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Saturday, July 12, 2008

Recession in a Time of $147 Oil and a Blastoff in Gold!

And now, here's some "must-read" news for the weekend ...

Government shuts down mortgage lender IndyMac

The bank is the largest regulated thrift to fail and the second largest financial institution to close in U.S. history, regulators said.

Some 10,000 depositors had funds in excess of the insured limit, for a total of $1 billion in potentially uninsured funds, the FDIC said.

Trade Gap Unexpectedly Shrinks

The trade deficit shrank unexpectedly in May as the U.S. bought less oil and exports increased. The news prompted a bit more optimism in the outlook for economic growth for this year, but separate reports showed that consumers remain gloomy and import prices continue to soar.

The gap between the value of the country's imports and exports narrowed 1.2% to $59.79 billion from $60.50 billion in April, the Commerce Department said, as petroleum imports fell by 10.5%. The data signaled that strength in America's export market, reinforced by the weak dollar, is helping prop up an otherwise sagging economy.

XX Sean’s note – If our exports are INCREASING, other countries (I’ll spot you a “C”) are NOT experiencing a recession. Want some evidence? Here …

IEA Raises 2008 World Oil Demand Forecast by 80,000 bpd

The International Energy Agency raised its forecast for world demand for oil for 2008 for the first time in several months, and anticipates demand in 2009 to increase by 1.1 percent to 87.7 million barrels per day, driven by emerging countries. The IEA, which had cut its forecast for world demand for 2008 for five months running, in its June report raised its forecast for the 2008 demand to 86.9 million barrels per day, an increase of around 80,000 bpd. World demand is therefore seen increasing by 890,000 bpd this year.

Also HERE (subscription required)

In other news …

Oil Stocks Hit Bargain Bin

The stock price of major oil companies hasn't kept pace with the price of a barrel of oil, which is now 95% more expensive than 12 months ago. Investors are skeptical that majors such as Exxon Mobil Corp. and Royal Dutch Shell PLC, which do everything from drilling oil to refining it to selling it, are going to have big futures. The stocks are actually down this year.

investors are skeptical that oil can stay at current levels: Prices may not fall below $100 a barrel but won't stay above $140, the consensus runs. That belief has led to the discounting in major oil stocks. Exxon's earnings per share have gone up 380% from 2003 until the end of June, but the stock price is up only 150% during this period. The P/E has come down, from about the low 20s to 11 more recently.

Au Revoir or Goodbye?(subscription required)

PHIL GRAMM, THE FORMER SENATOR FROM TEXAS, doesn't know beans about the economy, and he has a Ph.D. in economics to prove it. Last week, in an interview with a D.C. paper, he pronounced the United States a "nation of whiners" wringing their hands and moaning like mad about a recession that's all in their pointy little heads (those last three aren't exactly his words, but they sure do capture his meaning).

Mr. Gramm is now not only an ex-senator but also, thanks to his public whining about whiners, an ex-adviser to John McCain, as the presumptive GOP nominee for the presidency revs up to go mano a mano with Backtrack Barack. Gramm also happens to be dead wrong on the state of the economy. Just ask any working person striving to cope with the twin terrors of runaway prices and standstill wages

If the continuing demolition of the housing industry that has already wrought half a million foreclosures and threatens to add several million more to the woeful total; the vicious credit crunch; the humongous bite of $140-plus-a-barrel crude and $4.50-a-gallon gasoline; the remorselessly rising cost of such existential items as food, medical care and education; 5.5% unemployment even by Uncle Sam's skewed reckoning; rock-bottom consumer confidence; and the trillions that went up in smoke in global stock values in the first half of this year are all figments of our febrile imaginations, we'd just as soon not hear what kind of economic hell would qualify in Gramm & Co.'s eyes as a recession.

But then, it's always possible, we suppose, recession simply isn't allowed in the cosseted environs of Washington and the more rarified reaches of Wall Street.

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