http://www.nytimes.com/2008/05/28/business/28realty.html?em&ex=1212206400&en=84ac07abfdaa2a90&ei=5087%0A

Holy crap batman!  This is self explanatory.  Competition increases lower consumer prices.  Funny how Bush selects the realtors to take the beating, but farmers don’t or name your subsidized/protected industry doesn’t. Pharmaceuticals deserve no special treatment and it’s looking more and more like you can cure things much simpler than the ways we’ve marketed thus far.  A great article was written on this by Bill Sardi available at

http://www.lewrockwell.com/sardi/sardi84.html

The article is filled with lots of medical language and chemistry for those of you inclined.  I can understand enough of this to conclude logically it has a chance based on the trial numbers. What do you think the big pharma companies would do if some little start up starts producing this marginally above cost?  I bet they would be shut down as big pharma uses their Gestapo gang known as government to wield the big stick.  You lose. How pioneering could this be?  Who knows, but let’s look at the money to be made.

It cannot be said the Gc-MAF cancer cure has gone unheralded. Reuters News covered this developing story in January. But the news story still did not receive top billing nor did it fully elucidate the importance of the discovery, actually made years ago, that the human body is capable of abolishing cancer once its immune system is properly activated.

Gc-MAF is a naturally made molecule and is not patentable, though its manufacturing process is patent protected. There is no evidence of any current effort to commercialize this therapy or put it into practice. Should such an effective treatment for cancer come into common practice, the income stream from health insurance plans for every oncology office and cancer center in the world would likely be reduced to the point of financial insolvency and hundreds of thousands of jobs would be eliminated.

What happens when there are lots of extra doctors are available?  Prices fall!  Hello health care reform! You, the citizen wins, not to mention the lower costs of the drugs themselves.  I think we’ve got a large backlash brewing against government which is the FDA and like most government programs is dropping the ball and we need change.  There needs to be change everywhere, but we must begin demanding that change somewhere. What most more to you than your health?

The National Cancer Institute estimates cancer care in the U.S. costs ~$72 billion annually (2004). Furthermore, about $55 billion of cancer drugs are used annually, none which have not significantly improved survival rates throughout the history of their use. If a typical cancer patient had to undergo 30 Gc-MAF injections at a cost of $150 per injection, that would cost ~$4500, not counting doctor’s office visits and follow-up testing. For comparison, gene-targeted cancer drugs range from $13,000 to $100,000 in cost per year and produce only marginal improvements in survival (weeks to months).

Up to this point, the National Cancer Institute is totally silent on this discovery and there is no evidence the cancer care industry plans to quickly mobilize to use this otherwise harmless treatment.

It’s only too good to be true when there is a gatekeeper that got there by doing as they were told.  It’s time you demand your rights to open competition in the industry from alternatives that are affordable.  We have the window available.  Inflation in health care is notorious and we’re looking for solutions.  Is this not a solution?  Who knows for sure unless we can seriously test the clinical efficacy and be the judge?

http://www.ft.com/cms/s/0/4dc6d834-2ce2-11dd-88c6-000077b07658.html

Michael Chertoff, the Homeland Security secretary, does not agree with suggestions that the phrase is equated with a war on Islam, says Russ Knocke, his spokesman.

So this is one of those, your wrong because I think I’m right moments.  Who cares if you agree or not, if those people are offended and you want to stop fighting with them wtf sense does it make to continue to incite anger with their only possible detractors? At this moment, 70% of us don’t like Bush.  However faced with the lesser of two evils when push comes to shove, we would rally behind Bush if we’re occupied.  It’s common sense, yet they’re stuck on saying (believing) they’re right, until they’re proven wrong.  Nice strategy.

“We are at war with terrorism, and its underlying ideology – not Islam – and we’ve gone out of our way to make that point,” says Mr Knocke. “In truth, war has been declared upon us.”

“While we want to be mindful to the way our messages are heard by Muslim audiences, we also think war on terror accurately describes the fight we are in,” he added.

I remember the Redcoats being terrorized by Revolutionaries during the “War of Insurrection” when we did not line up like idiots and shoot at each other.  We used our brains and reasoned we must use tactics to suit our weakness’ to eliminate the foreign invaders.  Gee, what do the “terrorists” do – the same thing.  But we were right then, and they’re wrong now.  Do as we say, not as we do. History doesn’t repeat but it does rhyme…(Twain).

“The chairman is aware of the concerns voiced by many in the Muslim community about the phrase ‘war on terror’,” Captain Kirby said.

So there is more than one person to back this story up.  The Muslim world understands the connotation of the phrase rather than the denotative mind warp this administration wants us to believe. It’s flat out inflammatory and serves one purpose, to continue to add to the ranks of those against us and further the war serving American corporate interests.  Those are the only ones benefitting from this all.  The children of America are being slaughtered; the citizens who support the troops are being fleeced not only through the debt and interest but the wicked inflation that is gathering steam while the defense and infrastructure companies report record profits.

I suppose on one hand, maybe we should be happy.  America is on sale as the dollar gets trashed.  American companies are being purchased more frequently by foreign investors.  We’re not the ones buying a bunch of foreign companies, so what’s really going on here?  There is a large problem with the present course of action. Ultimately the world wants to reach our standard of living.  The thing is, our standard of living is so much better relative to most underdeveloped countries and consequently we’ll be giving up our standards and trading down while our bankers are seeking better alternative standards. Consider China’s communication infrastructure being near completely wireless.  Costs are lower, build out is quicker.  They’re catching up exponentially and when the frog looks out the day before the lake is covered, he sees half the lake.  The next morning he has no open water as the Lilli pads have grown exponentially.

You want to end this?  Follow Ron Paul’s sage words and remove the bases from foreign lands.  The basis for the struggle is a misguided animosity stemming from American hegemony distorting their way of life.  Yes corporate America will never leave, however the perceived aggression not only irritates a minority section of Islam, it is in violation of our constitution.  For those of us saying this is unrealistic, they do not understand the changes we have grown through.

Missile technology is quickly becoming the basis for military strategic operations.  We showed what we are capable of, near laser precision with a piece of metal moving several hundred miles an hour falling into your chimney.  Consider nuclear weapons.  One of two things must be true.  Either they work and are a nuclear deterrent, or they don’t work. If they do not deter anyone from using them against us, then we’ve wasted a few trillion tax dollars in the past sixty or so years. 

Or they work, and we’re waging wars against people and wasting money in the process.  The only wars we’ve fought since WWII have been limited engagements that have accomplished little.  Communism was destined to fail on its own.  The staple society in which it was constructed failed in the early nineties because their centrally planned economy was uncompetitive and was bankrupted when Saudi Oil flooded the market.

Even if we let Vietnam be overrun by Vietcong and never set foot, it would have failed as it has, and current day Vietnam is a small mirror to China. Both will produce a large middle class which won’t maintain status quo when it comes to individual freedoms.  It will take time, and most importantly a social movement to catapult the country even further forward.  The great firewall will not last.

So if we walk away and leave sovereign nations to conduct their business and we focus on ourselves instead of projection our insecurities, we might be able to move through beyond this and focus on real problems like citizens losing their freedom, transitioning away from fossil fuels and the general economic malaise that is descending upon us like icy hot.

Middle of Getting Nowhere

http://money.cnn.com/2008/05/28/news/economy/feelingpoor/index.htm?eref=rss_topstories

That’s exactly how Chris Ackerman feels. He said that he and his wife, who live just outside Seattle, find that their paychecks no longer cover their rent, student loans and daily living expenses. That is forcing the young couple to turn to their credit cards to make ends meet.

They’ve already cut out much of their entertainment and trips to visit her family and friends 30 miles away. If gas and grocery prices continue to rise, Ackerman, who works for an importer, said he’ll have to stop contributing to his 401(k) plan. He doesn’t see many other options.

Stories like this make me think of the classes we are led to believe don’t exist. I think the upper crust has been binging for the two terms of Bush following his lead in spending our money. Not until more people feel this and come to recognize they are getting nothing from the government in spite of the payments and patriotism in kind.  Corporate profits are private while the losses are being borne to the society.  When companies are not accountable for their losses, where is Capitalism?

Yet when we make an ultimate blunder but we can’t get bankruptcy to push the restart button. We get stuck with the tab on a five year plan.  Funny how people have to get on a five year plan, yet our own government and corporations have no five year plan. The government doesn’t even use the same accounting methodology they require public companies to use.  If we actually added all the commitments we’ve been promised the national debt is much closer to $40T, than the $10T we’re led to believe.

Mortgage Merry Go Round

http://online.wsj.com/article/SB121200132477426865.html?mod=todays_us_page_one

The rocket scientists are the wizards of Wall Street who invented securities that supposedly dispersed risk widely but actually created much more leverage than proved wise.

In a modern capitalist system, regulators provide guardrails to keep markets from driving the economy off a cliff. The regulators failed. Whether regulators should or could have restrained innovation on Wall Street or prohibited business deals between consenting, sophisticated adults is a tough question.

This is the problem.  Let’s move already to the post modern version where we have instituted the lessons learned from the failures of what we though were successes.  More government hands are not the answer, less is. Government is run by powerful, elite people who share boardrooms with each other when not in government. When government gets involved in the economy it does so at the expense of a free market. Resources allocated on the basis of true demand provides more benefits to more people, than one government deciding to choose a winner and a loser. I trust the 300 million of us to make a better decision than a few people insulated from their mistakes.

If all these people don’t financially hang for their mistakes there is no disincentive to refrain from repeating this decade after decade. No one should say they can or can’t create a product.  However if their proven to have been selling toxic waste, they should suffer the consequences of those actions.  Unfortunately we’ve climaxed to a point where if one comes down, they all do. Let these entities fail and reorganize the quality pieces as they’re own. 

This may result in marginal higher costs to the industry, passed on to us, but it’s the price we must pay for insurance against a total failure. It will cost more today to clean this mess up than it would have spread out over 300 million people over the last twenty years in the form of slightly higher costs to obtain credit.  Yes, we wouldn’t have been able to buy as many big screens as we wanted.  Aw shucks.

But investors who relied on the rating agencies — particularly supposedly sophisticated pension funds and other institutions — are at fault, too. Rating firms became a crutch for investors who simply didn’t want to spend the time and money required to be prudent investors at a time when low interest rates had everyone reaching for higher returns without contemplating the higher risks.

Pension funds and those people who are depending on others to set them up are going to be shocked when they want to take money out.  The wealth the baby boomers have tied up alone is staggering and they must transfer these illiquid assets into liquid cash as they need it.  When they begin to see others selling, someone must buy.  What happens when they begin to feel the itch that the longer they stay, the more they have to lose?

We know SS is reaching a state of disequilibrium in the fact that more people will be living on it than putting into it.  So those who are paying either pay more or those who receive get less.  Someone is going to be unhappy, is it all of the above or one over the other?  I suppose it depends on the average age of Congress and the President during the next term.  The higher the average, the more likely the lowly Gen X and Millennials get shafted.

Derivative H-Bomb

http://us.ft.com/ftgateway/superpage.ft?news_id=fto052820081907312104

Efforts to tackle the risk surrounding privately negotiated credit derivatives will take a step forward on Thursday when 11 of the world’s biggest investment banks announce the creation of the first central clearer for the opaque contracts by September.

Idea popped into my head.  What if this clearing house creates true price discovery for these derivatives and counter party risks quickly become clear.  If so, then will we have a rush to the exits and see whose left holding the bag?  Are we setting ourselves up for a crash in September?  There are those who do believe Sept/Oct is the best time frame seasonality wise to provide an opening for a crash. 

This clearing house is supposed to cast the light of day on a dark offbeat corner of the market.  Those inside the street agree that the derivative pyramid is akin to gambling.  Hedge funds have been selling insurance against losses for years as a way to provide a steady return on assets. Those products are exploding now that everyone is running to hide in a corner.  Oh well sorry, we’ve finally installed a light bulb and if we can find the switch to turn it on…

SAVING HOUSING

http://www.nytimes.com/2008/05/20/business/20housing.html?ref=business

The Senate agreed on a bill to help home owners.  Bush is declaring he’ll review and probably sign into law.  Great news, right? Let’s break down some numbers.

The Senate bill would create an affordable housing fund, financed by the government-sponsored mortgage-finance companies, Fannie Mae and Freddie Mac, and that fund would be used in its first year to provide about $500 million for the foreclosure rescue effort.

 “The primary goal here is to keep people in their homes, but also to establish a floor, a bottom to all this,” Mr. Dodd said. The foreclosure aid is tied to legislation creating a new regulatory agency to tighten oversight of the government-sponsored mortgage financiers.

I’m going to overlook the ridiculous idea that more government watch dogs will watch the government sponsored housing crooks more closely.  Who’s going to watch the watch dog then?

They are committing $500M in the first year, and it’s just about half over.  Pandering?  Probably.  But let’s assume not.  So this $500M will be divided into as many homes as possible if we’re trying to help as many people as possible. 

 $500M could help 5000 people with an average of $100K per home. The national median as of April was $220K per http://www.realtor.org/press_room/news_releases/2007/ehs_apr07_lending_standards_affect. On the average we’re looking at helping maybe 2300 rounding up. The total foreclosures for 2008 are forecasted to be around a million.  Based on these numbers we’re going to help about .23% of the homeowners.  I read that 2% of us are ultimately being affected by this based on the raw numbers, so why are we in such a big fuss over this corner of the market?  Oh follow the money….almost forgot.

 The Congressional Budget Office has estimated that under the House bill, up to 500,000 mortgages would be refinanced over the next five years, at a cost to taxpayers of about $2.7 billion.

$2.7B/500,000 = $5400 per home owner.  We are paying each homeowner $5400 because they and their lender can’t figure out who got screwed more. Who loses – we do.

That $500 million would be taken from a new affordable housing fund, which would collect slightly less than half a cent on every dollar of mortgages purchased by Fannie Mae or Freddie Mac.

That fund, proposed by Senator Jack Reed, Democrat of Rhode Island, would continue to exist after the foreclosure assistance plan ended, with the money directed to creating affordable housing, including low-income rental housing.

Then they want to give that money to the black hole known as Fannie Mae.  Aren’t those the ones who lost how many BILLIONS already?  Oh and the best part of government, it wont be going away once the crisis has ended.  On one hand it takes some nerve to tell us flatly it will not be going away on the other it’s like an open dare to call their bluff. Can we?

AUTO TERMINAL DECLINE

http://online.wsj.com/article/SB121124778122705883.html?mod=hps_us_whats_news

Through most of the 1990s, auto makers sold a little over 15 million cars and light trucks a year in the U.S. market. That changed in the late 1990s: With gasoline prices low and many U.S. consumers feeling flush from the tech-stock boom, auto sales surged. Sales peaked at 17.4 million in 2000 and remained near 17 million for another five years. Heads of General Motors Corp. and Toyota said the U.S. was entering a golden age of the automobile. In 2003, Toyota‘s head of North American sales predicted the industry would soon be selling 20 million vehicles a year.

They were wrong. Sales started falling in 2006 and this year are expected to be right back where they were in the 1990s, at just over 15 million. Last week, market researcher Global Insight Inc. lowered its 2008 forecast for U.S. vehicle sales to below 15 million. Global Insight now believes sales won’t reach previous highs again until 2012, a year later than it had previously thought.

Volume is a more important barometer than sales can ever be.  Any measurement of money carries an intrinsic problem we all feel today, namely inflation. People want to buy as much as they can leverage.  Middle class tries to emulate the upper by squeezing into car payments they can barely afford not to mention those who did the same in respect to the GREAT deals on SUVs.  More like another sucker debt trap depending on how much its utilized.

 For the foreseeable future the majority of us will be trading down.  The entire expansion from the fifties has surpassed the golden age we still believe we’re in.  These days we’re spending more money to stay in the same place.  Roads and highways are in disrepair and maintenance is shirked in favor of government slight of hand pointing to the new stuff they just built for us.

 Its over. While Europe the wise elder decided to build out mass infrastructure for all, we resisted once we could ignore the obvious.  There will be an end to the finite resource known as crude oil.  When it happens was irrelevant.  The time to act has past.  We will react violently when the Cheney defined American way of life become fully negotiable.

 If you sit down and do the math, you might be spending 25% of your paycheck to secure your paycheck.  What if you took a job you loved that paid 25% less, but was 1/10 the distance?

TRUCKER TERMINAL DECLINE

The trucking firm Jevic Transportation Inc., of Delanco, announced today that it was ceasing operations after 27 years, a victim of high diesel and insurance costs as well as the tightened economy.

“When you are a carrier, you see the recession coming before anyone else,” he said. “Customers are shipping less.”

“For many motor carriers, fuel is now equal to labor as the highest expense,” she said. “The trucking industry spent $112 billion on fuel in 2007, and we’re on pace to spend $141.5 billion in 2008.”

Besides new business systems, Jevic added other distinctive innovations: Its drivers carried business cards, just like senior managers. It was known for good pay and benefits, and thus had little difficulty filling the ranks of its drivers.

 Moreover, it made a point of bending over backward to get new customers, and to keep them in the fold.

Corollary to the above point.  Mass transportation is the current marginal form of transportation.  People will be switching to it as they get squeezed out of their autos.  Business is similar in that they must ship goods, rather than their labor.  They too are making marginal changes to their business model to cope with rising costs.  At some point, the marginal truckers will be eliminated in favor of moving back in time, namely freight rail transportation.  Wonder why Buffet bought so much RR stock?

Trucks are being forced into transporting local, last mile delivery.  Meaning the majority of domestic goods transport will be done via rails with the last mile delivery being carried out by an eighteen wheeler.  JIT inventory will be made mostly obsolete and business schools will search for ways to make it work until they realize it was all predicated on cheap energy and really little else.

http://www.breitbart.com/article.php?id=D90U74D01&show_article=1

WASHINGTON (AP) – Pentagon auditors say billions of dollars in military spending is going unchecked because they are having trouble keeping pace with the ever-expanding defense budget and combat operations in Iraq and Afghanistan.

In a recent report, the Defense Department inspector general estimates that nearly half of the military’s $316 billion weapons budget went unchecked last year because the IG’s office lacked the manpower. Whereas 10 years ago when a single auditor would have reviewed some $642 million in defense contracts, individual investigators are now charged with auditing more than $2 billion in spending.

The IG also has been stretching its staff to investigate corruption and fraud cases overseas, primarily in Iraq and Afghanistan where the military is hiring contractors to help run operations.

Growing up I can remember in the nineties when I started hearing about $200 toilet seats and hammers.  It was a big joke.  It’s even bigger now.  Are any of us laughing? I suppose the real point here is an expansion of government power to tax (how must they ultimately pay for this) without the corresponding increase in oversight.  It’s usually money first, deal with the problems when someone asks.  Who deals with the problems?

Apparently no one; regardless of which side of isle they come from, the budget goes up.  Every year the government grows more than the free market diverting valuable resources to waste.  This is corporatocracy at its finest.  People don’t have a unified lobby that can articulate anything of value. So corporate elite saddle up to government officials and discuss how they can be mutually beneficial.  This is econ 101 folks.  The incentives to loot are built into democracy.  It’s made worse by the wealth we’ve been deluded into believing we owned.  Turned out we are owned by the banks and we can’t get out of because the banks asked CONgress to limit “frivolous” bankruptcies.  The checks on this entire system rest with the people.  In order for people to “check” government, they must have time to do so. 

We can insert some Economic marginal utility theory into this, but basically we’re distracted with what we believe to be higher value needs.  For each of us it is different, but generally we’re working out, driving (wasting a whole lot of free thinking time), running kids around, watching tv, working to keep up with Joneses or surfing the internet. We’re running to stay in place and starting to collectively realize we’ve been duped. We leave the big stuff to the people who tell us it’s messy.  It’s not messy folks it’s real easy to understand most issues when you come to realize who benefits and who pays.  You rarely benefit directly from any one program.  However you’re paying for them all. 

Most of CONgress doesn’t write or read a bill that makes it to vote.  Who writes these laws anyway, oh yeah lobbyists coordinating with their employers – corporations.  I like corporations but when they are allowed to insulate themselves at our expense we’re screwed. Each company does what it must without regard to the whole.  They each seek their self interest in no different manner than a person would.  The practical difference lies in the fact that companies write our laws and our trained legal experts (most of them are lawyers anyway) don’t even read the 500 pages.  WTF?

Granted I don’t want to read that much either, but they wanted the position.  It seems as though they just want all the perks and none of the work that goes along with it.  Is it really shocking that we’re getting fleeced for everything in this war?  Every single number that comes from government should be ripped apart and verified.  None of it adds up and it’s so bad now we’ve got them trying to make us believe gas costs decrease in April 08 from a year ago! We must wake up…

All my devotion betrayed
I am no longer afraid
I was too blinded to see
How much you’ve stolen from me

~Disturbed, “Deify”, 10,000 Fists

http://www.nytimes.com/2008/05/28/business/28housing.html?ref=business

The inventory is not spread out evenly across the country. Manhattan and choice neighborhoods in San Francisco and downtown Boston, for example, do not appear to be suffering from the kind of glut that is hurting suburban Phoenix, southern Florida and inland areas of California.

“We are still getting multiple offers on properties there,” Phil Rodocker, a Seattle-based real estate agent, said about the downtown area and Bellevue. But “as you move south, every 10 miles south you go, you see more and more short sales and repossessed houses.”

The support mechanism for urban sprawl is more clearly becoming defined as cheap energy that bridged the transportation gap to your income source. Well, the rest of the world wants to copy us.  Oil supplies are clearly peakish at minimum. The entire paradigm created post WWII has reached zenith and will be replaced by more dense urban landscapes more integrated with the surroundings. 

Those who are relocating or buying properties nearer to urban centers will be the contrarian millionaires yet to come.  Most cities are totally unprepared for the reality of more scare, higher priced oil. It’s just going to be there we’re all thinking. Well no it’s not.

If you want to be ahead of the curve begin researching areas where light rail will be.  The goal is to get people within a few miles of a station and the closer you are, the higher priced that property will be.  There are urban centers in my city in complete shambles and plenty of developers are sitting on the properties in anticipation of something happening.  Trolley cars will be back. The only reason they left is because they got in the way of cars, a business more profitable for auto manufactures so of course they wanted to eliminate their competition and they did so through lobbying.  Nice. Now we get to pay for them again.

http://www.washingtonpost.com/wp-dyn/content/article/2008/05/27/AR2008052703330_pf.html

Congress recently considered a proposal by Sen. Richard J. Durbin (D-Ill.) to let bankruptcy judges cut interest rates and principal on troubled mortgages. But that plan was scuttled last month. Instead, consumers must operate under the law passed in 2005, which was intended to get people like the Smiths to choose other alternatives. In response to critics, such as credit card issuers who complained that people sought bankruptcy too frivolously, Congress enacted tighter income limits, tougher standards for measuring a debtor’s ability to pay and mandatory credit counseling.

A government official really thought he could rewrite contract laws to help out 2% of the total population, let alone his own constituents?  Eh, it’s not his money so what does he care? Funny how a credit card company tries to make people choose “other alternatives” yet we don’t seem to ever have “other alternatives” when it’s not consumer related. 

As long as you buy something, we’ll give you all the choice you want.  As long as we’re stealing you’re money from you though, you can’t tell us what to do with it or even how much we can have.  We’ll just ask some other government to loan us the money and you just deal with it, K? So far, yeah that seems to be just fine by us. We’re dumb enough to believe hype and fail to think for ourselves which leads into social pandering for all types of causes.  How about we buck up and starting taking ownership of what happens to us, rather than trying to blame anybody who can’t defend themselves.

When marketing began utilizing psychology we lost our ability to think for ourselves. It’s easier to believe what sounds reasonable without critical analysis.  We’re programmed this way and marketing teaches it in B School.  As long as we convince ourselves we were doing as well as the marginal neighbor, we feel better. That feeling is now eating away at us as we figure out where the eject button is.  Good luck finding yours.  I pushed mine nearly three years ago and haven’t looked back. 

Is the Oil Market Manipulated?

From MoneyEnergy on May 23, 2008:

“Do you think the oil markets are being manipulated?
Media talk about “supply threats” and other obstacles in Nigeria etc. are easy straw mans to prop up in order to explain the price of oil.

As long as oil’s traded in greenbacks, the price of oil reflects the weakness in the greenback. The price of oil doesn’t go up as much against the pound, or gold.”

However, there are very few people who benefit when prices rise as fast as they are.  Kings, sheiks, perhaps oil execs and I’m open to discussion of who benefits from higher prices.  Collusion would serve a very small group who would stand to endanger the larger whole.  We don’t understand basic paradigms as easily as we believe we understand complex ones.  Energy is the basis for all life.  We could pull up a formula from science and convert those BTU’s in a gallon of gas to calories to put the value of gas into perspective. The fact that humans discovered millions of years of solar energy in the form of black goo propelled our numbers exponentially.

From here I get one gallon of gas worth 124000 BTU’s and from Google I get one BTU = 252.1644 calories. In total a gallon of gas is roughly worth 31268385.6 calories.  The purpose of all this is to understand how valuable this one gallon is relative to a person.  You need roughly 2K calories to maintain bodily functions.  You must take in more than that to not kill yourself if you’re working real hard and converting those calories into useful energy. At $4/gal it’s roughly .25 cents a cup and worth MORE than the Starbucks coffee you were paying more for. That is why gasoline is aggressive at the moment.  Yes it is in a bubble, but that does not affect the fundamentals in place.  Remember Keynes when he warns…”Irrational markets can last longer than you can stay solvent.”

Consider the oil men we have elected.  They think they know oil, but in fact they know oil markets of the past.  Our brain is wired to react, not to assimilate data and draw meaningful conclusions.  Consider both DICK and BUSH went to the Kingdom of Saudi Arabia (KSA) to basically plead for them to do something.  They have a long history that Bush believes will pay dividends now.  Turns out he cashed in a long time ago when he invaded Iraq and now there’s hell to pay.  KSA can’t increase their production beyond three years ago.  When KSA peaks, the WORLD peaks.

One last point, yes oil priced in anything but a dollar would have insulated you from this problem.  Case in point check out the graphs below…

So yes, our dollar is the problem mostly.  However there are always several layers of analysis. If you’re really worried about manipulation of the oil market, consider OPEC’s decision in the late eighties to nearly double their reserves as a unit in a high stakes poker game designed to flush out USSR which it did resulting in their demise in the early nineties.

OIL REBOUND ON ITS WAY

This week has seen a dramatic surge in oil contracts dated as far forward as 2016. Futures have moved higher than the spot price, a rare event known as “contango”. This can cut both ways: either as a sign of an impending supply crunch years hence; or that the futures market has become unhinged from reality.

Almost all emerging nations have to slam on the brakes in coming months to curb inflation before it starts spiralling out of control. Inflation has hit 30pc in Ukraine, 22pc in Vietnam, 8.5pc in China, and double digits across most of the Gulf.

The countries that account for the most of the growth in oil demand over the last two years are almost all nearing the limits of easy economic growth.

Oil wells follow a simple production curve whereby at some point they begin to produce less than before forming a bell curve.  Logic will bring you to the conclusion that since each little well follows a bell curve, the sum of them all forms a bell curve. 

We’re on to something now.  Discovery of more oil than the year before peaked in 1980.  We have been discovering less and less oil for nearly thirty years.  Over that time other countries have begun to contribute to the demand for crude.

When you reach the apex of the curve you’ve reached roughly half the total supply available.  The first half was easy to find; just stick your finger in the ground.  The second half is harder and costlier to extract (middle of the ocean, 2 miles deep).  Therefore the only direction prices may move is higher, due to higher costs to secure it.  Throw in the dollar being trashed (everytime i-rates get cut) and we arrive at oil prices today.

We’re missing the entire point of high prices on crude.  We need to step back and examine historical changes in energy availability and plan accordingly.  Trolleys will once again ride as a supplement to dense urban transit networks supplement again. 

http://www.ft.com/cms/s/0/07cb8b1a-275e-11dd-b7cb-000077b07658.html

Top banks call for relaxed writedown rules

The IIF’s proposals, which were sent to US and European central banks, governments and accounting watchdogs, underline financial groups’ view that the credit crunch will inflict long-lasting damage on their business.

So in effect the bank is saying, if you don’t allow us to move the goal posts once again, we will not be able to score another touchdown.  So tell me why we should save you to keep this charade going?  Are you hoping to be the last one in the last chair?  The only solution to this is learning from this mistake.  We repealed all the banking laws in the mid nineties and they all competed to naturally to be the most cost efficient, not risk adverse, which required economy of scale. 

However when one becomes too big they are not allowed to fail and instead the mal investment that got them into it continues until they make the problem bigger with governments helping hand.  We’ve been doing this reflate at all costs since the eighties.  It’s not working so those who can’t comprehend change – step aside.  We should separate the banks so this RISK is FULLY contained and we don’t worry about a bank failing and bringing the entire economy down with it.

The economy is like an organism moving vital fluids around to consumers.  The mistake is building an organism that resembles humans in their concentrated frailty.  The economy, if resembling a creature such as an octopus, would be able to absorb losses anywhere and everywhere without the greater whole affected.  It would be a minor issue to let a simple bank or [fill in the blank] fail then to continue putting tourniquets attempting to keep the whole sum alive.

The IIF’s paper says: “The writedowns required under current interpretations may be substantially in excess of any actual or reasonably probable loss on many instruments”.

I hope someone in academia can do some type of analysis on the differences between these two methods.  I suppose it’s already underway since the obvious need for a good comparison is a daily joke.

However, accounting standard-setters in the US and Europe so far resisted pressure to relax fair value rules. Other regulators have also criticised financial companies for proposing rule changes that would reduce the impact of a crisis triggered in large part by their aggressive lending and underwriting practices. The IIF declined to comment.

The IIF will output their spin, but they won’t defend any failings on their own behalf.  This is what we’re rewarding.  The Banks are Pavlov and we’re the damn dog.  Every time a warning bell goes off, we don’t salivate, we’re being cut off. We use our brains to make the drugs aka money aka credit – last longer.

OIL PRODUCTION FALLING

http://www.ft.com/cms/s/0/c2955660-2696-11dd-9c95-000077b07658.html?nclick_check=1

Neil McMahon, of Sanford Bernstein, said: “Peak oil views – regardless of whether right or wrong – are seeping into the market and supporting high prices.” Since January, long-term futures oil contracts, such as those for delivery in 2016, have jumped almost 60 per cent, while near-term prices have gone up 35 per cent.

That trend was exacerbated by T. Boone Pickens, the influential investor who believes world oil production is about to peak as aging fields run dry. He warned that oil prices would hit $150 a barrel by the end of the year. “Eighty-five million barrels of oil a day is all the world can produce, and the demand is 87m,” Mr Pickens told CNBC. “It’s just that simple.”

Mr Pickens’s view is still in the minority in the oil industry. But concerns over future oil supplies are fast moving into the mainstream and influencing investors.

This comes as demand, especially from China, is set to continue to grow, while that of the US slows. Adam Sieminski, chief energy economist at Deutsche Bank, said: “The price is going to go up until governments that subsidise oil consumption in Asia and the Middle East can no longer afford it.”

I think the writing is become clear.  We are not running out of oil anytime soon, however we have run out of cheap, easily accessible oil we’ve enjoyed for the past one hundred years. The next twenty will be the worst yet.  Zero point energy research namely the Aether Physics model, may prove fruitful and the path to a future of energy independence.

Anyone who believes oil is gushing out from everywhere is insane.  This isn’t a bad thing.  We are using almost four times as much per capita as other developed nations.  Our free ride is over.  We’ll suffer now, to emerge from this in the future.

AAA Can Do Better

http://us.ft.com/ftgateway/superpage.ft?news_id=fto052020081848170760

Internal Moody’s documents seen by the FT show that some senior staff within the credit agency knew early in 2007 that products rated the previous year had received top-notch triple A ratings and that, after a computer coding error was corrected, their ratings should have been up to four notches lower.

The products were designed for institutional investors. In the recent credit market turmoil, those who still hold the products will have suffered some paper losses while others who have bailed out have lost up to 60 per cent of their investment.

“However, it would be inconsistent with Moody’s analytical standards and company policies to change methodologies in an effort to mask errors. The integrity of our ratings and rating methodologies is extremely important to us, and we take seriously the questions raised about European CPDOs. We are therefore conducting a thorough review of this matter.”

S&P stood by its ratings, saying: “Our model for rating CPDOs was developed independently and, like our other ratings models, was made widely available to the market. We continue to closely monitor the performance of these securities in light of the extreme volatility in CDS prices and may make further adjustments to our assumptions and rating opinions if we think that is appropriate.”

At first I thought this was crazy!  Then I realized they are a sanctioned monopoly without competitors.  Fitch was smart enough to realize they were in over their heads and bowed out.  So Moody’s was only able to get these their coveted AAA with a software glitch, yet S&P stands firm on their model is correct.  Between the two of them it’s clear both have lied and are in damage control mode.  Since no other companies are allowed to put their stamp of approval on debt, we’re stuck with inept choices not to different from political runs for the highest office – a lesser of two evils.

Why are we advocating MORE regulation to fix any of this? Free markets don’t fail.  They allocate resources most efficiently and create winners and losers.  Attempting to change this course serves only to distort the level of loss and gain.  Government regulation is nothing more than one person, or maybe a panel of a whole three, decide how they can take from us all to give to a few.  How does that parallel American values? Since when do we advocate free lunches when something goes wrong?  You mean we can eliminate consequences to our choices?  You can in Amerika at the moment.

SAVING HOUSING

http://www.nytimes.com/2008/05/20/business/20housing.html?ref=business

The Senate agreed on a bill to help home owners.  Bush is declaring he’ll review and probably sign into law.  Great news, right? Let’s break down some numbers.

The Senate bill would create an affordable housing fund, financed by the government-sponsored mortgage-finance companies, Fannie Mae and Freddie Mac, and that fund would be used in its first year to provide about $500 million for the foreclosure rescue effort.

“The primary goal here is to keep people in their homes, but also to establish a floor, a bottom to all this,” Mr. Dodd said. The foreclosure aid is tied to legislation creating a new regulatory agency to tighten oversight of the government-sponsored mortgage financiers.

I’m going to overlook the ridiculous idea that more government watch dogs will watch the government sponsored housing crooks more closely.  Who’s going to watch the watch dog then?

They are committing $500M in the first year, and it’s just about half over.  Pandering?  Probably.  But let’s assume not.  So this $500M will be divided into as many homes as possible if we’re trying to help as many people as possible. 

$500M could help 5000 people with an average of $100K per home. The national median as of April was $220K per http://www.realtor.org/press_room/news_releases/2007/ehs_apr07_lending_standards_affect. On the average we’re looking at helping maybe 2300 rounding up. The total foreclosures for 2008 are forecasted to be around a million.  Based on these numbers we’re going to help about .23% of the homeowners.  I read that 2% of us are ultimately being affected by this based on the raw numbers, so why are we in such a big fuss over this corner of the market?  Oh follow the money….almost forgot.

The Congressional Budget Office has estimated that under the House bill, up to 500,000 mortgages would be refinanced over the next five years, at a cost to taxpayers of about $2.7 billion.

$2.7B/500,000 = $5400 per home owner.  We are paying each homeowner $5400 because they and their lender can’t figure out who got screwed more. Who loses – we do.

That $500 million would be taken from a new affordable housing fund, which would collect slightly less than half a cent on every dollar of mortgages purchased by Fannie Mae or Freddie Mac.

That fund, proposed by Senator Jack Reed, Democrat of Rhode Island, would continue to exist after the foreclosure assistance plan ended, with the money directed to creating affordable housing, including low-income rental housing.

Then they want to give that money to the black hole known as Fannie Mae.  Aren’t those the ones who lost how many BILLIONS already?  Oh and the best part of government, it won’t be going away once the crisis has ended.  On one hand it takes some nerve to tell us flatly it will not be going away on the other it’s like an open dare to call their bluff. Can we?

AUTO TERMINAL DECLINE

http://online.wsj.com/article/SB121124778122705883.html?mod=hps_us_whats_news

Through most of the 1990s, auto makers sold a little over 15 million cars and light trucks a year in the U.S. market. That changed in the late 1990s: With gasoline prices low and many U.S. consumers feeling flush from the tech-stock boom, auto sales surged. Sales peaked at 17.4 million in 2000 and remained near 17 million for another five years. Heads of General Motors Corp. and Toyota said the U.S. was entering a golden age of the automobile. In 2003, Toyota’s head of North American sales predicted the industry would soon be selling 20 million vehicles a year.

They were wrong. Sales started falling in 2006 and this year are expected to be right back where they were in the 1990s, at just over 15 million. Last week, market researcher Global Insight Inc. lowered its 2008 forecast for U.S. vehicle sales to below 15 million. Global Insight now believes sales won’t reach previous highs again until 2012, a year later than it had previously thought.

Volume is a more important barometer than sales can ever be.  Any measurement of money carries an intrinsic problem we all feel today, namely inflation. People want to buy as much as they can leverage.  Middle class tries to emulate the upper by squeezing into car payments they can barely afford not to mention those who did the same in respect to the GREAT deals on SUVs.  More like another sucker debt trap depending on how much its utilized.

For the foreseeable future the majority of us will be trading down.  The entire expansion from the fifties has surpassed the golden age we still believe we’re in.  These days we’re spending more money to stay in the same place.  Roads and highways are in disrepair and maintenance is shirked in favor of government slight of hand pointing to the new stuff they just built for us.

Its over. While Europe the wise elder decided to build out mass infrastructure for all, we resisted once we could ignore the obvious.  There will be an end to the finite resource known as crude oil.  When it happens was irrelevant.  The time to act has past.  We will react violently when the Cheney defined American way of life become fully negotiable.

If you sit down and do the math, you might be spending 25% of your paycheck to secure your paycheck.  What if you took a job you loved that paid 25% less, but was 1/10 the distance?

TRUCKER TERMINAL DECLINE

http://www.philly.com/philly/business/breaking/20080519_Jevic_Transportation_closes__citing_fuel_costs.html

The trucking firm Jevic Transportation Inc., of Delanco, announced today that it was ceasing operations after 27 years, a victim of high diesel and insurance costs as well as the tightened economy.

“When you are a carrier, you see the recession coming before anyone else,” he said. “Customers are shipping less.”

“For many motor carriers, fuel is now equal to labor as the highest expense,” she said. “The trucking industry spent $112 billion on fuel in 2007, and we’re on pace to spend $141.5 billion in 2008.”

Besides new business systems, Jevic added other distinctive innovations: Its drivers carried business cards, just like senior managers. It was known for good pay and benefits, and thus had little difficulty filling the ranks of its drivers.

Moreover, it made a point of bending over backward to get new customers, and to keep them in the fold.

Corollary to the above point.  Mass transportation is the current marginal form of transportation.  People will be switching to it as they get squeezed out of their autos.  Business is similar in that they must ship goods, rather than their labor.  They too are making marginal changes to their business model to cope with rising costs.  At some point, the marginal truckers will be eliminated in favor of moving back in time, namely freight rail transportation.  Wonder why Buffet bought so much RR stock?

Trucks are being forced into transporting local, last mile delivery.  Meaning the majority of domestic goods transport will be done via rails with the last mile delivery being carried out by an eighteen wheeler.  JIT inventory will be made mostly obsolete and business schools will search for ways to make it work until they realize it was all predicated on cheap energy and really little else.

Truckers are less efficient in terms of energy use and wear and tear on the roadbed.  Reducing the time they are on the road should help reduce maintenance costs of the roads in addition to alleviating some carbon output, albeit marginal most likely.  All the marginal truck & air freight is pretty much been eliminated over as we ascended to $3/gal.  The next leg up will produce more losers and fewer winners but we can’t stop the market.  It would be too easy to say this train has left the station, but it did and those positioning themselves will be rewarded.

I know the Constitution is SO boring it’s almost a waste of our time to discuss, right?  Article one section eight outlines the financial arrangement between government and the people.  The three separate branches don’t share equal power and Congress is the only one allowed to appropriate monies. That is, until they authorized the Fed in 1913 to take over handling the supply of money.  For every dollar you have in your pocket, it is intrinsically worth less than face value. Let me explain. 

The Treasury authorizes Treasury bond sales to the Fed in clear violation of the Constitution.  The FED prints up money in exchange for a piece of paper that yields interest income from the Treasury. If the Treasury, that is the taxpayers, are in need of money, they are BORROWING it from the FED, not coining it as outlined in Article one, section eight. So your dollar in your left pocket is really only worth the face value minus the interest cost. Ever wonder why inflation exists? This money is no longer tied to ANYTHING of value and therefore is fiat – printable at the discretion of politicians and private bankers. 

By bailing out BSC, the FED has authorized an appropriation on behalf of American taxpayers without Congress even wincing. The executive branch, through the Treasury, has declared they have the power to appropriate our tax dollars.  So let me get this straight…A private bank and the executive branch has authorized tax payer money to be spent in complete violation of the basic framework PROTECTING citizens FROM government.  Go back and read the PURPOSE of the Constitution to understand why this is such a magnanimous event. 

Every member of Congress has taken the oath of office declaring to defend the Constitution.  Obviously CONgress hasn’t held up to their oath and it’s the citizens’ fault.  We are deluded by our own grandeur and have lost our focus.  The easy answer is to claim nothing is wrong so when the smoke clears, culpability will be shared by everyone equally and used as justification for failing to act. It’s time we all begin tuning out the sound bytes and we start tuning into the facts.  The fact is fiscal year 2006 interest payments on our national debt cost us $406 billion.  The operating budget of the government in the same year was $2.5 trillion.  We’re spending nearly 20% of our operating income on servicing debt and have NO plan on paying it back.  Can you get away with that?