27 July 2007

It's official... this blog has moved

Okay, it's official. This blog has moved to http://ecoecon.wordpress.com/

If you've been coming by here regularly it's time to update your bookmarks. I made a few edits to the default CSS template over at word press and I believe I'm committed to the change. There are a number of features that are definitely improvements on blogspot including easy integration of content pages outside the post and comment blogging format and better post editing tools. I do like the way the archives widget works better here on blogspot, but I think the choice is made.

For the next week or so I'll check back in here and move any random comments that turn up over to the new site. But, if you are looking for new posts they'll be posted over there, or rather here: the visible hand

26 July 2007

Possible move to wordpress...

For those of you who come by here regularly:

I've been checking out Wordpress blog hosting. Though I actually like the way this blogspot version looks, there are several features over at Wordpress that are improvements. I'm toying with the idea of signing up for the style sheet editing feature to make a few changes to the formatting.

There are a couple of new posts on the Wordpress version that aren't posted here. If you're interested, check out the visible hand on Wordpress at http://ecoecon.wordpress.com/

I'd be interested in any comments on the new format if you are so moved. For now I'll keep looking in on both blogs...


24 July 2007

Hypocrisy Reigns in Anti-Takeover Defenses

Bloomberg.com: Opinion
Hypocrisy Reigns in Anti-Takeover Defenses
By Michael R. Sesit
July 20 (Bloomberg) -- How's this for disingenuous?

For years, China, Japan, Russia, Saudi Arabia, Singapore, Norway and other countries have lent billions to Americans and Europeans. The money helped pay for the burgeoning U.S. trade deficit, funded consumers living beyond their means and financed budget shortfalls in the U.S., Germany, France and Italy.

Bloated with currency reserves totaling hundreds of billions of dollars -- in China's case $1.3 trillion -- many of these reserve-rich countries want to break open their piggy banks and invest the cash more profitably than just parking their funds in low-yielding U.S. and European government bonds.

Suspecting that this expanded appetite includes the acquisition of entire companies, Western countries, led by the U.S. and European Union, are already raising hackles -- signaling that the direct or indirect takeover of key companies or financial institutions is a no-go. And this is happening without anyone having made any offers recently.

Carbon Trading Is the New Big Thing

In London, Carbon Trading Is the New Big Thing -
Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times
July 6, 2007, 8:04 am

Seeking to match a desire to make money with his environmental instincts, Louis Redshaw, a former electricity trader, met with five investment banks in 2004 to propose the trading of carbon dioxide. Only one, Barclays Capital, was interested.

Three years later, the situation has turned, and carbon specialists like Mr. Redshaw are among the rising stars in the London financial district.

Managing emissions has become one of the fastest-growing specialties in financial services, and companies are scrambling to find workers, The New York Times’ James Kanter writes. Their goal is a slice of a market now worth about $30 billion and that could grow to $1 trillion within a decade.

“Carbon will be the world’s biggest commodity market, and it could become the world’s biggest market over all,” said Mr. Redshaw, the head of environmental markets at Barclays Capital.

21 July 2007

market climbs a wall of worry, bounces off glass ceiling

The Dow broke 14k this week, yet another new record.

WTF. The dollar is in decline, prices on food, fuel and commodities are going up, the housing market isn't due to rebound till at least 2009 and the willingness of foreign central banks to purchase US debt is weakening.

The Dow also fell over 150 points from peak to trough twice prompting an increase in sightings of the rumored Plunge Protection Team in the comments sections of blogs that follow such things.

It appears that most local folks don't care much about the market unless they have money invested. While I'm sympathetic with this point of view there are a number of local issues impacted by national and global trends -- in particular county land use policy and low income housing. Bucking these trends will be hard, we might want to plan ahead.

For those of you who might be interested in points of view on the current record setting stock market and the underlying economy itself that aren't directly funded by it's beneficiaries or housing market info that isn't specifically aimed at rebuilding lost confidence and minimizing downsides here are a couple of blogs worth reviewing. Don't forget to read the comments sections... very informative. If you want the consensus view, just watch TV.

Nouriel Roubini's Blog

Roubini is an economist and doesn't slow down to explain his terms. You may find it useful to use Firefox so you can select unfamiliar terms, right click and google them on the spot.

Calculated Risk

The Calculated Risk blog is definitely irreverent... even funny. It's focuses on the mortgage market with many comments from traders and industry pros that range far beyond straight up mortgage/investment instrument analyses. If you don't want to start with the nerdly details you might try this link first.

Check it out...

11 July 2007

By 2012 Oil Production Is Expected to Fall Short Of Global Demand

IEA Forecast Underlines Oil, Gas Supply Worries - WSJ.com
By 2012, Production Is Expected to Fall Short Of Global Demand

July 10, 2007; Page A12

The industrialized world's energy watchdog added to rising concerns in some quarters that oil and natural gas production won't keep up with the world's growing thirst for energy in coming years, highlighting worries over supplies and prices.

The Paris-based International Energy Agency, which monitors energy markets on behalf of the world's 26 most-advanced economies, yesterday released its annual medium-term forecast, projecting conditions through 2012. The agency expects oil supply to be tighter in coming years than it had forecast, with little prospect of relief unless world economic growth falters.
• Growing Tight: The IEA said the world could face an oil- and gas-supply crunch in coming years amid rising demand.
• Thin Cushion: Economic growth is expected to spur demand, but the IEA sees OPEC's spare capacity narrowing and expects growth from non-OPEC sources to dwindle after 2009.
• Price Pressure: The forecast adds to concerns over world oil supplies and implies continued upward pressure on petroleum prices.

The IEA doesn't forecast oil prices, but its conclusions imply that consumers should expect continued upward pressure on the cost of energy.

"Oil and gas price pressures look set to remain in the coming years," the IEA report said. "Slower-than-expected [gross-domestic-product] growth may provide a breathing space, but it is abundantly clear that if the path of demand doesn't change on its own, it may well be driven to change by higher prices," the report said.

Senators unveil anti-pollution proposal

Lawmakers unveil anti-pollution proposal
By H. JOSEF HEBERT Associated Press Writer
Article Launched: 07/11/2007 01:32:00 PM PDT

WASHINGTON—The nation can begin to address the risks of climate change while avoiding harm to the economy, senators said Wednesday in unveiling anti-pollution legislation.

The bill would establish a mandatory cap on carbon dioxide emissions from power plants, refineries and industrial plants but allow companies to trade emission credits and avoid making emissions cuts if the costs become too high.

Sen. Jeff Bingaman, D-N.M., one of the bill's chief sponsors, called it a "strong and balanced approach ... while protecting the American economy." It also includes incentives aimed at spurring other nations such as China to address climate change.

Economics Departments Growing Will to Debate Assumptions

In Economics Departments, a Growing Will to Debate Fundamental Assumptions - New York Times

Published: July 11, 2007

For many economists, questioning free-market orthodoxy is akin to expressing a belief in intelligent design at a Darwin convention: Those who doubt the naturally beneficial workings of the market are considered either deluded or crazy.

But in recent months, economists have engaged in an impassioned debate over the way their specialty is taught in universities around the country, and practiced in Washington, questioning the profession’s most cherished ideas about not interfering in the economy.

“There is much too much ideology,” said Alan S. Blinder, a professor at Princeton and a former vice chairman of the Federal Reserve Board. Economics, he added, is “often a triumph of theory over fact.” Mr. Blinder helped kindle the discussion by publicly warning in speeches and articles this year that as many as 30 million to 40 million Americans could lose their jobs to lower-paid workers abroad. Just by raising doubts about the unmitigated benefits of free trade, he made headlines and had colleagues rubbing their eyes in astonishment.

“What I’ve learned is anyone who says anything even obliquely that sounds hostile to free trade is treated as an apostate,” Mr. Blinder said....

Criticizing the approach that currently dominates the field, Mr. Blinder said economists must look more closely at the real world instead of modeling it in the lab. “Economics is insufficiently scientific,” he said. “Mathematics may be useful, but mathematics is not scientific. It doesn’t generate refutable hypotheses.”...

Max B. Sawicky at the Economic Policy Institute in Washington, a nonprofit research organization that is a bulwark of heterodoxy, wrote in a discussion on tpmcafe.com that, “The duty of orthodoxy is clear: deny departmental positions and resources to inferior research programs and purify the top journals of incorrect thinking, all understood as maintaining high standards.”

This is the point where Mr. Rodrik, who has written extensively on the downside of globalization, departs from both Mr. Sawicky and Mr. Blinder.... he acknowledged that inflexible rules about how one makes an argument and what counts as evidence can create blind spots, but insisted that once those rules were accepted, there was tremendous openness inside the academy.

The problem is outside, where economists are expected to “regurgitate ideas” about the glories of the free market. Most mainstream economists think that voicing any skepticism or doubt provides “ammunition to the barbarians,” he said, and allows narrow-minded people to “hijack any argument to suit their purpose.”

Mr. Rodrik said he used to worry about this until he realized that “on any issue, there are barbarians on both sides,” so there was no point in shading an argument to “suit one set of barbarians over the other.”

“And I’ve slept a lot better since.”

Golly, we didn't mean... you know... don't they have prisons?

Growing complaints of shoddy and unsafe products coming out of China led to a quick response by Beijing leaders... It appears that Chinese leadership concerns regarding protectionist US policy are dead serious.

More quality control of China food imports needed in both U.S., China
by Jing Zhou
Jun 27, 2007

Among some of Chicago’s food markets, there are complaints of inadequate U.S. governmental and technical support to secure the quality of food imported from China.

“The U.S. Food and Drug Administration wouldn’t care about our warehouse unless there’s a customer complaint,” said Judy Yu, accountant for Richwell Market, a food market in Chicago’s Chinatown. Otherwise, she said inspections occur about every two months.

Yu and other retailers say safeguards are important because they are the last links in the international food chain between potentially dangerous products and consumers.

Whole Grain Fresh Market in Westmont, Ill. said they depend solely on licensed food importers from New York for quality control.

Both markets said the recent food scandals caused a slight sales drop, mostly from non-Asian customers.

China Quick to Execute Drug Official
Published: July 11, 2007

BEIJING, July 10 — China executed its former top food and drug regulator on Tuesday for taking bribes to approve untested medicine, as the Beijing leadership scrambled to show that it was serious about improving the safety of Chinese products.

The Beijing No. 1 Intermediate People’s Court carried out the death sentence against Zheng Xiaoyu, 62, the former head of the State Food and Drug Administration, shortly after the country’s Supreme Court rejected his final appeal.

Mr. Zheng, who had appealed his May 29 sentence on the grounds that it was too severe and that he had confessed to the bribery charges against him, became the first ministerial-level official put to death since 2000 and the fourth since China opened its doors to the outside world nearly 30 years ago.

10 July 2007

The breeze's big brother finally matures...

The Wind

At least the rich are doing well...

Can’t Sell Your Home? Maybe It’s Priced Too Low - New York Times

Published: July 11, 2007

Given that the real estate market is supposed to be in free fall, some strange things have been happening recently in Mill Valley.

It is one of the expensive suburbs of San Francisco just over the Golden Gate Bridge, and much of the housing market there seems to be doing just fine. One three-bedroom house sold for $1.4 million last month without ever being officially put on the market. The seller accepted a pre-emptive bid — $20,000 above the asking price — from somebody who had heard that the house was about to be listed for sale.

“The homes that are having a hard time selling are the average-priced homes,” said Vanessa Justice, a real estate agent with Pacific Union GMAC in the Bay Area, where the median house price is about $750,000. For upper-end homes, she said, “it’s actually pretty crazy right now.”

Ratings Cuts By S&P, Moody's Rattle Investors

I'll try not to link through to pay/subscription sights too often, but today the WSJ webiste is free.

Ratings Cuts By S&P, Moody's Rattle Investors - WSJ.com
Critics Say Companies Are Reacting Too Late To Subprime Debt Woes
July 11, 2007

The widening meltdown in the subprime-mortgage market caught up with the nation's two big debt-rating companies yesterday, with Standard & Poor's and Moody's announcing plans to downgrade hundreds of bonds backed by the risky home loans.

The moves jolted jittery financial markets as investors adjusted to the idea that the downturn in the nation's housing market is worsening and that a rebound might be months away, at best. The Dow Jones Industrial Average tumbled 148.27 points , or 1.1% , to close at 13501.70 as investors fled stocks and low-quality bonds , and some of them criticized the ratings giants for being too slow to act.

In an acknowledgment that it severely misjudged the risk of bonds tied to subprime mortgages, Standard & Poor's Ratings Service said it is looking to slash credit ratings on as many as 612 such bonds, with a value of $12 billion, because of mounting delinquencies on the underlying mortgages. Subprime mortgages are made to borrowers with shaky credit profiles."

D.R. Horton to Report Net Loss After Orders Plunge

Bloomberg.com: Worldwide
D.R. Horton to Report Net Loss After Orders Plunge (Update6)
By Brian Louis

A D.R. Horton home under construction

July 10 (Bloomberg) -- D.R. Horton Inc., the second-largest U.S. homebuilder, will report a third-quarter loss after orders plunged 40 percent, and said it sees no sign of a housing rebound.

``We expect the housing environment to remain challenging,'' Chairman Donald Horton said today in a statement. The Fort Worth, Texas-based company is planning a ``significant'' writedown in the value of its real estate, and the shares fell to a three-year low.

D.R. Horton said orders dropped in every region, with the steepest declines in California and the northeast. The average price for its houses slid 12 percent to $233,672. Ryland Group Inc., a Calabasas, California-based homebuilder, said today it will report a second-quarter loss of as much as $1.35 a share. Lennar Corp., the biggest homebuilder by revenue, last month reported a loss along with falling revenue.

``All these companies face a lot of pressure,'' said Thomas Smith, an equity analyst at Standard & Poor's in New York. ``It's a tidal wave of trouble.''

09 July 2007

Chinese company signs deal with Daimler Chrysler: targets annual output of 1million vehicles by 2010

Chery targets annual output of 1million vehicles by 2010: report - MarketWatch
By China Bureau
Last Update: 12:46 AM ET Jul 9, 2007

BEIJING (MarketWatch) -- Chinese carmaker Chery Automobile Co. plans to raise its annual output to 1 million vehicles by 2010, the Xinhua News Agency reported over the weekend, citing unnamed company sources.

The company plans to increase its production capacity by 200,000 vehicles to 700,000 this year, Xinhua said. Chery expects sales in North America and Europe to reach 300,000 to 500,000 vehicles in 2019, the report said.

Chery signed a deal with DaimlerChrysler AG's (DCX.XE) Chrysler Group last week through which Chery will build cars for export under Chrysler brand names.

China city to tighten internet controls

FT.com / China city to tighten internet controls
Mure Dickie in Beijing

Published: July 8 2007 22:14

A Chinese city where residents recently held mass protests against a planned chemicals plant is preparing to tighten controls on the internet and force users to use their real names when posting messages on local websites.

The decision by the south-eastern city of Xiamen appears to be a response to the role played by the internet in the organisation of demonstrations last month that forced suspension of plans to build a Rmb11bn ($1.4bn) plant to produce paraxylene (PX), a chemical feedstock, in the city.

07 July 2007

China blames growing social unrest on anger over pollution

Interesting. US consumption of Chinese goods allows rapid growth in Chinese manufacturing... growth aided and abetted by US expertise and investment drawn to China by low cost labor and lax environmental standards. Guess what happens next... you'll never guess... surprise! Air quality in China declines, carbon emissions go up, acid rain follows the trade winds into Japan and South Korea.

So. We export US jobs, capital and manufacturing capacity, leave the pollution in China, and import cheap products for US consumers and corporate profits for US shareholders. Now we find that China has passed us in sheer volume of carbon emissions.

As an added bonus we get to act all shocked an' all about how China has a pollution problem... just as if we had nothing to do with it and derive no benefit from it. Now the Bush administration says: If China doesn't curb their carbon emissions why should we have to...? Oh, well. Maybe Bush didn't want to sign the Kyoto protocols anyway.

Serious bait and switch here.

Meanwhile China is coping with the results of being the low-rent industrial district of the world:

China blames growing social unrest on anger over pollution
Special reports | Guardian Unlimited

The head of China's environmental agency has blamed the rising number of riots, demonstrations and petitions across the country on public anger at pollution.

Echoing the language of the Cultural Revolution, Zhou Shengxian called for a "struggle" against polluters, and said the public refused to accept the increasing degradation of the environment.

His unusually outspoken comments underscore the frustration of state mandarins at local government officials who ignore environmental standards in order to attract investment, jobs and bribes.

Breakneck growth has turned China into a huge environmental disaster area. A soon-to-be-published World Bank report says some 500,000 people die each year as a result of pollution.

Beijing is trying to shift the economy on to a more sustainable development track. The state council - China's cabinet - tightened the water pollution law to require more testing, licensing and stiffer penalties, the state-run Xinhua news agency reported yesterday.

04 July 2007

Global Exodus from US$ in Motion -- Local impacts?

Here's the latest heads up on the willingness of the rest of the world to continue to finance US debt. While most of the posts on this blog reference macro economic policy/events well beyond the jurisdiction of local players, these events do and will have significant impacts on how local events play out.
It's difficult to bring the implications of these macro level issues back down to earth in terms of local impacts and local policy responses. I'm not an expert and I hesitate to make any firm predictions, either bearish or bullish, but hopefully some local leaders will look beyond acrimonious ideological debates to think strategically. Here's a couple scenarios where it may be useful to monitor macro level trends which will support or undermine our ability to reach local goals. See what you think...

For starters, the balance between development value and timber value on forested parcels is shifting.

If interest rates rise it could have a significant impact on PL's debt restructuring. If the housing market continues to weaken, and developers continue to take a beating, and access to mortgage credit continues to tighten, then effort's to include development/fragmentation value in any valuation of PL assets will also be weakened.

At the same time the declining dollar could weaken access to US lumber markets for foreign exports, strengthening the position of remaining US producers in the long run even as lumber production in the northwest is off 13.9% on a year over year basis. Production cutbacks have managed to bring lumber prices off the floor although the Random Lengths Framing Index is still off 24% from two years ago and 33% from June 2004.

In addition some of these same variables belie the idea that county planning is the primary variable impacting housing affordability.

Rising or falling home prices ("affordability") should certainly be reviewed in the light of statewide and national trends. With subprime mortgage credit continuing to unwind it's no wonder that there's local pressure on the HumCo general plan to include development potential for higher value homes (the only ones that are selling) in pursuit of "affordability" across all income levels.

In the current housing market context groups like Housing for All would do well to consider the possibility that tax exempt bonds coupled with higher density infill and falling home prices could actually increase the housing availability for low-income residents. It could be time to start planning to implement a low-income housing project at the bottom of the housing recession in 2008 or 2009.

Global Exodus from US$ in Motion - July 3, 2007
By Gary Dorsch

Trading in the arcane world of foreign exchange is often akin to judging a reverse beauty contest. The trick to profitable trading is to pick the least ugly currency. Nearly all fiat or paper currencies are ugly, because the 18 of the world’s top-20 central banks are inflating the money supply at double digit rates. At the moment, the world’s two ugliest currencies are the Japanese yen and the US dollar.

The Bank of Japan pegs its overnight loan rate at just 0.50%, in a brazen effort to devalue the yen, to boost exports abroad, and prevent an abrupt unwinding of the mushrooming “yen carry” trade. Meanwhile the Federal Reserve is inflating its M3 money supply at a 13.7% annualized clip, according to private economists, which if correct, would be the fastest rate of expansion in more than 30-years.

US Treasury chief Henry Paulson, and former chairman of Goldman Sachs, GS.N, “monitors the financial markets closely,” and has reinvigorated the infamous “Plunge Protection Team,” which comes to the rescue of the US stock market whenever nasty revelations come to the surface. At the moment, Paulson’s grand strategy is to offset losses in the US housing sector with big gains in the stock market, to prevent the US economy from sliding into recession.

A key player in the “Plunge Protection Team” (PPT) is none other than Federal Reserve chief Ben “helicopter” Bernanke. Since the Bernanke Fed discontinued the decades-old reporting of the broad M3 money supply in March of 2006, the growth rate of M3 has accelerated from an 8% rate to a sizzling 13.7% clip, its fastest in more than three decades. The Bernanke Fed is preventing borrowing rates from rising at a time of explosive loan demand for US corporate mergers and takeovers, by rapidly increasing the US money supply....

The Fed has obscured its money printing operations by discontinuing the reporting of M3, in order to limit the damage to the fixed income markets. But word of the explosive growth of the M3 money supply is slowly leaking out, and taking its toll on the US Treasury Note market, which briefly tumbled to its lowest level in five years in June, lifting 10-year yields as high as 5.30%, before receding back to 5.00%, on a “flight to safety” from the riskiest of the sub-prime home loan market.

Because the US credit markets are swimming in a tidal wave of rising liquidity, there will always be bargain hunters who are happy to park excess cash into the bond market whenever yields surge higher. Asian central banks and Arab Oil kingdoms in particular, have been big buyers of US T-bonds over the past four years, and hold roughly $1.3 trillion of the IOU’s, but even this massive intervention couldn’t turn the tide of the four-year bear market.

But now there are indications that China’s insatiable appetite for US T-bonds is waning. Beijing was a net seller of $5.8 billion of US T-bonds in April, the first drop in Chinese holdings since October 2005, and sparking the recent slide that lifted 10-year yields by 70 basis points, at its high mark. Since Beijing unhinged the dollar from a fixed peg of 8.27 yuan in July 2005, the value of the US 10-year T-note, when converted into yuan, has declined by 15 percent. Earlier today, the dollar slipped to 7.59 yuan, or 8.9% lower since the yuan was freed from the dollar peg.

02 July 2007

The Fed's Role in the Bear Stearns Meltdown

Here's an article from Mike Whitney at Counterpunch. Many of the issues he raises have been covered by articles referenced on this blog. While you may draw different conclusions, this summary of bearish arguments is worth reading...

Mike Whitney: The Fed's Role in the Bear Stearns Meltdown
A Subprime Chernobyl

The Bank for International Settlements issued a warning last week that the Federal Reserve's monetary policies have created an enormous equity bubble which could lead to another "Great Depression". The UK Telegraph says that, "The BIS--the ultimate bank of central bankers--pointed to a confluence a worrying signs, citing mass issuance of new-fangled credit instruments, soaring levels of household debt, extreme appetite for risk shown by investors, and entrenched imbalances in the world currency system."

The IMF and the UN have issued similar warnings, but they've all been ignored by the Bush administration. Neither Bush nor the Federal Reserve is interested in "course correction". They plan to stick with the same harebrained policies until the end.

The "easy credit" which created the subprime crisis in mortgage lending has now spread to the hedge fund industry. The troubles at Bear Stearns prove that Secretary of the Treasury Henry Paulson's assurance that the problem is "contained" is pure baloney. The contagion is swiftly moving through the entire system taking down home owners, mortgage lenders, banks, rating agencies, and hedge funds. We are just at the beginning of a system-wide breakdown.