Coffee — the Greatest Addiction Ever, and other Canada Weekend Reads

Thursday, June 30th, 2011

Here are this weekend's read­ing diver­sions for your enlight­en­ment. Wish­ing you a very Happy Canada Day Long Weekend!

Ban­ish Bad Breath | Lifescript.com

Every­one suf­fers from bad breath occa­sion­ally. Per­haps you ate too much gar­lic or spices for lunch, or maybe you were unable to brush your teeth the night before.

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How to Grow Greener Grass — Helptionary!

The first thing to do is to assess your lawn. Walk around it to see if there are any bare areas that need to be patched up. This can be done by buy­ing grass from or seedlings from a nearby gar­den, and using these to grow new grass in the prob­lem area. If you notice any areas that have an uneven sur­face, you might have to reap­ply the top­soil and plant new grass

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Sit­ting Too Long Raises Death Risk

The death risk was even higher for peo­ple who don't work out. The least active women in the study who also reported the high­est amount of sit­ting were 94 per­cent more likely to die than those who said they sat the least and exer­cised the most. For men, it was 48 per­cent, the study said

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5 (Caffeine-Free) Snacks To Fight Fatigue

Mid­day snacks should con­tain about 100 calo­ries or 15 grams of car­bo­hy­drates. The nat­ural sweet­ness in fruit takes longer to metab­o­lize than the processed sug­ars you'll find in candy. And the pro­tein in peanut but­ter pro­vides a long-lasting form of energy.

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Cof­fee: The Great­est Addic­tion Ever (VIDEO)

Cof­fee lovers and full-blown addicts alike will enjoy this video, which is pretty much every­thing you ever wanted to know about cof­fee, but were afraid to ask

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"Lean gene" ups risk of heart dis­ease and dia­betes - Yahoo! News

Being slim may not always lead to a lower risk of heart dis­ease and dia­betes, sci­en­tists said Sun­day after they iden­ti­fied a gene linked both to hav­ing a lean body and to a higher risk of meta­bolic diseases.

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Diet Soda Linked To Weight Gain

A study pre­sented at a Amer­i­can Dia­betes Asso­ci­a­tion meet­ing this week shows that drink­ing diet soda is asso­ci­ated with a wider waist in humans. And a sec­ond study shows that aspar­tame — the arti­fi­cial sweet­ener in diet soda — actu­ally raises blood sugar in mice prone to diabetes

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Why Do We Get Wrin­kled Fin­ger­tips? Mys­tery Solved, Say Scientists

The answer, accord­ing to evo­lu­tion­ary biol­o­gist Mark Changizi, is all about “grip.” Changizi and his team of researchers at 2AI Labs, believe that water wrin­kles are essen­tially treads — just like the ones that show up on our car tires — that have been genet­i­cally selected for over time

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Metal Head Baby Loves Pan­tera (VIDEO)

Pan­tera baby was born metal, man. He's been head­bang­ing and throw­ing up the sign of the horns since the womb. No really, check his ultra­sound photos.

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Canada Day 2011 — When is Canada Day 2011

Canada Day is cel­e­brated on July 1st across the coun­try. July 1st marks the anniver­sary of the for­ma­tion of the union of the British North Amer­ica provinces in a fed­er­a­tion under the name of Canada — that's the tech­ni­cal expla­na­tion, but Canada Day also means fire­works and the year's biggest national party. The Canada Day hol­i­day is akin to the U.S. July 4th cel­e­bra­tion but on a more Cana­dian scale.

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5 Every­day Habits That Can Harm Your Memory

When think­ing about mem­ory, Aaron Nel­son, Ph.D., assis­tant pro­fes­sor at Har­vard Med­ical School and author of "The Har­vard Med­ical School Guide to Achiev­ing Opti­mal Mem­ory," says to look at it this way: when think­ing about brain health, every­thing you know about heart health applies. The things that are bad for your heart — high cho­les­terol and smok­ing, for exam­ple — are also bad for your brain.

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Endometrio­sis: When Painful Cramps aren't "Nor­mal" | iVillage.ca

Endometrio­sis is a lit­tle known dis­ease that affects an aston­ish­ing 176 mil­lion women world­wide.  The cause of endometrio­sis is still up for debate  and cur­rently there is no cure.

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The Sci­en­tist Who Drew Brains, and Then a Nobel Prize | Mind & Brain | DISCOVER Magazine

Anatomist San­ti­ago Ramon y Cajal was the first to see–and illustrate–what neu­rons really do. His exquis­itely detailed draw­ings changed our under­stand­ing of the brain and ner­vous sys­tem. Cajal relent­lessly pur­sued his micro­copic study of ani­mal tis­sues, lead­ing to an essen­tial dis­cov­ery: Brain sig­nals jump from cell to cell rather than flow through a con­tin­u­ous web of fibers, as was believed at the time.

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Tags: American Diabetes Association, Bad Breath, Canada Day, Canadian, Canadian Market, Coffee Lovers, Death Risk, Diet Soda, Diversions, Free Snacks, Greener Grass, Heart Disease, Heart Disease And Diabetes, Lean Body, Metabolic Diseases, Natural Sweetness, Nearby Garden, New Grass, Risk Of Heart Disease, Seedlings, Topsoil, Uneven Surface
Posted in Canadian Market, Markets | Comments Off

Eric Sprott: Investment Outlook (June 2011)

Thursday, June 30th, 2011

Caveat Ven­di­tor!

by Eric Sprott & Andrew Morris

The recent bear raid on sil­ver has left many con­cerned about the sus­tain­abil­ity of its his­toric run. Sil­ver, being a rel­a­tively obscure mar­ket for most main­stream com­men­ta­tors, attracted much atten­tion in the ensu­ing days fol­low­ing the May 1 take­down. Indeed, though the 30% drop in sil­ver occurred over only four days, seem­ingly all eyes were on sil­ver, with com­men­ta­tors who could’ve cared less about the sil­ver mar­ket only a cou­ple of months ago, sud­denly trip­ping all over one another to make the bub­ble call. Sil­ver bub­ble 2.0? Hardly. Any­one who has been for­tu­nate to have been invested in sil­ver over the past few years would unfor­tu­nately be used to such bla­tant take­downs. The Chi­nese don’t call it the "Devil’s Metal" for no good rea­son. With so much talk these days about the risks of invest­ing in sil­ver, we think that per­haps it may be timely for us to weigh in on the mat­ter. The sil­ver mar­ket is riskier than ever, but for rea­sons the vast major­ity of pedes­trian com­men­ta­tors have failed to grasp.

There is no doubt that spec­u­la­tive dol­lars have been flow­ing into the sil­ver mar­ket. We note that in April record trad­ing vol­umes were reg­is­tered in the SLV¹, Comex futures², LBMA trans­fers³, and the Shang­hai Gold Exchange futures⁴. In fact, con­vert­ing the aver­age daily trad­ing vol­ume in the afore­men­tioned sil­ver instru­ments to the amount of ounces of sil­ver they are sup­posed to rep­re­sent, there were on aver­age, over 1.1 bil­lion ounces worth of sil­ver traded every day in the month of April⁵. Truly a stag­ger­ing num­ber when con­trasted against the actual amount of sil­ver avail­able for invest­ment. To wit, the world will only sup­ply about 979 mil­lion ounces this year from mine and recy­cling of scrap, of which it is esti­mated that 657 mil­lion ounces will be used up for non-investment pur­poses⁶. So in effect, that leaves roughly only 322 mil­lion ounces avail­able this year for invest­ment pur­poses. Con­vert­ing to days (recall that at least 1.1 bil­lion ounces traded each day) it leaves only about 1.3 mil­lion ounces per trad­ing day of avail­able sup­ply. So, we are essen­tially trad­ing the amount of phys­i­cal sil­ver actu­ally avail­able for invest­ment, 891 times over each day! It really begs the ques­tion; just what are peo­ple trad­ing in these markets?

Con­sider the largest and most promi­nent of those mar­kets — the Comex, which we believe has owned an effec­tive monop­oly on sil­ver price dis­cov­ery for decades. In fact, the Comex churned over 800 mil­lion ounces of sil­ver futures and options on aver­age each day in April⁷. Indeed, notwith­stand­ing the mas­sive but very opaque over-the-counter sil­ver deriv­a­tives mar­ket, trad­ing on the Comex dwarfs both the phys­i­cal and the other (known) paper sil­ver mar­kets, com­bined. Despite its dynam­ics being rel­a­tively com­plex and gen­er­ally not well under­stood by most, the world’s finan­cial com­mu­nity con­tin­ues to view trad­ing on the Comex as rep­re­sen­ta­tive of the fun­da­men­tals for the phys­i­cal sil­ver mar­kets. A mar­ket built on a high amount of lever­age, both the buy­ers and sell­ers of Comex futures and options con­tracts are able to estab­lish a posi­tion in "sil­ver" with pen­nies on the dol­lar in col­lat­eral and even more aston­ish­ingly, no phys­i­cal sil­ver back­ing the con­tracts at all. The fol­low­ing charts illus­trate just how unreal these mar­kets have become.

Chart A:

Source:  Bloomberg, Sprott Asset Management

Chart B:

Source:  Bloomberg, Sprott Asset Management

In chart A, we com­pare the total open inter­est in Comex futures and option con­tracts to the actual amount of sil­ver held in reg­is­tered inven­to­ries able to be deliv­ered against those con­tracts, since 2009. In chart B, with the steeply-sloping line shows the ratio of open inter­est (i.e. paper sil­ver ounces) per ounce of phys­i­cal sil­ver held in inven­tory. We believe the his­tor­i­cal trend of ris­ing open inter­est and falling inven­to­ries deserves con­sid­er­able atten­tion from any­one attempt­ing to under­stand the sil­ver mar­ket. And though we do note that since Octo­ber 2010 the trend of ris­ing open inter­est appears to have abated, the inven­to­ries have been evap­o­rat­ing steadily and thus the ratio of the two mea­sures has con­tin­ued to trend higher. In fact, since 2009 the ratio of paper sil­ver to phys­i­cal sil­ver has increased four­fold from approx­i­mately 8 times to almost 33 times, where it stands today.

Tags: Andrew Morris, Bubble 2, Canadian, Caveat Venditor, Comex, Eric Sprott, Futures, Gold Exchange, Good Reason, India, Investing In Silver, Investment Outlook, Investment Purposes, Lbma, Mainstream Commentators, Month Of April, No Doubt, Silver Market, Slv, Staggering Number, Takedown, Takedowns
Posted in Canadian Market, India, Markets | Comments Off

Canadian Inflation Quickens (BCA)

Thursday, June 30th, 2011

The quick­en­ing of infla­tion is serv­ing as a warn­ing that the Bank of Canada has to do some­thing to curb pres­sure with nor­mal mon­e­tary pol­icy mea­sures in the com­ing months, says BCA Research, in its Daily Insight on Canada. Also pref­aced is that this devel­op­ment should trans­late into a stronger Loonie.

Canada's CPI expe­ri­enced a greater-than-forecast month-over-month increase of 0.7% dur­ing May. Although this monthly increase was led by by food and energy, the core rate CPI rose by a strong 0.5% month-over-month. The under­ly­ing rate of infla­tion as mea­sured by the Bank of Canada accel­er­ated to 1.8% annu­al­ized, and this was far greater than the 1.4% fore­cast made by BoC in the lat­est Mon­e­tary Pol­icy Report. As a result of wor­ries over U.S. growth, Europe's debt cri­sis, and hard land­ing fears in China, inter­est rate futures had all but dis­counted the need for higher pol­icy inter­est rates for the next year ahead.

Despite those wor­ries, it appears the Cana­dian econ­omy is indi­cat­ing that a tight­en­ing of mon­e­tary pol­icy is required.

Hous­ing is show­ing signs of bub­bling, and there is pres­sure on the labour front, says BCA.

Yesterday's CPI report con­tained warn­ings that spare capac­ity within the Cana­dian econ­omy is nearly used up. Notwith­stand­ing exter­nal eco­nomic shock, the mon­e­tary tight­en­ing cycle should be resumed later this year. So long as U.S. Fed pol­icy stands down, spreads between short term inter­est rates will widen, mak­ing con­di­tions favourable for the Cana­dian dol­lar and Cana­dian bonds will under­per­form its coun­ter­part U.S. trea­suries, assum­ing cur­rency is hedged.

Source: BCA Research

Tags: Bank Of Canada, Boc, Canadian, Canadian Bonds, Canadian Economy, Canadian Inflation, Canadian Market, China Interest, Core Rate, Cpi Report, Debt Crisis, Economic Shock, Fed Policy, Interest Rate Futures, Labour Front, Loonie, Monetary Policy Report, Policy Interest, Policy Measures, Rate Of Inflation, Treasuries, Underlying Rate Of Inflation
Posted in Canadian Market, Markets | Comments Off

Ambush in the Oil Market

Thursday, June 30th, 2011

The most sig­nif­i­cant devel­op­ment in the finan­cial mar­kets dur­ing my recent sojourns in Europe was the Inter­na­tional Energy Agency’s shock­ing release of strate­gic petro­leum reserves. Unprece­dented dur­ing peace­time, the move caught oil traders com­pletely by sur­prise and prompted an imme­di­ate $6 drop in crude prices.

The howls of leaked infor­ma­tion and insider trad­ing were so loud that they could be heard in the dis­tant recesses of the Swiss Alps. This is what you usu­ally get when sev­eral lead­ing play­ers lose a huge chunk of money overnight.

The move was orches­trated by Pres­i­dent Obama’s White House, and quickly found sev­eral will­ing cocon­spir­a­tors in Japan, Ger­many, and South Korea. Osten­si­bly done to address the 1.6 mil­lion bar­rel a day short­fall in light crude sup­plies caused by the Libyan civil war, there are in fact far broader impli­ca­tions for all of us.

This is the first real attempt by the con­sum­ing nations to elim­i­nate the oil risk pre­mium, which has been var­i­ously esti­mated at up to $50 a bar­rel. Take away the insta­bil­ity from the Mid­dle East, the chi­canery by short term traders at hedge funds, and more recently, the entry into the mar­ket of high fre­quency algo­rithms, and crude should be trad­ing at a mere $50 a bar­rel. This is the point where vir­tu­ally all oil majors believe would be sup­ported by weak­en­ing global eco­nomic fun­da­men­tals, and on which they based their own multi­bil­lion dol­lar long term cap­i­tal spend­ing and devel­op­ment budgets.

The amount of oil involved was really quite small, some 2 mil­lion bar­rels, or 2.3% of a sin­gle day’s global con­sump­tion. That is not impor­tant. The impact at the mar­gin where prices are made was large. Gold­man Sacks said that this would cut oil prices by $10-$12 a bar­rel over the next three months, while JP Mor­gan pre­dicted a whack­ing great drop from $130 to $100 for Brent crude.

The game changer is that the move reflects a new inter­ven­tion­ist, activist approach by gov­ern­ments towards the com­mod­ity mar­kets in gen­eral and the energy space specif­i­cally. Traders may bet against the national inter­est, but now do so at their peril. Volatil­ity and unpre­dictabil­ity in the oil mar­kets have just taken a quan­tum  leap up.

That leads to an auto­matic increase in SPAN mar­gin, mak­ing it more expen­sive to main­tain posi­tions. Hedge fund risk man­agers will also be tak­ing an ax to oil trad­ing books. While the prof­its to be made from oil trad­ing are quite sub­stan­tial, they are now higher risk and of lower qual­ity, jus­ti­fy­ing lesser amounts of cap­i­tal. Over time this should shrink the spec­u­la­tive demand for oil in the mar­ket place, espe­cially if the IEA repeat the action in the face of ris­ing oil prices.

The impact on the global econ­omy can be quite large. World oil con­sump­tion is at 87 mil­lion bar­rels a day, or 31.8 bil­lion bar­rels a year. At today’s $95 a bar­rel, that costs con­sumers some $3 tril­lion a year out of a $60 tril­lion world GDP. If the IEA’s strat­egy works, and prices stay down 10% over time, this would inject $300 bil­lion into the world econ­omy. A 20% decline gen­er­ates $600 bil­lion, exactly the amount of money the finan­cial sys­tem is los­ing with the expi­ra­tion of Ben Bernanke’s QE2.  Call it QE3 in black?

You won’t hear any carp­ing from me, as I have been play­ing oil from the short side over the last two months, all the way down from $118, as part of a gen­er­al­ized “RISK OFF” trade, buy­ing puts on the oil ETF (USO), and buy­ing the 2X inverse oil major ETF (DUG). The IEA action gets us within strik­ing dis­tance of my down­side tar­get of $84 a bar­rel, the price that pre­vailed before the onset of the Libyan war and a six month low. That is the neigh­bor­hood where I start to buy again.

By. Mad Hedge Fund Trader

John Thomas, The Mad Hedge Fund Trader is one of today's most suc­cess­ful Hedge Fund Man­agers and a 40 year vet­eran of the finan­cial mar­kets. He has one of the best per­form­ing newslet­ters and has just launched a new invest­ment ser­vice for Investors and Traders.

Tags: Brent Crude, Chicanery, Commodity Markets, Crude Oil, Crude Prices, Development Budgets, Economic Fundamentals, First Real Attempt, Global Consumption, Goldman Sacks, Insider Trading, International Energy Agency, Japan Germany, Jp Morgan, Oil Majors, Oil Traders, Risk Premium, Sojourns, Strategic Petroleum Reserves, Swiss Alps, Term Traders
Posted in ETFs, Markets, Oil and Gas | Comments Off

Goldman Trading Desk Sees Surge In Gold Prices Into Year End

Thursday, June 30th, 2011

While Goldman's tra­di­tional, client-facing sell-side research is ter­mi­nally use­less and empir­i­cal evi­dence sug­gests that doing the oppo­site of what is rec­om­mended yields prof­itable results more than two thirds of the time, what its trad­ing desk releases to select clients is far more tar­geted, nuanced, and, in one word, cor­rect. Which is why we were sur­prised to hear what Goldman's traders had to say about gold. To wit: "We are hear­ing anec­dotes of strong phys­i­cal demand already com­ing through in the last few days. Offi­cial sec­tor buy­ing is also likely to fea­ture...Although hav­ing been rather wrong footed by this recent set­back I con­tinue to believe that gold will have a strong end of sum­mer into q4 and that cur­rent price moves are cre­at­ing another great buy­ing oppor­tu­nity." And unlike the reverse psy­chol­ogy in the research depart­ment, the sales guys are much more care­ful as they have named accounts they get make com­mis­sion rev­enue from. Piss these off one too many times and you are cut off. Which makes us believe that Gold­man is really long and strong here.

From GS Trading:

Last week gold made an attempt to break above tech­ni­cal resis­tance of 1550. The momen­tum failed at 1558 and was fol­lowed by a severe cor­rec­tion into the end of the week los­ing over 60 usd in price. Yes­ter­day we slipped below 1500 to 1491 which I felt cer­tain would not hap­pen as I men­tioned in the pre­vi­ous com­men­tary. Cor­re­la­tions with the eur are high and another broad de-risking across com­modi­ties amongst a highly unsta­ble macro envi­ron­ment gath­ered gold in it's wake. This morn­ing we trade 1508.

From the fran­chise flow per­spec­tive, we saw size­able liq­ui­da­tions from the lev­ered com­mu­nity many of which had been build­ing posi­tions ahead of the break (includ­ing myself). It's almost cer­tain that CFTC data for the week that ended yes­ter­day and released on Fri­day will show a size­able drop in spec length although not yet tak­ing us to the lower ranges. Most recent spec posi­tions were 29m oz. I think it could be at least 3m oz lower. Any­thing below 20m is con­sid­ered a much cleaner back­drop. Last sum­mer we also saw painful liq­ui­da­tions in gold as comex length dropped from 30m to 21m oz with prices drop­ping 100 usd to 1160. This was quickly absorbed by the phys­i­cal and cen­tral bank play­ers which set the stage for the huge rally in Sep­tem­ber and Octo­ber before end­ing the year at 1430.

From a tech­ni­cal per­spec­tive the thin sum­mer mar­kets could allow for fur­ther weak­ness to test last months sup­port around 1465–70 but I am sure that the phys­i­cal mar­kets will be absorb­ing well ahead of these lev­els. We are hear­ing anec­dotes of strong phys­i­cal demand already com­ing through in the last few days. Offi­cial sec­tor buy­ing is also likely to fea­ture. A recent sur­vey of cen­tral banks sug­gested that gold pur­chases would con­tinue to be an impor­tant part of their future activity.

Although hav­ing been rather wrong footed by this recent set­back I con­tinue to believe that gold will have a strong end of sum­mer into q4 and that cur­rent price moves are cre­at­ing another great buy­ing oppor­tu­nity. A sig­nif­i­cant break of 1460 will prob­a­bly usher in a new era and author of GS trader commentaries.....

Tags: Anecdotes, Cftc, Commodities, Correlations, Empirical Evidence, Gold Prices, Goldman, Liquidations, Macro Environment, Momentum, Nuanced, Price Moves, Profitable Results, Q4, Reverse Psychology, Setback, Technical Resistance, Two Thirds, Wit, Year End
Posted in Commodities, Markets | Comments Off

Tracing America's "Too Big To Fail" Crisis: An Infographic

Thursday, June 30th, 2011

Trac­ing America's "Too Big To Fail" Cri­sis: An Infographic

by Creditloan.com

Most call it one of the biggest finan­cial crises in liv­ing mem­ory. Oth­ers call it one great big Ponzi scheme. What­ever you want to call it, a bunch of peo­ple lost a bunch of money and the world of high finance may never be the same. But don’t worry – that doesn’t mean that we’ve fixed all these prob­lems or pun­ished the peo­ple respon­si­ble. It just means that next time you can’t get a loan or a higher credit limit, the banks will have an excuse.

Our “most unwanted” list includes guys like Mar­tin Feld­stein. He was an eco­nom­ics pro­fes­sor at a lit­tle school called Har­vard (maybe you’ve heard of it) and served as Ronald Reagan’s Chief Eco­nomic Advi­sor. He was a major archi­tect in Reagan’s dereg­u­la­tion scheme (which is either the best thing ever in the world to some polit­i­cal views, or the worst thing in the world to others).

Alan Greenspan is also respon­si­ble, some believe. He was paid $40,000 to tes­tify on behalf of extreme bank looter Charles Keat­ing. Greenspan spoke of his “sound busi­ness plans” and “exper­tise.” Of course, these kind words didn’t come for free.

Robert Rubin was the Trea­sury Sec­re­tary and also a for­mer CEO of Gold­man Sachs. He teamed with Larry Sum­mers to get Con­gress to pass the “Gramm-Leach-Bliley Act.” What­ever that did, he went and used it to make $126 mil­lion as Vice Chair­man of CitiGroup.

Last up is Larry Sum­mers, who also served as Trea­sury Sec­re­tary. Another Har­vard eco­nom­ics pro­fes­sor (not look­ing good for that place). He was another key player in dereg­u­la­tion and also helped cre­ate deriv­a­tives, the trad­ing of which was a major con­tribut­ing fac­tor to the finan­cial collapse.

Com­pa­nies and Their (Ille­gal) Activities

With all the time giant finan­cial cor­po­ra­tions spend doing shady and down­right ille­gal things, it’s a won­der that they have any time left to do…whatever it is that they are actu­ally sup­posed to do. Let’s take a look at some notable post-deregulation antics of those wacky corporations:

JP Mor­gan: Bribed gov­ern­ment officials

Riggs: Laun­dered money for Chilean dic­ta­tor Augusto Pinochet (a mil­i­tary leader – for those who don’t know – who led a coup in Chile and was said to have bru­tally crushed, killed, and interred all who opposed his ille­gal régime)

Credit Suisse: Laun­dered money for Iran in vio­la­tion of US sanctions

Fred­die Mac: Account­ing fraud

Fan­nie Mae: Account­ing fraud (which, in this case, means over­stat­ing their earn­ings by 10 bil­lion over ten years, which is NOT the same as slightly exag­ger­at­ing your salary to impress some­one at the bar)

UBS: Fraud

ENRON: Fraud – Citibank, JP Mor­gan, and Mer­rill Lynch tried to help con­ceal the fraud

Of course, this is just the begin­ning. Review the info­graphic to see how, exactly, the eco­nomic cri­sis of 2008 occurred and you be the judge: who’s to blame? Are we out of the dark yet? And are we mak­ing the right choices now?

[Via: CreditLoan.com]

The views and opin­ions expressed herein are the author's own and do not nec­es­sar­ily reflect those of AdvisorAnalyst.com

Tags: Alan Greenspan, Biggest Financial Crises, Charles Keating, Economic Advisor, Economics Professor, Financial Collapse, Financial Corporations, Goldman Sachs, Gramm Leach Bliley, Gramm Leach Bliley Act, Harvard Economics, High Finance, Infographic, Larry Summers, Living Memory, Martin Feldstein, Ponzi Scheme, Ronald Reagan, Sound Business Plans, Treasury Secretary
Posted in Markets | Comments Off

The Most Important Point in Market History, says Todd Harrison

Thursday, June 30th, 2011

by Trader Mark, Fund My Mutual Fund

I wanted to high­light a story on Mar­ket­watch by Minyanville's Todd Har­ri­son.  While the head­line is a bit of hyper­bole , I've learned many times, head­lines are not writ­ten by authors but by pub­lish­ers (but judg­ing from the con­tent of the piece, Todd might have choesn the head­line as well).  That said, it's a nice overview of the big­ger issues behind the scenes — that of a grand trans­fer of risk.debt from the pri­vate sec­tor to the pub­lic, as we focus on the day to day mar­ket envi­ron­ment in 'bailout globe'.  As stock spec­u­la­tors this hand­off is a "great thing" (as evi­denced by huge ral­lies each time gov­ern­ments trans­fer trou­ble from the 'mar­kets' to 'cit­i­zens')... and will con­tinue to be a great thing, until one day it is not.  But for now kick the can for­ever is the only solu­tion 2007-present.

A few snippets

• Still, we’ll chew through the macro dew one more time, for this is per­haps the most impor­tant junc­ture of the year—if not, and I’m not prone to hyper­bole, his­tory.  Yes, history.
• The bulls will point to strong cor­po­rate credit mar­kets (which sug­gest higher equity prices despite trad­ing well off their best lev­els) and “The Mis­ery Index,” which recently hit a 28-year high, as a con­trary indi­ca­tor. They’ll use tech­ni­cal terms like “sto­chas­tics” and “put/call ratios” to sup­port their the­sis, and in a vac­uum they’re 100% right.
• Out­side the vac­uum, here in the world with the rest of us, we’re danc­ing on the head of a pin, and few peo­ple seem to notice how pre­car­i­ous our posi­tion is. Way back when, dur­ing the panic of 2008, we spoke about the lesser of two evils, about how the gov­ern­ment bought the can­cer in an attempt to sell the car crash.
• They were “suc­cess­ful,” inso­far that they jacked the stock mar­ket 100% and allowed Cor­po­rate Amer­ica to roll its debt and issue stock. What they also did, per­haps unin­ten­tion­ally, is trans­fer risk from the pri­vate sec­tor to an already bur­geon­ing pub­lic sec­tor, which has height­ened ten­sion across the geopo­lit­i­cal spectrum.

Again, there are two paths:

• Drugs that mask the symp­toms (throw­ing tril­lions of dol­lars at the prob­lem), which trig­gered a spate of unin­tended con­se­quences (such as out­sized bank prof­its) and lead to a tricky tri­fecta of soci­etal acri­mony (over the likes of Gold­man Sachs and BP), social unrest (from Greece to Libya), and geopo­lit­i­cal con­flict (yet to be determined).
• Med­i­cine that cures the dis­ease (debt destruc­tion and reor­ga­ni­za­tion) will be a bit­ter pill to swal­low. But once we tra­verse that process, it’ll pave the way to a legit­i­mate outside-in glob­al­iza­tion (the US won’t lead, but will par­tic­i­pate). This, in my view, is where the mar­ket was head­ing before the syn­thetic stim­uli, and it’s where the mar­ket will ulti­mately go whether we like it or not. The ques­tion, of course, is,“From where?”

Tags: Bailout, Car Crash, Credit Markets, Dancing On The Head Of A Pin, Handoff, Head Of A Pin, Hyperbole, Issue Stock, Juncture, Lesser Of Two, Lesser Of Two Evils, Market Environment, Market History, Minyanville, Misery Index, Stochastics, Stock Speculators, Time Governments, Todd Harrison, Transfer Risk
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Worldwide Nuclear Industry Woes Deepen

Thursday, June 30th, 2011

World­wide Nuclear Indus­try Woes Deepen

The year 2011 will go down for the nuclear indus­try world­wide as an annus hor­ri­bilis.
First came the March Fukushima nuclear dis­as­ter, with oper­a­tor Tokyo Elec­tric Power Co. (TEPCO) belat­edly acknowl­edg­ing that three of the facility's six reac­tors did, in fact, suf­fer core meltdowns.

On 20 June Moody's Investors Ser­vice oblig­ingly cut its credit rat­ing on TEPCO to junk sta­tus and kept the oper­a­tor of Japan's crip­pled nuclear power plant on review for pos­si­ble fur­ther down­grade, cit­ing uncer­tainty over the fate of its bailout plan. TEPCO is Japan's largest cor­po­rate bond issuer and its shares are widely held by finan­cial insti­tu­tions. TEPCO shares have plum­meted 80 per­cent since March, drag­ging its mar­ket cap­i­tal­iza­tion below $9 bil­lion. Fol­low­ing the Fukushima cri­sis, includ­ing a round of emer­gency loans from lenders and $64 bil­lion in out­stand­ing bonds, TEPCO now has around $115 bil­lion in debt ver­sus equity of about $35 bil­lion. It's enough to make any self-respecting Japan­ese salary­man com­mit hara-kiri.

Far­ther to the west, the U.S. Nuclear Reg­u­la­tory Com­mis­sion is closely mon­i­tor­ing con­di­tions along the Mis­souri River, where flood­wa­ters were ris­ing at Nebraska Pub­lic Power District's Cooper Nuclear Sta­tion and Omaha Pub­lic Power District's Fort Cal­houn nuclear power plant. Flood­ing could com­pli­cate the restart of the Fort Cal­houn plant, shut in April for refu­el­ing, as the U.S. Army Corps of Engi­neers expects record water release from the fed­eral dams along the Mis­souri River to con­tinue until mid-August. The fail­ure on Fri­day of a Mis­souri River levee in north­west Mis­souri offered the imper­iled plants a brief reprieve from pos­si­ble flood­ing, although Nebraska offi­cials ner­vously expect the river's waters to rise again.

Com­plet­ing the tri­fecta and adding to the per­fect storm is news of a work stop­page at Israel's secre­tive Dimona nuclear power sta­tion. The only thing that Dimona offi­cials fear more than pub­lic­ity is bad pub­lic­ity and Israel's Chan­nel 10 is report­ing that Dimona employ­ees have decided to enact work sanc­tions after ongo­ing nego­ti­a­tions have failed to bring an end to a dis­pute over their work con­di­tions. Begin­ning Sun­day, exter­nal work­ers will not be allowed to work in Dimona, and the union may shut down the core com­pletely in the com­ing weeks if their demands are not met. The labor dis­pute is between the Trea­sury and the reactor's man­agers, who are demand­ing salary reim­burse­ment com­pa­ra­ble to that of nuclear researchers.

And the hits just keep on coming.

The Israeli Atomic Energy Com­mis­sion is prepar­ing to make a pre­sen­ta­tion to a spe­cial ses­sion of the Inter­na­tional Atomic Energy Agency (IAEA) in Vienna to out­line new steps to super­vise Israel's two nuclear reac­tors, the 24-megawatt Dimona reac­tor and a 5-megawatt Cen­ter for Nuclear Research reac­tor at Nahal Sorek and the han­dling of their nuclear waste. Israel's Atomic Energy Com­mis­sion head is lead­ing the Israeli delegation.

It is likely to be a con­tentious meet­ing. The United States pro­vided the Nahal Sorek reac­tor to Israel in the 1960s as part of the Atoms for Peace Pro­gram. The reac­tor is under IAEA super­vi­sion and is vis­ited by inter­na­tional inspec­tors twice a year.

Dimona, on the other hand, was sup­plied to Israel by France in 1958 and is widely believed to pro­vide fis­sile mate­r­ial for Israel's nuclear weapons pro­gram. But­tress­ing these con­cerns is the fact that Israel is not a sig­na­tory to the Nuclear Non-Proliferation Treaty and refuses to allow IAEA inspec­tors to super­vise or even visit Dimona. Israel's protes­ta­tions over the benign nature of Dimona's activ­i­ties received a world­wide blow in 1986 when a tech­ni­cian at Dimona, Mordechai Vanunu, revealed an account of Israeli covert nuclear weapons pro­duc­tion there, com­plete with pho­tographs, to London's Sun­day Times. An infu­ri­ated Israeli gov­ern­ment sub­se­quently kid­napped him in Rome, return­ing him to Israel for trial on charges of trea­son and espi­onage in a closed court, where he received and served a 18-year sen­tence, 11 of them in soli­tary, for hav­ing the temer­ity to reveal Israel's covert nuclear mil­i­tary pro­gram to the world.

Accord­ing to an Arab diplo­matic source speak­ing to Kuwait's KUNA news agency, Arab nations are demand­ing that the IAEA inspect Israel's nuclear facil­i­ties at an inter­na­tional nuclear secu­rity con­fer­ence, which opened at IAEA head­quar­ters in Vienna on Mon­day. Arab nations main­tain that Israel's unmon­i­tored nuclear pro­gram, led by Dimona's aging reac­tor, pose an unac­cept­able risk to Mid­dle East­ern nations with­out proper IAEA super­vi­sion. Fur­ther upping the ante, the diplo­matic source stated that the par­tic­i­pat­ing Arab del­e­ga­tions are renew­ing calls for Israel to sign to the Nuclear Non-Proliferation Treaty as well open­ing its nuclear facil­i­ties to reg­u­lar IAEA super­vi­sion. In the wake of Fukushima such calls are cer­tain to receive a more sym­pa­thetic hearing.

Between Vienna and labor woes, its enough to make an Israeli nuclear offi­cial wish for some­thing more man­age­able, like a plague of locusts.

Source: http://oilprice.com/Alternative-Energy/Nuclear-Power/Worldwide-Nuclear-Industry-Woes-Deepen.html

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Stock Price Correction Mostly Played Out, But Duration Could Go Longer (BCA)

Wednesday, June 29th, 2011

In the con­text of this macro-economic cli­mate, BCA Research says that investors will need to become more tac­ti­cally involved in asset allo­ca­tion, than they needed to be dur­ing the ini­tial period of the equity rally, and that tech­ni­cal sig­nals will become very impor­tant as far as the tim­ing of moves is concerned.

BCA's U.S. Equity Strat­egy ser­vice has watched numer­ous key tech­ni­cal mea­sures dur­ing the cur­rent cor­rec­tion. It appears sen­ti­ment has retraced back to lev­els that indi­cate pre­vi­ous bull mar­ket troughs. More NYSE stocks are cur­rently reach­ing new lows than highs, indi­cat­ing that sell­ing or 'dis­tri­b­u­tion' pres­sure is advancing.

BCA has two pro­pri­etary indices, the Inter­me­di­ate Equity Indi­ca­tor, and the Capit­u­la­tion Index, and both have dropped sharply and are get­ting close to neu­tral ter­ri­tory. In past cor­rec­tions, both of these slipped slightly into neg­a­tive ter­ri­tory by the time broader mar­kets hit the floor.

Accord­ing to BCA, when you com­bine these tech­ni­cal sig­nals, what shines through is that the bulk of the cor­rec­tive phase may be over as far as mag­ni­tude, though none of these indi­ca­tors has been fully played out, espe­cially if you con­sider the VIX has yet to 'spike.'

In con­clu­sion, BCA says that while the mar­ket has already expe­ri­enced an advanced cor­rec­tion, where price is con­cerned, its dura­tion still has room to run.

Copy­right © BCA Research

Tags: Asset Allocation, Capitulation, Corrective Phase, Distribution Pressure, Duration, Economic Climate, Equity Strategy, Initial Period, Lows, Magnitude, Negative Territory, Neutral Territory, Nyse Stocks, Sentiment, Signals, Stock Price, Strategy Service, Technical Measures, Troughs, Vix
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Second Quarter Earnings Expectations (Bespoke)

Wednesday, June 29th, 2011

by Bespoke Invest­ment Group

The first chart below shows how expec­ta­tions for Q2 S&P 500 earn­ings growth have changed over the past four months.  From the end of Feb­ru­ary through the end of April, growth expec­ta­tions rose from 10.7% to 14.1%.  Since the end of April, how­ever, earn­ings growth expec­ta­tions have drited lower and the con­sen­sus esti­mate cur­rently stands at 13.3%.  The peak in the Q2 earn­ings growth esti­mate coin­cides with the peak in the S&P 500 this year.  Has the mar­ket dropped because of the drop in growth esti­mates, or have ana­lysts low­ered their esti­mates because of the mar­ket drop?  Some­thing tells us it's the latter.

Below we high­light the cur­rent con­sen­sus Q2 earn­ings growth expec­ta­tions for the ten S&P 500 sec­tors.  As shown, just two sec­tors are expected to see Q2 growth that is big­ger than the S&P 500 as a whole — Energy at 40.5% and Mate­ri­als at 46.3%.  Tech­nol­ogy, Indus­tri­als and Finan­cials are expected to see low double-digit Q2 earn­ings growth, while Health Care, Tele­com, Con­sumer Dis­cre­tionary and Con­sumer Sta­ples have single-digit growth expectations.  Utilities is the only sec­tor with neg­a­tive Q2 growth expectations.

Copy­right © Bespoke Invest­ment Group

Tags: Stocks
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The Fed Outlook: Uncertainty and Reluctance

Wednesday, June 29th, 2011

The Fed Out­look: Uncer­tainty and Reluc­tance
June 27 – July 1, 2011

by Dr. Scott Brown, Chief Econ­o­mist, Ray­mond James

The Fed­eral Open Mar­ket Com­mit­tee pol­icy state­ment and Chair­man Bernanke’s post-meeting press con­fer­ence held few sur­prises. Mon­e­tary pol­icy is still accom­moda­tive – and still on hold. There’s also appar­ently lit­tle will at the Fed to do more to help the recov­ery along. For­tu­nately for the Fed and the con­sumer, we can catch a break if oil prices con­tinue to decline.

The Fed low­ered its GDP fore­cast for this year to a range of 2.7%-2.9% (4Q11-over-4Q10). In Jan­u­ary, the Fed was expect­ing 3.4% to 3.9%. Growth has slowed due to tem­po­rary fac­tors, accord­ing to the Fed, includ­ing higher energy prices and the effects of Japan’s earth­quake and tsunami. Still, the Fed also low­ered its growth out­look for 2012 GDP growth.

The Fed believes that an unem­ploy­ment rate of 5.2% to 5.6% is con­sis­tent with sus­tain­able long-term growth. How­ever, the Fed expects the unem­ploy­ment rate to decrease grad­u­ally. That’s bad news for the mil­lions unem­ployed or under­em­ployed – and yet, the Fed appears unwill­ing to do any­thing about that.

Bernanke made it clear that the cur­rent sit­u­a­tion is dif­fer­ent from a year ago. Last sum­mer, the Fed was fail­ing on both of its objec­tives. Growth was too slow and infla­tion was falling. At this point, we have only one month (May) of sub­par job growth (which fol­lowed strong job gains in the three pre­vi­ous months). Last year, job growth had slowed for a num­ber of months. Core infla­tion is higher in recent months, giv­ing the Fed less lee­way to act. Mon­e­tary pol­icy is made by a group, not just the Fed chair­man, and some Fed offi­cials have strong feel­ings against doing another round of asset purchases.

The Fed made one change to its con­di­tions for keep­ing rates low for an extended period. Pre­vi­ously, these con­di­tions included “low rates of resource uti­liza­tion, sub­dued infla­tion trends, and sta­ble infla­tion expec­ta­tions.” How­ever, with the core CPI at a 2.4% annual rate in the first five months of the year, some might be dis­in­clined to call the under­ly­ing trend “sub­dued.” The extended-period con­di­tions are now “low rates of resource uti­liza­tion and a sub­dued out­look for infla­tion over the medium run.” The trend in the core CPI and infla­tion expec­ta­tions are key fac­tors in the infla­tion out­look, but they are not the goal. So, while the change may appear to be mov­ing the goal­posts, it makes sense if you think about the Fed’s goals.

Is the Fed against job growth? Not at all. While the Fed has a dual man­date, most econ­o­mists believe that job growth will be bet­ter over the long run if infla­tion is kept low. There are leg­isla­tive efforts in the works to replace the Fed’s dual man­date with a sin­gle goal, price sta­bil­ity, but such leg­is­la­tion is unlikely to get far. A cou­ple of weeks ago, Bernanke said that “mon­e­tary pol­icy can­not be a panacea.” There is room for more fis­cal pol­icy stim­u­lus, but lit­tle polit­i­cal will to do so.

As is often the case, oil prices are the wild­card in the eco­nomic out­look. A fur­ther decline in the price of gaso­line would be very help­ful for con­sumers and the eco­nomic recovery.

Tags: Asset Purchases, Chief Economist, Committee Policy, Core Inflation, Dr Scott, Energy Prices, Fed Chairman, Fed Officials, Federal Open Market Committee, Gdp Forecast, GDP Growth, Growth Outlook, Higher Energy, Japan Earthquake, Leeway, Open Market Committee, Raymond James, Reluctance, Resource Utilization, Unemployment Rate
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"Greetings from London" (Saut)

Wednesday, June 29th, 2011

“Greet­ings From Lon­don”
June 27, 2011

“Lack of a com­pletely sat­is­fac­tory Greek bailout, along with an uptick in unem­ploy­ment claims, had the upper hand last week with a slight decline for the S&P and bond yields clos­ing at just 2.87%. How­ever, there was a sig­nif­i­cant pack­age of pos­i­tives includ­ing cor­po­rate prof­its, durable goods orders, and a –15 cent decline in gaso­line futures, and Wen declar­ing a vic­tory on infla­tion. Unem­ploy­ment claims over the next 5 weeks should tell us a good deal about whether the Soft Patch has been more due to under­ly­ing prob­lems or tran­si­tory fac­tors. Vehi­cle pro­duc­tion in July is sched­uled to surge +23.8% m/m, and judg­ing by gaso­line futures, retail gaso­line is on track to decline to $3.50.”

... Ed Hyman, ISI Research

Greet­ings from Lon­don, where I am off to a din­ner late Sun­day night with var­i­ous port­fo­lio man­agers, and there­fore these com­ments will be shorter than usual. Last week the S&P 500 (SPX /1268.45) ral­lied into the pre­scribed over­head resis­tance zone between 1292 and 1296 ref­er­enced in these mis­sives. I have sug­gested this zone would be an impor­tant “attractor/repeller” level. Unfor­tu­nately, it appears it has become a “repeller” since the SPX ‘tagged” 1295.52 and sub­se­quently declined to close last Fri­day at 1268.45. This leaves the SPX again test­ing its 200-DMA (@1263.47). My guess, given the cur­rent eco­nomic back­drop, is that the 200-DMA will be vio­lated to the down­side, lead­ing to a “false break­down” into the ascribed 1230 – 1250 zone. Also worth not­ing is that a Dow The­ory “sell sig­nal” will not be reg­is­tered until the DJIA (INDU/11934.58) closes below 11613.30, with a con­firm­ing close by the D-J Trans­ports (TRAN/5214.15) below 4950.00. If, how­ever, there is a sub­se­quent Dow The­ory “sell sig­nal,” com­bined with a down­side vio­la­tion of the 1230 – 1250 sup­port zone, I would view that as extremely neg­a­tive. Recall, we were in a pretty heady “cash posi­tion” when the SPX topped in late April. We sub­se­quently raised more cash when the 1316 – 1320 level was breached, and raised even more cash when 1295 was vio­lated. While I doubt the 1230 – 1250 zone will fail to pro­vide sup­port, clearly the equity mar­kets can do any­thing. In the interim, I think the equity mar­kets are in the process of bottoming.

The call for this week: It is depress­ing that the equity mar­ket couldn’t build on its 90% Upside Day of June 21. It is also depress­ing that the NASDAQ broke below its 200-DMA (COMP/2652.89), since we like lead­er­ship from the NASDAQ. Impor­tantly, the recent decline is all about the fact that Sell­ing Pres­sure has increased mod­estly, rather than a sig­nif­i­cant decline in Buy­ing Power. Nev­er­the­less, we are in defen­sive mode until the SPX can close above the 1292 – 1296 level, fol­lowed by a close bet­ter­ing the 1316 – 1320 zone. To get really bull­ish would require a close above 1346. Until then, we remain circumspect ...

Tags: Attractor, Bailout, Bond Yields, Cash Position, Corporate Profits, DJIA, Dow Theory, Durable Goods Orders, Economic Backdrop, Ed Hyman Isi, Gasoline Futures, Indu, Missives, Portfolio Managers, Retail Gasoline, Saut, Spx, Support Zone, Unemployment Claims, Uptick
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Uneven Aging of America; Cultural Shift Coming; Competition for Resources Between Young and Old Will Be Intense

Wednesday, June 29th, 2011

by Michael Mish Shed­lock, Global Eco­nomic Trends Analysis

William H. Frey, Senior Fel­low, at the Brook­ings Insti­tu­tion dis­cusses the Uneven Aging and "Young­ing" of Amer­ica as noted in the 2010 census.

Amer­ica is begin­ning to show its age as the baby boom gen­er­a­tion advances toward full-fledged senior-hood. But the pace of this aging will vary widely across the national land­scape due to notice­able geo­graphic shifts in the younger pop­u­la­tion, with impli­ca­tions for health care, trans­porta­tion, and hous­ing, and pos­si­ble impacts upon our abil­ity to forge soci­etal consensus.

An analy­sis of data from the 1990, 2000, and 2010 decen­nial cen­suses reveals that:

Due to baby boomers “aging in place,” the pop­u­la­tion age 45 and over grew 18 times as fast as the pop­u­la­tion under age 45 between 2000 and 2010.

Although all parts of the nation are aging, there is a grow­ing divide between areas that are expe­ri­enc­ing gains or losses in their younger populations.

Sub­urbs are aging more rapidly than cities with higher growth rates for their age-45-and-above pop­u­la­tions and larger shares of seniors. Peo­ple age 45 and older rep­re­sent 40 per­cent of sub­ur­ban res­i­dents, com­pared to 35 per­cent of city residents.

There are far more charts, graphs, and analy­sis, in the Com­plete PDF The Uneven Aging and ‘Young­ing’ of Amer­ica: State and Met­ro­pol­i­tan Trends in the 2010 Cen­sus. The excerpts above were from a summary.

Cul­tural Shift Coming

The Wash­ing­ton Post dis­cusses demo­graphic changes in If baby boomers stay in sub­ur­bia, ana­lysts pre­dict cul­tural shift

Dur­ing the past decade, the ranks of peo­ple who are middle-aged and older grew 18 times as fast as the pop­u­la­tion younger than 45, accord­ing to Brook­ings Insti­tu­tion demog­ra­pher William Frey, who ana­lyzed the 2010 Cen­sus data on age for his report, “The Uneven Aging and ‘Young­ing’ of Amer­ica.” For the first time, they rep­re­sent a major­ity of the nation’s voting-age population.

The polit­i­cal ram­i­fi­ca­tions could be huge as older vot­ers com­pete for resources with younger generations.

“When peo­ple think of sub­ur­ban vot­ers, it’s going to be dif­fer­ent than it was years ago,” Frey said. “They used to be peo­ple wor­ried about schools and kids. Now they’re more con­cerned about their own well-being.”

The nation’s baby boomers — 76 mil­lion peo­ple born between 1946 and 1964 — were the first gen­er­a­tion to grow up in sub­ur­bia, and the sub­urbs is where many chose to rear their own chil­dren. Now, as the old­est boomers turn 65, demog­ra­phers and local plan­ners pre­dict that most of them will not move to retire­ment areas such as Florida and Ari­zona. They will stay put.

“If you ask younger boomers, who are 45-ish, a lot say they expect to move and retire else­where,” said John Ken­ney, chief of aging and dis­abil­ity ser­vices with the Mont­gomery County health depart­ment. “But as peo­ple get to 65 and 70, whether because of choice or default, they end up stay­ing. We are plan­ning on peo­ple being here.”

“Retire­ment used to be the golden years,” said Ken­ney. “No more.”

Local gov­ern­ments are start­ing to grap­ple with the implications.

“Clearly, the age wave is com­ing,” said Pat Her­rity (R-Springfield), a county super­vi­sor who heads the 50-plus committee.

Although Florida and Ari­zona remain retire­ment mag­nets, 17 of the 25 states with the high­est con­cen­tra­tions of senior cit­i­zens are cold-weather states.

Older Amer­i­cans now rep­re­sent 53 per­cent of voting-age adults.

“The polit­i­cal clout of older Amer­i­cans will be even more mag­ni­fied if the tra­di­tional higher turnout of this group con­tin­ues, and as the com­pe­ti­tion for resources between the young and the old becomes more intense,” Frey writes.

Retire­ment No Longer Golden Years

I have been dis­cussing social trends and chang­ing social atti­tudes for quite some time. Here is a snip from May 2008 on Demo­graph­ics Of Job­less Claims

Struc­tural Demo­graph­ics Poor

Struc­tural demo­graphic effects imply that prospects in the full-time labor mar­ket will be poor for those over age 50–55 and work­ers under age 30. Teen and college-age employ­ment could suf­fer a great deal from (1) a dra­matic slow­down in dis­cre­tionary spend­ing and (2) part-time Boomer reen­trants into the low-paying ser­vice sec­tor; work­ers who will be com­pet­ing with younger workers.

Iron­i­cally, older part-time work­ers remain­ing in or reen­ter­ing the labor force will be cheaper to hire in many cases than younger work­ers. The rea­son is Boomers 65 and older will be cov­ered by Medicare (as long as it lasts) and will not require as many ben­e­fits as will younger work­ers, espe­cially those with families.

In effect, Boomers will be com­pet­ing with their chil­dren and grand­chil­dren for jobs that in many cases do not pay liv­ing wages.

One of the many con­se­quences of boomer demo­graph­ics is the longer the US opus of reform of Medicare, and Social Secu­rity, the more dif­fi­cult it will become because of vot­ing demographics.

Mike "Mish" Shedlock

http://globaleconomicanalysis.blogspot.com

Tags: Baby Boom Generation, Baby Boomers, Brookings Institution, Census Data, City Residents, Decennial Censuses, Demographer, Demographic Changes, Global Economic Trends, Metropolitan Trends, Michael Mish, Mish Shedlock, National Landscape, Population Age, Societal Consensus, Suburban Residents, Suburbia, Washington Post, William Frey, William H Frey
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James Montier (GMO): Investment Perspective (June 2011)

Tuesday, June 28th, 2011

James Montier's (GMO) lat­est, "A Value Investor’s Per­spec­tive on Tail Risk Pro­tec­tion: An Ode to the Joy of Cash," pro­vides an excel­lent per­spec­tive on risk man­age­ment tenets most often over­looked by investors. Montier's behav­ioural sci­ence back­ground make him one of the most inter­est­ing cross mar­ket strate­gists in the invest­ing world.

Long ago, Keynes argued that the “cen­tral prin­ci­ple of invest­ment is to go con­trary to gen­eral opin­ion, on the grounds that, if every­one is agreed about its mer­its, the invest­ment is inevitably too dear and there­fore unat­trac­tive.” This pow­er­ful state­ment of the need for con­trar­i­an­ism is fre­quently ignored, with dis­turb­ing alacrity, by many investors.

The lat­est exam­ple in the long line of such behav­ior may well be the gen­eral enthu­si­asm for so-called tail risk pro­tec­tion. The range of tail risk pro­tec­tion prod­ucts seems to be explod­ing. Invest­ment banks are offer­ing “solu­tions” (invest­ment bank speak for high-fee prod­ucts) to investors and fund man­age­ment com­pa­nies are launch­ing “black swan” funds. There can be lit­tle doubt that tail risk pro­tec­tion is cer­tainly an invest­ment topic du jour.

I can’t help but won­der if much of the desire for tail risk pro­tec­tion stems from greed rather than fear. By which I mean that it seems one of the com­mon rea­sons for want­ing tail risk pro­tec­tion is to allow investors to con­tinue to “har­vest risk pre­mium” even when those risk pre­mi­ums are too nar­row. This flies in the face of sen­si­ble invest­ing. A safer and less costly (in terms of price, although per­haps not in terms of career risk) approach is sim­ply to step away from mar­kets when risk pre­mi­ums become nar­row, and wait until they widen before returning.

The very pop­u­lar­ity of the tail risk pro­tec­tion alone should spell cau­tion to investors. Keynes’s edict with which we opened would sug­gest that the degree of pop­u­lar­ity of tail risk pro­tec­tion helps to under­mine its ben­e­fits. Effec­tively, you should seek to buy insur­ance when nobody wants it, rather than when every­one is excited about the idea. An alter­na­tive way of phras­ing this is to say that insur­ance (and that is exactly what tail risk pro­tec­tion is) is as much of a value propo­si­tion as any other ele­ment of investing.

As always, a com­par­i­son between price and value is required. One of the nice aspects of insur­ance in an invest­ment sense is that it is gen­er­ally cheap when its value is high­est (although this may no longer be the case given the rise of so many tail risk prod­ucts). That is to say, because most mar­ket par­tic­i­pants appear to price every­thing based on extrap­o­la­tion, they ignore the influ­ence of the cycle. Thus they demand lit­tle pay­ment for insur­ance dur­ing the good times because they never see those times end­ing. Con­versely, dur­ing the bad times, the aver­age par­tic­i­pants seem will­ing to over­pay for insur­ance as they think the bad times will never cease.

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Tags: Alacrity, Behavioural Science, Black Swan, Central Principle, Cross Market, Edict, Fund Management Companies, Investment Bank, Investment Banks, Investment Perspective, Investment Topic, James Montier, Market Strategists, Offering Solutions, Risk Approach, Risk Premium, Risk Premiums, Risk Protection, Science Background, Value Investor
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The World According to Malcolm Gladwell

Tuesday, June 28th, 2011

Mal­colm Glad­well, one of the best sto­ry­tellers of our gen­er­a­tion, is the author of four books, includ­ing “The Tip­ping Point: How Lit­tle Things Make a Big Dif­fer­ence,” (2000) , “Blink: The Power of Think­ing With­out Think­ing” (2005), and “Out­liers: The Story of Suc­cess” (2008) all of which were num­ber one New York Times best­sellers. His lat­est book, “What the Dog Saw” (2009) is a com­pi­la­tion of sto­ries pub­lished in The New Yorker.

(Hat tip: Barry Ritholtz, The Big Pic­ture)

Tags: Barry Ritholtz The Big Picture, Blink, Compilation, Four Books, Gladwell Malcolm, Hat Tip, Malcolm Gladwell, New York Times, New Yorker, Outliers, Storytellers, Success, Tipping Point
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China: Solution for European Debt? (Mobius)

Tuesday, June 28th, 2011

"It's not unre­al­is­tic (for China to back­stop the Euro­pean debt cri­sis); in fact it's very real­is­tic, par­tic­u­larly at this time when China wants to diver­sify its for­eign exchange hold­ers... They have $3-trillion, and try­ing to put that away isn't easy, and the euro is an obvi­ous can­di­date," Mark Mobius, exec­u­tive chair­man of Tem­ple­teon Emerg­ing Mar­kets Group told CNBC.

Source: CNBC

Tags: Backstop, China, Cnbc, Debt Crisis, Emerging Markets Group, Executive Chairman, Foreign Exchange, Mark Mobius, Trillion
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"Land of the Predictable": Pimco CEO Warns U.S. Debt Default Might Have "Catastrophic" Effect; Obama's Hypocrisy

Tuesday, June 28th, 2011

In yet another of the seem­ingly end­less self-serving fear-mongering exer­cises, Pimco’s El-Erian Says U.S. Debt Default Might Have ‘Cat­a­strophic’ Effect

Pacific Invest­ment Man­age­ment Co. LLC Chief Exec­u­tive Offi­cer Mohamed El-Erian said a short-term default by the U.S. on its debt might have “cat­a­strophic” legal consequences.

“We would be in the land of the unpre­dictable” if law­mak­ers fail to reach an agree­ment to raise the $14.3 tril­lion debt ceil­ing and the U.S. misses a pay­ment “sim­ply because of the tech­ni­cal link­ages,” El-Erian said in an inter­view on CNN’s “Fareed Zakaria GPS” pro­gram, sched­uled to air today.

U.S. law­mak­ers are seek­ing a path to increas­ing the debt limit and to cut­ting at least $1 tril­lion from the long-term deficit before an Aug. 2 dead­line. Pres­i­dent Barack Obama plans to hold sep­a­rate meet­ings at the White House June 27 with Sen­ate lead­ers Ari­zona Demo­c­rat Harry Reid and Ken­tucky Repub­li­can Mitch McConnell in an effort to break an impasse that scut­tled a seven-week nego­ti­at­ing effort led by Vice Pres­i­dent Joe Biden.

“My advice is please try and get together and solve this issue in the con­text of a medium-term reform pack­age,” El-Erian said. “If you can’t do that and you’re going to kick the can down the road, kick the can rather than face some­thing that could be cat­a­strophic in terms of legal con­tracts being triggered.”

“So when we look at Trea­suries, we see the big buyer step­ping away from the mar­ket, for cer­tain. And we ask the ques­tion, who else is going to be buy­ing at these lev­els, and we can’t iden­tify another buyer of the size of the Fed.”

El-Erian said the U.S. fis­cal prob­lems are dwarfed by those of Greece, whose debt reached 143 per­cent of gross domes­tic prod­uct last year.

“It is inevitable that Greece would have to restruc­ture its debt,” he said. “Greece has two prob­lems: it has too much debt and it can­not grow. And until these prob­lems are solved, more and more of Europe is going to become contaminated.”

"Land of the Predictable"

I mock the lame fear-mongering excuses of gov­ern­ment offi­cials, politi­cians, and in this case buy­ers of gov­ern­ment and agency debt who do not want to see inter­est rates rise out of fear of what it would do to the short-term value of their portfolios.

Thus it was entirely pre­dictable that Pimco would issue a "Cat­a­strophic" warn­ing. As for who would buy US gov­ern­ment debt, that answer is quite easy to explain: China and Japan would as a func­tion of trade-deficit math, and they would add to that total, as would the UK, Canada, and Europe. El-Erian knows just that (as much as any­one knows any­thing in the land of the unknowable).

The biggest irony in El-Erian's state­ment is Pimco would be a buyer, and so would mil­lions of oth­ers if inter­est rates rose high enough.

Finally, inter­est rates would come crash­ing back down as soon as an agree­ment was worked out and there is no doubt an agree­ment will be reached sooner rather than later.

The only thing "unpre­dictable" is the exact nature of that agreement.

Shut­downs Hap­pened Twice Before

Please note that US gov­ern­ment shut­downs have hap­pened twice before, in 1995 and 1996 under pres­i­dent Clinton.

The United States fed­eral gov­ern­ment shut­down of 1995 and 1996 was the result of a con­flict between Demo­c­ra­tic Pres­i­dent Clin­ton and the Republican-controlled Con­gress over fund­ing for Medicare, edu­ca­tion, the envi­ron­ment and pub­lic health. It took place after Clin­ton vetoed the spend­ing bill which Con­gress sent him. There­upon, the Fed­eral gov­ern­ment of the United States put non-essential gov­ern­ment work­ers on fur­lough and sus­pended non-essential ser­vices from Novem­ber 14 through Novem­ber 19, 1995 and from Decem­ber 16, 1995 to Jan­u­ary 6, 1996. The major play­ers were Pres­i­dent Bill Clin­ton and the Speaker of the U.S. House of Rep­re­sen­ta­tives Newt Gingrich.

Noth­ing Cat­a­strophic Happened

Amidst all this fear-mongering by pres­i­dent Obama, Pimco, and oth­ers, I calmly point out that noth­ing cat­a­strophic hap­pened last time, and there is no rea­son to believe any­thing cat­a­strophic would hap­pen this time.

Pres­i­dent Obama's Hypocrisy

Inquir­ing minds just may be inter­ested in know­ing Obama's track record on debt ceil­ings when he was Sen­a­tor Obama.

The Obama admin­is­tra­tion is warn­ing of cat­a­strophic con­se­quences if Con­gress does not increase the debt ceil­ing, the legal limit on how much the fed­eral gov­ern­ment can bor­row, but Barack Obama held a dif­fer­ent view on the issue as a sen­a­tor in 2006.

Five years ago, then-Sen. Obama (D-Ill.) voted against rais­ing the debt ceil­ing and even spoke about it on the Sen­ate floor before the Republican-controlled Sen­ate voted 52–48 to increase it.

“The fact that we are here today to debate rais­ing America's debt limit is a sign of lead­er­ship fail­ure,” Obama said on March 16, 2006. “Lead­er­ship means that ‘the buck stops here.’ Instead, Wash­ing­ton is shift­ing the bur­den of bad choices today onto the backs of our chil­dren and grand­chil­dren. Amer­ica has a debt prob­lem and a fail­ure of lead­er­ship. Amer­i­cans deserve bet­ter. I there­fore intend to oppose the effort to increase America's debt limit.”

Fail­ure of Leadership

I remind the pres­i­dent “The fact that we are here today to debate rais­ing America's debt limit is a sign of lead­er­ship fail­ure. Wash­ing­ton is shift­ing the bur­den of bad choices today onto the backs of our chil­dren and grand­chil­dren. Amer­ica has a debt prob­lem and a fail­ure of lead­er­ship. Amer­i­cans deserve better."

I urge Con­gress to dis­re­gard the self-serving fear-mongering of pres­i­dent Obama and Pimco CEO El-Erian because we have a debt prob­lem and a fail­ure of lead­er­ship to do any­thing about it. Amer­i­cans deserve bet­ter, and the way to do that is to act respon­si­bly on a deficit-reduction pack­age, now, not 10 years from now.

Mike "Mish" Shedlock

http://globaleconomicanalysis.blogspot.com

Tags: Barack Obama, Canadian Market, Chief Executive Officer, Cnn, Co Llc, Debt Ceiling, Debt Default, Debt Limit, Fareed Zakaria, Fear Mongering, Fiscal Problems, Harry Reid, Joe Biden, Legal Consequences, Legal Contracts, Mitch Mcconnell, Mohamed El Erian, Pacific Investment Management Co, PIMCO, President Joe, Senate Leaders
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Why Its Getting Harder To Beat the Market (Michael Mauboussin)

Tuesday, June 28th, 2011

On this week's Wealth­Track, “Finan­cial Thought Leader” Michael Mauboussin, Chief Invest­ment Strate­gist of Legg Mason Cap­i­tal Man­age­ment, explains why its get­ting harder to beat the mar­ket and why doing less can actu­ally make you more.

Copy­right © Con­suelo Mack, WealthTrack

Tags: Chief Investment Strategist, Financial Investment, Legg Mason, Legg Mason Capital Management, Mack, Michael Mauboussin, Wealthtrack
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Look For Improved Conditions in the Second Half of 2011 (Doll)

Tuesday, June 28th, 2011

by Bob Doll, Chief Equity Strate­gist, Fun­da­men­tal Equi­ties, Black­Rock

Stocks again expe­ri­enced mixed results last week as mar­kets remain stuck in neu­tral. Last week, the Dow Jones Indus­trial Aver­age lost 0.6% to 11,935, the S&P 500 Index was down 0.2% to 1,268 and the Nas­daq Com­pos­ite ral­lied 1.4% to 2,653. As we have been say­ing for sev­eral weeks now, while we are expect­ing to see addi­tional volatil­ity, we view the cur­rent period of weak­ness as a poten­tial buy­ing opportunity.

The Fed­eral Reserve held its reg­u­larly sched­uled pol­icy meet­ing last week and, to no one’s sur­prise, elected to keep inter­est rates on hold. The accom­pa­ny­ing state­ment and Fed Chair­man Ben Bernanke’s follow-on news con­fer­ence made it clear that the cen­tral bank has down­graded its assess­ment of US eco­nomic growth. The Fed did, how­ever, under­score that the fac­tors caus­ing the weak­ness were mostly tem­po­rary, in par­tic­u­lar high­light­ing higher fuel and food prices and dis­rup­tions from the nat­ural dis­as­ters in Japan ear­lier this year. Look­ing ahead, we are not expect­ing to see any near-term changes in the Fed’s posi­tion. We think there is vir­tu­ally no chance of addi­tional quan­ti­ta­tive eas­ing mea­sures (i.e., we will not see a QE3). Con­versely, given a slow recov­ery and a sub­dued infla­tion out­look we are not expect­ing to see higher inter­est rates until at least mid-2012.

Oil prices were also in the news last week, given the Inter­na­tional Energy Agency’s announce­ment that it would be releas­ing up to 60 mil­lion bar­rels of oil from strate­gic reserves over the com­ing month. At roughly 2 mil­lion bar­rels per day, this amount should more than off­set the short­fall from lost Libyan pro­duc­tion, albeit only for a month. The announce­ment came as a sur­prise to the mar­kets and resulted in a sharp downtick in oil prices, but we are not expect­ing this down­trend to be long-lasting. The amount of oil being released is not enough to change the medium– or longer-term out­look for prices, which should remain depen­dent on such fac­tors as demand lev­els and geopo­lit­i­cal risks.

An addi­tional item that gar­nered its share of head­lines last week was the stalled debate in Wash­ing­ton over the debt ceil­ing. At present, Democ­rats and Repub­li­cans have been unable to move the debate for­ward, with Repub­li­cans remain­ing adamant in their stance that for every dol­lar the debt ceil­ing is raised, an equal amount of spend­ing must be cut. The GOP is also insist­ing that any dis­cus­sion of poten­tial tax increases remain off the table. It really is not much of a sur­prise that the talks are get­ting bogged down. As we saw with the ear­lier debate over a poten­tial gov­ern­ment shut­down, there is a great deal of games­man­ship and polit­i­cal the­ater asso­ci­ated with these issues and, ulti­mately, we expect some sort of com­pro­mise to be reached. In our view, there is vir­tu­ally no chance that the grid­lock reaches a point that could cause an actual default on US Trea­sury debt. Even if Con­gress is unable to reach a short– or long-term agree­ment by the cur­rent dead­line of August 2, the gov­ern­ment would have a num­ber of options. The Trea­sury depart­ment still has the flex­i­bil­ity to pri­or­i­tize other spend­ing to remain cur­rent on debt pay­ments and pol­i­cy­mak­ers could even elect to enact some sort of par­tial gov­ern­ment shut­down rather than default.

As has been the case for many weeks now, con­vic­tion lev­els are low among investors, which have resulted in a mod­est, but pro­longed, cor­rec­tion in stock prices. The macro envi­ron­ment of slow-but-positive growth, low infla­tion and easy mon­e­tary pol­icy remains con­ducive to higher equity prices, but investors are unable or unwill­ing to look past near-term risks and as a result, the “risk on/risk off” trade remains dom­i­nant. The ques­tion, then, is what it will take to get the mar­kets back on track. Cor­po­rate earn­ings have been strong, and we are approach­ing the begin­ning of the second-quarter earn­ings sea­son, but expec­ta­tions have drifted lower due to weak­ness in the finan­cial sec­tor. Clar­ity around the endgame of the Euro­pean sov­er­eign debt cri­sis would cer­tainly help, but that does not appear to be forth­com­ing any time soon. Ulti­mately, we are expect­ing to see bet­ter news con­cern­ing the US econ­omy and are call­ing for a reac­cel­er­a­tion in growth in the sec­ond half of 2011. Should that hap­pen, it should reas­sure investors that the global recov­ery will per­sist, which should help stock prices to again move higher.

Bob Doll is Chief Equity Strate­gist for Fun­da­men­tal Equi­ties at Black­Rock^® a pre­mier provider of global invest­ment man­age­ment, risk man­age­ment and advi­sory ser­vices. Mr. Doll is also Lead Port­fo­lio Man­ager of BlackRock's Large Cap Series Funds. Prior to join­ing the firm, Mr. Doll was Pres­i­dent and Chief Invest­ment Offi­cer at Mer­rill Lynch Invest­ment Managers.

Sources: Black­Rock; Bank Credit Ana­lyst. This mate­r­ial is not intended to be relied upon as a fore­cast, research or invest­ment advice, and is not a rec­om­men­da­tion, offer or solic­i­ta­tion to buy or sell any secu­ri­ties or to adopt any invest­ment strat­egy. The opin­ions expressed are as of June 27, 2011, and may change as sub­se­quent con­di­tions vary. The infor­ma­tion and opin­ions con­tained in this mate­r­ial are derived from pro­pri­etary and non­pro­pri­etary sources deemed by Black­Rock to be reli­able, are not nec­es­sar­ily all-inclusive and are not guar­an­teed as to accu­racy. Past per­for­mance is no guar­an­tee of future results. There is no guar­an­tee that any fore­casts made will come to pass. Reliance upon infor­ma­tion in this mate­r­ial is at the sole dis­cre­tion of the reader. Invest­ment involves risks. Inter­na­tional invest­ing involves addi­tional risks, includ­ing risks related to for­eign cur­rency, lim­ited liq­uid­ity, less gov­ern­ment reg­u­la­tion and the pos­si­bil­ity of sub­stan­tial volatil­ity due to adverse polit­i­cal, eco­nomic or other devel­op­ments. The two main risks related to fixed income invest­ing are inter­est rate risk and credit risk. Typ­i­cally, when inter­est rates rise, there is a cor­re­spond­ing decline in the mar­ket value of bonds. Credit risk refers to the pos­si­bil­ity that the issuer of the bond will not be able to make prin­ci­pal and inter­est pay­ments. Index per­for­mance is shown for illus­tra­tive pur­poses only. You can­not invest directly in an index.

Tags: 60 Million, Ben Bernanke, Bob Doll, Disruptions, Dow Jones, Dow Jones Industrial, Dow Jones Industrial Average, Fed Chairman, Food prices, Inflation Outlook, International Energy Agency, Nasdaq Composite, Natural Disasters In Japan, News Last Week, Oil Prices, Qe3, Shortfall, Strategist, Term Changes, Volatility
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China Eyes Canada's Oil, U.S.' Energy Nest Egg

Monday, June 27th, 2011

CALGARY, Alberta (AP) — In the north­ern reaches of Alberta lies a vast reserve of oil that the U.S. views as a pil­lar of its future energy needs.

China, with a grow­ing appetite for oil that may one day sur­pass that of the U.S., is ready to spend the dol­lars for a big piece of it.

The oil sands of this Cana­dian province are so big that they will be able to serve both of the world's largest economies as pro­duc­tion expands in the com­ing years. But that will mean build­ing at least two pipelines, one south to the Texas Gulf Coast and another west toward the Pacific, and that in turn means fresh envi­ron­men­tal bat­tles on top of those already rag­ing over the costly and energy-intensive method of extract­ing oil from sand.

Most believe that both will even­tu­ally be built. But if the U.S. doesn't approve its pipeline promptly, Canada might increas­ingly look to China, think­ing Amer­ica doesn't want a big stake share in what envi­ron­men­tal­ists call "dirty oil," which they say increases green­house gas emissions.

Alberta has the world's third largest oil reserves, more than 170 bil­lion bar­rels. Daily pro­duc­tion of 1.5 mil­lion bar­rels from the oil sands is expected to nearly triple to 3.7 mil­lion in 2025. Over­all, Alberta has more oil than Rus­sia or Iran. Only Saudi Ara­bia and Venezuela have more.

Alberta is one of the few places where oil com­pa­nies can invest, as the major­ity of the world's oil reserves are con­trolled by national gov­ern­ments. Only 22 per­cent of the total world reserves are acces­si­ble to pri­vate sec­tor invest­ment, 52 per­cent of which is in Alberta's oil sands, accord­ing to the Cana­dian Asso­ci­a­tion of Petro­leum Producers.

Canada's only major oil export mar­ket is the U.S. But with the prod­uct of oil sands and pipeline deliv­ery to the U.S. under peren­nial clouds of envi­ron­men­tal objec­tions, and with Asian demand grow­ing, this coun­try wants to diver­sify its mar­ket, and China is eager to oblige.

Sinopec, a Chi­nese state-controlled oil com­pany, has a stake in a $5.5 bil­lion plan drawn up by the Alberta-based Enbridge com­pany to build the North­ern Gate­way Pipeline from Alberta to the Pacific coast province of British Colum­bia. Alberta Finance Min­is­ter Lloyd Snel­grove met this month with Sinopec and CNOOC, China's other big oil com­pany, and China's largest banks.

"They are sit­ting there say­ing if you need money, we've got money; if you need exper­tise, we've got that; what­ever you need we've got," Snel­grove said.

Alberta Pre­mier Ed Stel­mach said Amer­i­can gov­ern­ment offi­cials have expressed con­cern about a pipeline to the Pacific. They have raised it in terms of "Well, are you still going to be able to sup­ply us?" he said.

That fear may already have fallen aside.

"There are peo­ple who still feel that one bar­rel of oil going from Canada to China could be one more bar­rel going to the United States. But those are peo­ple in the minor­ity. It is a con­cern but it is not a big con­cern," said Wen­ran Jiang, a pro­fes­sor at the Uni­ver­sity of Alberta and a senior fel­low of the Asia Pacific Foundation.

Stel­mach said the U.S. will remain Canada's pri­mary oil customer.

But abo­rig­i­nal and envi­ron­men­tal oppo­si­tion to the Pacific pipeline is fierce. The oppo­nents fear it will leak. The local mem­ber of Par­lia­ment, Nathan Cullen, says acci­dents are inevitable in the rough waters around Kiti­mat, British Colum­bia, where the pipeline will end. And no one has for­got­ten the Exxon Valdez oil spill of 1989, some 1,300 kilo­me­ters (800 miles) north of Kitimat.

How­ever, Cana­dian Prime Min­is­ter Stephen Harper, freshly and con­vinc­ingly re-elected, is an oil man who has sug­gested he sup­ports build­ing the pipeline. Also, Calgary-based Kinder Mor­gan has plans to expand an exist­ing pipeline route to Van­cou­ver so that oil can be shipped to Asia.

Crit­ics dis­like the whole con­cept of oil sands, because extract­ing the oil requires huge amounts of energy and water, increases green­house gas emis­sions and threat­ens rivers and forests. Key­stone XL, the pipeline that would bring Alberta oil to Texas Gulf Coast refiner­ies to serve the U.S. mar­ket, com­pounds the issue.

Pipeline leaks can affect drink­ing water and sen­si­tive ecosys­tems, the U.S. Envi­ron­men­tal Pro­tec­tion Agency warns. In a let­ter to the State Depart­ment this month, it cited major pipeline spills last year in Michi­gan and Illi­nois, as well as two leaks last month in the Key­stone pipeline, a 1,300-mile line owned by the same com­pany that wants to build Key­stone XL. The U.S. pipeline safety agency briefly blocked Calgary-based Tran­sCanada from restart­ing the Key­stone pipeline this month because of safety concerns.

But Key­stone XL could sub­stan­tially reduce U.S. depen­dency on oil from the Mid­dle East and other regions, accord­ing to a report com­mis­sioned by the Obama admin­is­tra­tion. It sug­gests that the pipeline, cou­pled with a reduc­tion in over­all U.S. oil demand, "could essen­tially elim­i­nate Mid­dle East crude imports longer term."

Tags: Calgary Alberta, Canadian, Canadian Association Of Petroleum, Canadian Market, Canadian Province, China Eyes, Chinese State, Crude Oil, Dirty Oil, Environmental Battles, Greenhouse Gas Emissions, Intensive Method, Largest Economies, National Governments, Nest Egg, Oil Export, Oil Sands, Petroleum Producers, Private Sector Investment, Sinopec, Texas Gulf Coast, U S Energy, World Reserves
Posted in Canadian Market, Markets, Oil and Gas | 1 Comment »