoline prices went down last month

http://www.bls.gov/cpi/cpid0804.pdf

THE US IS DOOMED TO CI-ISRAILI MONEYTARY HODGEPODGE IN LIGHT OF THE CHINAMAN WHO LEARNED MATH SINCE HE WAS 3

LIBERTARIAN RULE IN THAT THE CYBORGIAN ELITE WILL RULE CAPITAL TO A CERTAIN EXTENT? IS ZUCKERMAN A FLASH IN THE PAN OR AN ARMY OF OVERMEN

COMICBOOK TROLL THINKS FOR HIMSLEF!!!